2021 QCCA 1594, 2021 QCCA 1594

9369-1426 Québec inc. (Restaurant Bâton Rouge) c. Allianz Global Risks US Insurance Company 2021 QCCA 1594 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No.: 500-09-029340-213 (500-06-001068-200) DATE: October 26, 2021 CORAM: THE HONOURABLE MARK SCHRAGER, J.A. CHRISTINE BAUDOUIN, J.A. FRÉDÉRIC BACHAND, J.A. 9369-1426 QUÉBEC INC. DBA RESTAURANT BÂTON ROUGE APPELLANT – Applicant v. ALLIANZ GLOBAL RISKS US INSURANCE COMPANY RESPONDENT – Defendant JUDGMENT [ 1 ] This is an appeal from a judgment rendered on January 14, 2021 by the Superior Court, District of Montreal (the Honourable Mr.

Justice Gary D.D. Morrison) , [1] granting the respondent’s application to refer the appellant’s application for authorization to institute a class action to arbitration (article 622 C.C.P. ). [ 2 ] The underlying dispute relates to insurance claims for business interruption due to the COVID-19 pandemic. After coverage was denied, the appellant sought to commence a class action on behalf of insureds in similar situations. In response, the respondent sought to refer the matter to arbitration on the basis of a dispute resolution clause found in the applicable policy.

The clause, a mediation/arbitration (“med-arb”) clause located in a part of the policy entitled Provincial Statutory Conditions Applicable to the Province of Quebec only , reads as follows: 5. Dispute Resolution In the event that the Insurer and the Insured(

s) cannot agree concerning either the coverage or the quantum afforded by this Policy, it is agreed that the dispute shall be resolved in accordance with the dispute resolution process hereinafter described: a. Mediation with a Mediator mutually agreed by the parties to the dispute. If the parties fail to concur on the choice of the Mediator, a Court shall appoint a Mediator on a Motion by one of the parties. b.

If settlement at Mediation is not possible, the dispute will be referred to Arbitration in accordance with the applicable Arbitration legislation/regulations in the jurisdiction in which the Policy is issued. The decision of the Arbitrator will be binding on all parties to the dispute with no right of appeal. c. Each party shall bear its own costs and expenses in connection with the dispute resolution process. The costs and expenses of Mediation and Arbitration shall be shared equally by the parties to the dispute. By agreement in writing, the Insurer and the Insured(

s) may waive compliance with this

section or any part thereof for purposes of a specified dispute. [ 3 ] The appellant opposed the respondent’s application on the ground that, on a proper reading of the policy as a whole, the parties never clearly agreed to resolve coverage disputes through binding arbitration. The appellant placed particular emphasis on another dispute resolution clause, found in a

section of the policy entitled General Terms and Conditions , providing for the resolution of coverage disputes by the courts of the place in which the insured is located: 2. Policy Jurisdiction This policy shall be deemed to have been made under and shall be governed by the laws and decisions of the province or territory shown in the mailing address of the Named Insured, as it is shown in the “Policy Declarations”. The Courts in the Court District in which the Named Insured is located shall have exclusive jurisdiction in case of a coverage dispute.

The appellant argued that the two dispute resolution clauses were contradictory, while adding that the ensuing ambiguity regarding theparties’ intention was fatal to the respondent’s application. [4] The judge of first instance rejected the appellant’s arguments. He first found that the second clause had nothing to do withsubject-matter jurisdiction, but, rather, that it related to territorial jurisdiction.

For that reason, he saw no conflict between that clause andthe med-arb clause invoked by the respondent:[2] [The med-arb clause] is not in conflict with the territorial jurisdiction clause which dictates in what court district, for example, Allianzwas to file its Bene Esse Motion, the object of the present judgment, or where the parties would file an application in the event they couldnot agree on the choice of a mediator, in which case the Court would decide. [5] The judge also relied on the fact that the provisions of the General Terms and Conditions stipulate that Quebec-based insuredsare governed by the Provincial Statutory Conditions Applicable to the Province of Quebec only:[3] In this regard, the next-following clause in the General Terms and Conditions, being

section 3, stipulates that the Policy is governed bythe Provincial General and Statutory Conditions, such that for insureds resident in Quebec, they are to be governed by those sections. Itis precisely in those Conditions that

section 5 Dispute Resolution is to be found. [6] The judge further found that the competence-competence principle, as interpreted in the Supreme Court’s decision in Dell,[4]did not prevent him from making a final determination regarding the jurisdiction of the mediator and the arbitrator to be appointedpursuant to the med-arb clause.

