Quebec court refuses to be bound by arbitration clauses signed years after dispute came to court

Matters sought to be referred to arbitration should proceed in scheduled trial, court says

Quebec court refuses to be bound by arbitration clauses signed years after dispute came to court

In a recent case involving oppression remedy proceedings, the Superior Court of Quebec found that arbitration clauses did not bind it in documents executed over two years after the present dispute was first brought before the court.

In Sigounis c. Sigounis, 2021 QCCS 4185, the plaintiff filed the oppression remedy proceedings in 2017, seeking the liquidation of various private corporations in which his family members had direct or indirect interests. The defendants, who were the plaintiff’s father and sister, contested the proceedings. They alleged that this was a family matter wherein they did not want to debate over mostly insolvent corporations. The defendants also sought to purchase the interests that the plaintiff might have in such corporations.

In January 2020, the trial on the merits was scheduled from Oct. 13 to Oct. 26, 2021. After the defendant father died in August 2020, his widow filed a notice of continuance of suit in her capacity as the estate’s liquidator and as universal legatee.

During the proceedings, the defendant sister disclosed certain confirmation documents showing that, a few months before the defendant father died, he had transferred all the shares he held in the corporations to her.

In Sigounis, the Superior Court of Quebec was dealing with the defendant sister’s application invoking arbitration clauses found in the confirmation documents and seeking to refer to arbitration all the issues and matters raised by the widow, as a defendant in continuance of suit, in her intervention, defense and cross-application.

On the issue of whether the Quebec Superior Court had the jurisdiction to hear the matters sought to be referred to arbitration, the court held that these matters could not be reasonably, efficiently and definitively tried in a different forum. This determination was because their outcome might directly and significantly impact the relief that may be granted in the present proceedings and because the court had found, on a prima facie basis, reasons to believe that the confirmation documents might amount to additional acts of oppression concerning the plaintiff.

The arbitration clauses in the confirmations were not binding on the court concerning the present oppressive remedy proceedings, the court ruled. The court noted that one of the two arbitration clauses provided an exception for severe disputes over family matters, and this case involved a protracted and bitter family dispute which has grown out of proportion and which should be addressed as soon as possible, with the trial beginning on Oct. 13 constituting the only appropriate forum.

The court also said that the jurisprudence cited about this issue referred to cases where arbitration clauses were executed in anticipation of future disputes. In this case, the arbitration clauses were entered into more than two years after the dispute was first brought before the court.

On the issue of whether the widow had legal interest or capacity to intervene or to file a cross-application, the court ruled that she, as universal legatee and subject to her exercise of the option for her late husband’s estate, had sufficient interest. The court treated the widow’s intervention and cross-application as the same given their similar allegations.

As regards the plaintiff’s “Paulian” action, the court found that it raised essentially the same facts and most of the same issues as the present proceedings, so there was no need for duplicate hearings for the most part.

“It is high time to give closure to the members of the Sigounis Family Group on all the issues that have been consuming them for too many years,” wrote Justice Michel Pinsonnault for the Quebec Superior Court.

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