Ontario –  A pathological med-arb clause – #781

Stothers v Kazeks, 2023 ONSC 5021 is a perfect example of the confusion about the med-arb process that I covered in my last case note: Med-arb process was “fundamentally flawed” – #775. If you want to skip to the language of the pathological so-called med-arb clause without the factual background in this case, just scroll down to just above the Editor’s Notes section.

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Québec – Arbitration clauses bind parties only, even if parallel proceedings – #780

In Clinique Ovo inc. v. Elite IVF, 2023 QCCA 1097, the Court determined that an arbitration clause barred some, but not all third-party claims. The factual matrix underlying this decision is convoluted: two agreements; similar but not identical arbitration clauses; and multiple actors. The background facts are sensational: an alleged fraudulent in vitro impregnation involving parties in Geneva and Cyprus; a birth in Monaco; disputed support payments required from a bewildered father; and, inevitably, litigation with third-party claims raising issues of arbitration clause interface with the court proceedings. Against this backdrop, the Court of Appeal decision is grounded in a key and decisive first principle: arbitration clauses bind parties to the agreement, not strangers. 

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Ontario – High bar to oppose enforcement of international arbitral award – #777

In Prospector PTE Ltd v CGX Energy Inc, 2023 ONSC 4207, the Court considered an application by Prospector PTE Ltd. (“Prospector”) for the enforcement of an international arbitration award issued in an ICC arbitration. Prospector brought the application pursuant to the International Commercial Arbitration Act, 2017, SO 2017, c 2, Sched 5 (“ICAA”), which incorporates the UNCITRAL Model Law on International Commercial Arbitration (“Model Law”). CGX Energy Inc. (“CGX”) opposed the application based on the procedural fairness exception in Article 34(2)(ii)(a) of the Model Law. CGX argued that it was denied the opportunity to fully present its case. However, based on the arbitral award, CGX failed to adduce sufficient evidence to prove its counterclaim. The Court granted the enforcement application. Prospector, together with the Ontario Court of Appeal decision in Consolidated Contractors Group S.A.L. (Offshore) v. Ambatovy Minerals S.A., 2017 ONCA 939, leave to appeal to the SCC refused, 2018 CanLII 99661 (“Consolidated Contractors”), make clear that the procedural fairness exception in Article 34(2)(ii)(a) is very narrow. A court is not likely to intervene for process or public policy reasons unless the conduct or decision of the tribunal offends the principals of justice and fairness in a fundamental way. 

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B.C. – Med-arb process was “fundamentally flawed” – #775

In Shaikh v Brar, 2023 BCSC 1285, the applicants (“Tenants”) complained about an unfair mediation-arbitration process and applied for judicial review and an order setting aside a decision of an arbitrator from the B.C. Residential Tenancies Branch (“RTB”). This case note focusses on the med-arb issues it raises, not the relevant statutory regime, the nature of the Arbitrator’s discretion under it, or the standard of review. The Court found that the med-arb process was “fundamentally flawed” and set aside the award because the RTB Arbitrator: (1) used decision-making powers in the mediation stage that should have been reserved for the arbitration stage; and (2) went beyond the scope of appropriate exhortation to settle in the med-arb context. 

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Québec – “Uniformity principle” drives appointment of French amicus curiae to harmonize Québec law – #774

This case note reports on a trilogy of case management decisions that arose in the context of an application by the Claimant under art. 632 of the Code of Civil Procedure, RLRQ, c C-25.01 (“CCP”) challenging a tribunal’s jurisdiction to determine claims brought by the Respondent, which the Claimant alleged were new claims made after numerous rounds of written submissions – and thus outside the tribunal’s jurisdiction –  in a commercial arbitration relating to a lease agreement (the “Arbitration”). The key issues decided were: (1) a court conducts a hearing de novo when deciding an objection to a tribunal’s ruling on its own jurisdiction (Hypertec Real Estate Inc c Equinix Canada Ltd, 2023 QCCS 2103); (2) Claimant’s application for an interim stay of arbitral proceedings during the pendency of its jurisdictional challenge was denied (Hypertec Real Estate Inc c Equinix Canada Ltd, 2023 QCCS 2098); and (3) the Court appointed a French amicus curiae with expertise in international law to assist it during the jurisdictional hearing, invoking the Court’s duty to abide by the uniformity principle in interpreting Québec legislation based on the Model Law (Hypertec Real Estate Inc c Equinix Canada Ltd, 2023 QCCS 3061).

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Québec – Arbitrator wrong to extend arbitration agreement to include third-party employees – #769

The Superior Court of Québec in Mullen c. Nakisa inc., 2023 QCCS 2678 held that employees not party to an arbitration agreement should not be added as parties to an ongoing arbitration. There is no support for the proposition that all third parties that are in some way related to the signatory parties of an arbitration agreement should be bound by it. This decision on the merits follows the stay granted by the Superior Court in October 2021 (Mullen c. Nakisa inc., 2021 QCCS 4388), covered in Case Note Québec – Stay of arbitrator’s decision to add third parties, force them to meet timetable, and refusal to hear them without payment – #553.

