Comment on the decision in Tessier v. 2428-8516 Québec inc.: extension of the arbitration clause “in the interest of justice” – what about consent?
In a recent decision, the Québec Superior Court extended the effect of the arbitration clause to non-signatory parties “in the interest of justice”, without seeking their eventual, or even tacit consent to arbitration. Such a ground of extension of the arbitration clause seems inopportune, in that it obscures the fundamental role of consent in arbitration law. Although the outcome is positive, this decision, in our opinion, constitutes a missed opportunity to develop the doctrine of tacit consent to arbitration in Québec.
The extension of the effect of the arbitration clause to nonsignatories is relatively controversial, in that it shakes two fundamental principles of the law of obligations, namely those of consent of the parties and the relative effect of the contract, according to which only the parties to a contract are bound by it.[1] However, the Québec jurisprudence, as in several other jurisdictions, admits that it is possible, in certain circumstances, to bring a party to arbitration even if that party has not expressly consented thereto.
However, contrary to other jurisdictions,[2] the Québec courts have not adopted a methodical approach to the application of the arbitration clause to non-signatories, nor have they always attempted to reconcile this clause with the central issue of consent to arbitration. Indeed, the decisions of the Québec Court of Appeal instead reveal a case-by-case approach, intended to be prudent and pragmatic, depending on the circumstances specific to each case.[3]
A recent decision of the Québec Superior Court (“the Court”), Tessier v. 2428-8516 Québec inc.[4], is in direct line with this jurisprudence applied in concreto. In this case, the plaintiff Tessier and the plaintiffs Mandeville raised the same factual background in support of their joint application, before the state jurisdictions, to be recognized as sole shareholders of the defendant corporations Construction La-Ray and LR Concept Design, respectively. An arbitration clause had been inserted in the unanimous shareholder agreement of the corporation Construction La-Ray and thus bound the plaintiff Tessier. On the other hand, neither the corporation LR Concept Design, nor the plaintiffs Mandeville had signed an arbitration clause. This did not prevent the Court from extending the effect of the arbitration clause contained in the unanimous shareholder agreement of the corporation Construction La-Ray to the plaintiffs Mandeville and the defendant LR Concept Design on the ground that, since the two disputes were “closely linked”, it was in the interest of justice not to split the case, particularly so as not to “deprive the shareholders of Construction La-Ray of the effects of the arbitration clause of the unanimous shareholder agreement solely due to the fact that the shareholders of LR Concept Design did not freely consent thereto”.[5].
The outcome of this case is not inherently surprising or vexatious. The interest of the decision instead arises from the Court’s choice to justify the extension of the arbitration clause to third parties in the interest of justice and to refer to article 1 of the Code of Civil Procedure, which requires the parties to “consider private prevention and resolution processes before referring their dispute to the courts”.
In so doing, the sound administration of justice prefers the will of the parties and, in the opinion of the Court, becomes sufficient cause to remove from its jurisdiction a dispute over which it otherwise would have jurisdiction.
It appears that this motivation can be criticized in that it has little to do with the matter of consent, the very basis of the arbitration from which it derives all its legitimacy. However, there was cause to justify the extension of the arbitration clause by the tacit consent of the non-signatories. Indeed, the Court notes that the two defendant corporations were working in concert in the performance of construction contracts and that they had established their head office at the same address.[6] Thus, it could be considered, based on these elements, that the defendant LR Concept Design, whether by its interference in the performance of the contracts made by the corporation Construction La-Ray, or by the confusion of its identity with the latter corporation, had consented tacitly to the arbitration clause, and the extension of the arbitration clause to the corporation LR Concept Design and to the plaintiffs Mandeville could be justified on this basis.
It is regrettable that the Court did not contemplate this possibility. Indeed, we consider it preferable to maintain the legitimacy of arbitration on the consent of the parties, particularly by developing the notion of tacit consent, espoused by other jurisdictions, such as France.[7] Conversely, basing the recourse to arbitration on “the interest of justice” obscures its consensual and voluntary nature, and risks causing it to appear as the spare tire of the courts and, in fine, depreciating its value. In these circumstances, it is appropriate to mention that the Code of Civil Procedure, in the same provision as the Court cites in its decision, begins with a reminder: “To prevent a potential dispute or resolve an existing one, the parties concerned, by mutual agreement, may opt for a private dispute prevention and resolution process.”[8]
[1] Article 1440 of the Civil Code of Québec: “A contract has effect only between the contracting parties; it does not affect third persons, except where provided by law. ”
[2] For example, the French courts have chosen an approach based on the identification of the third party’s implicit “consent”, with the assistance of “objective” indicators, such as the third party’s interference in the negotiation, conclusion, execution and/or cancellation of the contract, inaugurated in the Dow Chemical decision of the Paris Court of Appeal of October 21, 1983 and the Cotunav decision of the Court of Cassation, Civil Chamber 1, of January 25, 1991, 90-11.485.
[3] Décarel inc. v. Concordia Project Management Ltd., 1996 CanLII 5747 (QC CA), paras 4-6; Société Asbestos limitée v. Lacroix, 2004 CanLII 76694 (QC CA), paras. 34-35.
[8] Article 1 of the Code of Civil Procedure
Yassine Alaoui – A member of the Barreau du Québec, Yassine Alaoui practises in international arbitration with the firm Teynier Pic, located in Paris, France.
