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Arbitration - Stay. RH20 North America Inc. v. Bergmann
In RH20 North America Inc. v. Bergmann (Ont CA, 2024) the Ontario Court of Appeal reviews a recent SCC case [Peace River] that considers several provincial statutes regarding arbitration stays:The Peace River decision
[36] By the time the motion judge heard the motion for a stay, the Supreme Court of Canada had released its decision in Peace River [SS: Peace River Hydro Partners v. Petrowest Corp. (SCC, 2022)]. In that case, the Supreme Court described two general components to the stay provisions in provincial arbitration legislation, which this court summarized in Husky Food Importers & Distributors Ltd. v. JH Whittaker & Sons Limited, 2023 ONCA 260, at paras. 23-25:[In Peace River] the Supreme Court identified two general components common to stay provisions in provincial arbitration legislation: (i) the technical prerequisites for a mandatory stay of court proceedings; and (ii) the statutory exceptions to a mandatory stay of court proceedings. The applicant for a stay must establish the technical prerequisites “on the applicable standard of proof”; if the applicant does so, the party seeking to avoid arbitration then must show that one of the statutory exceptions applies, such that a stay should be refused: at paras. 76-79.
The technical prerequisites concern whether the stay applicant has established the arbitration agreement engages the mandatory stay provisions. As the Supreme Court observed in Peace River, at para. 83, provincial arbitration legislation typically contains four relevant technical prerequisites:(a) an arbitration agreement exists;
(b) court proceedings have been commenced by a “party” to the arbitration agreement;
(c) the court proceedings are in respect of a matter that the parties agreed to submit to arbitration; and
(d) the party applying for a stay in favour of arbitration does so before taking any “step” in the court proceedings. If all the technical prerequisites are met, the mandatory stay provision is engaged. The court should then move on to the second component of the analysis, which concerns the statutory exceptions to granting a stay, such as whether an arbitration agreement is “void, inoperative or incapable of being performed”. [37] As the Supreme Court noted in Peace River, at para. 77, the two general components are “interrelated” but ought to remain analytically distinct.
[38] The appeal in the Peace River case considered the application of provincial domestic arbitration legislation, specifically the pre-2020 version of the British Columbia arbitration legislation, the Arbitration Act, R.S.B.C. 1996, c. 55.[4] That legislation contained a stay provision containing language similar to that found in art. 8(1) of the Model Law but that also expressly referred to the effect of a party to an arbitration agreement taking a “step” in a court proceeding. Sections 15(1) and (2) of the old British Columbia act stated:15(1) If a party to an arbitration agreement commences legal proceedings in a court against another party to the agreement in respect of a matter agreed to be submitted to arbitration, a party to the legal proceedings may apply, before filing a response to civil claim or a response to family claim or taking any other step in the proceedings, to that court to stay the legal proceedings.
(2) In an application under subsection (1), the court must make an order staying the legal proceedings unless it determines that the arbitration agreement is void, inoperative or incapable of being performed. [Emphasis added]. [39] By the time the Supreme Court heard submissions in the Peace River case, new provincial arbitration legislation had been enacted in British Columbia: the Arbitration Act, S.B.C. 2020, c. 2. The stay provision in the new legislation tracked much of the language found in the former statute but dropped the express reference to a “step” in the court proceeding. Sections 7(1) and (2) of the new Act provide:7(1) If a party commences legal proceedings in a court in respect of a matter agreed to be submitted to arbitration, a party to the legal proceedings may, before submitting the party's first response on the substance of the dispute, apply to that court to stay the legal proceedings.
