2024 QCCS 389, 2024 QCCS 389

McLaren Automotive Incorporated c. 9727272 Canada Inc. 2024 QCCS 389 SUPERIOR COURT CANADA PROVINCE OF QUEBEC DISTRICT OF LAVAL No.: 540-17-015649-238 DATE: February 7, 2024 _____________________________________________________________________ BY THE HONOURABLE PIERRE A. BÉLIVEAU, J.S.C. _____________________________________________________________________ MCLAREN AUTOMOTIVE, INCORPORATED Applicant v. 9727272 CANADA INC.

Defendant and ADR CHAMBERS and Me PATRICE BRUNET Impleaded parties _____________________________________________________________________ JUDGMENT _____________________________________________________________________ OVERVIEW [ 1 ] The Court is seized of an application by the Applicant (" McLaren ") to order the stay of a consensual arbitration process currently in progress between it and the Respondent (" 972 ") until the Superior Court rules on the merits of its principal application. [ 2 ] The principal application seeks, inter alia , that : a.

The first arbitral decision in which the arbitrator decided that he had no jurisdiction to act be homologated; b. The decision of a three-arbitrator appeal panel overturning the decision of the arbitrator be annulled; [ 3 ] The parties had the opportunity to

schedule a hearing on the merits of this case at the end of March 2024, which renders the impact of the present judgment on them relatively limited. 1.

BACKGROUND [ 4 ] McLaren is the exclusive distributor of McLaren motor vehicles and spare parts in Canada. [ 5 ] 972 operates as a retailer of McLaren products in Laval. [ 6 ] In 2015, McLaren and 972 began negotiations for the latter to open and operate a dealership of McLaren products in Laval. [ 7 ] With a view to concluding an agreement, McLaren submitted to 972 a formal contract entitled Dealer Sales and Service Agreement (“ DSSA ”) to be binding on the parties, after a number of conditions and requirements were met by 972. [1] [ 8 ] Paragraph 36.2.3 of the DSSA provided that any controversy or claim arising out of the agreement shall be determined by binding arbitration administered by the ADR chambers under the National Automobile Dealer Arbitration Program (“ NADAP ”). [ 9 ] To this date, the parties have been unable to sign the DSSA. [ 10 ] In 2017, the parties entered into a Conditional agreement (“Conditional agreement”), pending a definitive one, which also contained a binding arbitration clause giving jurisdiction to the American Arbitration Association (“AAA”) for any controversy or claim arising out from the Conditional agreement. [2] [ 11 ] On June 29, 2023, 972 filed proceedings under the NADAP to resolve a dispute between the parties arising from McLaren’s decision to have a new McLaren dealer in Québec city.

It is not required for the purposes hereof to discuss the details of the issues raised

by 972, particularly as it was only superficially addressed in the context of this short hearing. [ 12 ] On August 24, 2023, following a motion filed by McLaren, the arbitrator declined jurisdiction to conduct the arbitration. [ 13 ] Dissatisfied with this decision, 972 appealed to an appeal arbitration panel established under the NADAP provisions.

McLaren participated in this appeal arbitration procedures. [ 14 ] On October 30, 2023, the appeal panel overturned the arbitrator’s decision declining jurisdiction and returned the file to the arbitrator to conduct the arbitration. [ 15 ] After receiving this decision, McLaren informed 972 of its intention to file an application to the Superior Court to have the NADAP appeal panel decision annulled. [ 16 ] More specifically, what McLaren is now seeking before the Superior Court is the homologation of the arbitration award of the first arbitrator and the annulment of the decision of the appeal panel, notably on the following grounds : a. the NADAP rules pertaining to appeal right to an appeal panel are invalid under Québec law since an arbitration award may only be challenged by way of an application for its annulment under articles 632 and 648 of Code of civil procedure , as the case may be; b. the NADAP appeal procedures are contrary to public order; c. the NADAP appeal decision pertains to a dispute beyond the scope of its rules, in that the rules do not allow for the determination of whether an agreement exists or whether the parties are bound by the DSSA which they never signed; d.

