Québec – court suspends own process, requires parties take arbitration-related steps prior to decision on stay – #365

In Syndicat de la copropriété Clark et Fleury v. Généreux, 2020 QCCS 1835, Mr. Justice Mark Phillips issued a sequence of orders regarding the parties’ to exhaust the steps related to each of their competing dispute resolution procedural approaches.  Without pre-determining either party’s rights either to pursue freshly-filed litigation or to obtain referral to arbitration, Phillips J. suspended his own involvement in a referral application and, during that suspension, imposed steps to complete procedural arguments for/against arbitration in two (2) court files. His orders included ‘recommending’ the parties exercise certain rights in their agreement to arbitrate prior to a later but near-in-time date at which he would resume involvement. Phillips J. limited his involvement to ensuring completion of all steps necessary to (i) the agreement to arbitrate and (ii) contesting the court’s jurisdiction, under reserve of any upcoming decision that the agreement to arbitrate applied to the disputes.

The Syndicat de la copropriété Clark et Fleury (“Syndicat”) and G disputed issues arising from contractual agreements involving a condominium.  Those contracts included an agreement to arbitrate disputes in order to resolve them.  Those contracts were no doubt complex

On June 9, 2020 AG had initiated litigation against Syndicat and two (2) individuals (“S” and “D”) in a Superior Court file, docket number ending in 202 (“Court File 202”).

Syndicat applied in a Superior Court file, docket number ending in 195 (“Court File 195”), to have the court name an arbitrator for their dispute pursuant to the terms of its agreement to arbitrate with G and under article Code of Civil Procedure, CQLR c C-25.01 (“C.C.P.).

Article 625 C.C.P. If the appointment of an arbitrator proves difficult, the court, on a party’s request, may take any necessary measure to see to the appointment.

For example, if a party fails to appoint an arbitrator within 30 days after having been required by another party to do so, the court may make the appointment. As well, the court may appoint an arbitrator if, 30 days after two arbitrators are appointed, they cannot agree on the choice of the third arbitrator”.

In support of its application, Syndicat provided a copy of the proceeding it would submit to the arbitrator (“Arbitration Claim”), the agreement to arbitrate and G’s refusal to proceed to arbitration.  In the absence of G’s involvement in the arbitration and appointing an arbitration, Syndicat in its application also identified the arbitrator for which it sought appointment.

Phillips J.’s reasons do not set out the exact claims and remedies in Court File 195 and Court File 202 but he does observe that the files are ‘in large part, the mirror of the other’.  At para. 7, Phillips J. did list the four (4) elements common to each:

(a) Syndicat seeks a declaration that its decisions are valid and are those challenged by G in Court File 202;

(b) the conclusions by which Syndicat seeks a monetary condemnation against G involve the common expenses determined in those decisions;

(c) each court file involves the issue of the legal hypothec (lien/mortgage) published by Syndicat in regard to the common expenses; and,

(d) in general, the same points are raised in both court files by each of the parties as much as for the claim by one and the defense of the other.

Part of the issues in dispute were further disclosed by G’s grounds to resist Syndicat’s application to name an arbitrator. Despite acknowledging the existence of the agreement to arbitrate, G resisted Syndicat’s application to name an arbitrator, raising three (3) grounds:

(i) an arbitrator would not have jurisdiction to deal with three (3) elements in the litigation as they are within the exclusive jurisdiction of the Superior Court: (a) a request to annul six (6) decisions taken by Syndicat’s board; (b) a request to radiate a legal hypothec; and, (c) damages for abuse;

(ii) the litigation involves also third parties not covered by Syndicat’s Court File 195; and,

(iii) Syndicat has not followed the procedure to choose an arbitrator as set out in the agreement to arbitrate.

In addition to those grounds, G also argued that her Court File 202 was the best procedural vehicle for the entirety of the litigation because Syndicat would need only formulate its claim against her, as disclosed in Syndicat’s Arbitration Claim, as a cross-demand in Court File 202.

Syndicat also indicated to Phillips J. that it intended to file a similar motion in Court File 202.

Having set the context, Phillips J. determined that it was best to manage both court files together in a ‘harmonious manner’ in order to avoid contradictory decisions in the court files.

Phillips J. noted that, despite G’s challenges as set out above, G also had not renounced to her right to be consulted on the arbitrator as provided for in the process set out in the agreement to arbitrate in the event that the litigation would be resolved by arbitration.

Phillips J. then issued his order, deciding to:

– suspend adjudication of Syndicat’s application in Court File 202 to refer the parties to arbitration under article 622 C.C.P.;

– grant Syndicat a delay, corresponding to the 45 days delay set out in article 622 C.C.P. in which to make an application for referral to arbitration, to file such application in Court File 202;

– order Syndicat to e-mail to Phillips J. a copy of the application in Court File 202 with a notice of presentation for that application advising recipients (i.e. third parties S and D) that the application in Court File 202 would be heard at a date/hearing room to be determined by the Court, in compliance with instructions from Phillips J. in addition to serving notice of that application of G’s attorneys and filing in the court record;

– reserve jurisdiction to order joinder of the court files;

– recommend Syndicat to communicate with G regarding the choice of an arbitrator according to the terms of the agreement to arbitrate;

– recommend G to collaborate in Syndicat’s steps to discuss choice of an arbitrator without prejudice to her grounds to challenge the jurisdiction of the arbitrator;

– order the parties to advise Phillips J. by e-mail of the results of all steps taken in their communications regarding choice of an arbitrator; and

– advise the parties that if no application in Court File 202 is made, served and filed within the 45 day delay, Phillips J. would render a decision in writing on Syndicat’s application in Court File 195.

urbitral note – First, Phillips J. provided the parties the court’s assistance in managing their respective approaches (court vs. arbitration) without compromising either party’s procedural approach or challenges made against the other party’s approach.  In order to leave to the parties the greatest scope of autonomy over how best to at least frame a hearing on their competing approaches, Phillips J. elected to suspend the court’s own process, for a short time frame, and require only that the parties discuss and inform each other of the few steps necessary to take prior to the court exercising its jurisdiction.  Such steps include Syndicat’s decision to make, serve and file an application for referral to arbitration in Court File 202.  If the step is not taken and completed as ordered in the time frame, at least the parties and the court will have subscribed the need for any court involvement in their agreement to arbitrate.

Second, Phillips J.’s orders do not pre-determine any result on Syndicat’s application in either court file and reserve G’s rights to challenge an arbitrator’s jurisdiction even if ‘recommended’ to participate in discussion.

Third, Phillips J. made no comment on Syndicat’s own choice of arbitrator and only encouraged discussion between the parties.  Such discussions could well lead to agreement on Syndicat’s proposed arbitrator.  Phillips J.’s reasons record no objection by G to the proposed arbitrator but only arguments in favour of proceeding by court.  In doing so, Phillips J. effectively underlined that the court need not involve itself in a process (appointing an arbitrator) unless the parties themselves have at least attempted to manage that process first.

Fourth, for another recent decision by Phillips J. regarding jurisdiction of an arbitrator, see Alice & Smith Divertissement Inc. v. Duro, 2020 QCCS 2253. In that decision, Phillips J. considered an arbitrator’s interim decision granted a jurisdictional objection, determining that he lacked jurisdiction as arbitrator for a particular aspect of the shareholders’ dispute. For the reasons set out in that decision, Phillips J. determined that the arbitrator did have jurisdiction for that particular aspect of the shareholders’ disputes raised in arbitration. An Arbitration Matters note on that decision will be posted.