Le syndicat de Normandin Lumber Ltd.
(Plaintiff)
v.
The Angelic Power et al. (Defendants)
Trial Division, Pratte J.—Montreal, July 19;
Ottawa, August 17, 1971.
Shipping—Practice—Arbitration clause in charterparty—
Validity of arbitration clause under Quebec law—Stay of
action pending arbitration.
Plaintiff chartered defendant ship by a charterparty
signed in London on January 4, 1970. The charterparty
provided that any dispute between owners and charterers
should be decided by arbitrators in London. On January 28,
1970, plaintiff initiated an action in this Court for breach of
the charterparty arising from the refusal of the ship's cap
tain to sign bills of lading for cargo loaded at Quebec. The
ship was seized in Quebec City but was released on defend
ants' solicitors undertaking by letter to file an appearance in
the action and to furnish security. This they did a few days
later. Defendants' solicitors in their letter stated that it
would appear that the dispute would be settled by arbitra
tors in London and that the action would be discontinued.
Plaintiff proceeded with the action, however, and on
December 15, 1970, filed a statement of claim in the action.
Defendants moved to dismiss the action.
Held, proceedings in the action should be stayed. Plaintiff
had not shown that enforcement of the arbitration clause
would lead to an injustice and it must therefore be enforced.
1. Art. 951 of the Quebec Code of Civil Procedure enact
ed in 1965 recognizes the validity of such clauses. National
Gypsum Co. v. Northern Sales Ltd. [1964] S.C.R. 144,
distinguished.
2. Although valid by the law of Quebec (the lex fori), an
arbitration clause cannot exclude the jurisdiction of the
Federal Court, and accordingly plaintiff's action may not be
dismissed but merely stayed pending the arbitration.
3. By filing an appearance defendants could not be taken
in the circumstances to have acquiesced in the Court's
jurisdiction and disentitled themselves from pleading the
arbitration clause.
MOTION to dismiss action.
T. Bishop for defendants, applicants.
R. Gaudreau for plaintiff, contra.
PRATTE J.—By their motion defendants seek
dismissal of the suit brought by the plaintiff, on
the ground that the parties agreed, under the
charterparty they entered into, to submit all
their disputes to arbitration.
By a charterparty signed in London on Janu-
ary 4, 1970, plaintiff chartered the ship Angelic
Power. This agreement contains an arbitration
clause which reads as follows:
17. That should any dispute arise between Owners and
the Charterers, the matter in dispute shall be referred to
three persons at London, one to be appointed by each of the
parties hereto, and the third by the two so chosen; their
decision or that of any two of them, shall be final, and for
the purpose of enforcing any award, this agreement may be
made a rule of the Court. The Arbitrators shall be commer
cial men.
Plaintiff initiated this suit on January 28,
1970 for breach of the charterparty and had the
Angelic Power, which was then at Quebec City,
seized. By this suit plaintiff sought compensa
tion for damages allegedly suffered by it
because the captain of the vessel, contrary to
the terms of the charterparty, refused to sign, or
to authorize anyone else to sign, the bills of
lading for cargo loaded at Quebec. The ship was
however released the next day, after counsel
for the defendants had contacted plaintiff's
counsel and undertaken to file an appearance to
the suit and to write them a letter in which they
would undertake to furnish security if
requested.
In performance of this agreement counsel for
the defendants wrote to plaintiff's counsel, on
January 30, 1970, a letter which, with the
Court's leave and without objection by the
opposing party, was filed at the hearing. This
letter read as follows:
Dear Sirs:
We have received your telex of January 29, 1970, and
should like to confirm that we agree to file an Appearance
into court provided that you send us copies of the pro
ceedings which were served on the ship.
Since it would appear that any dispute will be settled by
arbitration in London, we would appreciate your advising
us that the charterer is willing to discontinue this action,
each side paying its own costs.
We understand that Mr. N. J. Thwaites of the United
Kingdom P & I Association will be in Montreal on
Monday, February 16, 1970, and would appreciate the
opportunity of meeting with you and Mr. Hampton-
Davies to further discuss this matter. Would you kindly
advise us whether you can attend at Montreal on that day
and if so, at what time. We think that the afternoon of
February 16th would be best.