The procedure for the appointment of the arbitrators of the panel appeal was not observed. [ 17 ] De bene esse , McLaren contests jurisdiction of both the arbitrator and the arbitration appeal panel under the NADAP rules in the absence of a DSSA duly executed and signed by the parties. [ 18 ] Other developments during the arbitration process have caused the parties to go back and forth between the arbitrator and the arbitration appeal panel.

This has prompted McLaren to ask the Court to suspend the arbitration, with the laudable aim of avoiding the multiplication of proceedings and the legal costs arising therefrom. [ 19 ] Therefore, the Court must now rule, on an interlocutory basis, on McLaren’s application to stay arbitration proceedings until final judgment is rendered on its application by the Superior Court. [ 20 ] The parties do not contest in principle that the Court has the discretionary power to order to stay the arbitration, but 972 asserts that the requisite conditions of such intervention do not exist in the present case. 2.

ANALYSIS 2.1 Criteria applicable to the Application to stay [ 21 ] The first issue here is to determine the criteria applicable to the analysis of an application to stay arbitration proceedings pending a judgment of the Superior Court. The parties have diverging positions on the matter. [ 22 ] McLaren submits that the applicable criteria for granting a stay are those outlined in Manioli Investments v.

Investissements MLC , which Justice Langlois explained as follows : [29] Les tribunaux ont accepté de suspendre une instance lorsqu'il existe un lien indéniable entre un débat devant une instance d'appel et un recours pendant devant la Cour supérieure, lorsque le sort ultime d'un recours dans une instance dépend dans une large mesure du sort d'un recours dans une autre instance, lorsque la suspension d'un recours permet d'assurer le respect de la règle de proportionnalité imposée à l'article 4.2 du Code de procédure civile , lorsqu'il y a un risque de jugements contradictoires relativement à certaines questions dont sont saisies deux instances et lorsque l'absence de suspension aurait pour effet de multiplier inutilement les procédures et les coûts pour les parties. [3] [References omitted] [ 23 ] The context in which the judgment was rendered is quite different from our own.

The Superior Court was being asked to stay its own proceedings pending an appeal before the Court of Appeal. [ 24 ] From the Court's point of view, the test outlined in Manioli does not apply to a situation in which the Superior Court is being asked to issue an order to stay proceedings ongoing in another forum, in this case a consensual arbitration. [ 25 ] For this reason, the Court will not apply this approach. [ 26 ] Alternatively, McLaren submits that the power of the Court to stay arbitration rests on the criteria set forth in Manitoba v.

Metropolitan Stores [4] , which correspond to those for issuing injunctions, i.e., the existence of an appearance of right or a serious issue, the possibility of irreparable harm and the balance of convenience. In this judgment, the Supreme Court of Canada held that the Superior Court had jurisdiction to suspend proceedings pending before an administrative tribunal. [ 27 ] The Court of Appeal adopted such an approach in Fraternité des policiers policières de Montréal v .

Ville de Montréal [5] : [110] Les critères régissant le pouvoir d’un tribunal administratif de suspendre l’instance engagée devant lui jusqu’à ce qu’un tribunal

de droit commun statue sur une contestation constitutionnelle présentant un lien indéniable avec un différend dont il est saisi sont ceux de l’arrêt Metropolitan Stores .

Même si cet arrêt porte sur la suspension des procédures devant un tribunal administratif par une Cour supérieure dans le cadre d’une contestation constitutionnelle, les critères sont largement les mêmes lorsqu’il s’agit pour un tribunal administratif de suspendre des procédures pendantes devant lui au motif qu’un tribunal de droit commun est aussi saisi de la question constitutionnelle. (…) [ 28 ] According to 972, the criteria for the Superior Court to exercise its power to stay arbitration are much narrower. [ 29 ] Its position is based on the principles set out by Barin J. in Hypertec Real Estate v.

