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The Arbitration Act of Ontario, in section 7, provides a mechanism to stay actions brought where the action’s subject matter is to be decided by arbitration pursuant to an agreement to do so made by the parties. Exceptions, in whole or in part, to the rule are provided in the statute at sub-sections 7(2) to 7(5). The final sub-section, section 7(6), provides that there is no appeal from the court’s decision.

A Recent Case Invokes s. 7(6)

The Ontario Court of Appeal (ONCA) recently had to deal with this question in the case of Eggiman v. Martin (2019). The plaintiffs, the franchisees, were licensed by the franchisor to operate two coffee shops in Belleville, Ontario. That license agreement did not contain an arbitration clause. The plaintiffs had also entered into operating agreements with the other three defendants who had been vetted and recommended to them by the franchisor as suitable operators as permitted by the license agreement. The operating agreements did include an arbitration clause, which read as follows:

All matters in difference between the parties in relation to this Agreement shall be referred to the arbitration of a single arbitrator appointed by [the franchisor], which shall either be an employee of [the franchisor] or a third-party arbitrator, at [the franchisors] discretion. The award and determination of the arbitrator shall be binding upon the parties and their respective heirs, executors, administrators and assigns.

The plaintiffs then became aware that one of the operators had assaulted one of their female employees. They also learned that the operator had had similar issues in the past which had been known to the franchisor but which had not been disclosed to them when they were recommended. The franchisees then terminated the operating agreements and commenced an action against the operators and the franchisor. The action against the operators was based on breach of contract and the action against the franchisor was based on negligence, breach of contract and/or breach of the duty of good faith and fair dealing.

The operators sought a stay of the action against them pursuant to the Arbitration Act. Their application was denied and they appealed the decision, contending that the motions judge erred in refusing the stay as none of the exceptions in the Arbitration Act applied.

Reasons Stay was Refused

The motions judge reasoned that if a stay was granted it would only be a partial stay as the franchisor defendant was not subject to the same arbitration clause. If stayed, there would be two proceedings with the same facts and the possibility of inconsistent findings.

Secondly, the motions judge disliked the authority of the franchisor to appoint the arbitrator and the resulting unfairness of such power.

ONCA: s. 7(6) Precludes Appeal

At the hearing of the appeal, the respondents raised for the first time sub-section 7(6) of the Arbitration Act, which states that there was no right to appeal such a decision. The ONCA concluded that once section 7 is properly invoked, it then follows that no appeal is allowed or available to the unsuccessful party. This is so no matter the outcome of the motion.

S. 7(6), which states simply that “there is no appeal from the court’s decision”, effectively precludes any appeal from the decision with respect to the motion to stay, no matter the outcome of the order.

The appeals court was not required to engage in an analysis of the motion judge’s reasons and dismissed the appeal solely on the basis of s. 7(6). Parties involved in future motions to stay a proceeding in favour of arbitration should be aware that s. 7(6) puts this limit on the right to appeal a motion judge’s decision. Once the decision on the motion is made, there is little that can be done to change the outcome.

Contact Milosevic Fiske LLP in Toronto for unparalleled representation in even the most complex corporate and commercial disputes, including franchisee/franchisor disputes. Over the years, our team of exceptional litigators has seen it all and has successfully fought for our clients’ rights. Our impressive track record speaks for itself.  Call us at 416-916-1387 or contact us online for a consultation.