(2) In an application under subsection (1), the court must make an order staying the legal proceedings unless it determines that the arbitration agreement is void, inoperative or incapable of being performed. [40] At the time of the hearing of the Peace River case, Ontario’s domestic arbitration legislation also did not contain any language about the effect on the availability of a stay by a party to an arbitration agreement taking a further “step” in the court proceeding.[5] Nor did Alberta’s domestic arbitration act, the language of which is very similar to that of the Ontario act.[6]
[41] I refer to this legislative history of the British Columbia Arbitration Act and the content of stay provisions in other major provincial domestic arbitration legislation to make a simple point. Although the appeal in Peace River involved arbitration legislation whose stay provision included the language of “taking any other step in the proceedings”, the Supreme Court’s identification of a two-part framework for stays of court proceedings in favour of arbitration did not turn on such statutory “step” language. As I read Peace River, the court’s general description of “the technical prerequisites for a mandatory stay of court proceedings” in “stay provisions in provincial arbitration legislation across the country” reflected conceptual elements common to most Canadian arbitration legislation. As I shall explain shortly, those conceptual elements include the negative obligation of parties to an arbitration agreement not to seek the resolution of disputes subject to an arbitration agreement in domestic courts.
[42] That negative obligation is also a common conceptual element shared by most provincial domestic arbitration legislation and provincial legislation that has adopted the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, Can. T.S. 1986 No. 43, (the “New York Convention”)[7] and Model Law for international commercial arbitration agreement disputes. That conceptual commonality underpinned this court’s decision in Husky Foods to apply the Peace River framework to stays sought under s. 9 of the ICAA and art. 8(1) of the Model Law in respect of international commercial arbitration agreements.
[43] The appeal in Husky Foods did not raise the issue that is central to this appeal: whether the party requesting a stay had waived its right to arbitration by taking a step in the court proceeding other than challenging the court’s jurisdiction to hear the dispute. Instead, Husky Foods involved the issue of whether an arbitration agreement existed and, more specifically, the standard of proof applicable to establishing the technical prerequisites for a mandatory stay: at paras. 28-35. Accordingly, the present case requires a further consideration of how to apply Peace River’s two-step framework to international arbitration agreements under the ICAA in circumstances where it is argued that a stay should be denied because the requesting party took a “step” in the court proceeding. . Ismail v. First York Holdings Inc.
In Ismail v. First York Holdings Inc. (Ont CA, 2023) the Court of Appeal considers s.7(1) of the Arbitration Act, which allows a party to stay a court proceeding when it is subject to arbitration, and s.7(6) which bars a court appeal from a s.7 order:(1) Does s. 7(6) of the Arbitration Act preclude this appeal?
[23] Section 7(6) of the Arbitration Act provides that there is no appeal from the court’s decision made under s. 7.
[24] Section 7(1) requires the court to stay an action where there is an arbitration clause that applies. Section 7(2) provides 5 circumstances where the court may refuse a stay. In this case, the court refused a stay. There is no appeal if the decision to refuse a stay was made under s. 7 of the Act.
[25] However, where the decision to refuse a stay is based on a finding that there is no arbitration agreement, then the decision to refuse a stay is not made under the Act, and therefore an appeal is not barred by s. 7(6): Toronto Standard Condominium Corporation No. 1628 v. Toronto Standard Condominium Corporation No. 1636, 2020 ONCA 612, 454 D.L.R. (4th) 126, at paras. 4, 47-49, 62; Huras v. Primerica Financial Services Ltd. (2000), 137 O.A.C. 79 (C.A.), 2000 CanLII 16892. That is the situation in this case; s. 7(6) does not preclude this appeal.
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[35] The motion judge proceeded by considering the five question test set out in this court’s decision in Haas v. Gunasekaram, 2016 ONCA 744, 62 B.L.R. (5th) 1, at para. 17.[3] The five questions are:1) Is there an arbitration agreement?
2) What is the subject matter of the dispute?
3) What is the scope of the arbitration agreement?
4) Does the dispute arguably fall within the arbitration agreement?
5) Are there grounds on which the court should refuse to stay the action? [36] This five part test arises from ss. 7(1) and 7(2) of the Arbitration Act which read:7(1) If a party to an arbitration agreement commences a proceeding in respect of a matter to be submitted to arbitration under the agreement, the court in which the proceeding is commenced shall, on the motion of another party to the arbitration agreement, stay the proceeding.