Equinix Canada , in the context of an application to stay a consensual arbitration : [44] Without necessarily disagreeing with the above decision, I am of the view that given the importance that both the provincial and federal legislatures in Canada and the highest court in this country have given to such parallel-to-the-courts dispute resolution mechanisms, something more stringent than special circumstances is required for granting a stay under article 632(4) C.C.P. [45] To be more precise, in my view, the granting of a discretionary stay in the context of consensual arbitrations taking place in Quebec requires “exceptional circumstances” , which must be carefully considered by a competent court on a case-by-case basis. [6] [Underlining by the Court] [ 30 ] After examining the position of each of the parties in the light most favourable to McLaren, i.e. according to the principles applicable to injunctions, the Court concludes that McLaren's application to stay the arbitration must be dismissed. 2.2 Analysis of application to stay according to injunction criteria • Appearance of right [ 31 ] The analysis of the criterion of the serious issue/appearance of right is dependent on a preliminary analysis of the legal and factual value of the main application.

Here, McLaren fails to demonstrate that it has a serious chance of succeeding on the merits. [ 32 ] McLaren first argues that, in Quebec, the only available recourse against a consensual arbitration decision is to seek its annulment before the Superior Court, pursuant to

article 648 C.C.P. [ 33 ] Resorting to an appeal panel of arbitrators would be contrary to public order provisions on arbitration contained in the Code of civil procedure. [7] For this reason, 972 would have had no choice but to turn to the Superior Court if it was dissatisfied with the arbitrator's decision on its jurisdiction to act in this case. [ 34 ] Although the argument is of interest, does it enable McLaren to satisfy the test of appearance of right? [ 35 ] The arbitration in which the parties are engaged involves international commercial interests, as McLaren has its headquarters in the State of Texas, USA. [ 36 ]

Article 649 C.C.P. provides that in such a case, the relevant provisions of the Code of Civil Procedure may be interpreted in the light of the 1985 Model Law on International Commercial Arbitration [8] (“ Model Law ”), as subsequently modified. [ 37 ]

Article 45 of

Part 2 of the Model Law , while not excluding recourse to the tribunals, specifically provides for the possibility of recourse to a second-level arbitration tribunal. NADAP also refers to such an appeal panel, in articles 2 and 88 et seq. [ 38 ] The Quebec Court of Appeal, in Bérubé v.

General Motors , analyzed the scope of NADAP and referred to the possibility of an appeal of an arbitration decision before an appeal panel, without raising the possibility that such a proceeding would contravene public order or the provisions of the Code of Civil Procedure. [9] [ 39 ] McLaren's position that multi-level arbitration is illegal in Quebec raises interesting legal issues, but the law it alleges is neither clear nor indisputable.

This cannot serve as a basis for its demand for a stay of arbitration. [ 40 ] McLaren then argues that the arbitrator has no jurisdiction to decide the dispute between the parties, since the DSSA providing for arbitration under NADAP rules was never signed by the parties. [ 41 ] Yet, 972 has been operating its retail business and selling McLaren products since 2017. The conduct of the parties leads to the conclusion that they are necessarily bound by contractual agreements, regardless of their exact nature.

These agreements have governed their legal relationship over the years, whether it is the DSSA or their original Conditional agreement or any other agreement, written or verbal, that may have replaced or be added over time.

It is worth noting that the DSSA and the Conditional agreement both contain arbitration provisions. [ 42 ] At this preliminary stage, it is not for the Court to attempt to define the contours of these agreements, or to presume that the parties would not be bound by the DSSA and that for this reason, the arbitration they have been submitting to since June 2023 would be invalid. [ 43 ] In this respect, reference should be made to one of the conclusions reached by the appeal panel after analyzing the parties' business relationship : 29. (…) None of the terms of the DSSA were in dispute between the parties and it was clear on the evidence that the relationship between 972 and McLaren on all operational aspects of the dealership had been based on the DSSA and the policies incorporated by reference in the DSSA.(…) [10]

[ 44 ] In any event, from the outset of their negotiations, McLaren proposed to 972 a formal contract, the DSSA, to govern their contractual relationship, the content of which McLaren knew and accepted. [ 45 ] In order to resolve a dispute between the parties, 972 resorted to the arbitration process provided for in this contract. In such circumstances, the position now taken by McLaren is rather surprising. [ 46 ] Finally, McLaren argues that the appeal arbitration panel was improperly constituted, since it is composed of three Ontario arbitrators, none of whom are civil law practitioners.

