Some readers and friends write to me these days asking if I will continue sharing articles on the case laws. Indeed, in the past few days, although I have been reading court decisions on daily basis for work and leisure, I did not share my summary and analysis of the case laws here.
In the past few days, I moved from my previous apartment in downtown Montreal with serious construction issues (the construction noise sometimes starts at 7 a.m. since May this year) to a cozy condo with beautiful view and kind neighbours in Town of Mount Royal. In the past few days, I managed to facilitate the communications between my clients and the opposing parties in some family files so that they reach consent for the best interests of their children and move forward in their life with peace of mind; In the past few days, I managed to prepare legal proceedings for a Court of Appeal case on private international law, which I received the mandate two days before the deadline (big thanks to the teamwork); I also handled a few pre-trial examinations in French and some negotiations in English for some civil files; Besides, I have appeared in front of the Municipal Court to help the client to get his justice etc.
In November and December, I will participate in the 19th CIETAC CUP as an arbitrator again. And I am taking more trainings on arbitration organized by Barreau du Québec in the coming days. Apparently, thanks to the readers’ comments and support on my website, I would love to continue publishing more summary and analysis of the case laws here so that I could build up connections with experienced lawyers in Quebec and with jurists from different countries and jurisdictions.
This post aims to summarize the analysis of Mr. Justice Lukasz Granosik, j.c.s. on Mullen c. Nakisa inc., 2021 QCCS 4388. It is worth to mention in the very beginning that this legal proceeding is governed by Art. 530 (2) C.C.P. i.e. an application for judicial review of a decision made by an arbitrator during a case management conference on July 30, 2021.
Factual Background
On January 24, 2017, Nakisa and Sierra reached a service contract which includes an arbitration agreement. During the period of their collaboration, some disputes raised between the two parties;
On March 22, 2019, by reaching a Memorandum of agreement, Nakisa and Sierra submitted their disputes to Centre canadien d’arbitrage commercial at Montreal according to the laws of Quebec. Sierra claims US $1,021,487.20 from Nakisa, while Nakisa filed a cross-application against Sierra to claim US $2,002,950 from Sierra as during the execution of their service contract, Kumar (the president of Sierra) and Mullen (the project manager of Sierra) have committed faults in the performance of their respective functions.
On February 12, 2020, Nakisa instituted a lawsuit against Mullen and Kumar before the Superior Court of Quebec to request compensation based on the same facts.
On August 12, 2020, Nakisa’s application was rejected by the Superior Court of Quebec on the grounds of lack of international jurisdiction according to Art. 3148 (3) C.c.Q (Nakisa inc. c. Kumar, 2020 QCCS 2487);
On December 18, 2020, the Court of Appeal confirmed this conclusion (Nakisa inc. c. Mullen, 2020 QCCA 1808).
Then, Nakisa amended its cross-application for the arbitration proceeding and added Kumar and Mullen as co-defendants in the arbitration proceeding against Sierra;
On July 14, 2021, the arbitrator granted this modification during a case management conference;
On July 30, 2021, the arbitrator ordered the parties, including Kumar and Mullen to respect the timeline agreed upon between Nakisa and Sierra. The timeline requires the parties to set down the case for an arbitration trial that would last 10 days starting in November 2021.
On August 13, 2021, Kumar and Mullen expressed their intention to contest the arbitral tribunal’s jurisdiction over them;
On September 14, 2021 and September 27, 2021, Mullen and Kumar filed applications separately for judicial review of the arbitrator’s decision and requested the suspension of the arbitration proceedings in their regard according to Article 530 (2) C.C.P. as they did not personally sign the arbitration agreement.
Main Issue to Analyse
Should the Superior Court of Quebec suspend the arbitration proceeding with regard to Kumar and Mullen until final judgment on judicial review application is rendered?
Court’s Analysis
Yes.
- Art. 530 (2) C.C.P. provides that the application for judicial review does not stay proceedings pending before the arbitral tribunal unless the Court decides otherwise;
- The suspension request can only be granted in exceptional cases for serious reasons when the application meets the following three criteria: the appearance of right, serious or irreparable prejudice and the balance of inconveniences (para. 10 of the Decision);
- ) Appearance of Right
It is noted that the appearance of right constitutes a generally low threshold.
Nakisa alleges that her requests to add Mullen and Kumar in the arbitral proceeding are well founded in law and facts because (1) Mullen and Kumar are involved in the management team of Nakisa and that they are pertinent to the disputes between Nakisa and Sierra; (2) the arbitrator has all the necessary powers to rule on their own jurisdiction according to Art. 632 C.C.P. Nakisa’s application is also supported by case law Décarel inc. c. Concordia Project Management Ltd., 1996 CanLII 5747 (QC CA).
