Arbitration Case-Law Update: Q1 2023

• Jurisdiction: Canada
• Law Firm: Borden Ladner Gervais LLP
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution, Court Procedure, Shareholders
• Author: Mr Jack Maslen, Andrew Pozzobon and Matti Lemmens
• Published date: 24 March 2023

In late 2022, the Supreme Court of Canada (SCC) released its decision in Peace River Hydro Partners v. Petrowest Corp., 2022 SCC 41, which concerned the enforceability of arbitration agreements in a receivership proceeding. The SCC ultimately denied to court proceedings commenced by the receiver but made it clear that such a finding was exceptional and Canadian law generally defers to and promotes arbitration proceedings. The SCC expressed a "legislative and judicial preference for holding parties to arbitration agreements".

So far in 2023, Canadian courts appear to be continuing this pro-arbitration trend. This article summarizes two noteworthy decisions concerning the arbitration of complex commercial disputes: 3-Sigma v Ostara, 2023 BCSC 100 and Costco Wholesale Corporation v. TicketOps Corporation, 2023 ONSC 573. The cases concern, among other things, non-signatory issues and the bounds of procedural fairness in arbitration.

3-Sigma v Ostara, 2023 BCSC 100

In 3-Sigma, the plaintiffs were shareholders of the defendant corporation (Ostara). They claimed that through a plan of arrangement, Ostara had orchestrated a sale of shares to its largest shareholder in such a way as to withhold the benefits of that sale from the plaintiffs. Other defendants included Ostara's majority shareholders, directors and senior management. The defendants sought a stay of the court proceeding on the basis that the claim was subject to a mandatory arbitration agreement found in a shareholders' agreement.

More particularly, the defendants relied on section 7 of B.C.'s Arbitration Act, which provides that a party to a legal proceeding may apply for a stay of those proceedings on the basis the parties agreed to submit the matter to arbitration. Pertinent to this analysis was the fact that several of the plaintiffs and defendants were not signatories to the shareholder agreement.

Decision

A main issue before the B.C. court was "whether the parties to the claim [were] parties to an agreement to arbitrate".

In resolving this issue, the BC Supreme Court began by explaining that the "guiding principle" for applications to stay court proceedings is "competence-competence". In other words, such applications must be guided by the foundational principle that arbitrators'not the court'are to decide the scope of an arbitration agreement in the first instance. It likewise follows that the burden on the party seeking the stay is low, requiring only an "arguable case" that the legal...