Québec Superior Court again confirms that an arbitration agreement can apply to non-signatories

Facts

Mr. Bélanger sold his shares in Machinex pursuant to a share purchase agreement that contained an arbitration clause. Bélanger initiated an arbitration against Machinex claiming outstanding consideration for his shares. Machinex counterclaimed, alleging Bélanger was breaching his non-compete undertakings through a company called Waste Robotics ("Robotics"), in which Bélanger was a shareholder. Machinex successfully asked the arbitral tribunal to join Robotics to the arbitration.

Machinex later sought to join another entity, Newtech Waste Solutions Inc. ("Newtech"), to the arbitration for the same reasons as those supporting the joinder of Robotics. Newtech opposed Machinex's request, but the tribunal decided to join Newtech. It found that Machinex put forward sufficient evidence that Newtech, together with Bélanger and Robotics, collaborated in the impugned unfair competition and Bélanger's breach of his non-compete undertakings.

Newtech brought an application before the Québec Superior Court to contest the decision of the tribunal to join it as an impleaded party ("mise en cause") in the arbitration.

Decision

The Superior Court of Québec dismissed Newtech's application. The Court confirmed that its task was not to "review" the decision of the arbitral tribunal. Instead, the Court had to decide for itself whether the arbitral tribunal had jurisdiction over Newtech. After review of the facts and relevant case law, the Court confirmed that the arbitral tribunal did have jurisdiction over Newtech and that it could add Newtech as a party to the arbitration.

Analysis

The Court confirmed that it is possible to join third parties to an arbitration when the circumstances require their presence. Considering the similar nature of the different relief – that pending before the arbitral tribunal and that which Machinex would have to pursue against Newtech before the Superior Court – the identity of the issues, the facts, as well as the parties involved, the Court confirmed that the presence of Newtech in the arbitration was required. Like the arbitral tribunal, the Court concluded Bélanger was at the centre of this whole affair.

The Court's key analysis points were:

  • The arbitral tribunal committed no error in concluding that it was necessary to determine whether Bélanger used Newtech as a vehicle to breach his non-compete undertakings.
  • The arbitral tribunal did not prejudge the merits of the case in relying on the allegations in the parties' pleadings.
  • Conflicting judgments could result should the arbitral tribunal be precluded from examining the acts of Bélanger with Newtech that might be actionable before the Superior Court.
  • It would be inappropriate to split the dispute, which would multiply proceedings and slow or add complexity to the adjudication process.