Court Declines Plaintiff’s Request to Stay Its Own Action in Favour of Arbitration

Andrew Ottaway, B.A. (Hons.), LL.B.Arbitration, Civil Litigation, Contract Disputes0 Comments

In Paul Wurth Inc. v. Anmar Mechanical and MAG Engineering, the Plaintiff entered into a contract with MAG Engineering.  The contract contained an arbitration clause.  Nevertheless, the Plaintiff brought a court action against MAG Engineering for breach of contract.  The Plaintiff also claimed against Anmar Mechanical.  Anmar Mechanical was not a party to the contract.  But the Plaintiff alleged that the services under the contract were to be provided by both MAG Engineering and Anmar Mechanical, and that MAG Engineering was an agent, partner, or joint venturer of Anmar Mechanical.

After starting its court action, the Plaintiff brought a motion to stay its action and to require MAG Engineering and Anmar Mechanical participate in binding arbitration.  In the alternative, the Plaintiff sought to force only MAG Engineering to participate in arbitration, and to stay its action against against Anmar Mechical pending the outcome of that arbitration. The Judge dismissed the Plaintiff’s motion because, among other reasons:

  • section 7(1) of the Ontario Arbitration Act precludes a party who starts a court proceeding from moving to stay its own proceeding in favour of arbitration;
  • the contractual arbitration agreement was between the Plaintiff and MAG Engineering only.  An arbitrator would not have jurisdiction over Anmar Mechanical;
  • the Plaintiff had delayed in seeking arbitration.  MAG Engineering and Anmar Mechanical had delivered a Statement of Defence, the Plaintiff had delivered a Reply, and the Plaintiff had delivered a Discovery Plan;
  • the Plaintiff had included parties and issues beyond the scope of the arbitration agreement.  Accordingly, it was desirable that the dispute be resolved under “the umbrella of a single proceeding”;
  • the case was distinguishable from the case relied upon by the Plaintiff where the court allowed a Plaintiff to stay its own action pursuant to section 101 and 106 of the Courts of Justice Act. In that case, the Plaintiff did not know about the arbitration clause before commencing its action.  However, there was evidence in this case that the Plaintiff was aware of the arbitration clause in its contract with MAG Engineering before commencing its court action.

The decision did not provide any guidance as to what would have occurred if the Plaintiff had referred the dispute against both MAG Engineering and Anmar Mechanical to arbitration rather than commencing its court action.

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About the Author
Andrew Ottaway, B.A. (Hons.), LL.B.

Andrew Ottaway, B.A. (Hons.), LL.B.

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