Case number: 118
Article number: model arbitration law / 8(1); 23(1)
Thessaurs issue:
Country of decision: Canada
Year of decision: 1994
Type of decision: Judicial decision

Case 118: MAL 8(1); 23(1)
Canada: Ontario Court of Justice, General Division (Borins J.) 21 December 1994
Bab Systems, Inc. v. McLurg
Original in English
Unpublished

The plaintiff, one of the parties to a franchise agreement, applied to the court seeking judicial relief. Within hours of the court granting certain provisional relief in respect of the application, and adjourning for further particulars, the plaintiff advised the defendant of its intention to submit the dispute to arbitration pursuant to an arbitration clause in their agreement. This oral advice was followed by written confirmation a day later indicating that the plaintiff sought to amend its notice of application, that had been served on the defendant, by discontinuing all relief sought except for certain provisional relief, which was specifically excluded from the scope of the arbitration clause. The plaintiff then sought a court order referring the dispute to arbitration and a stay of the court proceedings, except the claim for provisional relief.

Having concluded that, except for the provisional relief, the relief sought in the application was within the arbitration clause, the court considered, whether the plaintiff had waived arbitration by having brought its dispute before the court. Even assuming a right of unilateral waiver, which was unlikely as the arbitration clause bound all parties to the contract, the court concluded that the waiver had been effectively retracted by reasonable notice of the intention to arbitrate.

The defendant argued that the court should not stay the judicial proceedings under the Ontario equivalent of article 8(1) MAL because the application for stay had been made after the plaintiff had submitted its "first statement on the substance of the dispute" by filing an application with the court. The court held that the word "statement" in article 8(1) MAL meant the first statement in the arbitral process, as distinct from the litigation process. Expressly disagreeing with the interpretation of article 8(1) MAL by the Federal Court of Appeal in Ruhrkohle Handel Inter GmbH v Fednau Ltd. (see Case 33), the court concluded that, since the plaintiff had not submitted its first statement in the arbitral proceedings, within the meaning of articles 23(1) and 8(1) MAL, its request for submission to arbitration was timely. An order was issued referring the parties to arbitration pursuant to their agreement.