In Municipalité de Caplan v. Arpo Groupe-Conseil Inc., 2020 QCCS 885, Madam Justice Michèle Lacroix refused to nominate an arbitrator due to the limited scope the parties gave to the definition of dispute in the agreement to arbitrate. She held that when an agreement to arbitrate uses imprecise terms, access to the courts must be favoured over enforcement of such clauses.
By January 20, 2017 resolution, the Municipalité de Caplan (“City”) retained Arpo Groupe-Conseil Inc. (“Arpo”) to prepare plans and specifications for the repair and expansion of a multi-purpose hall, including the preparation of tender materials and oversight of the planned work (“Contract”).
Following completion of the work, the City held Arpo and two (2) other entities responsible for certain costs allegedly related to three (3) different incidents. The City held the parties liable for damages related to trouble and inconvenience, professional fees and expert fees stemming from the incidents.
The City filed an application to the court to name an arbitrator under the terms of its Contract with Arpo. Arpo resisted, arguing that its refusal to engage in arbitration was genuine given that the dispute did not fall within the terms of its agreement to arbitrate.
Section 8 of the Contract provided for a tiered dispute process, including reasonable efforts, negotiation, mediation and arbitration. In particular, section 8.2 provided that the parties would try mediation of their disputes and, if unsuccessful, arbitration. Despite the detail in the tiered process, section 8 limited the nature of the disputes subject to the process.
[informal translation of excerpt] ‘The parties agree that all differences or disputes regarding the present contract or stemming from its interpretation or application will be submitted to mediation’ … ‘If no agreement results within sixty (60) days of the mediator’s nomination, the dispute will be finally resolved by arbitration to the exclusion of the courts, according to the laws of Québec’.
The balance of the agreement to arbitrate was otherwise complete. The full text of the City and Arpo’s section 8.2 is as follows:
“8 RÈGLEMENT DES DIFFÉRENDS
8.1 Processus de règlement
Les parties doivent essayer, en faisant tous les efforts raisonnables possibles, de régler leurs différends à l’amiable. Elles conviennent de révéler tous les détails, de donner les renseignements et de fournir tous les documents pertinents susceptibles de faciliter les négociations, le tout sans préjudice de leurs droits, de manière franche et en temps utile.
Si les négociations ne se concluent pas par le règlement du différend, les prochaines étapes à envisager sont la médiation et l’arbitrage.
Dans le cas de tout différend entre la Municipalité de Caplan et l’adjudicataire relativement à leurs obligations et à leurs droits respectifs en vertu du contrat, l’une des parties a le droit d’aviser l’autre partie de ce différend et de demander la médiation ou l’arbitrage à ce propos, à l’exception du recours aux tribunaux. La procédure de médiation ou d’arbitrage peut avoir lieu en tout temps même en cours d’exécution du contrat.
8.2 Médiation et arbitrage
Les parties conviennent que tout désaccord ou différend relatif à la présente convention ou découlant de son interprétation ou de son application sera soumis à une médiation. À cet effet, les parties aux présentes s’engagent à participer à au moins une rencontre de médiation en y déléguant une personne investie d’un pouvoir de décision. Le médiateur sera choisi par les parties.
Si aucune entente n’intervient dans les soixante (60) jours suivant la nomination du médiateur, ce différend sera tranché de façon définitive par voie d’arbitrage et à l’exclusion du recours aux tribunaux, selon les lois du Québec. Les parties peuvent à tout moment convenir d’un délai plus long avant de soumettre le différend à l’arbitrage.
À moins que les parties n’en décident autrement dans une convention d’arbitrage, l’arbitrage se déroulera sous l’égide d’un arbitre seul et sera conduit conformément aux règles de droit et aux dispositions du Code de procédure civile du Québec en vigueur au moment où le différend est survenu. La sentence arbitrale sera sans appel et exécutoire, et liera les parties”.
Lacroix J. began her brief reasons by noting the requirement set by article 622 of the Code of Civil Procedure, CQLR c C-25.01 (“C.C.P.”).
“Article 622 C.C.P. Unless otherwise provided by law, the issues on which the parties have an arbitration agreement cannot be brought before a court even though it would have jurisdiction to decide the subject matter of the dispute.
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. The application for referral to arbitration must be made within 45 days after the originating application or within 90 days when the dispute involves a foreign element. Arbitration proceedings may be commenced or continued and an award made for so long as the court has not made its ruling.
