Summary
In
The court dismissed
Background
The GMP Agreement contained the following arbitration clause:
"Unless specifically agreed otherwise, all disputes arising out or in connection with Contractual Relationship(s) hereunder shall be governed by the substantive laws of the Province of
However, another section of the GMP Agreement contained the following carve-out:
"[Eurofins] may elect to bring action for the collection of unpaid fees in any court having competent jurisdiction. [
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Eurofins' claim against
- Eurofins' claim went beyond the carve-out. In addition to the unpaid fees, which
BevCanna acknowledged to fall within the carve-out, Eurofins' other claims fell squarely under the arbitration clause. These claims included breach of trust, unjust enrichment and breach of fiduciary duty. In these circumstances, all of Eurofins' claims should proceed via arbitration instead of litigation.4 - The parties drafted the GMP Agreement specifically to allow Eurofins to commence an action regarding the unpaid fees. The Agreement further contemplated that
BevCanna be responsible for legal expenses associated with an action for the collection of unpaid fees. - There was no basis to stay any portion of Eurofins' claim. The substance of Eurofins' claim "relate[d] in its entirety to unpaid fees". All of Eurofins' ancillary claims (e.g., breach of trust) related to the recovery of unpaid fees.5
- Examine the arbitration clause to see if it permits exceptions or carve-outs. In particular, watch for language such as "unless specifically agreed otherwise";
- Identify and understand the scope of any carve-outs and the specific circumstances in which they apply; and
- Ensure that the substance of the claim aligns with the applicable carve-outs, including when drafting the pleadings (e.g., Statement of Claim). Doing so increases the likelihood that the courts will allow the claim to proceed through the courts instead of staying the claim in favour of arbitration.
The Court's Dismissal of
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Forcing Eurofins to arbitrate on the issue of the unpaid fees would "thwart the very purpose" of the carve-out. The rationale for staying actions in favour of arbitration is to give effect to the parties' agreement to arbitrate. It is not a general preference for arbitration.
Implications
While courts will construe arbitration clauses generously, they will give effect to any exceptions or carve-outs to the extent that they reflect the parties' intentions and expectations. This decision has practical implications for those seeking to commence a claim in court, despite an existing arbitration clause. To navigate this, follow three key steps:
Footnotes
1.
2. Ibid. at para. 17.
3. Ibid. at para. 27.
4. Ibid. at paras. 29-31.
5. Ibid. at paras. 32-37.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Mr
Fasken
Bay Adelaide Centre, Box 20
ON M5H 2T6
Tel: 4163668381
Fax: 4163647813
E-mail: sdookhoo@fasken.com
URL: www.fasken.com
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