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New Brunswick – Arbitration award not trigger for discoverability of related claim– #764

In Architecture 2000 Inc. v. Moncton, 2023 NBCA 50,  a unanimous Court of Appeal summarily dismissed civil claims of breach of contract and negligence in the design and management of a building addition. While the appeal turned on New Brunswick’s limitations legislation, claims made in an earlier arbitration from the same construction project were crucial to this outcome, as explained below. The decision exemplifies problems that can arise in a dispute in which there are multiple contracts at issue, when some players are parties to some contracts but not others, and when an arbitration agreement covers only some of the disputes between the various contracting players.

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Alberta – Misapplication of separability principle in contract dispute – #762

Gutama Estate v Vital Property Services Inc., 2023 ABKB 436, is NOT an arbitration case and the contract at issue contained no arbitration clause. But bear with me! The case involved the alleged repudiation/termination of a shareholders agreement and the consequences to the rights and obligations of the parties as a result. The question: if the contract was repudiated/terminated, were all the parties’ rights unwound? The Court quoted from Heyman v. Darwins Ltd. (uniset.ca), the leading U.K. decision that established the common law principle of separability of the arbitration clause. The Court described Heyman v Darwins as a case that addresses the operation of an arbitration clause where the contract has come to an end: in circumstances in which the contract-terminating event did not go to the very existence of the contract, “it did not matter how the contract came to be terminated: the contract (including its arbitration clause) had existed, and the arbitration clause continued to operate….” The Court then extrapolated that concept and applied it more broadly: “[i]n other words, pre-existing and engaged contractual rights continued to operate despite the later termination (by whatever means) of the contract”. Applying that reasoning to this case where the shareholders agreement was alleged to have been repudiated or terminated by its own terms, the Court said that any such termination did not,  “eclipse the agreement completely ie render it meaningless for all purposes and at all times… [i]nstead, crystalized rights and obligations would continue.”  In other words, “the parties would be discharged from future obligations, but remain bound by rights and obligations that have accrued through partial performance”. Thus the Court imported part of a uniquely arbitration law principle with a specific public policy purpose, separability, into general contract law.

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Ontario – Title of proceedings may be amended in recognition and enforcement proceeding – #760

IC2 Fund v Wires, 2023 ONSC 3879 addresses: (1) whether it is appropriate for a party seeking to enforce an international arbitral award to correct the title of proceedings in an enforcement proceeding where both abbreviated and formal names were used interchangeably in the arbitration; (2) whether an applicant using an abbreviated name has standing; and (3) whether a party resisting enforcement can do so on the basis of an arbitrator’s alleged partiality after such allegations were addressed in the arbitration, which decision was not challenged. Here, the applicant (the respondent in the arbitration) brought an application to enforce an arbitral award (the “Award”) relating to its costs of the arbitration. In the title of proceedings in the notice of application, the applicant used an abbreviated corporate name. In the absence of confusion around the party’s identity, including because the respondent (the applicant in the arbitration) had used both the formal and abbreviated names, the court granted leave to amend the notice of application to reflect the full corporate name and resolved the standing issue on the same basis. The court also recognized the Award, rejecting the allegations of partiality of the arbitrator. The respondent had previously made allegations in the arbitration about the arbitrator’s lack of impartiality, which were rejected. The respondent did not challenge this decision.

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Alberta – No discretion under Rules to correct procedurally flawed appeal of award – #759

In Kwadrans v Kwadrans, 2023 ABCA 203, the Alberta Court of Appeal considered the appeal of a chambers judge’s order that struck the appeal of an arbitration award in a family law dispute. The chambers judge held that the appellant, by filing a Notice to Attend Family Docket Court instead of an originating application, did not properly commence his appeal of the arbitral award within 30 days as required by the Alberta Arbitration Act, RSA 2000, c A-43 (“Arbitration Act”). The chambers judge issued an order striking the appeal. The Court of Appeal upheld the chambers judge’s finding and dismissed the appeal. Kwadrans makes clear that although the Arbitration Act is silent about how an appeal is to be commenced, rule 3.2(5) of the Alberta Rules of Court, Alta Reg 124/2010 (“Rules of Court”) fills that gap and requires that an appeal be made by originating application. Further, based on the authority of the Alberta Court of Appeal in Kwadrans and Allen v Renouf, 2019 ABCA 250, the Court does not have discretion to cure a procedural deficiency if the effect would be to extend a limitation period under the Arbitration Act. Kwadrans addresses issues that may arise as a result of the interplay between the Rules of Court and the Arbitration Act generally and has application to appeals of commercial arbitral awards.

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