Therefore, before granting the application, he found that both the mediator and the arbitrator were“empowered and competent to act in the matter raised by [the appellant] on its own behalf against [the respondent], and this to theexclusion of the Superior Court”.[5] * * * [7] The appellant argues that the judge erred in holding that the clause found in the General Terms and Conditions relates toterritorial jurisdiction rather than subject-matter jurisdiction.

It adds that the judge further erred while considering the relationshipbetween the General Terms and Conditions and the Provincial Statutory Conditions Applicable to the Province of Quebec only.Specifically, while the judge was right to note that the General Terms and Conditions provide that the policy is governed by additionalterms which include those set out in the Provincial Statutory Conditions Applicable to the Province of Quebec only, he allegedlyoverlooked that the latter conditions specifically provide that they are applicable “except as [they] may be modified or supplemented byany of the Clauses or Endorsements contained in the Policy”.

The appellant argues that, had the judge considered those provisions, hewould have found that the policy addressed the relationship between those two parts of the policy in clearly contradictory terms. [8] The respondent’s position is that the judge’s

interpretation of the clause found in the General Terms and Conditions is correct,as that clause does no more than incorporate into the policy the rule of territorial jurisdiction set out in

article 43 para. 2 C.C.P.[6]Consequently, for the respondent, there is no conflict between the two clauses. * * * [9] As the Court recently recalled,[7] applications based on

article 622 C.C.P. are to be decided in accordance with the approach tothe competence-competence principle set out by the Supreme Court in Dell.[8] That approach was summarized as follows in thecompanion case of Rogers Wireless Inc. v. Muroff:[9] [W]hen an arbitration clause exists, any challenges to the jurisdiction of the arbitrator must first be referred to the arbitrator. Courtsshould derogate from this general rule and decide the question first only where the challenge to the arbitrator’s jurisdiction concerns aquestion of law alone.

Where a question concerning jurisdiction of an arbitrator requires the admission and examination of factual proof,normally courts must refer such questions to arbitration. For questions of mixed law and fact, courts must also favour referral toarbitration, and the only exception occurs where answering questions of fact entails a superficial examination of the documentary proofin the record and where the court is convinced that the challenge is not a delaying tactic or will not prejudice the recourse to arbitration. In its recent decision in Uber Technologies Inc. v.

Heller,[10] the Supreme Court provided the following clarification:[11] Neither Dell nor [Seidel v. TELUS Communications Inc., 2011 SCC 15] fully defined what is meant by a “superficial” review. Theessential question, in our view, is whether the necessary legal conclusions can be drawn from facts that are either evident on the face ofthe record or undisputed by the parties (see Trainor v. Fundstream Inc., 2019 ABQB 800, at para. 23 ; see also Alberta MedicalAssociation v. Alberta, 2012 ABQB 113, 537 A.R. 75, at para. 26). [10] In the present case, the issues in dispute raise questions of contractual

interpretation. While such questions generally constitutemixed questions of fact and law,[12] the Supreme Court held in 2016 that the

interpretation of a standard-form contract raises questionsof law where “the

interpretation at issue is of precedential value” and “there is no meaningful factual matrix that is specific to the partiesto assist the

interpretation process”.[13] [11] These conditions are met here. As a result, the judge was right to analyze fully, rather than on a mere prima facie basis, theobjection to arbitral jurisdiction raised by the appellant.[14] It also means that the applicable standard of appellate review is correctness,rather than palpable and overriding error. * * * [12] Was the judge correct in concluding that the dispute had to be referred to arbitration on the basis of the med-arb clause found inthe Provincial Statutory Conditions Applicable to the Province of Quebec only? [13] We begin our analysis by recalling two propositions that are logical consequences of the Supreme Court’s embrace of the

legitimacy and virtues of commercial arbitration [15] and that are now well settled, including under Quebec law. The first is that arbitration clauses — which must always be considered as legally distinct from the contracts in which they are embedded (article 2642 C.C.Q. ) — are to be interpreted in a large and liberal manner. [16] The second is that any ambiguity as to an arbitration clause’s scope is to be resolved not through presumptions or tie-breaking rules based on now-antiquated views about the purported superiority of courts over arbitral tribunals, but rather by resorting to the usual rules of contractual

interpretation. [17] To be clear, statements to the effect that ambiguities in arbitration clauses ought to be resolved so as to preserve a plaintiff’s right to resort to courts [18] are inconsistent with contemporary jurisprudential developments. [ 14 ] The rules of contractual

interpretation, as they apply in Quebec, were summarized in the leading case of Uniprix . [19] The Supreme Court explained that they call for a two-step analytical process. At the first step, the key question is whether the relevant contractual terms are clear or ambiguous, and that question is to be answered in light of the contract’s other clauses as well as the circumstances in which it was concluded.

