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Arbitration and Tort Claims

. Haas v. Gunasekaram

It has been argued that arbitration clauses only apply to contractual disputes between the parties, not torts. In Haas v Gunasekaram (Ont CA, 2016) this issue was considered, including the tort of fraud:
Tort claims do not automatically fall outside arbitration agreements

[32] Although Matrix was a case about a forum selection clause, not an arbitration agreement, in the course of his reasoning Sharpe J.A. pointed to several cases where the courts have required the parties to proceed to arbitration even though tort claims were involved, at paras. 16-17:
In Dalimpex Ltd. v. Janicki, (2003), 2003 CanLII 34234 (ON CA), 64 O.R. (3d) 737 (“Dalimpex”), at paras. 41-43, this court adopted and applied the test for applying a contractual provision which employs the words “disputes arising out of or in connection with” the parties’ contract used by the Alberta Court of Appeal in Kaverit Steel and Crane Ltd. v. Kone Corp. (1992), 1992 ABCA 7 (CanLII), 87 D.L.R. (4th) 129 (“Kaverit Steel”), at p. 135, leave to appeal to S.C.C. refused, [1992] S.C.C.A. No. 117, [1992] 2 S.C.R. vii. According to that test, a dispute is caught by the provision “if either claimant or defendant relies on the existence of a contractual obligation as a necessary element to create the claim, or to defeat it.” See also Woolcock at para. 23, holding that a claim is one “relating to” a contract “[s]o long as the matter in dispute is referable to the interpretation or implementation of some provision of the Agreement” (emphasis added by Sharpe J.A.).

In Kaverit Steel, the plaintiff advanced a conspiracy claim that relied upon a breach of the contract as the source of the unlawfulness to ground the conspiracy, and that was held to fall within the scope of the arbitration clause. Likewise, in Dalimpex, the claims for conspiracy and breach of fiduciary duty were mingled with claims for breach of contract and, in any event, in that case, this court declined to express any definitive view on the reach of the arbitration clause holding that determination should be left for the arbitrator.
[33] In Matrix Sharpe J.A. concluded that the tort claims being advanced did not rely on a breach of the contract prescribing the forum, leaving the plaintiff free to sue in Ontario. He stated, at para. 18:
The present case is not one where “either claimant or defendant relies on the existence of a contractual obligation as a necessary element to create the claim, or to defeat it” or where the “matter in dispute is referable to the interpretation or implementation of some provision in the agreement.”
[34] This case is readily distinguishable from Matrix, since, as I noted earlier, the motion judge’s statement, at para. 24, that “the bulk of Haas’s claims fall outside the arbitration clause” simply does not bear up under scrutiny. The bulk of the claims fall within the arbitration agreement and are clearly referable to the shareholders’ agreement.

[35] Further, I would be reluctant to agree that the presence of tort claims nullifies an arbitration agreement. Justice Laskin cautioned the court to be wary of cases in which a party to an arbitration agreement seeks to avoid it by pleading a common law tort: Piko v. Hudson’s Bay Company (1998), 1998 CanLII 6874 (ON CA), 41 O.R. (3d) 729 (C.A.), at para. 9. Although that case involved possible arbitration under a collective agreement, in my view the principle holds more broadly.

Fraud does not necessarily vitiate an arbitration agreement

[36] In Ash v. Corp. of Lloyd’s (1992), 1992 CanLII 7659 (ON CA), 9 O.R. (3d) 755 (C.A.), at para. 9, Carthy J.A. observed that “an allegation that a contract is void ab initio does not make it so until a final judgment of the court”. The court upheld the motion judge’s stay of an action against Lloyds alleging Lloyds’ fraud. Justice Carthy agreed that the strategy of alleging fraud, while depriving the defendant of the contracted choice in respect of arbitration, would impair such arbitration clauses, which he considered to be “too important in international commerce to permit that anomalous result to flow” (at para. 9). The court should lean against a result that undermines arbitration agreements.

[37] This is not a new proposition. Lord Wright said in the seminal case of Heyman v. Darwins, Ltd., [1942] A.C. 356 (H.L. (Eng.)), at p. 384:
Hence, if the question of whether the alleged contract was void for illegality, or, being voidable, was avoided because induced by fraud or misrepresentation, or on the ground of mistake, it depends on the terms of the submission whether the dispute falls within the arbitrator’s jurisdiction.
[38] In James v. Thow, 2005 BCSC 809 (CanLII), 5 B.L.R. (4th) 315, the application judge considered whether an action fell within the scope of an arbitration clause in an agreement between the plaintiff and the defendant. The plaintiff alleged fraudulent misrepresentation, breach of trust, breach of fiduciary duty and fraud. The application judge stayed the action and counterclaim, concluding, at para. 76: “I am satisfied that the issues raised by the pleadings concern disputes that arguably fall within the scope of the arbitration agreement.”

[39] Put simply, in cases involving arbitration agreements, fraud does not necessarily vitiate everything. It is a matter of interpretation. The arbitration agreement in this case contains broad language, referring to “any dispute, difference or question…or any failure to agree…respecting this Agreement or anything herein contained then every such dispute, difference or question or failure to agree shall be referred to a single arbitrator” (emphasis added). There is no exclusion for tort claims, misrepresentation or fraud.


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