In Gauvin v. SBYC1935 Inc., 2025 QCCS 11, the Court granted an application by the Plaintiffs to have their own action stayed and referred to arbitration. The Defendant contested the application, arguing waiver of arbitration and tardiness in the filing of the application to stay, as the statutorily prescribed deadline to seek a stay was well past. The Defendant also argued the application was dilatory and an abuse of process by the Plaintiffs. The Court found that there was insufficient evidence of waiver and, noting that the deadline to seek a stay is not strict, it exercised its discretion to relieve the Plaintiffs’ delay.
Factual Background – On April 15, 2024, the Plaintiffs applied for judicial recognition of ownership by acquisitive prescription (adverse possession). The dispute involved five parcels of land over which the Plaintiffs claimed property rights based on continuous, peaceful, public, and unequivocal possession for over ten years. The disputed land had direct access to Lake Memphremagog.
The history leading up to the dispute dates back several decades. In the early 1990s, The Plaintiffs and two former business partners, Cerantola and Lafontaine, acquired the land, including the disputed parcels.
On October 19, 1996, an initial partition of the land between Plaintiffs and Cerantola and Lafontaine created a right of passage over certain parcels. A second partition was made on August 10, 1998, which created additional rights of passage, beach access, and views. Importantly, this second partition included an arbitration clause stating that any disputes regarding the interpretation or application of the rights of passage would be resolved through arbitration (the “1998 Agreement”).
On July 27, 2007, further changes were made, and new rights of passage were created, although this agreement did not include a new arbitration clause.
The Defendant, SBYC1935 Inc., acquired the disputed land in November 2023 from Cerantola and Lafontaine, with the intention of opening a sailing school.
Procedural Context – When the Plaintiffs filed an application for judicial recognition of property rights – specifically rights of way to the lake – in April 2024, a series of legal proceedings were set in motion:
- On May 30, 2024, the Defendant’s lawyer contested the Plaintiffs’ claims in a letter, highlighting that the dispute raised issues related to the rights of passage created by the 1998 Agreement.
- The following day, May 31, 2024, the parties agreed on a protocol for the case, outlining the procedural steps to be followed, as required by the Code of Civil Procedure (“CCP”).
- On June 7, 2024, the Plaintiffs filed a separate proceeding for a provisional and interlocutory injunction, seeking immediate relief from the Court as the Defendant had blocked their access to the Lake (“Injunctive Proceedings”). This proceeding invoked the 1998 Agreement and explicitly reserved the Plaintiffs’ right to proceed to arbitration on the merits of the issues raised regarding the rights of passage.
- Examinations on discovery were held on June 27, 2024, and a surveyor’s report on the disputed parcels was obtained by the Defendant on September 11, 2024. That report identified an overlap between the land over which the Plaintiffs claimed ownership and the scope of the rights of way granted by the Agreements of 1998 and 2007.
- Consequently, the Defendant filed a motion to dismiss the action on September 19, 2024, and sent an arbitration notice to institute another distinct proceeding on September 27, 2024 (“SBYC’s Arbitration”), seeking to define the scope of the rights of passage over the disputed land.
On October 9, 2024, the Plaintiffs filed an application to refer this matter to arbitration pursuant to Article 622 CCP. The Defendant opposed the application on the grounds that (i) the Plaintiffs had waived the arbitration clause by instituting the court proceedings in the first place, (ii) the Plaintiffs were too late, as the 45-day deadline to file an application under Article 622 CCP had expired, and (iii) the application to refer to arbitration was a dilatory tactic and an abuse of process.
Analysis of the Court – The Court found that the Plaintiffs had not waived their right to arbitration and that the request, although late, was not a dilatory or abusive tactic. Consequently, it granted the Plaintiffs’ request to refer the dispute to arbitration.
The Court recognized the validity of the arbitration clause in the 1998 Agreement, with reference to Article 2638 of the Civil Code of Quebec, and emphasized the principle of “competence-competence,” which allows arbitrators to rule on their own jurisdiction.
The Court then addressed each of the Defendant’s arguments in turn:
(i) Waiver – The Court relied on the following wording of Article 622 CCP:
“622. (…) 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. (…)” [emphasis added]
To conclude that since “a party” may present an application to refer a matter to arbitration, a plaintiff is not precluded from doing so simply because it initiated the court proceedings.
Accordingly, the Court assessed the evidence and concluded that there was no conclusive evidence of any waiver on the part of Plaintiffs. In this analysis, the Court noted the reservation of rights to arbitrate in the Injunctive Proceedings as evidence against finding waiver in this matter.
(ii) The 45-day Deadline – Article 622 CCP requires that, in domestic arbitrations, the application to refer to arbitration must be made within 45 days after service of the initial proceeding. This is not a strict deadline, and the Court can exercise its discretion to extend it where it considers it necessary or justified. The party seeking this extension must justify the delay in filing and show its intention to respect the arbitration agreement.
Here, the Court extended the deadline due to the interconnected nature of the disputes, including the arbitration initiated by the Defendant and the risk of contradictory decisions.
(iii) The abusive and dilatory nature of the Plaintiffs’ application – The Defendant argued that the request to refer to arbitration was a delaying tactic to avoid a Court ruling on its motion to dismiss, but the Court found the argument premature and unconvincing. As SBYC’s Arbitration was already under way, there was no significant delay anticipated from referring the matter to arbitration.
Consequently, the Court granted the Plaintiffs’ request to refer the dispute to arbitration and ordered the suspension of the judicial proceedings pending the outcome of the arbitration.
Contributor’s notes:
This is one of the rare occasions where the Court is presented with a stay application by the parties who initiated the court proceedings that they now seek to refer to arbitration. In this case, however, contextual factors, including the existence of a parallel arbitration initiated by the Defendant in connection with the issues in litigation, appear to have carried more weight in the Court’s analysis of the waiver issue than the fact that the Plaintiffs had taken numerous procedural steps in the court proceedings.
Unlike the case law on the jurisdiction of Quebec courts over matters referred to arbitration in an international context (see Québec – precedents on attornment re-read in light of newer rules requiring compliance to judicial contract – #434), the Court has confirmed that the institution of proceedings in a domestic arbitration does not constitute waiver. Indeed, as noted by the Court, Article 622 CPC permits for the Court to grant “a party’s application” to refer a dispute to arbitration. This necessarily means that a plaintiff may do so. Practically speaking, however, successfully referring one’s own action to arbitration can happen only where the context and the actions of the other parties justify the about-face. More often than not, this will be a insurmountable challenge (see for example Québec –Waiver of arbitration after court proceedings, despite letter proposing arbitration– #786).
Also, the result here – referring the entire case to arbitration and suspending the underlying proceedings – may be surprising in light of the exclusive jurisdiction of the Superior Court of Quebec to declare acquisitive prescription, the object of the Plaintiffs’ action. In this respect, however, the Court highlights the connection between the scope of the rights of way, an issue over which the parties gave the arbitrator jurisdiction, and the acquisitive prescription claimed by the Plaintiffs in the proceeding. As a result of this interconnectedness, the Court considers that the arbitration could be dispositive of the Plaintiffs’ action. The Court appears to have approached this from a practical perspective (albeit in obiter) and proposed that the acquisitive prescription issue be taken up again in the proceedings to homologate the eventual arbitral award. The tone of this portion of the discussion aligns with the opening directive of the CCP that promotes and encourages private dispute resolution, reminding us that “[p]arties must consider private prevention and resolution processes before referring their dispute to the courts.” [Emphasis added]