If the terms are ambiguous, the analysis proceeds to a second step guided by the cardinal principle according to which “[t]he common intention of the parties rather than adherence to the literal meaning of the words shall be sought/ on doit rechercher quelle a été la commune intention des parties plutôt que de s’arrêter au sens littéral des termes utilisés ” (article 1425 C.C.Q. ). It is only here that recourse may be had to other rules of

interpretation, including those found in articles 1426 et seq. C.C.Q. [ 15 ] Applying this legal framework to the case at hand, we conclude, at the first step of the analysis, that the relevant terms of the contract are ambiguous. [ 16 ] While

section 5 of the Provincial Statutory Conditions Applicable to the Province of Quebec clearly indicates that coverage disputes are to be resolved through arbitration — if unresolved pursuant to mediation —, an ambiguity arises when one considers

section 2 para. 2 of the General Terms and Conditions . First, it is by no means clear to us that the latter provision’s object is strictly limited to territorial jurisdiction, as the respondent claims.

Second, the appellant is right in contending that the policy addresses the relationship between the General Terms and Conditions and the Provincial Statutory Conditions Applicable to the Province of Quebec only in somewhat unclear terms. [20] [ 17 ] Therefore, upon reading the relevant provisions of the policy, one is left with the impression that coverage disputes involving Quebec insureds fall within the ambit of both a forum selection clause and an arbitration clause, and that the policy contains equivocal language regarding which clause ought to prevail. [ 18 ] However, that ambiguity is easily resolved at the second step of the analysis. [ 19 ] To understand why, it is worth noting at the outset that the relevant clauses are found in the policy’s first

chapter ( General Policy Terms, Conditions, Exclusions and

Definitions ), which is comprised of four sections: (

i) General Terms and Conditions ; (ii) General Exclusions ; ( iii ) General

Definitions ; and ( iv ) Provincial General and Statutory Conditions . The fourth

section has three parts: (

a) Provincial General Conditions Applicable to all Common Law Provinces and Territories except Alberta, British Columbia and Manitoba only ; (

b) Provincial Statutory Conditions Applicable to Alberta, British Columbia and Manitoba only ; and (

c) Provincial Statutory Conditions Applicable to the Province of Quebec only . It is clear from the language used in the policy that the first

section is intended to set out general terms that are supplemented, in the fourth section, by terms that vary depending on the province or territory where the insured is located. Moreover, neither the first nor the second part of the fourth

section contain dispute resolution clauses similar to those found in the General Terms and Conditions and the Provincial Statutory Conditions Applicable to the Province of Quebec only . [ 20 ] These contextual elements convey the strong impression that — consistent with the rule according to which specific language generally prevails over general language [21] — the forum selection clause was intended to apply only in common law provinces and territories, while the arbitration clause was intended to apply in Quebec. That impression is only reinforced when one considers the rule found in

article 1428 C.C.Q. , [22] because interpreting the clauses in that manner avoids any conflict while ensuring that they can both be given some effect. [ 21 ] The only other rule of

interpretation that could arguably support the appellant’s position is the contra proferentem rule, which provides that ambiguities in contracts of adhesion and consumer contracts ought to be resolved in favour of the adhering party or the consumer (article 1432 C.C.Q. ). However, even assuming that giving precedence to the forum selection clause found in the General Terms and Conditions could be characterized as the

interpretation more favourable to the respondent’s clients — which is by no means a given —, contra proferentem is only applicable when an ambiguity remains unresolved after other rules of

interpretation have been applied, [23] which is not the case here. [ 22 ] Therefore, a proper reading of the relevant provisions of the policy leads to the conclusion that the dispute between the parties falls within the ambit of

section 5 of the Provincial Statutory Conditions Applicable to the Province of Quebec only . The judge was thus right to grant the respondent’s application and refer the matter to arbitration. FOR THESE REASONS, THE COURT: [ 23 ] DISMISSES the appeal, with legal costs. MARK SCHRAGER, J.A. CHRISTINE BAUDOUIN, J.A. FRÉDÉRIC BACHAND, J.A.

Mtre Laurent Debrun Mtre Charles Côté-De Lagrave SPIEGEL SOHMER For the Appellant Mtre John Nicholl, Ad. E. Mtre Gabriel Archambault Mtre Eric van Eyken Mtre Audrey Boily CLYDE & CO For the Respondent Date of hearing: September 30, 2021