Québec – simplicity of jurisdictional challenge is for arbitrator to decide first – #090

In an oral decision, Mr. Justice Daniel W. Payette in Cineplex Entertainment v. Compagnie France Film inc., 2018 QCCS 2133 resisted defendant’s claim that the court could decide defendant’s jurisdictional challenge on the basis that doing so required only a superficial review of the facts.  Payette J. acknowledged that the parties’ contract contained clearly worded delays regarding arbitration but held that the parties’ post-dispute conduct removed them from the narrow exception, mentioned in Dell Computer Corp. v. Union des consommateurs, [2007] 2 SCR 801, 2007 SCC 34, to the general rule of ‘challenge first before arbitrator’.  The parties’ numerous exchanges about extending delays in their contract renewal had blurred their contract’s clear wording.  Because those exchanges resisted easy factual analysis, Payette J. referred the parties to their arbitrator to decide the jurisdictional issue on more fulsome facts and sealed the sensitive information prepared for the court’s jurisdictional hearing.

Cineplex Entertainment Limited Partnership (“Cineplex”) and Compagnie France Film inc. (“France Film”) disputed rent obligations under a lease signed between the two companies.  Cineplex applied to have the court appoint an arbitrator under clause 3.4A of their lease.  The parties admitted the validity of the clause which read as follows:

Failing agreement as to the value of the option base rental, the applicable option base rental for such extended term is to be fixed by arbitration in a court, as per provisions of the Code of Civil Procedure of the Province of Québec, as amended or replaced from time to time. The arbitration award shall be final and the jurisdiction of the civil court shall be excluded to the extent permitted at law.

The arbitration clause refers to Québec’s Code of Civil Procedure, CQLR c C-25.01 (“C.C.P.”) which, at articles 620 and following, sets out Québec’s approach to arbitration.  Unlike other provinces, Québec does not have two legislative approaches to arbitration, one for ‘domestic’ and and another for ‘international’.  Rather, the C.C.P. provisions follow a unified approach which allows no appeals on any questions of law, fact or mixed fact and law.

In prefacing his excerpt of clause 3.4A, Payette J. characterized the wording of the parties’ arbitration clause as ‘unequivocal’ but was tasked by France Film to refuse Cineplex’ request.  France Film claimed that Cineplex was too late to invoke clause 3.4A.

Payette J. observed that a strict reading of the lease set June 30, 2017 – 14 months before the end of the lease – as the day by which Cineplex had to initiate an arbitration.  The uncontradicted evidence before Payette J. was that the parties began lease renewal discussions on May 29, 2017 by the communication of a notice to that effect (“Option Notice”).  Following that Option Notice, the parties agreed on extensions of the delays provided in clause 3.4A.  The parties agreed postponed the date of the Option Notice to February 15, 2018.  On that date, Cineplex made an offer but received no official answer from France Film until February 26, 2018.

Note: the only lease excerpt provided is the one reproduced above.  The dates cited are taken from the reasons and not from any lease excerpts reproduced in the reasons.

On March 2, 2018, Cineplex send a notice to arbitrate but France Film refused to engage in the arbitration, claiming that the date to do so has expired.  Cineplex disagreed, claiming that the parties by consent extended the date to do so.

At the date of the hearing before Payette J., France Film had agreed to submit the question of jurisdiction to the arbitrator.  Payette J. wrote that it was still useful to point out the court’s approach in jurisdictional challenges as established by Dell Computer Corp. v. Union des consommateurs, notably paras 84-85.

84 First of all, I would lay down a general rule that in any case involving an arbitration clause, a challenge to the arbitrator’s jurisdiction must be resolved first by the arbitrator.  A court should depart from the rule of systematic referral to arbitration only if the challenge to the arbitrator’s jurisdiction is based solely on a question of law.  This exception is justified by the courts’ expertise in resolving such questions, by the fact that the court is the forum to which the parties apply first when requesting referral and by the rule that an arbitrator’s decision regarding his or her jurisdiction can be reviewed by a court.  It allows a legal argument relating to the arbitrator’s jurisdiction to be resolved once and for all, and also allows the parties to avoid duplication of a strictly legal debate.  In addition, the danger that a party will obstruct the process by manipulating procedural rules will be reduced, since the court must not, in ruling on the arbitrator’s jurisdiction, consider the facts leading to the application of the arbitration clause.

 85 If the challenge requires the production and review of factual evidence, the court should normally refer the case to arbitration, as arbitrators have, for this purpose, the same resources and expertise as courts.  Where questions of mixed law and fact are concerned, the court hearing the referral application must refer the case to arbitration unless the questions of fact require only superficial consideration of the documentary evidence in the record.

Payette J. resisted France Film’s claim that its challenge fell within the latter category.  He determined that a superficial examination of the evidence would not allow him to determine the arbitrator’s jurisdiction.  France Film’s position required him to conclude either: (a) that the parties had agreed not to refer their matter to arbitration when agreeing to extend the dates for the Option Notice; or, (b) that Cineplex’ right to arbitrate remained but Cineplex had to exercise it within the delays applicable to 3.4A despite that the other delays had been extended and despite discussions between the two parties.

Payette J. noted that the Court of Appeal had numerous times reminded litigants that courts often must determine the intention of parties in cases of ambiguity even when the terms of their contract appear clear.  If the terms of the contract and the extensions may appear clear at first glance, their impact on the arbitrator’s jurisdiction was not.  Payette J. held that it was for the arbitrator to decide that issue raised by France Film.

As both Cineplex and France Film agreed on naming the same arbitrator as sole arbitrator, Payette J. endorsed it.

In a brief closing paragraph, Payette J. agreed to follow the parties’ joint application and ordered a sealing order (‘non-access’) to the exhibits and a specific affidavit containing sensitive information as well as the contents of the parties’ current negotiations.  In issuing his sealing order, Payette J. footnoted Sierra Club of Canada v. Canada (Minister of Finance), [2002] 2 SCR 522, 2002 SCC 41.  In doing so, he enabled the litigants to maintain the confidentiality of the arbitration process as much as possible.

The provisions of Québec’s C.C.P. do address the public nature of the procedures before the courts as well as the confidentiality of the arbitration process, adding to what the parties may or may not have stipulated to in their own agreements.  For example:

Article 11 C.C.P. provides that civil justice administered by the courts is public and anyone may attend court hearings wherever they are held and have access to court records and entries in the registers of the courts.  Article 11 C.C.P. allows that an exception to that principle applies if the law provides for in camera proceedings or restricts access to the court records or to certain documents filed in a court record.

Article 12 C.C.P. provides, among other things, that the court may make an exception to the principle of open proceedings if, in its opinion, the protection of substantial and legitimate interests, requires that the hearing be held in camera, that access to a document or the disclosure or circulation of information or documents specified by the court be prohibited or restricted.

With regard to arbitration, the C.C.P. underlines the importance of confidentiality:

Article 4 C.C.P. provides that parties who opt for a private dispute prevention and resolution process and the third person assisting them undertake to preserve the confidentiality of anything said, written or done during the process, subject to any agreement between them on the matter or to any special provisions of the law.

Article 644 C.C.P. provides that the arbitrator is required to preserve the confidentiality of the arbitration process and protect deliberative secrecy but violates neither by stating conclusions and reasons in the award.

Payette J.’s sealing order appears to be motivated by applying articles 4 and 12 as an exception to article 11 C.C.P.