Québec – court lacks jurisdiction to refer parties to arbitration where dispute involves $15,000.00 or less – #177

Mr. Justice Daniel Bourgeois in Medeiros v. Jan-Pro Canada Est, 2019 QCCQ 663 held that he had no jurisdiction sitting in Court of Québec, Small Claims Division to refer the parties to arbitration because an arbitration tribunal did not qualify as a ‘court’ under article 547 al. 2(2) of Québec’s Code of Civil Procedure, CQLR c C-25.01 (“C.C.P.”) governing the options available to parties.  Instead of a referral, Bourgeois J. suspended the court proceedings in Small Claims Division pending an arbitration tribunal’s determination of the validity of the arbitration clause.

Plaintiff and Defendant had entered into an April 2, 2015 franchise contract which contained an arbitration clause for any dispute concerning the performance, interpretation, application or nullity of the contract.  Despite the clause, Plaintiff filed a claim against Defendant in Court of Québec, Small Claims Division, seeking $15,000.00 in damages.

Defendant responded by filing a contestation and applying for an order referring the parties to arbitration. Bourgeois J., sitting in Small Claims Division for the Court of Québec, considered the motion.

The Small Claims Division falls under the jurisdiction of the Court of Québec.  Article 35 C.C.P. stipulates that the Court of Québec has exclusive jurisdiction to hear and determine applications in which the value of the subject matter of the dispute or the amount claimed is less than $85,000, exclusive of interest.  Within that jurisdiction of the Court of Québec, articles 536 C.C.P. provides for a Small Claims Division for claims not exceeding $15,000.00, excluding interest.

In support of its motion for referral to arbitration, Defendant relied on articles 167 and 622 C.C.P.:

Article 167 C.C.P. If an application is brought before a court other than the court of competent jurisdiction, a party may ask that it be referred to the competent court or, failing that, that it be dismissed.

Lack of subject-matter jurisdiction may be raised at any stage of the proceeding, and may even be declared by the court on its own initiative, in which case the court adjudicates as to legal costs according to the circumstances.

Article 622 C.C.P. Unless otherwise provided by law, the issues on which the parties have an arbitration agreement cannot be brought before a court even though it would have jurisdiction to decide the subject matter of the dispute.

A court seized of a dispute on such an issue is required, on a party’s application, to refer the parties back to arbitration, unless the court finds the arbitration agreement to be null. The application for referral to arbitration must be made within 45 days after the originating application or within 90 days when the dispute involves a foreign element. Arbitration proceedings may be commenced or continued and an award made for so long as the court has not made its ruling.

The parties cannot, through their agreement, depart from the provisions of this Title that determine the jurisdiction of the court or from those relating to the application of the adversarial principle or the principle of proportionality, to the right to receive notification of a document or to the homologation or the annulment of an arbitration award.

In addition to those relied on by Defendant, Bourgeois J. drew the parties’ attention to articles 536 C.C.P. et seq. which provide special rules for small claims. In particular, Bourgeois J. pointed to article 547 al. 2(2) C.C.P. which sets out the options available to a defendant when deciding how to respond to a claim made within the jurisdiction of the Court of Québec’s Small Claims Division. 

Among the options available, including acquiescence, article 547 al. 2(2) C.C.P. stipulates that a defendant who chooses to defend the application may “ask that the application be dismissed, that the case be referred to another judicial district or to another court or to the competent administrative tribunal”.

By drawing the parties’ attention to article 547 al. 2(2) C.C.P., Bourgeois J. treaded on familiar ground, having been down the same path before.  In an earlier decision, Bourgeois J. in Guillette v. Jan-Pro Canada Est, 2016 QCCQ 7186 had refused to refer the parties to arbitration because article 547 al. 2(2) C.C.P. did not provide referral as an option.  Rather, on the facts before him in that case, Bourgeois J. declared the nullity of the arbitration clause.  He did so on the basis that the contract, being an adhesion contract, failed to meet the principle of proportionality in violation of article 622 al. 3 C.C.P.

On application for judicial review of Bourgeois J.’s earlier decision to the Superior Court, Mr. Justice Bernard Tremblay of the Québec Superior Court in Jan-Pro Canada Est inc. v. Bourgeois, 2017 QCCS 2151 granted the application but only in part.  Tremblay agreed with Bourgeois J.’s analysis of article 547 al. 2(2) C.C.P. but disagreed with Bourgeois J.’s decision to declare the nullity of the arbitration clause.  

At paras 26-37 of his reasons, Tremblay J. considered the express wording of article 547 al. 2(2) C.C.P. and, in light of the earlier Court of Appeal decision in Fédération des producteurs acéricoles du Québec v. St-Pierre, 2005 QCCA 839, determined that an ‘arbitration tribunal’ did not fall within the ‘courts’ (or ‘tribunals’) mentioned in article 547 al. 2(2) C.C.P.  As a result, the Court of Québec, Small Claims Division had no grant of jurisdiction to refer the parties to arbitration. 

The terms used at article 8 C.C.P. and article 1 of the Courts of Justice Act, CQLR c T-16 provide only for those ‘courts’ expressly identified therein and make no mention of or provision for arbitration tribunals.  The Act respecting administrative justice, CQLR c J-3 limits its application to “a decision to be made by the Administrative Tribunal of Québec or by another body of the administrative branch charged with settling disputes between a citizen and an administrative authority or a decentralized authority”, thereby excluding arbitration tribunals.  Tremblay J. held that arbitration tribunals do not settle disputes between a citizen and an administrative authority.  As a result, Tremblay J. held that Bourgeois J.’s decision to interpret article 547 al. 2(2) C.C.P. as excluding arbitration tribunals was reasonable and justified.

Turning to the current case before him, Bourgeois J. then noted that Plaintiff had not asked for the nullity of the arbitration clause.  He went on the observe that, had that been Plaintiff’s intention, the determination of the clause’s nullity had to be made first by the arbitrator.  His observation relied on cases cited by Tremblay J. in Jan-Pro Canada Est inc. v. Bourgeois, 2017 QCCS 2151, namely Dell Computer Corp. v. Union des consommateurs, [2007] 2 SCR 801, 2007 SCC 34, Rogers Wireless Inc. v. Muroff, [2007] 2 SCR 921, 2007 SCC 35 and Groupon Canada inc. v. 9178-2243 Québec inc., 2015 QCCA 645 as well as 7847866 Canada inc. v. Gree Electric Appliances Inc. of Zhuhai, 2017 QCCS 1723 and Fondacaro v. Syndicat des copropriétaires Prince Consort, 2018 QCCQ 4050.

Bourgeois J. held that Defendant sought only the referral of the parties to arbitration and not the dismissal of the action.  Given his review of the legislation and the case law regarding his jurisdiction under article 547 al. 2(2) C.C.P., he could not and would not refer the parties to arbitration.  Instead, as a matter of case management, he ordered the suspension (stay) of the court proceedings until the parties were able to have the arbitration clause before the ‘appropriate forum’.  Though he did not expressly mention ‘arbitration tribunal’ in his closing comment or in the dispositive, the content of his analysis immediately prior to that conclusion mentioned only the arbitration tribunal as a forum.