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JURISDICTION OF THE COURT TO REVIEW - Stay of court proceedings

Tuesday, June 02, 2020 @ 9:16 AM  

Lexis Advance® Quicklaw®
Appeal by the defendant, Clayworth, from refusal of a stay of civil proceedings in favour of arbitration. The defendant worked for the plaintiffs, Octaform, between 2013 and 2016 as a sales process co-ordinator. The parties’ employment agreement included a provision protecting the defendant’s confidential information, and a dispute resolution mechanism providing for mediation and arbitration rather than litigation. After the defendant left her employment, a dispute arose over whether she breached the employment agreement through the improper use of trade secrets or other confidential information. At first, the plaintiff initiated mediation and arbitration proceedings. However, in 2018, the plaintiff commenced litigation seeking damages, an accounting of profits, delivery of documents and injunctive relief. The defendant applied for an order staying the civil proceeding beyond the request for injunctive relief. The chambers judge refused the relief sought on the basis that the parties’ civil dispute was not covered by the arbitration clause. The defendant appealed.

HELD: Appeal allowed. A disagreement as to whether a dispute fell within an arbitration clause was not a question of law. To the extent that the chambers judge treated the issue as a question of law, and therefore exempt from the general rule in Dell that in any case involving an arbitration clause a challenge to the arbitrator’s jurisdiction must be resolved first by the arbitrator, the judge was in error. Characterizing the question as one of mixed fact and law did not establish that the judge applied the correct test. The judge did not assess the question of whether there was an arguable case that the dispute fell within the arbitration clause, but instead made a final determination as to the scope of the exception to the arbitration clause. Applying the arguable case test supported the conclusion that the stay should be granted. The dispute concerned an allegation of breach of contract concerning the defendant’s confidential information obligations. The fact that the plaintiff sought equitable remedies outside of the arbitrator’s jurisdiction was not relevant to the issue before the chambers judge. The civil action, but for the injunctive relief, was accordingly stayed.

Octaform Systems Inc. v. Clayworth, [2020] B.C.J. No. 675, British Columbia Court of Appeal, P.M. Willcock, J.J.L. Hunter and G.B. Butler JJ.A., April 23, 2020. Digest No. TLD-June12020003