(2) However, the court may refuse to stay the proceeding in any of the following cases:1. A party entered into the arbitration agreement while under a legal incapacity.
2. The arbitration agreement is invalid.
3. The subject-matter of the dispute is not capable of being the subject of arbitration under Ontario law.
4. The motion was brought with undue delay.
5. The matter is a proper one for default or summary judgment. [37] The motion judge asked the first question from the Haas test and concluded that there was no arbitration agreement. The text of s. 7(1) makes clear that a decision on whether to stay a proceeding under s. 7 requires the existence of an arbitration agreement. He therefore did not need to proceed any further with the analysis. . Goberdhan v. Knights of Columbus
In Goberdhan v. Knights of Columbus (Ont CA, 2023) the Court of Appeal considered Arbitration Act [s.7(6): 'no appeal of court stay of court proceedings where arbitration'], and which statute the appeal jurisdiction lay in the case of conflict between multiple appeal jurisdictions:(1) Jurisdiction to hear the appeal
[6] The respondent relied on s. 7(6) of the Arbitration Act as foreclosing an appeal of the motion judge’s decision. Section 7(6) states that “there is no appeal from the court’s decision” on a motion to stay brought under section 7(1) of the Act. The respondent asserted that the appellant’s motion was brought under s. 7(1) and that the motion judge, after determining that there was an absence of consideration for the agreements containing a mandatory arbitration clause, concluded that the arbitration agreements were invalid and dismissed the motion under s. 7(2). The respondent relied on a statement from the Supreme Court’s decision in TELUS Communications Inc. v. Wellman, 2019 SCC 19, [2019] 2 S.C.R. 144, at para. 91:Given the absence of any qualifying language, s. 7(6) must be taken as referring to a “decision” made under any subsection contained in s. 7 [and] would include, for example, a decision to stay the proceeding under s. 7(1), a decision to refuse a stay under s. 7(2), or a decision to order a partial stay under s. 7(5). [7] We did not give effect to this argument.
[8] The fact that the appellant brought its stay motion relying on the Arbitration Act, and that the motion judge’s determination was that the arbitration agreement was “invalid” under s. 7(2), are not determinative. In Huras v. Primerica (2000), 2000 CanLII 16892 (ON CA), 137 O.A.C. 79 (C.A.), this court stated that, where a court finds that there is no arbitration clause (in that case because the clause was unconscionable), the Arbitration Act has no application, and the dispute lies beyond the scope of s. 7: at paras. 9-10. The court noted that “it follows that if the court has decided that the Act is not applicable, then the prohibition against an appeal in s. 7(6) is equally not applicable”: at para. 10.
[9] The authority of Huras, and the jurisprudence that followed it, was recently confirmed by a five-judge panel of this court in Toronto Standard Condominium Corporation No. 1628 v. Toronto Standard Condominium Corporation No. 1636, 2020 ONCA 612, at paras. 3-8. In that case, Jamal J.A. (as he then was) addressed and rejected the argument made here, that Wellman changed the law in respect of the scope and application of s. 7(6). He concluded that Wellman “did not disturb the Huras line of cases on the interpretation of s. 7(6)”, and that “the Huras line of cases was correctly decided”: at para. 6. . Goberdhan v. Knights of Columbus
In Goberdhan v. Knights of Columbus (Ont CA, 2023) the Court of Appeal considered an appeal from a motion to stay under the Arbitration Act:(2) Did the motion judge err in refusing to stay the action?
[11] The appellant argued that the motion judge erred in two ways when he refused to stay the action.
