Pre-Arbitration Interim Relief by Courts

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is a litigation lawyer practicing at Perley-Robertson, Hill & McDougall LLP in Ottawa, Ontario. He may be reached at 613.566.2823 or obourns@perlaw.ca.

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Where parties have an agreement to arbitrate disputes which may arise between them, typically, the Courts have no role to play until after an arbitrator (or an arbitral tribunals) has made a decision of some nature.  Then the parties can avail themselves of certain appeal rights under the Ontario Arbitration Act, 1991, S.O. 1991, c. 17, see for example sections 45 and 46.

In fact, arbitrators are the proper entities to rule on their own jurisdiction (often referred to as the doctrine of “Kompetenz-Kompetenz” in international law).  This rule has also been codified in section 17 of the Arbitration Act.  The Courts favour encouraging parties to submit their differences to consensual dispute resolution mechanisms outside of the regular court system.

However, where “no adequate alternative remedy exists,” then courts have a residual discretionary power:  St. Anne Nackawic Pulp & Paper Co. v. Canadian Paper Workers Union, Local 219, [1986]] 1 S.C.R. 704 at p. 727.

For example, in some circumstances a party may require urgent interim relief, such as an injunction.  An arbitrator may have the power to make such an interim Order (see s.31 of the Arbitration Act), however, there are instances where it will be necessary and appropriate to go to Court for an interim Order.  In particular, where the moving party seeks an interim Order against a non-signatory to an arbitration agreement and/or where the arbitrator has actually not yet been appointed, then resort must be had to the Courts for the relief sought.

Section 8(1) of the Arbitration Act specifically permits the Courts to provide for interim relief despite the fact that a matter is to be arbitrated:

8.  (1)  The court’s powers with respect to the detention, preservation and inspection of property, interim injunctions and the appointment of receivers are the same in arbitrations as in court actions.

The Courts are permitted to make interim Orders to preserve the parties’ position until the matter can be heard by an Arbitrator.  However, Courts may not overstep their bounds and make an Order which is tantamount to usurping the role of the Arbitrator and deciding the main dispute between the parties. (See 407 ETR Concession Co. v. Ontario (Minister of Transportation), (2005) CanLII 21673 (Ont. C.A.))

In Healthy Body Services Inc. v. Muscletech Research & Development Inc., (2001) CarswellOnt 2724 (Ont. Sup. Ct.) a claimant in an arbitration brought a motion before the Superior Court seeking an injunction restraining the defendant from breaching a distribution agreement it had with the plaintiff, pursuant to which the plaintiff sold certain health products exclusively for it in Canada.  The plaintiff alleged, and the Court found, that the defendant had taken steps to have alternative re-sellers ready to distribute its products.

The respondent first argued that the motion was improperly before the Court because the parties had an arbitration agreement (para 2).  Nonetheless, the Court found that without an injunction the claimant would suffer irreparable harm and relied on s.8(1) of the Arbitration Act to enjoin and restrain the respondent from appointing a new sales representative for any of its products.

In an interesting decision, Farah v. Sauvageau Holdings Inc., (2011) CarswellOnt 1862 (Ont. Sup. Ct.), the Court held that an arbitrator’s interim Mareva injunction against one of the respondents was inappropriate because he did not have the jurisdiction with respect to third parties outside of the arbitration agreement.  However, Perrell J. then partially replaced the arbitrator’s Mareva injunction with a judicial Mareva injunction.  Perrell J. explained the Court’s powers to intervene in arbitral matters pursuant to s.8 of the Arbitration Act (para 58-59):

[…] s. 6 of the Act, which permits the court to intervene to assist the conducting of arbitration. Section 6 states:

6. No court shall intervene in matters governed by this Act, except for the following purposes, in accordance with this Act: 

1. To assist the conducting of arbitrations.2. To ensure that arbitrations are conducted in accordance with arbitration agreements.3. To prevent unequal or unfair treatment of parties to arbitration agreements.4. To enforce awards.

Section 6 is complemented by s. 8 (1) of the Act, which acknowledges the court’s jurisdiction to assist the conducting of arbitrations by making injunctive orders and orders for the detention, preservation and inspection of property and the appointment of receivers.

In addition to the above, a claimant seeking an interim remedy will be required to satisfy the Court that they have met the requirements of Rule 40 of the Rules of Civil Procedure whereby they will have to show that:

1. There a serious question to be tried;

2.  The applicant suffer irreparable harm if the injunction is not granted; and

3.  That the applicant party will suffer greater harm from granting or refusing the remedy pending a decision on the merits.

Thus, where an arbitrator is not yet appointed and/or where an interim remedy is required against non-parties to an arbitration agreement then the Court will intervene despite an arbitration agreement requiring that all disputes proceed in that venue.

 

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Owen Bourns is a litigation lawyer in Ottawa, Ontario.  He may be reached at 613.566.2823 or at obourns@perlaw.ca.

1 comments
Sonya76
Sonya76

I think that far too often with the granting of an injunction, specifically the super injunctions you get in the UK, is that point 2. above is not applicable int he granting of the injunctions.