In Multi Chariots Élévateurs inc. v. 9191-0216 Québec inc., 2025 QCCQ 6048, the Court granted the Defendant’s application to annul the arbitration award rendered in a small claims arbitration process due to non-compliance with the applicable procedure and violation of the Defendant’s right to be heard; the Defendant had no notice of the arbitration. Small claims arbitration in Quebec, as discussed in this decision, is a new procedure resulting from the coming into force of the Regulation respecting mediation and arbitration of small claims, C-25.01, r. 0.6.1. This regulation stipulates that a claim of less than $5,000 brought before the Court of Quebec Small Claims Division shall be referred to arbitration (at no cost) after mandatory mediation has failed to resolve the matter. The Rules provide for a specific arbitration procedure, requiring the state- appointed arbitrator to expressly validate the parties’ consent to proceed by way of arbitration, or the matter will proceed in the courts.
The new Regulation respecting mediation and arbitration of small claims – Since November 2023, claims of less than $5,000 filed with the Court of Quebec, Small Claims Division, follow a process designed to promote the use of ADR methods. These claims are subject to mandatory mediation and, in the event of an impasse, are automatically referred to arbitration at no cost to the parties. This new process is part of the Quebec legislature’s desire to improve access to justice within a reasonable time frame by reducing congestion in the courts.
In the event a mediation is not successful, the Regulation initially provides that the parties have 30 days to refuse to participate in arbitration and thus withdraw from the process so that their case can be heard and decided by a judge of the Court of Quebec. If no party refuses to participate within this 30-day period, the case is referred to a state-appointed arbitrator, who is also required to validate the parties’ consent to participate in arbitration before proceeding.
After confirming the consent of the parties, the arbitrator shall hold the hearing on a date agreed with them within 45 days of their appointment. The arbitrator may conduct the arbitration by technological means if the parties agree and has 30 days after the hearing to render the award. The rules also provide that the arbitrator may proceed by default if one of the parties fails to participate at the arbitration hearing (article 60 of the rules). However, this option requires that the parties’ consent has been previously validated and the date of the hearing set with them.
The arbitration proceedings – In this case, the matter was referred to arbitration following the failure of mediation. The appointed arbitrator sent an arbitration protocol to the parties by email to confirm their consent to the arbitration process. The Plaintiff signed the protocol, but the arbitrator did not receive a response from the Defendant. The arbitrator returned the protocol to the Defendant by regular mail and again received no response from the Defendant. Then the arbitrator summoned the Plaintiff to an arbitration hearing and issued a default award that ordered the Defendant to pay the Plaintiff the claimed amount of $2,332.78 plus legal costs.
The Application for Annulment – The Defendant requested the annulment of the arbitral award in accordance with Articles 646 and 648 of the Code of Civil Procedure, on the following two grounds:
“646. […]
3. the procedure for the appointment of an arbitrator or the applicable arbitration procedure was not observed;
4. the party against which the award or measure is invoked was not given proper notice of the appointment of an arbitrator or of the arbitration proceedings, or it was for another reason impossible for that party to present its case.”
The applicable arbitration procedure was not observed – The Court granted the request and set aside the arbitral award, concluding that the Defendant had not consented to the arbitration proceedings, in violation of Article 52 of the Rules. It specifically provides that the arbitrator must validate the consent of the parties before proceeding. The evidence showed that the arbitrator had made a mistake in the Defendant’s email address and that, due to a postal strike, the Defendant had not received the documents sent by the arbitrator. In these circumstances, the arbitrator had not followed the applicable rules of arbitration procedure.
Furthermore, the Court concluded that the arbitration procedure had not been followed with regard to setting the date for the arbitration hearing, which must be agreed upon with the Parties in accordance with Article 50 of the Rules. Finally, the arbitrator held the arbitration hearing by technological means, which may only be done with the consent of both parties in accordance with Article 51 of the Rules, which was not the case in this instance.
The party was not given a proper notice of the arbitration proceedings – The Court also granted the application for annulment because the Defendant had not been duly summoned to the arbitration hearing and had therefore been deprived of its right to be heard. The Court concluded that the fundamental principle of adversarial proceedings had been violated, justifying the annulment of the arbitral award.
For the above reasons, the Court ruled that the arbitrator’s violation of various provisions of the Rules discredited the administration of justice and therefore set aside the award. The Court also scheduled a hearing on the merits before the Court of Québec instead of returning the parties to arbitration.
Contributor’s Notes:
The new Regulation explicitly requires the arbitrator to validate the parties’ consent to the arbitration process because of its automatic application under the Rules. However, this case can be applied more broadly to an arbitration in which the parties freely negotiate the arbitration clause. It highlights the general principle that arbitrators must adopt best practices to ensure notice when faced with a party that fails to participate in the arbitration process.
The defaulting party must have been duly notified of the arbitration. Simple transmission of notice by regular mail or email without confirmation of receipt is clearly insufficient.
However, even where the arbitrator is satisfied that a party has received notice of the arbitration, they may face an additional challenge when a party does not participate. The Regulation does not address this situation. And institutional Rules are generally vague about how the arbitrator should conduct the proceedings in this situation.
However, Article 4.17.1 of the ADRIC Arbitration Rules prescribes that “a defaulting party must continue to receive all documents delivered and notification of all steps taken in the arbitration, including notice of the final hearing”.
The Chartered Insitute of Arbitrators has created useful Guideline on how to conduct arbitration in the event that one party fails to participate. This Guideline recommends the following:
“Given that arbitrators should endeavour to make a valid and enforceable award, they need to be particularly careful in the conduct of the proceedings when dealing with a non-participating party in order to minimise the risk that their award is challenged. Accordingly, arbitrators should ensure that the non-participating party has received proper notice of the request for arbitration and of any subsequent steps in the arbitration, has had a fair opportunity to present its case and has been informed of the consequences of its non-participation.”
The Guideline sets out five rules, briefly summarised below, that arbitrators should follow:
- Ensure that the party has been duly summoned and has no valid excuse for its absence;
- Ensure that the arbitrator has jurisdiction to act, even in the absence of a party;
- Ensure that all parties have had a reasonable opportunity to be heard, including the defaulting party;
- Ensure that the defaulting party is informed of each step in the arbitration process and document the efforts made to inform the defaulting party of the progress of the process.
- Notify the defaulting party of the arbitrator’s intention to render a default award and include in the award a detailed description of the efforts made to include that party in the arbitration process.
Message to arbitrators: make sure you apply best practices to properly protect the validity of your awards!