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Contracts - Alternative Dispute Resolution (ADR) Clause. Fowlie et al v. Wrestling Canada Lutte et al
In Fowlie et al v. Wrestling Canada Lutte et al (Ont Divisional Ct, 2024) the Ontario Court of Appeal allowed an appeal, without leave to amend the pleadings, against an interlocutory order that declined to strike a cause of action.
Here the court considers whether termination of the contract ends any contractual ADR rights that the party had (though the narrower issue in this case was that such ADR rights had not been invoked):33. While Fowlie alleges in the statement of claim that WCL would not engage with them respecting their concerns about the purported campaign being mounted against Dr. Fowlie, Fowlie did not plead that they had referred the matter (or any breach under the Contract) to arbitration under the Dispute Resolution Clause. Counsel for Fowlie confirmed that he had not done so. Therefore, any rights that Fowlie may have had under the Dispute Resolution Clause had not been triggered prior to the lawful termination of the Contract by WCL. Such rights cannot be triggered months after said termination. It is noted, as well, that Fowlie decided to commence the within action rather than invoke an arbitration process under s. 9.8, or otherwise engage the Arbitration Act, 1991, S.O. 1991, c. 17 (“the Arbitration Act”).
34. Fowlie argues that the Dispute Resolution Clause operates independent of the rest of the Contract and, therefore, it survives termination of the Contract. The decisions relied upon by Fowlie in support of this position, however, are all distinguishable from the case before us. In Electek Power Services Inc. v. Greenfield Energy Centre Limited Partnership, 2022 ONSC 894, the applicant brought an application pursuant to s. 17(8) of the Arbitration Act seeking an order setting aside a decision made by a panel of arbitrators that they had jurisdiction to decide the dispute between the parties. In Ismail v. First York Holdings Inc., 2023 ONCA 332, Ismail sued for an oppression remedy and misrepresentation, among other claims. First York Holdings Inc. made a motion under s. 7(1) of the Arbitration Act to stay the claims on the basis that they were subject to an arbitration clause. In Krutov v. Vancouver Hockey Club Ltd., 1991 CarswellBC 2412, [1991] B.C.J. No. 3464 (B.C.S.C.), the defendant had sent the parties’ contract dispute for arbitration, pursuant to an arbitration clause, and so applied for a stay of proceedings of the action. There is no doubt that these cases confirm the general principle of law that an arbitration clause is not brought to an end by the termination of the contract in which it is situate absent specific wording to do so, but that does not assist Fowlie in this case. This is because, unlike the parties in Electek Power, Ismail, and Krutov, here, Fowlie never referred or submitted to arbitration a dispute between the parties, and neither Fowlie nor WCL engaged the Arbitration Act.
35. In addition, Fowlie cited the decision in Heyman v. Darwins Ltd., [1942] A.C. 356, [1942] 1 All E.R. 337, wherein Heyman, a selling agent, had sued Darwins Ltd., a steel manufacturer, for refusing to perform its obligations under a distribution contract made between the parties. The court had to decide if the action should be stayed pursuant to the applicable arbitration legislation so that the repudiation could be dealt with under an arbitration clause. Fowlie further referred to MDG Kingston Inc. v. MDG Computers Canada Inc., 2008 ONCA 656, leave to appeal refused [2010] S.C.C.A. No. 94, wherein the respondents had rescinded one of the parties’ agreements, relying on s. 6(2) of the Arthur Wishart Act (Franchise Disclosure), 2000, S.O. 2000, c. 3, because the appellants had not delivered a required disclosure document. The key issue before the Court of Appeal in MDG was whether an arbitration clause remains effective when the agreement containing the clause is terminated or rescinded. In both Heyman and MDG, there had been a repudiation or rescission of the subject contract and, again, the relevant arbitration act had been engaged by one of the parties. Here, there was no repudiation or rescission of the Contract by WCL, and the Arbitration Act was not invoked. Accordingly, neither of these decisions assist Fowlie on this appeal.
36. There is also the question of what would be arbitrated in this situation? In light of the fact that Fowlie did not refer any issue to arbitration, that there was no term of the Contract granting Fowlie the right to have an opportunity to clear his name, and that the motion judge found the required 30 days’ notice of termination was given (which finding was not appealed), there is nothing left to resolve or arbitrate. Surely it cannot be that an arbitrator could determine that WCL was not entitled to terminate the Contract without having a sufficient reason for doing so, since that would fly directly in the face of the language of s. 8.3 itself and result in a commercial absurdity.
37. If the interpretation proffered by Fowlie was accepted, it would make the Contract effectively interminable unless an arbitrator agreed that the agreement could be terminated. That is, every termination would become an assessment of whether WCL had cause to terminate the agreement. This would render the without cause termination right provided in s. 8.3 meaningless.
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