[12] First, the appellant asserted that the motion judge was required to grant a stay so long as it was “arguable” that the dispute fell within the scope of arbitral jurisdiction. It would then fall to the arbitrator to determine whether the arbitration clause applied. The appellant relied on Peace River Hydro Partners v. Petrowest Corp., 2022 SCC 41, 475 D.L.R. (4th) 1, at para. 39, to argue that the determination of arbitral jurisdiction is a question for an arbitrator to make. The only exceptions are where the challenge to jurisdiction raises a pure question of law or questions of mixed fact and law requiring only superficial consideration of the evidentiary record: at para. 42. See also Uber Technologies Inc. v. Heller, 2020 SCC 16, [2020] 2 S.C.R. 118, at paras. 31-36 and Irwin v. Protiviti, 2022 ONCA 533, at paras. 10-11.
[13] We did not accept this submission.
[14] Peace River sets out a two-step process to be applied in determining whether court proceedings should be stayed in favour of arbitration. First, the party relying on an arbitration provision must establish the technical requirements for a mandatory stay of proceedings, including that there is an agreement to arbitrate: at para. 83. Then, a stay in favour of arbitration will follow unless the opposing party establishes one of the exceptions (in Ontario, under s. 7(2)): at paras. 79, 87-90.
[15] The court went on to note that a stay application should only be dismissed on the basis of a statutory exception in a “clear case”, “for example, one in which the party seeking to avoid arbitration has established on a balance of probabilities that the arbitration agreement is void, inoperative or incapable of being performed. Where the invalidity or unenforceability of the arbitration agreement is not clear (but merely arguable), the matter should be resolved by the arbitrator”: at para. 89. See also Dalimpex Ltd. v. Janicki (2003), 2003 CanLII 34234 (ON CA), 64 O.R. (3d) 737 (C.A.), at para. 22.
[16] In our view this was a clear case where the motion judge was able to determine the question at issue – whether there was fresh consideration to support the contracts containing arbitration clauses – on the evidence before him. In this case, the motion judge was able to find on the evidence before him that there was no fresh consideration for the agreements containing an arbitration clause. This was not a proposition that was “merely arguable”. Accordingly, we did not accept the appellant’s first challenge to the motion judge’s decision. . Paulpillai Estate v. Yusuf
In Paulpillai Estate v. Yusuf (Ont CA, 2020) the Court of Appeal held that it had no appeal jurisdiction over a refusal of a stay under the Arbitration Act:[47] Even if the motion judge is viewed as having exercised discretion because of undue delay under s. 7(2)4 of the Arbitration Act to refuse to stay the court proceeding and refer the dispute to arbitration — despite the silence of the order on this point — this court would still lack appellate jurisdiction over this aspect of the order. Section 7(6) of the Arbitration Act provides: “There is no appeal from the court’s decision.” The appeal bar in s. 7(6) applies to any decision under s. 7, including a decision to refuse a stay under s. 7(2): see TELUS Communications Inc. v. Wellman, 2019 SCC 19, [2019] 2 S.C.R. 144, at para. 91; Toronto Standard Condominium Corporation No. 1628 v. Toronto Standard Condominium Corporation No. 1636, 2020 ONCA 612, at paras. 62, 66-68, and 95. . Toronto Standard Condominium Corporation No. 1628 v. Toronto Standard Condominium Corporation No. 1636
In Toronto Standard Condominium Corporation No. 1628 v. Toronto Standard Condominium Corporation No. 1636 (Ont CA, 2020) the Court of Appeal addressed an awkward issue from the Arbitration Act. The Act provides that when a party commences a civil proceeding with respect to a matter that should be, by contract, arbitrated - that the court shall stay the proceeding in favour of the arbitration. It also says there is no appeal from the stay order. But in this appeal the stay order was denied because the respondent asserted that some of the issues were arbitrable and some not. A prior case, Huras v. Primerica Financial Services Ltd. (2000) (Ont CA, 2000), that dealt with this situation was being challenged (the challenge lost):[1] Toronto Standard Condominium Corporation No. 1628 (“Condo 1628”) moves to quash an appeal brought by Toronto Standard Condominium Corporation No. 1636 (“Condo 1636”), Soho Grand Condominiums Inc. (“Soho”), and Soinco Ltd. (“Soinco”) from the order of the motion judge refusing to stay a court proceeding in favour of arbitration. Condo 1628 claims this court lacks jurisdiction because the appeal is barred by s. 7(6) of the Arbitration Act, 1991, S.O. 1991, c. 17 (“Arbitration Act”).[1]
[2] Subject to certain exceptions under ss. 7(2) and 7(5), s. 7(1) of the Arbitration Act provides that if a party to an arbitration agreement commences a court proceeding about a matter they agreed would be submitted to arbitration, the court shall, on the motion of another party to the arbitration agreement, stay the court proceeding. Under s. 7(5), when arbitrable and non-arbitrable matters are combined in a single court proceeding, if certain conditions are met, the court may stay the proceeding with respect to the matters dealt with in the arbitration agreement and allow it to continue with respect to the other matters. Section 7(6) decrees: “There is no appeal from the court’s decision.”
