Québec – court orders parties to agree on arbitrator from plaintiff’s list rather than appoint one itself – #233

Relying on his inherent powers and without reference to the provisions applicable to arbitration, Mr. Justice Jocelyn Geoffroy in 9338-3941 Québec inc. v. 9356-2379 Québec inc., 2019 QCCS 4226 ordered the parties (i) to appoint an arbitrator from a list of five (5) sent earlier by Plaintiff rather than appoint one himself and (ii) to complete their arbitration by year’s end.  Geoffroy J. also issued a safeguard order for payment of commercial rent owing going forward but refrained from dealing with past months, stating that retroactive payments were within the arbitrator’s jurisdiction.

9338-3941 Québec Inc. (“Plaintiff”) had leased commercial space to 9356-2379 Québec Inc. (“9356” or “Defendant”).  Two (2) individuals signed on to the lease as guarantors to Defendant’s obligations. Disputes arose and Plaintiff instituted court litigation alleging breach of the lease and seeking: (i) declarations from the court resiliating and annulling the lease; (ii) damages; and, (iii) an injunction evicting Defendant. 

The parties had already appeared in court earlier on March 29, 2019 regarding whether their arbitration agreement applied to the dispute between them. At that time, Madam Justice Danye Daigle in 9338-3941 Québec inc. v. 9356-2379 Québec inc., 2019 QCCS 1221 granted a declinatory motion and declared that the parties’ dispute was subject to arbitration.  See the earlier Arbitration Matters note : “Québec – parties’ autonomy favours allowing arbitrator to decide jurisdiction first even if some claims appear beyond it

Due to Defendant’s filing of a notice of intention to file a proposal under the Bankruptcy and Insolvency Act, RSC 1985, c B-3 (“BIA”), Daigle J. had also issued a second decision that same day authorizing Plaintiff to continue the proceedings and declaring that articles 69-69.4 of the BIA involving injunctive and declaratory relief did not apply to Plaintiff.

Plaintiff and Defendant and two (2) others serving as guarantors (“Defendants”) undertook mediation on August 28, 2019 but were unsuccessful in arriving at an agreement.

Plaintiff applied for a safeguard order requiring Defendants to pay the monthly rent retroactive to February 1, 2019 or, in the alternative, evicting Plaintiff for non-payment.

Geoffroy J. cited the parties’ arbitration agreement which imposed a set time frame within which to undertake arbitration should mediation fail.  He noted that the delay had expired but that the parties had failed to agree on an arbitrator. He observed that Plaintiff faulted Defendants for unduly delaying the arbitration process by not providing their position regarding the five (5) names proposed as arbitrator on June 4, 2019.

During the hearing, Geoffroy J. ordered counsel for the parties (i) to agree on an arbitrator by September 12, 2019 from among the list proposed buy Plaintiff on June 4, 2019 and (ii) to ensure that the arbitration was completed by the end of 2019.  Geoffroy J. wrote that he considered it his duty and authority to do so under article 49 of the Code of Civil Procedure, CQLR c C-25.01 (“C.C.P.”):

Article 49 C.C.P. The courts and judges, both in first instance and in appeal, have all the powers necessary to exercise their jurisdiction.

They may, at any time and in all matters, even on their own initiative, grant injunctions or issue protection orders or orders to safeguard the parties’ rights for the period and subject to the conditions they determine. As well, they may make such orders as are appropriate to deal with situations for which no solution is provided by law.

Geoffroy J. expressed concern with maintaining a balance between the parties, finding it unfair that a party could continue to occupy space but not pay for it. Respectful of the imminent nomination of the arbitrator, he issued an order that Defendants were to pay to Plaintiff’s attorneys in trust the monthly rent at an amount he stipulated but only for the current and future months.  He expressly refrained from dealing with amounts owing for earlier months, acknowledging that they would be dealt with by the arbitrator as those amounts were within the arbitrator’s jurisdiction.  Failing payment of the rent, he stipulated that he would issue an expulsion order.

urbitral note – Geoffroy J. sourced his jurisdiction in an article placed outside the C.C.P. section assigned to arbitration, Title II, articles 620 C.C.P. et seq. or the introductory ones at articles 1-7 C.C.P.  Doing so recognizes the court’s larger set of tools to assist the parties in proceeding with arbitration.  The orders oblige the parties to exercise their autonomy by choosing their arbitrator while imposing a set time frame.  Geoffroy J. introduced his analysis by commenting on the purpose of having chosen arbitration in the first place:

(informal translation) – ‘Normally when parties provide an arbitration clause in their contract, it’s because they want to proceed rapidly and with reduced costs, should a dispute arise.  The present file is no exception’.