Québec – court holds parties to their bargain to refuse challenge to arbitral award – #036

Mouhadi v. Fiducie famille Eusanio, 2017 QCCS 3570 demonstrated the economy inherent in Québec’s approach to the court’s post-award intervention by briskly considering and dismissing four challenges to a final arbitration award.  Unlike other Canadian provinces and territories, Québec arbitration law makes no distinction between international and domestic arbitration, applying a single standard familiar to international commercial arbitration practitioners. Defendants failed to meet their burden of establishing any one of the few grounds available to resist homologation.  

Amale Mouhadi (“Mouhadi”) and Richard Viau (“Viau”) sold their shares in Agence Vitale Inc. (“AVI”) to Fiducie Famille Eusanio (“FFE”) and Fiducie Peter et Barbara Eusanio (“FPBE”).  The same day, VTI retained Mouhadi’s services through a contract of sale with 9289-3767 Québec Inc.  (“9289”).  Two disputes arose, one involving the contract of sale and another involving the contract of service.  Each contract contained an arbitration clause, albeit not identical including differences in the arbitration costs.  

The arbitrator issued a final award.  Mouhadi, Viau and 9289 (“Plaintiffs”) applied to homologate the award.  FFE, FPBE and AVI (“Defendants”) resisted and applied to annul the award.  Madam Justice Claudine Roy looked to article 646 of the Code of Civil Procedure, CQLR c C-25.01 (“C.C.Q.”) for the reasons for which the court could refuse to homologate an award. 

Article 646 The court cannot refuse to homologate an arbitration award or a provisional or safeguard measure unless it is proved that 

(1)   one of the parties did not have the capacity to enter into the arbitration agreement; 

(2)   the arbitration agreement is invalid under the law chosen by the parties or, failing any indication in that regard, under Québec law; 

(3)   the procedure for the appointment of an arbitrator or the applicable arbitration procedure was not observed; 

(4)   the party against which the award or measure is invoked was not given proper notice of the appointment of an arbitrator or of the arbitration proceedings, or it was for another reason impossible for that party to present its case; or 

(5)   the award pertains to a dispute not referred to in or covered by the arbitration agreement, or contains a conclusion on matters beyond the scope of the agreement, in which case only the irregular provision is not homologated if it can be dissociated from the rest. 

The court cannot refuse to homologate the arbitration award on its own initiative unless it notes that the subject matter of the dispute is not one that may be settled by arbitration in Québec or that the award or measure is contrary to public order. 

Relying on the Québec Court of Appeal’s recent iteration of the burden of proof in Endoceutics inc. v. Philippon, 2015 QCCA 1346, Roy J. noted that the burden of establishing that one or more grounds in article 646 C.C.Q. have been met rests on the party invoking its provisions.  

Defendants raised three arguments, each of which Roy J. considered and dismissed. 

Defendants objected to the 18 month delay taken by the arbitrator to issue the final award.  They claimed that they suffered a prejudice in the form of additional interest accumulating.  Roy J. noted that while article 642 C.C.Q. requires that an arbitral award issue within three months once taken under advisement, exceeding that delay is not a ground listed in article 646 C.C.Q. for refusing to homologate an award.  As well, Defendants never complained of the delay.  Only Plaintiffs wrote the arbitrator to enquire as to the status of the award. With regard to the interest, Roy J. observed that Defendants could have paid the portion of the claim which they did not contest, either directly to Plaintiffs or into court.  Their tendering a cheque to pay half with a mention of “final payment” was refused by Plaintiffs.  Roy J. wrote that the Defendants had to bear the consequences of the approach they adopted.  

Defendants claimed that the arbitrator exceeded his jurisdiction when ordering AVI to pay legal fees.  They argued that the arbitration agreement did not provide authority to do so. Roy J. disagreed.  She noted that the parties had renegotiated their arbitration agreements by consolidating them in to after the two were initiated and all arbitration parties, including AVI, expressly agreed that the arbitrator could award legal fees as part of the costs of the arbitration.   

Defendants objected to having been ordered to pay a part of the legal fees given that they were partially successful.  Roy J. noted that the arbitrator had properly explained why Defendants would pay a portion of the costs and not the entirety and that the court, asked to homologate an award, was not tasked with redoing the costs condemnation.  

Defendants considered that the arbitrator had breached the rules of natural justice by reopening the hearing, at Plaintiffs’ request, and in doing so denied Defendants a full right to be heard.  Roy J. held that the complaint was unfounded as each party had been given full and equal opportunity to communicate their position in writing.  Had they wanted to obtain further procedural measures, such as cross-examining witnesses on some questions, they could have requested them but did not.   Roy J. held that Defendants could not now only complain about the process once it was finished because they disagree with the result. 

Roy J. considered each of Defendants’ reproaches and dismissed each of them.  She noted that Defendants had negotiated and accepted the very procedure of which they now complained, had tolerated any alleged grounds and could have objected in a timely manner prior to the issuance of the award.  Concluding that Defendants raised no valid grounds to annul the award, Roy J. homologated the award.