The promised appearance was filed a few
days later and on February 17, counsel for the
defendants, acting "for and on behalf of the
United Kingdom Freight, Demurrage &
Defence Association, Limited, and the Owners
of the Angelic Power," wrote the following
letter to counsel for the plaintiff:
In consideration fdr your releasing the "ANGELIC
POWER" from arrest' in the above action, we, on behalf
of the United Kingdom Freight, Demurrage & Defence
Association, Limited, and the owners)of the "ANGELIC
POWER" do hereby consent and agree that on demand,
and whether or not the "ANGELIC POWER" shall have
been lost or sold, to cause to be filed in the said proceed
ings a bail bond in the usual form from a surety company
authorized to become surety in the said court for an
amount not exceeding Six Thousand Two Hundred Fifty-
One Dollars and Forty-Two Cents Canadian ($6,251.42)
but without prejudice to the amount of any final judgment
in your favour against the "ANGELIC POWER" and her
Owners relating to the alleged refusal of the Master to
sign or authorize to be signed bills of lading for the cargo
loaded at Quebec City and for damages resulting from
this refusal.
This letter is given without prejudice to any defences
which may be available to the said "ANGELIC POWER"
and/or her owners and is not to be deemed an admission
of liability.
Discussions were held between the parties in
an attempt to reach an amicable settlement of
plaintiff's claim; in November 1970, however,
the latter decided to proceed with its suit. On
December 15, 1970, therefore, plaintiff filed its
statement [of claim] at the Registry of the
Court, a copy of which statement had been
received by counsel for the defendants "in lieu
of service" the previous November 27. Some
weeks later, i.e. on January 5, 1971, counsel for
the defendants wrote plaintiff's counsel to
inform them that their clients insisted on the
dispute's being settled by arbitration under
Clause 17 of the charterparty and calling upon
plaintiff to appoint its arbitrator. This letter
read as follows:
In reply to our request for details to file a Defence to
this action, our principals have requested us to have your
principals, Le Syndicat de Normandin Lumber Ltd., con-
sent to proceed to arbitration in London as per Clause 17
of the Charterparty dated in Montreal on January 4, 1970.
On January 30, 1970, we requested that this action be
discontinued and that the matter in dispute be sent to
arbitration in London. However, we never received any
reply from you, probably because settlement negotiations
were pending at the time between representatives of the
Plaintiff in London and Defendant's P & I association.
Our principals, the owners of the "ANGELIC POW
ER", have the following counter-claims against the Plain
tiff arising out of the same charterparty:
1. Unpaid hire Canadian $ 5,776.74
2. Repairs to the "ANGELIC POWER"
arising from ice damage 18,597.23
3. Overtime during temporary repairs 2,444.61
4. Repairs to the "ANGELIC POWER"
arising from damage by stevedores
Minimum 3,000.00
As it would be in the interest of justice if all the issues
were decided by arbitration in London, including the
dispute which is the subject of Plaintiff's action, we
hereby, in accordance with Clause 17 of the said charter-
party, call upon the Plaintiff to appoint an arbitrator
within the next ten (10) days to represent it with respect
to all disputes arising out of the said charterparty. On
January 5, 1971, the owners appointed Mr. Cedric Bar-
clay of 1 Cromwell Road, London SW 7, as their
arbitrator.
We suggest Plaintiff therefore appoint its own arbitra
tor within the next ten (10) days, failing which we will
apply to the court to have the present action dismissed
and/or suspended and/or for the arbitration to proceed
ex -parte and/or in accordance with the arbitration laws of
the United Kingdom.
This summons was repeated in two other
letters dated January 20 and February 4, 1971,
respectively and, as plaintiff did not comply,
defendants submitted the motion now before
the Court.
At the hearing counsel for the plaintiff con
tended that the motion should be dismissed for
two reasons: first, because the dispute between
the parties was not one which should, under
Clause 17 of the charterparty, be submitted to
arbitration; secondly, because, he said, defend
ants had submitted to the Court's jurisdiction
by filing an unconditional appearance to the
suit. Counsel for the plaintiff further maintained
that, even if defendants' motion were allowable,
the Court should not, as prayed, dismiss the
action but merely order a stay of proceedings.
Defendants' counsel contented himself at the
hearing with maintaining that the arbitration
clause contained in Clause 17 of the charterpar-
ty should be considered valid, and that no
reason existed for not giving effect to it. He
added he was not insisting on being granted
dismissal of the suit, and that he would be
content if the Court ordered a stay of proceed
ings, so that the parties could go ahead with the
arbitration agreed upon.
The first question raised by this case is that
of the validity and effect of the arbitration
clause relied on by the defendants.