Yet McLaren raised no objection to the panel's composition at the appropriate time during the arbitration procedure. [11] [ 47 ] The procedure followed complied with the NADA​P rules, which also provides for the possibility of the parties retaining arbitrators from the province in which the dispute originates, in this case Quebec. [ 48 ] The fact that the parties are unable to reach agreement on this issue cannot justify suspending the arbitration. • Irreparable or serious prejudice [ 49 ] McLaren has failed to demonstrate the existence of serious prejudice. [ 50 ] It can hardly be otherwise, since the on-going arbitration procedure is the one McLaren incorporated into the contract it proposed to 972 at the outset of their negotiations. [ 51 ] McLaren argues that the current situation entails substantial legal costs and a great deal of energy for it - and presumably both parties - in which the principle of proportionality seems to have been set aside.

However, the Court cannot conclude that the option to prioritize the current proceedings before the Superior Court, to the detriment of the consensual arbitration process, would remedy the prejudice alleged by McLaren. [ 52 ] Insofar, as a hearing on the merits before the Superior Court can be held as early as March 2024, it becomes even more difficult to envisage that the continuation of the arbitration process until then could cause serious prejudice to McLaren. • Balance of convenience [ 53 ] McLaren failed to demonstrate that the balance of convenience criterion militated in favor of granting his request. [ 54 ] Here, 972 seeks interim injunctive relief in the course of the arbitration proceeding.

On December 28, 2023, the arbitrator dismissed its claim. 972 appeals this decision to the appeal panel, which recourse is still pending. [ 55 ] The parties did not elaborate on the nature of this application, but 972 certainly has an interest in seeing it progress through the arbitration process. [ 56 ] In this respect, the suspension of arbitration would cause 972 more inconvenience than McLaren, which essentially raised the financial disadvantages associated with the multiple procedures underway. 2.3 Analysis of application to stay under the exceptional circumstances criterion [ 57 ] The criterion defined by Barin J. in Hypertech makes the suspension of consensual arbitration subject to a demonstration of exceptional circumstances.

This raises the bar even higher for McLaren than the injunction criteria. [ 58 ] The circumstances outlined above do not allow McLaren's application to be granted, given the absence of such exceptional circumstances. 2.4 Conclusion [ 59 ] The Superior Court must act with caution, reserve and circumspection before intervening in the course of a consensual arbitration. [ 60 ] The Supreme Court of Canada has on several occasions reiterated that “the parties to an arbitration agreement are free, subject to any mandatory provisions by which they are bound, to choose any place, form and procedures they consider appropriate” [12] and that the “courts must show due respect for arbitration agreements and arbitration more broadly, particularly in the commercial setting” [13] which goes “with the principle of limited court intervention in arbitration matters.” [14] [ 61 ] The decision whether or not to suspend the proceedings rests primarily with the arbitrator, the courts having recognized that this constitutes a management measure covered by

article 632 C.C.P. [15] [ 62 ] In addition,

article 632 al. 4 C.C.P. specifically provides that the arbitrator may continue the arbitration proceedings until the court has ruled on his jurisdiction, which implies that he may also suspend them at his discretion [16] . This

article is inspired by article 16(3) of the Model Law . [ 63 ] The Superior Court may, as a last resort, order such a suspension, but this should be rare [17] , or even limited to exceptional situations. [ 64 ] Here, McLaren did not meet the criteria for an injunction, nor did it demonstrate exceptional circumstances that would allow its request to be granted.

[ 65 ] The very purpose of arbitration is to enable the parties to settle any dispute expeditiously and in a simplified procedural environment. Suspending arbitration would jeopardize this objective. FOR THESE REASONS, THE COURT : [ 66 ] DISMISSES the application of the Applicant to stay the arbitration on an interlocutory basis; [ 67 ] WITH LEGAL COSTS to follow. __________________________________ PIERRE A. BÉLIVEAU, j.S.C. Me Fadi Amine Miller Thomson SENCRL / LLP Attorneys for Applicant Me Audrey Boctor Me Laura Cardenas IMK s.e.n.c.r.l./LLP Attorneys for Defendant Hearing date: January 23, 2024