Court File and Parties

CITATION: Kocur v. FirstService Corporation, 2017 ONSC 6114

COURT FILE NO.: CV-17-572684

DATE: 20171116

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Roman Kocur, Plaintiff/Respondent

AND:

FirstService Corporation, Defendant/Moving Party

BEFORE: Pollak J.

COUNSEL: R. Mark Fletcher and Justin Tetreault, for the Plaintiff/Respondent

Tina H. Lie and Daniel Rosenbluth, for the Defendant/Respondent

HEARD: October 12, 2017

Reasons for decision

[1] This is a motion for a stay of this action, brought by the Defendant, FirstService Corporation (“FirstService”). FirstService submits this action is a dispute within the scope of the arbitration clause of the employment agreement between the parties and that the arbitrator should determine the arbitrability of the dispute, unless the Plaintiff, Roman Kocur (“Mr. Kocur”), can prove that there is a “clear case” to the contrary. It is only in exceptional cases that a court should refuse to stay the proceeding for the arbitrator to decide on jurisdiction.

[2] Mr. Kocur’s wrongful dismissal claim alleges he was terminated from employment without cause and claims damages for lost remuneration as well as punitive and moral damages.

[3] FirstService relies on an arbitration clause in the written employment agreement between the parties.

[4] Mr. Kocur’s argument in this motion is that his action should not be stayed for the following reasons:

(a) The employment agreement (including the arbitration clause) is void for a lack of consideration;

(b) Many of the claims raised by Mr. Kocur in this action are specifically excluded from the scope of the arbitration clause either by the terms of the employment agreement itself or the three amendments to the employment agreement, each of which confer exclusive jurisdiction to resolve disputes concerning the subject matter of the amendments to this court. In fact, the second amendment to the employment agreement invalidates the arbitration clause in the employment agreement entirely; and

(c) To stay only a portion of the action would create a multiplicity of proceedings, amplify the legal costs, and lead to the risk of inconsistent decisions, which should be avoided.

[5] All of these arguments are based on the court interpreting the employment agreement between the parties. The parties agree that this court should decide this motion by applying the following judicially established analytical framework:

(1) Is there an arbitration agreement?

(2) What is the subject matter of the dispute?

(3) What is the scope of the arbitration agreement?

(4) Does the dispute arguably fall within the scope of the arbitration agreement?

(5) Are there grounds on which the court should refuse to stay the action?

(Haas v. Gunasekaram, 2016 ONCA 744, 62 B.L.R. (5th) 1, at para. 17.)

[6] The Court of Appeal for Ontario in Dalimpex Ltd. v. Janicki, 2003 34234 (ON CA), 64 O.R. (3d) 737, at paras. 21-22 (Ont. C.A.), also provided the following guidance for staying motions:

It is my view that the proper approach to be taken by the court on a motion pursuant to article 8 is that set out by Hinkson J.A. of the British Columbia Court of Appeal in Gulf Canada Resources Ltd. v. Arochem International Ltd. (1992), 1992 4033 (BC CA), 43 C.P.R. (3d) 390. That case was decided under the British Columbia International Commercial Arbitration Act, S.B.C. 1986, c. 14 of which ss. 8 and 16 are substantially identical to articles 8 and 16 of the Schedule to the Ontario statute. Hinkson J.A. wrote at p. 397:

Considering s. 8(1) in relation to the provisions of s. 16 and the jurisdiction conferred on the arbitral tribunal, in my opinion, it is not for the court on an application for a stay of proceedings to reach any final determination as to the scope of the arbitration agreement or whether a particular party to the legal proceedings is a party to the arbitration agreement, because those are matters within the jurisdiction of the arbitral tribunal. Only where it is clear that the dispute is outside the terms of the arbitration agreement, or that a party is not a party to the arbitration agreement, or that the application is out of time should the court reach any final determination in respect of such matters on an application for a stay of proceedings.