In National Gypsum Co. y. Northern Sales
Ltd. [1964] S.C.R. 144, the Supreme Court of
Canada affirmed a decision of the Exchequer
Court, sitting in Admiralty, which had dismissed
a motion like the present one because an arbi
tration clause like the one cited by defendants
was held void and contrary to public order. The
Court reached this conclusion because it con
sidered that an arbitration clause is an agree
ment regarding procedure, and, consequently,
that its validity should be determined by the lex
fori. As there was no provision on this point in
the rules of the Court, reference had to be
made, under practice rule 2(1)(b) of the Exche
quer Court Rules, to the law of Quebec, where
the cause of action originated, to decide wheth
er the clause was valid; and it was because
Quebec law condemned arbitration clauses as
contrary to public order that the Supreme Court
concluded, in the case before it, that the arbitra
tion clause could not be enforced.
As I feel I am bound by this decision, I
should hold, if the law of the Province of
Quebec ha remained unchanged, that the arbi-
tration clause invoked by defendants is void,
and, consequently, dismiss their motion. The
fact is, however, that since 1965 Quebec law
has not been the same as it was prior to that
date. Indeed, in that year the Legislature enact
ed a new Code of Civil Procedure which, in
Article 951, specifically regulates arbitration
clauses:
951. An undertaking to arbitrate must be set out in
writing.
When the dispute contemplated has arisen, the parties
must execute a submission. If one of them refuses, and does
not appoint an arbitrator, a judge of the court having
jurisdiction makes such appointment and states the objects
in dispute, unless the agreement itself otherwise provides.
Despite this change in the law, the Superior
Court of Quebec continues to hold that an arbi
tration clause like the one with which we are
concerned is contrary to public order (Boren-
stein v. Trans American Investment and Devel
opment Co. [1970] Que. S.C. 192; Sun and Sea
Estates Ltd. v. Aero-hydraulics Corp. [1968]
Que. P.R. 210), but these decisions seem to me
to be ill-founded, as I do not see how the
Quebec legislator could have regulated the form
and effect of an agreement whose validity he
does not admit. Moreover, the point of view
expressed in these decisions is not shared by all
Quebec judges (Singer Plumbing and Heating
Co. v. Richard [1968] Que. Q.B. 547; Mobilcol-
or Productions v. Gula [1968] Que. P.R. 22;
Morin v. Travelers Indemnity Co. [1970] Que.
S.C. 84). Nor is it shared by writers who have
studied the problem: John E. C. Brierley,
Aspects of the Promise to Arbitrate in the Law
of Quebec, 1970 Revue du Barreau, p. 473;
Emile Colas, Clause compromissoire, un com-
promis et arbitrage en droit nouveau, 1968
Revue du Barreau, p. 129.
I feel, therefore, that an arbitration clause
like the present one is now valid under Quebec
law.
Here, however, another problem arises. If
recourse must be had to Quebec law to decide
on the validity of the arbitration clause in a case
where the cause of action originated in Quebec,
as the Supreme Court held in National Gypsum,
it would seem logical to refer to the same law in
deciding on its effect. Under Quebec law, when
the parties to a contract have agreed to submit
disputes arising between them to arbitration, the
courts are without jurisdiction to hear such
disputes. In Quebec, as in France (Dalloz:
Répertoire de droit civil, vb° compromis, No. 126
et seq.), the effect of the arbitration clause is to
limit the court's jurisdiction. This is why, in
cases where one party takes legal action to
resolve a dispute which it has agreed to submit
to arbitration, the courts, unless the opposing
party agrees to revoke the arbitration clause,
hold that they have no jurisdiction and simply
dismiss the suit. Auto Fabric Products Co. v.
Kaplan Construction Co. [1949] Que. Q.B. 241; ,
Mobilcolor Productions Inc. v. Gula [1968]
Que. P.R. 22; Morin v. Travelers Indemnity Co.
[1970] Que. S.C. 84. Thus, if, in a case such as
this, reference must be made to Quebec law to
determine the effect of the arbitration clause, it
would follow that the result of such an agree
ment would be to remove from the jurisdiction
of the Court cases which, under the law, are
within its competence. I do not feel that such a
conclusion is acceptable. The laws defining the
jurisdiction of this Court, and of the one it
replaced, are laws of public order which citi
zens cannot escape. If the arbitration clause has
long been held valid in the common law, this is
because it was held that the effect of such an
agreement is not to deny the courts jurisdiction.
Thus, in Atlantic Shipping & Trading Co. v.
Louis Dreyfus and Co. [1922] 2 A.C. 250, Lord
Dunedin said at page 255:
My Lords, under the old law an agreement to refer
disputes arising under a contract to arbitration was often
asserted to be bad, as an ousting of the jurisdiction of the
Courts, but that position was finally abandoned in Scott v.
Avery 5 H.L.C. 811. As I read that case, it can no longer be
said that the jurisdiction of the Court is ousted by such an
agreement; on the contrary the jurisdiction of the Court is
invoked to enforce it, and there is nothing wrong in persons
agreeing that their disputes should be decided by arbitra-
tion. It follows that the clause here is not obnoxious so far
as it provides for arbitration.
