Arbitration clause did not exclude tort claims, misrepresentation or fraud

Ontario civil | Alternative Dispute Resolution

Stay of court proceedings

Arbitration clause did not exclude tort claims, misrepresentation or fraud

Plaintiff was overseas resident who went into business with defendants to run restaurant. Plaintiff, who invested $200,000, entered into shareholders’ agreement with defendants that contained arbitration clause. After failure of restaurant, plaintiff brought action against defendants. Defendants’ application to stay action in favour of arbitration was dismissed. Defendants appealed. Appeal allowed. Mandatory language of s. 7 of Arbitration Act strongly favoured giving effect to arbitration agreement. Motion judge did not properly consider impact of jurisprudence’s similar pro-arbitration orientation on his determinations . Plaintiff’s allegations of misrepresentations largely related to defendants’ failures to perform obligations under shareholders’ agreement. Motion judge’s finding that pith and substance of claims, apart from oppression claim, related to fraudulent misrepresentation that induced plaintiff to enter into business agreement could not be accepted. Motion judge erred in assuming that tort claims fell outside scope of arbitration agreement and that fraud claim vitiated arbitration agreement, since neither assumption was supported by case law as automatically applying principle. Arbitration clause contained broad language and did not exclude tort claims, misrepresentation or fraud. Motion judge failed to advert to policy of enforcing arbitration agreements and letting arbitrators decide scope of their authority. Motion judge fell into error in equating forum selection clauses with arbitration agreements. Motion judge’s conclusion that bulk of claims fell outside arbitration clause simply did not bear up under scrutiny . Motion judge erred in refusing to grant stay on ground that subject matter was beyond scope of shareholders’ agreement.
Haas v. Gunasekaram (2016), 2016 CarswellOnt 16116, 2016 ONCA 744, J.C. MacPherson J.A., Janet Simmons J.A., and P. Lauwers J.A. (Ont. C.A.); reversed (2015), 2015 CarswellOnt 12596, 2015 ONSC 5083, S.A.Q. Akhtar J. (Ont. S.C.J.).

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