Ontario – Court refuses to stay a proceeding in favour of arbitration when the case is a proper one for summary judgment and it would be unfair or impractical to refer the matter to arbitration – Arbitration Act, 1991, s.7(1)- (2).
Jencel 407 Yonge Street Inc. v Bright Immigration Inc. and Ramroop
2021 ONSC 6030 (CanLII)
Akbarali, J.T., J., September 10, 2021
This case reminds counsel that even where there is an arbitration clause, which should result in the stay of an action, the merits of the case must be carefully scrutinized. The Court has a discretion under s.7(2) of the Arbitration Act,1991 (“Act”) to refuse the stay on several grounds, including that the case is a proper one for summary judgment.
This is a commercial landlord and tenant dispute over rent arrears. The Landlord made an agreement with the Tenant and guarantor about the rent arrears, which the Tenant later breached. The landlord commenced an action to recover the arrears. The Tenant and guarantor brought a motion to stay the Landlord’s action in favour of arbitration pursuant to s. 7(1) of the Act as the lease contained an agreement to refer any disputes regarding the lease to arbitration.
Section 7(1) of the Act is mandatory and creates a statutory presumption in favour of arbitration over litigation. However, the court may refuse to stay the proceedings in certain circumstances set out in s. 7(2). The Court referred to the five-part framework to assess whether a stay should be granted as discussed in Haas v Gunasekaram, 2016,ONCA 744(CanLII) at para.17. In the present case, the key consideration was the fifth part of the test, namely, should the court refuse the stay on the grounds that the case is a proper one for summary judgment.
The Court referred to MDG Kingston Inc. v MDG Computers Inc.2008 ONCA 656 (CanLII) [paras 36-37], where the Court of Appeal held that s.7(2) creates an exception to the mandatory stay in where it would be unfair or impractical to refer the matter to arbitration. In MDG, the Court refused to stay the action as there were no genuine issues for trial.
The Court applied the test in Hryniak v Mauldin, 2014 SCC 7[ para. 43] (CanLII) and Rule 20 of the Ontario Rules of Civil Procedure to hold that where the responding party has raised genuine issues requiring a trial, the matter is not a proper case for summary judgment and should be referred to arbitration [para.17].
Justice Akbarali held that the rent and accounting issues and contract interpretation issues raised could easily be determined on a summary judgment motion. The tenant’s arguments about failure to mitigate were not genuine issues requiring a trial.
The Tenant’s application for a stay was dismissed and summary judgment was awarded to the Landlord.