If it so desires, the Legislature of a Province
may certainly grant citizens the right to avoid
the jurisdiction of the courts falling within its
own legislative powers. However, the Provin
cial legislator is not able to permit exclusion of
the jurisdiction of the courts whose powers are
defined by the Federal Parliament. It is there
fore impossible for an arbitration clause recog
nized as valid by Quebec law to have the effect
of removing a case from the jurisdiction of this
Court or the one that preceded it. Arbitration
clauses may only be given effect to the extent
that they do not detract from this Court's juris
diction. It follows from this that the effect of an
arbitration clause like the one in question
cannot be to alter the Court's jurisdiction, and
that for this reason, when the Court has to deal
with a motion of this kind, it may not dismiss
the suit for want of jurisdiction, but may only
order a stay of proceedings.
We can now examine the arguments present
ed by counsel for the plaintiff in response to
defendants' motion. Firstly, plaintiff claims that
the dispute in question here is not one which
must be submitted to arbitration under Clause
17 of the charterparty. This claim cannot be
supported. It is only necessary to read the rele
vant clause of the charterparty, and plaintiff's
statement of claim, to realize this. Plaintiff
wants compensation for damages incurred as a
result of the charterparty's not having been
fully performed; in my opinion, this is a dispute
which should be resolved by arbitrators under
Clause 17 of the charterparty, in which it was
agreed to have "any dispute ... between
Owners and the Charterers" decided by arbitra
tion. There is no basis for saying, as counsel for
the plaintiff contended, that the only disputes to
which this clause refers are those regarding
interpretation of the charterparty (as opposed to
disputes regarding failure to perform said
contract).
Secondly, plaintiff's counsel contended that
defendants should not be entitled to plead the
arbitration clause because, he said, they had
acquiesced in the jurisdiction of the Court by
filing a simple appearance to the suit. I feel that,
as submitted, this reason is clearly ill-founded.
It is quite true that the rules of practice in effect
when the suit was brought allowed the defend
ant (as indeed the rules in force at the present
time do), to file a conditional appearance. It is
also true that the fact of filing a simple rather
than a conditional appearance may in some
cases be interpreted as acceptance of the
Court's jurisdiction. However, this has no bear
ing on the problem we are dealing with here,
for, as I have indicated, the effect of the arbi
tration clause is not to remove the parties from
the Court's jurisdiction. Assuming—and such
hypothesis is not in accordance with reality—
assuming that the filing of a simple appearance
always precludes the defendant from then
pleading the Court's want of jurisdiction, the
fact that the defendants here filed an uncondi
tional appearance would not have prevented
them from requesting performance of the arbi
tration clause, because they do not impair the
Court's jurisdiction in so doing.
In fact, plaintiff should have presented this
contention in a different way. The arbitration
clause is an agreement; like any agreement, it
may be revoked by common consent of the
parties. By bringing the suit, plaintiff clearly
expressed its intention to revoke the arbitration
clause to which it had subscribed; and the ques
tion is whether the defendants in fact consent
ed, expressly or by implication, to this revoca
tion. It is clear that in this case the defendants
did not expressly agree to ignore the arbitration
clause; but did they act in such a way that they
must be taken to have implicitly consented to
the suit being settled by other means than arbi
tration? We must recall here that a party's con
sent to an agreement may never be assumed,
and that there is tacit consent on the part of an
individual only when the latter has performed
actions, which, though not performed in order
to demonstrate his consent, nevertheless pre-
suppose that it exists. We need only recall the
facts I have stated above to conclude that
defendants have not been shown to have acted
so as to lead of necessity to the conclusion that
they wished to waive their right to rely on the
arbitration clause. As a means of securing the
immediate release of the ship, defendants filed
an appearance to the action and undertook to
furnish security; these are not actions which, in
the circumstances, necessarily imply that they
were waiving the benefit of the arbitration
clause. Nor can this construction be placed on
the fact that defendants delayed in taking
advantage of this agreement; such delay is quite
understandable in the circumstances, since up
to the end of November, 1970, the parties were
negotiating in an attempt to reach an amicable
settlement.
I therefore conclude that the present arbitra
tion clause to which the parties freely sub
scribed must be enforced unless it appears that
this would be unjust. However, plaintiff's coun
sel did not put forward any grounds for con
cluding that the enforcement of the arbitration
clause in this case would lead to an injustice.
Defendants' motion will therefore be granted,
with costs, and a stay of the proceedings
already initiated will be ordered so that the
parties may proceed to arbitration as they have
agreed to do.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.