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Digest - Alternative Dispute Resolution - Binding arbitration - Voluntary binding arbitration - Agreement to arbitrate - Interpretation

Thursday, November 10, 2016 @ 7:00 PM  

Appeal by the defendants Gunam and Feng from a decision of a motions judge refusing to stay the action in favour of an arbitration agreement. The co-defendant Viscardi did not appeal. The parties entered into a shareholder agreement respecting the operation of a restaurant. When the restaurant failed, the respondent sued the appellants and Viscardi for fraudulent misrepresentation which he alleged induced him to sign the shareholders’ agreement. The shareholders’ agreement contained an arbitration agreement. The alleged misrepresentation largely related to the failures of Viscardi and the appellants to perform their obligations under the shareholders’ agreement. The motion judge found that the claims were not in pith and substance contractual, but related only to fraudulent misrepresentation, apart from the oppression claim. The motion judge took the view that the scope of the arbitration agreement did not extend beyond contractual claims.

HELD: Appeal allowed. The motion judge went too far in characterizing the claims, apart from the oppression claim, as relating only to fraudulent misrepresentation. The bulk of the claims fell within the arbitration agreement and were clearly referable to the shareholders’ agreement. The motions judge erred in his determination of the scope of the arbitration agreement by assuming tort claims fell outside of the scope of the arbitration agreement, assuming that a fraud claim vitiated an arbitration agreement and by failing to advert to the law’s policy of enforcing arbitration agreements and letting arbitrators decide the scope of their authority. He erred in equating forum selection clauses with arbitration agreements. The arbitration agreement in this case contained broad language and did not exclude tort claims, misrepresentation or fraud. The law, both statutory and judicial, favoured the enforcement of arbitration agreements. The fact that Viscardi did not appeal did not force the court to dismiss the appeal to avoid multiplicity of proceedings.