In Nantel v Gonzalez (not reported), Justice Buchholz stayed an action as against one defendant of a group and referred its dispute with the Plaintiffs to arbitration, even though the Plaintiffs alleged solidary (joint) liability as against all Defendants.
Plaintiff Christian Nantel and Defendant William Gonzalez were shareholders and directors of companies registered as 9224-8335 Québec Inc. (“9224 Christian”) and 9251-5816 Québec Inc. (“9251 William”). In January, 2013, 9224 Christian and 9251 Québec signed an undivided co-ownership agreement, by which they agreed to be undivided co-owners of the Soltimum trademark and others. That same day, these parties and Plaintiff Soltimum Ltd. (“Soltimum”) entered into a licence agreement that gave Soltimum the right to use the trademark for the sale of products, in return for the payment of all resulting profits to 9224 Christian and 9251 William. Nantel was the sole shareholder and director of Soltimum.
Nantel (and related corporations) sued Gonzalez (and related corporations) and his brother for damages in the amount of $2.7 million, alleging (among other things) unfair competition and that they had defrauded him. (See Nantell v Gonzalez, 2021 QCCS 3245, an application for emergency injunctive relief, for the background facts of the dispute.)
In May, 2022, the Plaintiffs added CPJ Technologies as a Defendant to the action, alleging that it had willingly aided the original Defendants in the acts of unfair competition based upon breaches of its contract with Plaintiff Soltimum.
By application dated July 25, 2022, CPJ sought a dismissal of the action as against it and referral to arbitration on the ground that its agreement with Soltimum contained “a binding arbitration clause”, which provided that, “[a]ny controversy or claim arising out of or relating to this Agreement, or breach thereof…shall be settled by arbitration”.
Justice Buchholz noted that the arbitration clause was to be, “interpreted broadly and generously to give full effect to the parties’ contracted wishes”. He concluded that the dispute fell within the scope of the arbitration clause.
He referred the claims against CPJ to arbitration. The fact that the Plaintiffs sought a solidary finding of liability (joint liability under the common law) as against all Defendants was not a bar to the referral of the Plaintiffs’ dispute with CPJ to arbitration, while the same claims against the other Defendants continued in the court.
Often, as here, when a plaintiff brings an action against multiple defendants, some of whom are parties to the arbitration agreement and some who are not, the court will grant a stay of the action as against the parties to the arbitration agreement and allow the litigation to proceed as against the non-parties. The result is a multiplicity of proceedings in circumstances where the issues overlap or are intertwined, which courts abhor. However, sometimes the entire action is stayed pending the outcome of the arbitration, sometimes findings are made to bring non-signatories of the arbitration agreement into the arbitration by operation of law (such as “the group of companies” doctrine, “the alter ego doctrine”, lifting the corporate veil, agency, and so on). Unfortunately, the result in such cases often cannot be predicted.
See the following recent Arbitration Matters Case Notes which address this vexing issue:
- B.C. – arbitration agreement not inoperative simply because arbitral party’s litigation intertwines non-parties – #136
- Québec – Light touch to determining arbitration clause application (except to the non-signatory, maybe!) – #638