[3] This motion concerns the scope of s. 7(6). Condo 1628 asks this court to overrule 20 years of its jurisprudence on when s. 7(6) bars an appeal.
[4] This court’s leading decision interpreting s. 7(6), Huras v. Primerica Financial Services Ltd. (2000), 2000 CanLII 16892 (ON CA), 137 O.A.C. 79 (C.A.), held that if a motion judge decides that an arbitration agreement does not apply to the dispute before the court, then the Arbitration Act also does not apply, including the bar on appeals in s. 7(6). Huras has been followed by this court in seven unanimous decisions, including by two five-judge panels, and adopted as persuasive authority by the appeal courts of three other provinces with provisions identical to s. 7(6) in their arbitration statutes.
[5] Condo 1628 invites this court to overrule the Huras line of cases and quash this appeal based on the Supreme Court of Canada’s decision in TELUS Communications Inc. v. Wellman, 2019 SCC 19, [2019] 2 S.C.R. 144. In Wellman, Moldaver J. for the majority held that s. 7(5) “does not grant the court discretion to refuse to stay claims that are dealt with in an arbitration agreement”: at para. 8. He ruled that s. 7(5) “does not … permit the court to ignore a valid and binding arbitration agreement”: at para. 103. Wellman overturned this court’s contrary interpretation of s. 7(5) in Griffin v. Dell Canada Inc., 2010 ONCA 29, 98 O.R. (3d) 481, leave to appeal refused, [2010] S.C.C.A. No. 75, which had construed s. 7(5) as granting a motion judge discretion to refuse to stay claims dealt with in an arbitration agreement.
[6] As I elaborate below, although Wellman overturned Griffin on the interpretation of s. 7(5), it did not disturb the Huras line of cases on the interpretation of s. 7(6). In my view, the Huras line of cases was correctly decided.
[7] I also conclude that s. 7(6) does not bar an appeal from the motion judge’s order in this case. The motion judge found that the proceeding before the court combines matters that are dealt with in the arbitration agreement with other matters that are not dealt with in the arbitration agreement. Because the motion judge did not have the benefit of Wellman at the time of his decision, he applied this court’s decision in Griffin, refused to stay any part of the proceeding under s. 7(5), and allowed the entire proceeding to continue before the court. But as Wellman later confirmed, s. 7(5) does not grant the court discretion to refuse to stay claims that are dealt with in an arbitration agreement, and does not permit a court to ignore a valid and binding arbitration agreement. Because the motion judge granted relief that was unavailable under s. 7(5) or elsewhere in s. 7, he did not make a decision under s. 7, so an appeal is not barred by s. 7(6). And because this was a final order — terminating potential proceedings before the arbitrator and overriding a substantive contractual right to arbitrate — an appeal lies to this court under s. 6(1)(b) of the Courts of Justice Act, R.S.O. 1990, c. C.43.
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