Where it is arguable that the dispute falls within the terms of the arbitration agreement or where it is arguable that a party to the legal proceedings is a party to the arbitration agreement then, in my view, the stay should be granted and those matters left to be determined by the arbitral tribunal.

An issue may also arise on an article 8 motion as to whether the agreement is (a) null and void; (b) inoperative; or (c) incapable of being performed. In the same way, where it is clear that one of these situations exist, the court will make a determinative finding to that effect and dismiss the motion for referral. However, in cases where it is not clear, it may be preferable to leave any issue related to the “existence or validity of the arbitration agreement” for the arbitral tribunal to determine in the first instance under article 16. In my view, this deferential approach is consistent with both the wording of the legislation and the intention of the parties to refer their disputes to arbitration. [Emphasis added.]

[7] Further, in the case of Dell Computer Corp. v. Union des consommateurs, 2007 SCC 34, [2007] 2 S.C.R. 801 (“Dell”), the Supreme Court of Canada affirmed the “competence-competence” principle, according to which arbitrators should be allowed to rule first on their own jurisdiction. Justice Deschamps summarized the “general rule” on stay motions in the present circumstances as follows, at paras. 84-85:

First of all, I would lay down a general rule that in any case involving an arbitration clause, a challenge to the arbitrator's jurisdiction must be resolved first by the arbitrator.

If the challenge requires the production and review of factual evidence, the court should normally refer the case to arbitration, as arbitrators have, for this purpose, the same resources and expertise as courts. Where questions of mixed law and fact are concerned, the court hearing the referral application must refer the case to arbitration unless the questions of fact require only superficial consideration of the documentary evidence in the record.

[8] In Hass, at para. 15, our Court of Appeal reaffirmed that a challenge to an arbitrator’s jurisdiction must be resolved first by the arbitrator “absent a clear case to the contrary”.

[9] FirstService relies on Article 7, the arbitration clause, of the employee agreement dated January 1, 2012, which provides as follows:

ARTICLE 7 - ARBITRATION

7.1 Dispute. To the fullest extent permitted by applicable Laws, if any dispute, claim or other matter should arise concerning the interpretation, performance or breach of this Agreement or any action taken by a party hereto pursuant to this Agreement (such dispute, claim or other matter being referred to in this Article 7 as the “Dispute”), such Dispute shall be determined by arbitration conducted in the City of Toronto, Ontario (the “Designated City”) in accordance with the Arbitration Act (Ontario), S.O. 1991, c. 17 (the “Arbitration Act”) and the party hereto seeking arbitration of a Dispute shall send to the other party hereto a written notice (the “Arbitration Notice”) requesting arbitration of such Dispute in accordance with this Article 7.

[10] It also provides that “any controversy concerning whether a Dispute is an arbitrable matter or as to the interpretation or enforceability of [the arbitration clause] shall be determined by the Arbitrator”.

[11] The employment agreement was amended three times as follows:

(a) effective January 1, 2013, to restructure the Value Appreciation Rights (“VARs”);

(b) effective December 31, 2014, to reflect a corporate reorganization among FirstService’s entities; and

(c) effective January 15, 2016, per an “addendum”, to clarify executive bonus payments in the FirstService Residential organization.

[12] There is a critical dispute with respect to possible interpretations of these amendments and their effect on the arbitration provisions in the employment agreement.

[13] Mr. Kocur submits that, since his VARs and bonus payments are at issue, the three amendments remove significant parts of his claim from the scope of the arbitration clause and give exclusive jurisdiction to Ontario courts. He further submits that the second amendment, concerning corporate reorganization, invalidates the arbitration provision in the employment agreement.

[14] He relies on the entire agreement clause in the three amendments which states, in part, as follows:

This Amendment constitutes the entire full and complete agreement and understanding among the undersigned in respect of the subject matters hereof and supersedes all prior agreements, arrangements, and understandings, whether oral or written, among the undersigned with respect thereto.

