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Contracts - Arbitration
COMMENT
Contracts can have terms or clauses that dictate specific remedial procedures in the event of dispute between it's parties. Here the procedure is 'arbitration', which is essentially private non-court litigation regulated under Ontario's Arbitration Act, 1991 [which see: Arbitration].
This sort of 'alternative-to-court' clause can also occur with 'alternative dispute resolution' (ADR), and there are even clauses which specify a foreign country venue (common in internet contracts).
. J.P. Thomson Architects Ltd. v. Greater Essex County District School Board
In J.P. Thomson Architects Ltd. v. Greater Essex County District School Board (Ont CA, 2025) the Ontario Court of Appeal allowed an appeal, here from "the application judge’s denial of an order appointing an arbitrator pursuant to a dispute resolution clause in its contract with the respondent, Greater Essex County District School Board ".
Here the court considers the appellate SOR for contracts (here, a custom contract), and generally for arbitration issues:[17] The application judge’s interpretation of GC18 is reviewable on a correctness standard. The interpretation of a standard form contract attracts the correctness standard where it has precedential value and there is “no meaningful factual matrix specific to the particular parties to assist the interpretation process”: Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, [2016] 2 S.C.R. 23, at para. 46; see also Deslaurier Custom Cabinets Inc. v. 1728106 Ontario Inc., 2017 ONCA 293, 135 O.R. (3d) 241, at paras. 21, 41, leave to appeal refused, [2016] S.C.C.A. No. 249. GC18 was a standard dispute resolution clause in Ontario Association of Architects contracts. There is no factual matrix that would assist in interpreting the parties’ intentions; Thomson was required to accept all contractual terms proposed by the Board, including GC18, when it responded to the Board’s requests for proposal.
[18] Ordinary principles of contractual interpretation apply in interpreting an arbitration clause. The language of the clause must “be read in the context of the agreement as a whole, and its intended meaning gleaned within that context”: Mantini v. Smith Lyons LLP (2003), 2003 CanLII 20875 (ON CA), 64 O.R. (3d) 505 (C.A.), at para. 21, leave to appeal refused, [2003] S.C.C.A. No. 344; see also Huras v. Primerica Financial Services Ltd. (2001), 2001 CanLII 17321 (ON CA), 55 O.R. (3d) 449 (C.A.), at paras. 12-14. The chosen interpretation should be consistent with sound commercial principles and good business sense: see Geoff R. Hall, Canadian Contractual Interpretation Law, 4th ed. (Toronto: LexisNexis Canada, 2020), s. 2.6.1 and caselaw cited therein. . Haas v Gunasekaram
In Haas v Gunasekaram (Ont CA, 2016) the Court of Appeal considers when a contractual arbitration clause precludes the bringing of court proceedings to enforce contractual rights (which would be done by the ordering of a stay in the court proceeding):[7] There is a single issue in this appeal: Did the motion judge err in refusing to stay the action under s. 7 of the Arbitration Act, thereby permitting Mr. Haas to avoid arbitrating the matters in dispute despite the arbitration agreement in the shareholders’ agreement?
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[9] Many cases have considered how the court should approach its task under s. 7(1) of the Arbitration Act, which provides: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. [Emphasis added.] [10] The law favours giving effect to arbitration agreements. This is evident in both legislation and in jurisprudence. Section 7 of the Arbitration Act contains mandatory language, stating “the court in which the proceeding is commenced shall, on the motion of another party to the arbitration agreement, stay the proceeding” (emphasis added).
[11] The mandatory wording in s. 7 of the Arbitration Act is a change from s. 7 of the old Arbitrations Act, R.S.O. 1990, c. A.24, which gave the court discretion to stay the action:[I]f satisfied that there is no sufficient reason why the matter should not be referred in accordance with the submission and that the applicant was at the time when the proceeding was commenced and still remains ready and willing to do all things necessary to the proper conduct of the arbitration, [the court] may make an order staying the proceeding. [Emphasis added.] [12] As can be seen, the statutory language in s.7 of the current Arbitration Act is directory, not equivocal. It strongly favours giving effect to an arbitration agreement. This policy direction is reinforced by s. 17 of the Arbitration Act:17(1) An arbitral tribunal may rule on its own jurisdiction to conduct the arbitration and may in that connection rule on objections with respect to the existence or validity of the arbitration agreement.
