Québec – litigants’ membership in professional association binds them to arbitrate disputes – #436

In brief reasons, Mr. Justice Éric Couture in Diamond Diamond Real Estate Inc. v. Londono Realty Group Inc., 2021 QCCQ 176 dismissed an action for payment of commissions, holding that the litigants’ membership in a real estate association included bylaws submitting their dispute to mandatory arbitration.  The dispute resolution bylaw also stipulated that disputes subject to arbitration under the membership bylaw must be submitted within one (1) year from the date of the transaction.  As the action concerned an October 2016 transaction, Couture J. dismissed the action rather than stay it or refer the parties to arbitration. The facts serve as a sample situation in which parties are bound to arbitrate (i) by virtue of their membership in an association rather than having negotiated a contract and included an agreement to arbitrate and (ii) within a time frame shorter than applicable prescription/limitation periods.

Londono Realty Group Inc. (“Londono”) and Diamond Diamond Real Estate Inc. (“Diamond”), real estate agencies, disputed the commission owing on an October 2016 sale.  Londono as listing agent disputed Diamond’s claim for a share of commission.  Diamond alleged that it represented the buyer and had effectively initiated the sale, entitling it to the 2.5% commission as initiating agent.  Diamond issued an invoice for its commission claim but Londono refused to pay leading to an action by Diamond.

Londono applied for dismissal of the action, alleging that both it and Diamond were, at the time of the transaction, members of the Chambre immobilière du Grand Montréal (“CIGM”) (now the Québec Professional Association of Real Estate Brokers).  Londono argued that the CIGM bylaws in effect at that time included a bylaw which, at article 90, obliged members to engage in binding arbitration for disputes between the members.  See Conciliation and Arbitration Bylaw/Règlement de conciliation et d’arbitrage (“Bylaw”) which appears to be the arbitration bylaw in question.

Couture J. referred to articles 1.2, 1.5, 4.2 and 7.20 to conclude that Diamond and Londono were bound to undertake arbitration to resolve their disputes. 

Article 1.2 identified those members who were bound to resolve their disputes pursuant to the process in the Bylaw.

1.2 The present Bylaw shall apply to any dispute between the following QFREB members:

a) between real estate agencies;

b) or between real estate agencies and brokers acting on their own account as defined in the Real Estate Brokerage Act (L.R.Q., c. C-73.2);

c) or between brokers belonging to the same real estate agency;

d) or between brokers acting on their own account;

Brokers involved in a dispute must be members on the date of the brokerage operation that is the subject of the dispute”.

Article 1.5 stipulated that the arbitration tribunal constituted under article 6 of the Bylaw (“Arbitration Council”) has exclusive jurisdiction over disputes covered by the Bylaw.

1.5 The Arbitration Council shall be the sole court authorized to deal with and hear disputes as defined in the present Bylaw”.

Article 4.2 also imposed a one (1) year period in which a member had to present its request for arbitration.

4.2 The member must present his/her request for conciliation and arbitration within a period not exceeding one (1) year from the date of the brokerage transaction that is the subject of the dispute or from the collection of compensation in the case of a written agreement between the members. This time period is mandatory”.

Article 7.20 underlined the final and binding nature of the arbitral award, the absence of any appeal and the applicable lex arbitri.

7.20 The arbitration decision shall be final and without appeal. It shall bind the parties and become enforceable in accordance with the provisions of Book VII of the Code of Civil Procedure (R.S.Q. c. C25) relating to the homologation of the arbitration decision”.

Having reviewed the relevant provisions of the parties’ agreement to arbitrate membership agreement, Couture J. referred to the definition of arbitration agreement set out in the Civil Code of Québec, CQLR c CCQ-1991 (“C.C.Q.”).

Article 2638 C.C.Q. An arbitration agreement is a contract by which the parties undertake to submit a present or future dispute to the decision of one or more arbitrators, to the exclusion of the courts”.

Couture J. concluded that the Bylaw, applicable by virtue of the parties’ membership as agencies, qualified as a valid, binding agreement (“une clause compromissoire parfaite”), as identified by the Supreme Court in Zodiak International v. Polish People’s Republic, 1983 CanLII 24 (SCC), [1983] 1 SCR 529

In addition to his own analysis, Couture J. held that the Bylaw had already received application and enforcement by the Québec Court of Appeal in Re/Max Platine Inc. v. Groupe Sutton-Actuel Inc., 2008 QCCA 1405 para. 14.  In that earlier decision, the Court held that Bylaw was clear and mandatory, not optional or a preliminary step to engaging in litigation. See also Pelletier v. Brandt, 2013 QCCA 1557.

Couture J. dismissed Diamond’s action.

urbitral notes – First, Couture J. did not stay the action or refer the parties to arbitration.  Couture J. dismissed the action.  Note the agreement of the parties as members to the CIGM that disputes must be submitted to arbitration under the Bylaw within one (1) year.

Second, regarding the distinction between a stay and a dismissal, see the earlier Arbitration Matters note “B.C. – a stay is not a dismissal – #315”.

In Clayworth v. Octaform Systems Inc., 2020 BCCA 117, B.C.’s Court of Appeal held that interpretation of the scope of an agreement to arbitrate is a question of mixed fact and law, not a question of law.  As such, the courts are to apply the “arguable case” test whereby jurisdictional issues relating to the scope of the arbitration agreement are to be resolved in first instance by the arbitrator. The Court also emphasized the distinction between a stay and a dismissal. A stay simply holds proceedings in abeyance until the arbitrator completes the work which the parties agreed should be arbitrated. If the arbitrator determines the dispute is not one referred to arbitration or there are matters which remain unresolved after arbitration, a stay could be lifted upon application.