[15] Further, he relies on the governing law provisions in all three amendments which give exclusive jurisdiction to resolve disputes regarding the subject matter of the amendments to this court.

[16] FirstService, however, relies on the fact that these amendments are only amendments to the employment agreement, and that all of these provisions in the amended employment agreement must be interpreted to provide that Mr. Kocur’s claims are subject to the arbitration clause in the employment agreement. FirstService submits that the amendments do not invalidate the parties’ agreement that Mr. Kocur’s claims must be arbitrated.

[17] The parties accept that FirstService’s burden on this motion is to establish that Mr. Kocur’s claims “arguably” fall within the scope of the arbitration clause: see Haas; Dalimpex Ltd.

[18] The thrust of FirstService’s argument is that Mr. Kocur has a high onus to overcome the “competence-competence” principle.

[19] FirstService relies on the case of Nazarinia Holdings Inc. v. 2049080 Ontario Inc., 2010 ONSC 1766, 69 B.L.R. (4th) 65, aff’d 2010 ONCA 739, wherein Strathy J. (as he then was) discussed the “invalidity” exception to the mandatory stay requirement as follows, at paras. 32-33:

It should be noted that s. 7(2) of the Arbitration Act provides that the court may decline to stay the action where “the arbitration agreement is invalid.” The mandatory language of s. 7(1), coupled with the discretionary language of s. 7(2), suggests that the court is not required to stay an action simply because the validity of the agreement in which the arbitration agreement is contained, is brought into question as a result of allegations of fraud, illegality or lack of mutuality. Otherwise, a party resisting arbitration could simply plead those allegations in order to derail the arbitration. The court must have an obligation to scrutinize the pleadings, and the evidence before it, to determine whether, at a minimum, there is some foundation for the allegations. Even then, the court retains the discretion to grant a stay.

I respectfully agree with the observations of Pitt J. in IMG Canada Ltd. v. Melitta Canada Inc., at para. 18, that the mere allegation of invalidity will not usually be sufficient to resist a stay. To do otherwise would be to ignore s. 17(1) of the Arbitration Act giving the arbitration panel authority to rule on such matters. At a minimum, to use the language of Pitt J., the court must make “a prima facie determination that invalidity is a serious issue.” To the extent that earlier authorities suggest that the mere allegation of fraud will defeat a motion to stay (see, for example, Canadian Motion Picture Productions Ltd. v. Maynard Film Distributing Co., 1949 125 (ON SC), [1949] O.R. 736 at 737, [1949] 4 D.L.R. 458, referring to Heyman et al. v. Darwins, Limited), they reflect an approach to arbitration agreements that has been superceded by the deferential approach reflected in the Arbitration Act. [Italics in original.]

[20] FirstService submits that on this preliminary motion for a stay of proceedings, conclusive findings of fact on the validity of the arbitration clause would be inappropriate. Rather, FirstService argues that Mr. Kocur has not established a clear case of invalidity on only a superficial consideration of the record, and that his is therefore not one of the clear cases where this court should exercise its discretion to refuse a stay of proceedings. I agree.

[21] Although Mr. Kocur has advanced many persuasive arguments on the possible interpretations of the employment agreement, I also find that all of these arguments are dependent on the court’s interpretation of the employment agreement. I therefore find that “it is arguable” that Mr. Kocur’s claims fall within the scope of the arbitration clause.

[22] Following the extensive principles and guidance to which I have referred above, I find that Mr. Kocur has not persuaded this court that this is a “clear” case where a stay should be refused. I therefore grant a stay of proceedings.

Costs

[23] If the parties are unable to agree on costs, they may make brief written submissions to me no longer than three pages in length. The Defendants’ submissions are to be delivered by 12:00 p.m. on November 24, 2017, and the Plaintiff’s submissions are to be delivered by 12:00 p.m. on December 1, 2017. Any reply submissions are to be delivered by 12:00 p.m. on December 8, 2017.

Pollak J.

Date: November 16, 2017