(2) If the arbitration agreement forms part of another agreement, it shall, for the purposes of a ruling on jurisdiction, be treated as an independent agreement that may survive even if the main agreement is found to be invalid. [13] Subsection 17(1) did not exist in the 1980 or the 1990 Arbitrations Act. Subsection 17(2) codifies the common law, and establishes that an arbitration agreement can survive even where the contract in which it is found is determined to be invalid.[2]
[14] The same pro-arbitration orientation is found in the jurisprudence. In Dell Computer Corp. v. Union des consommateurs, 2007 SCC 34 (CanLII), [2007] 2 S.C.R. 801, Deschamps J., speaking for the majority of the Supreme Court, articulated a general rule, at para. 84: “I would lay down a general rule that in any case involving an arbitration clause, a challenge to the arbitrator’s jurisdiction must be resolved first by the arbitrator.” This has become known as the “competence-competence principle”. The exception is where a “challenge to the arbitrator’s jurisdiction is based solely on a question of law, or one of mixed fact and law that requires for its disposition ‘only superficial consideration of the documentary evidence in the record’” (Dell Computer, at para. 84). See also Seidel v. Telus Communications Inc., 2011 SCC 15 (CanLII), [2011] 1 S.C.R. 531, at para. 4.
[15] This court most recently discussed the “competence-competence” principle in Ciano Trading & Services C.T. & S.R.L. v. Skylink Aviation Inc., 2015 ONCA 89 (CanLII), stating “where it is unclear if the arbitrator has jurisdiction, it is preferable to leave the issue to the arbitrator pursuant to the competence-competence principle” (at para. 7). In Dancap Productions Inc. v. Key Brand Entertainment, Inc., 2009 ONCA 135 (CanLII), 246 O.A.C. 226, at paras. 32-33, Sharpe J.A. explained:It is now well-established in Ontario that the court should grant a stay under art. 8(1) of the Model Law where it is “arguable” that the dispute falls within the terms of an arbitration agreement. In Dalimpex Ltd. v. Janicki (2003), 2003 CanLII 34234 (ON CA), 64 O.R. (3d) 737 (C.A.), at para. 21, Charron J.A. adopted the following passage by Hinkson J.A. in Gulf Canada Resources Ltd. v. Arochem International Ltd. (1992), 1992 CanLII 4033 (BC CA), 66 B.C.L.R. (2d) 113 (B.C.C.A.), at paras. 39-40, as “the proper approach” to art. 8(1):it is not for the court on an application for a stay of proceedings to reach any final determination as to the scope of the arbitration agreement or whether a particular party to the legal proceedings is a party to the arbitration agreement because those are matters within the jurisdiction of the arbitral tribunal. Only where it is clear that the dispute is outside the terms of the arbitration agreement or that a party is not a party to the arbitration agreement or that the application is out of time should the court reach any final determination in respect of such matters on an application for a stay of proceedings.
Where it is arguable that the dispute falls within the terms of the arbitration agreement or where it is arguable that a party to the legal proceedings is a party to the arbitration agreement then, in my view, the stay should be granted and those matters left to be determined by the arbitral tribunal. As Charron J.A. explained in Dalimpex, at para. 22, “a deferential approach” allowing the arbitrator to decide whether the dispute is arbitrable, absent a clear case to the contrary, “is consistent both with the wording of the legislation and the intention of the parties to review their disputes to arbitration.” .....
[17] An analytical framework has emerged from the jurisprudence. It breaks the judge’s task of considering a stay under s. 7 down into a number of sub-issues:
(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 scope of the arbitration agreement?
(5) Are there grounds on which the court should refuse to stay the action?
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