However, the Court notes that the disputants who signed arbitration agreement are not entitled to add the non-signatories to the arbitration proceeding simply because they are relevant to the disputes. Further, in the present case, the arbitrator has already made decision on his “jurisdiction” by adding the two non-signatories to his arbitral proceeding. More importantly, Mr. Justice Lukasz Granosik, j.c.s. points out that adding non-signatories to arbitral proceeding is not a question of jurisdiction stricto sensu on the scope of his power or on nature of the dispute but on the identity of the parties that can be brought before a private dispute resolution process based on the arbitration agreement (para. 13 of the Decision).
Further, Mr. Justice Granosik, j.c.s. emphasizes that the Decision on Décarel inc. has been challenged and criticized by subsequent case laws, such as GreCon Dimter inc. v. J. R. Normand inc., 2005 SCC 46 and Société Asbestos limitée c. Lacroix, 2004 CanLII 76694 (QC CA), which states that adding non-signatories to arbitral proceeding should be considered as the exception not the principle.
Therefore, the Court finds that Mullen and Kumar have the appearance of right in the present case.
2.) Serious or Irreparable Prejudice
The Court notes that it constitutes serious and irreparable prejudice for Mullen and Kumar as the arbitrator imposes Mullen and Kumar to proceed their defense in a 10 days arbitral proceeding to be held in November 2021, which will be presided by an arbitrator that they did not participate in the process of appointment. Their prejudice is certainly irreparable as the arbitrator even mentions that he intends to proceed with the arbitration hearing in November 2021 even in the absence of Mullen and Kumar.
3.) Balance of Inconveniences
It is worth to note that the balance of inconveniences aims to determine which parties will suffer the greatest prejudice if the Court does not grant the suspension of the arbitral proceeding with regard to Mullen and Kumar (paras. 35 to 36, Manitoba (A.G.) v. Metropolitan Stores Ltd., 1987 CanLII 79 (SCC)). The Court finds that Mullen and Kumar suffer greater prejudice if the Court does not grant the suspension. For Nakisa, in the worst case scenario, if the judicial review applications were dismissed by the Superior Court and the arbitration hearing was held in November without involving Mullen and Kumar, Nakisa could resume the arbitration later against Mullen and Kumar to determine their responsibility in the disputes between Nakisa and Sierra. The suspension does not prevent Mullen and Kumar from testifying during the arbitration hearing in November 2021.
For the above-mentioned reasons, the Court decides to suspend the arbitration proceeding with regard to the non-signatories to the arbitration agreement, Mullen and Kumar, until final judgments on judicial review applications are rendered.
Reflection
1. 魁省民事诉讼法第632条规定法院可以在仲裁员对自己的管辖权作出决定后进行审查。本案中，仲裁员于今年7月份对仲裁程序中的被告Nakisa提出追加在其公司任命的两个高管Mullen和Kumar作为共同被告的提议作出的准许裁决。因此，在Mullen和Kumar对此裁决向法院提出司法审查请求时，魁省高级法院对此有裁量权 （更多关于魁省仲裁的文章，请点击此处）；
2. 商事仲裁的核心精神是当事人意思自治。其仲裁庭的权力往往来自于签订仲裁协议的当事人的合意。如果仲裁庭以降低纠纷解决成本为目的，将非签约第三方以仲裁原告或被告的身份强行加入仲裁程序中，这一行为将违反了仲裁当事人意思自治基本原则和仲裁精神。所以，仲裁员或法院在作出此类裁决前，应作出更加慎重的考虑（更多关于强行加入第三方的文章，请点击此处）；
3. 鉴于魁省高等法院和上诉法院已于2020年作出判决指出，由于合同执行地和损害发生地都不在魁省，魁省法院对Nakisa状告Mullen和Kumar一案没有司法管辖权 （“最密切联系原则”）。那么，如果魁省高等法院最终认定仲裁庭也无权将Mullen和Kumar强行以被告身份加入Nakisa和Sierra的仲裁程序中，Nakisa只能在美国另行提起诉讼追究Mullen和Kumar的法律责任了。
(Reminder: The purpose of this article is to provide general legal information. It does not contain a full analysis of the law nor does it constitute a legal advice on the points of law discussed. To minimize the legal risk for your business, you must take specific legal advice from a lawyer on any particular matter which concerns you. Thanks for your attention.)