When Does A Party's Conduct Impact Its Ability To Enforce An Arbitration Agreement And Stay A Court Proceeding?

• Published date: 04 August 2021
• Law Firm: McCarthy Tétrault LLP
• Author: The International Arbitration Blog, Andrew Kalamut and Olivia Trojko

In CSI Toronto Car Systems Installation Ltd. v. Pittasoft Co., Ltd., 2021 ONSC 5117 ("Pittasoft"), Justice Sharma of the Ontario Superior Court of Justice refused to grant a stay of proceedings in favour of arbitration due to the conduct of the defendant, which estopped them from enforcing their arbitration agreement.

Why This Decision Matters

A party cannot rely on an arbitration clause "as if its prior conduct had not occurred."¹ Here, Pittasoft, the defendants in this action, began a claim in Korea against the plaintiff, CSI Toronto Car Systems Installation Ltd ("CSI"). The court invoked estoppel by conduct principles from both local and foreign jurisprudence to support its finding that a party's conduct may preclude its ability to enforce an arbitration clause to its benefit later.

While the court may forgive accidental slips that are quickly corrected, parties should keep in mind that even though there is a high threshold to render an arbitration clause unenforceable, commencing litigation in a court may foreclose a party's ability to enforce an arbitration clause and stay a court proceeding.²

Underlying Facts

In March 2018, the plaintiff CSI, an auto electronic installation company, entered into a Sales Agreement with Pittasoft, a Korean company that manufactures dashboard cameras. The Sales Agreement included an arbitration clause, referring a dispute to arbitration.

A dispute arose between the parties. CSI...