The parties cannot, through their agreement, depart from the provisions of this Title that determine the jurisdiction of the court or from those relating to the application of the adversarial principle or the principle of proportionality, to the right to receive notification of a document or to the homologation or the annulment of an arbitration award”.
In light of article 622 C.C.P., Lacroix J. examined the wording used by the parties in their agreement to arbitrate. She held that the litigation filed by the City did not qualify as a dispute within the meaning of the parties’ agreement to arbitrate. The litigation concerned claims for damages and not interpretation of the Contract. Citing Great-West Life Insurance Company v. Cohen, 1993 CanLII 3978 (QC CA), Villeneuve v. Pelletier, 2010 QCCS 320 and 9283-7459 Québec inc. v. Anfossi Tassé d’Avirro inc., 2018 QCCS 2548, she held that the wording in an agreement to arbitrate must leave no room for ambiguity regarding the obligation to submit to arbitration. In cases where the wording of such agreements is imprecise, access to the courts must be favoured over such agreements.
Lacroix J. referred to 9096-0105 Québec Inc. v. Construction Cogela Inc., 2003 CanLII 546 (QC CS) which held that the conclusions of the litigation were relevant to determining whether the litigation falls within the terms of the agreement to arbitrate. In doing so, Lacroix J. noted that the conclusions to the City’s litigation sought damages and Arpo’s liability raised no interpretation or application of the Contract. The action required no clause of the Contract to interpret or any question regarding modalities of its interpretation.
Lacroix J. dismissed the application to name an arbitrator.
urbitral note – First, the agreement to arbitrate mentions two (2) components to ‘disputes’: (i) ‘all differences or disputes regarding the present contract’ or (ii) ‘stemming from its interpretation or application’. In her reasons, Lacroix J. expressly held the parties to the terms of their bargain which provided for arbitration limited to disputes involving (ii), the interpretation or application of their contract. Lacroix J.’s analysis does not expressly address the first half (i) ‘regarding the present contract’.
It is unclear from the brief reasons whether the agreement to arbitrate (i) ‘all differences or disputes regarding the present contract’ lacked sufficient scope to cover litigation regarding breach/performance of the Contract or whether the wording was simply not precise enough. Rather than scope, it could be implied from her reasons the (i) did not apply to the litigation because the wording for (i) was imprecise and therefore insufficient to deny access to the courts.
Second, regarding the most recent decision relied on by Lacroix J., 9283-7459 Québec inc. v. Anfossi Tassé d’Avirro inc., 2018 QCCS 2548, see the Arbitration Note “Québec court enforces parties’ requirement of post-dispute agreement to arbitrate”. In that decision, the court held that parties’ reference to arbitration in their contract was neither sufficient nor clear enough to eliminate recourse to the courts. By adding the mention of ‘by agreement of the parties’ in their undertaking to arbitrate, the parties had imposed a post-dispute requirement for fresh agreement to go to arbitration. Given that the responding party resisted arbitration, the court held that the terms of the undertaking to arbitrate had not been met and she would not order the parties to do what they had not clearly undertaken to do.
Third, in Villeneuve v. Pelletier, 2010 QCCS 320, the court held that the agreement to arbitrate was insufficient and not complete. The wording imposed a requirement that arbitration be undertaken ‘following agreement of the parties to arbitrate’ (“suivant l’entente des parties de soumettre leur différend”). In that case, the court refused to consider the agreement to be a binding one especially if the other party did not agree, once the dispute arose, to arbitrate.
In that decision the court did note at paras 51-54, the applicant’s declared motivation in applying to the court for the nomination of an arbitrator. The applicant stated that a reason for applying for the nomination of an arbitrator was its fear that the other party would raise the arbitration clause as a reason not to engage in litigation before the courts if the applicant did choose the courts instead.
The court noted that applicant’s fear was not unfounded and that it was possible for the other party to raise the objection. The court noted, however, that the fear was no longer well-founded as the other party had ‘made its bed’. [informal translation] ‘By arguing that arbitration was not possible unless the parties ‘agreed to submit their dispute’ to an arbitrator, the party could no longer plead that the arbitrator had jurisdiction after having refused to agree with applicant to submit the dispute to arbitration’.
The court appeared to endorse the approach taken by applicant to use its motion to pre-empt a challenge to court litigation or otherwise simplify access to a single method of dispute resolution.