November 3, 2023

By Brian Babcock

Courts continue to defer jurisdiction to arbitrators where parties have agreed to arbitrate.

THE ISSUE

How far will a court defer where the dispute contains issues beyond claims of breach of contract?

THE CASE

A recent example at the Superior Court level is Spasiw et al. v. Quality Green Inc. et al. The parties were in a dispute over a Share Purchase Agreement and a Shareholders Agreement. Each agreement contained a clause which required arbitration of :

Any dispute, difference or question arising between the Parties concerning the construction, meaning, effect or implementation of this Agreement (including any allegations or disputes regarding alleged breaches), a Party seeking injunctive relief, specific performance or any other equitable remedy shall be entitled to seek such remedy in a court of competent jurisdiction.

The Plaintiff included in his claim to the Court a request for an oppression remedy. We have described this remedy in prior articles. It is a remedy created by law- the Ontario Business Corporations Act – and the Plaintiff argued that this requested remedy took the case out of the jurisdiction of arbitration. He further argued that his claim included equitable relief.

Despite this, the judge ruled that the question of jurisdiction had to be ruled upon by an arbitrator, not the Court. Under the provisions of the Arbitrations Act, an arbitrator may grant equitable relief.

The Court of Appeal has ruled in the past that claims outside the contract may be within the scope of the arbitration where they are “mingled with the claims of breach of contract”.

It is up to the arbitrator to make that determination, subject to any subsequent rights of judicial review or appeal.

The judge was also influenced by the broad language of the arbitration clause, a subject of an earlier article.

As a result, the court action was stayed pending submission to arbitration.

TAKEAWAYS

• Courts are serious about deferring to arbitration.
• This includes initial issues of the arbitrator’s jurisdiction.
• The wording of the arbitration clause is significant in that process.
• Care must be taken in drafting agreements to set limits of the right or requirement to arbitrate.
• A broadly worded arbitration clause may submit claims of fraud, oppression, or other torts mingled with a contract dispute to arbitration.
• If the arbitration issues go beyond the contract, that may impact upon the choice of arbitrator.

WHAT WEILERS LLP CAN DO TO HELP YOU

The experienced business lawyers at Weilers LLP may help draft a clause that reflects your intentions or at least make sure you understand what you are agreeing to. They work closely with our dispute resolution lawyers to keep current and aware of the evolving times. And if you do end up in a dispute, our lawyers are adept at either litigation or arbitration.

For more information, give us a call. We might be the right lawyers for you.