In Service Bérubé Ltée v General Motors du Canada Ltée(1) the Quebec Court of Appeal provided guidance with respect to an important issue in the law of arbitration in Quebec, outlining that a future potential need for injunctive relief amounted to insufficient justification to find that an arbitrator lacked jurisdiction.
The facts of the dispute relate to a 2005 franchise contract entered into by Service Bérubé Ltée and General Motors du Canada Ltée (GM).
The initial five-year term of the contract was set to expire on October 31 2010. On renewal, pursuant to the terms of the contract, if it was established that Bérubé had respected its contractual obligations, it could be assured that GM would renew the contract. However, on May 20 2009, in light of the economic upheaval in the North-American automobile industry and the resulting closure of numerous dealerships, GM formally advised Bérubé that it would not be renewing the contract.
The contract had encouraged the parties to adhere to the National Automobile Dealer Arbitration Programme (NADAP); in fact, following the conclusion of the contract, both GM and Bérubé agreed that any future disputes would be resolved by way of arbitration undertaken pursuant to the NADAP regime. The regime provided that GM was to launch an internal management review, following an initial request by a dealer; thereafter, if GM maintained its position, the dealer could initiate mediation proceedings, followed by arbitration proceedings administered by ADR Chambers in Toronto, if necessary.
When GM informed Bérubé on May 20 2009 that it would not renew the contract, Bérubé immediately availed itself of the NADAP procedure and on the same day requested a management review. Subsequently, on September 14 2009 Bérubé advised GM that it would no longer be adhering to the NADAP regime. Thereafter, on December 3 2009, following its management review, GM advised Bérubé that it was maintaining its initial decision, and thus the contract was not to be renewed.
On January 26 2010 Bérubé initiated proceedings before the Quebec Superior Court, requesting that the court issue a safeguard order so as to maintain the contract and allow the dealership to remain open during the course of judicial proceedings, until a decision on the merits was rendered. GM objected to the Superior Court's jurisdiction on the basis that NADAP arbitration was the proper forum for the dispute.
On March 9 2010 the Quebec Superior Court sided with GM and ruled that the parties had first to avail themselves of the NADAP regime.(2)
Bérubé based its appeal of this Superior Court decision on two grounds:
- The purview of the arbitration provisions in the contract - recourse to arbitration under the contract was optional; the nature of the dispute was not within the purview of the NADAP regime entered into by the parties; and because Bérubé had rescinded its adherence to the NADAP regime, it could seek court intervention so as to obtain relief; and
- The jurisdiction of the arbitrator in relation to injunctions - pursuant to Quebec law, only the Superior Court, as opposed to arbitrators, has the power to award injunctive relief.
In a unanimous decision issued on March 25 2011, the Quebec Court of Appeal maintained the lower court ruling and held that in light of the undertaking to arbitrate, Bérubé had to carry out NADAP arbitral proceedings so as to obtain relief.
Purview of the arbitral provisions in the contract
On appeal, Bérubé maintained that the undertaking to arbitrate was neither valid nor conclusive because the contract outlined that should a dispute arise, the parties could have recourse to either arbitration or judicial proceedings. The court dismissed this argument because when a party entered into a franchise contract with GM, adherence to the NADAP was encouraged, but not obligatory; thus, it was logical that the contract outlined possible recourse to both judicial and arbitral proceedings. However, in the case at hand, in light of the parties having elected to rely on the NADAP regime, the reference to judicial proceedings in the contract could be discounted and thus the undertaking to arbitrate was both valid and conclusive.
Furthermore, the court of appeal also found that the nature of the dispute fell within the purview of the NADAP regime which, pursuant to Article 5(l) of the NADAP Rules,(3) specifically outlined that the decision by GM not to renew a franchise contract was arbitrable. In an attempt to demonstrate that the dispute was not arbitrable, as outlined in Articles 20(c) and (d),(4) Bérubé also set forth two arguments in relation to the fact that:
- another dealer was also a party to Bérubé's claim against GM, giving rise to possible class proceedings; and
- GM's decision not to renew the contract was a direct result of its decision to discontinue the Pontiac line-up of cars.
However, the court dismissed both of these arguments because it found that the English version of the contract provided a restrictive interpretation of what amounted to a 'class action' and the proceedings submitted by Bérubé made no mention of GM's decision to discontinue the Pontiac line-up as the basis for its claim.
Finally, Bérubé had also claimed that its September 14 2009 letter informing GM that it would no longer be adhering to the NADAP regime precluded the dispute from arbitration. However, the court ruled that as of May 20 2009, when Bérubé initiated the management review, the dispute had crystallised and thus Bérubé could not thereafter attempt to rescind its adherence to the NADAP regime once the regime's dispute resolution procedure had been initiated.
Jurisdiction of the arbitrator in relation to injunctions
After citing several Supreme Court of Canada cases which affirmed that the granting of injunctive relief in Quebec was the sole jurisdiction of the Superior Court,(5) the court of appeal concluded that Bérubé's attempt to seek injunctive relief was at this point premature.
The court found that the NADAP Rules granted the arbitrator the capacity to ensure specific performance of the contract; thus, the parties had already agreed that if an arbitrator concluded that GM had failed to renew the contract, the arbitrator could then issue an order so as to force GM to implement the appropriate action. The court then pointed out that orders for specific performance were not automatically forms of injunctive relief. Rather, Bérubé's need for injunctive relief would arise only after an arbitrator's order for GM to renew the contract was homologated, followed by GM's failure to respect this order.
Consequently, the court dismissed Bérubé's appeal and the parties were required to undertake arbitration proceedings pursuant to the NADAP regime.
In one of the closing paragraphs of the decision, the court stated that "[i]n all instances, any homologation by the Superior Court of an arbitrator's order cannot transform said order into a veritable, Superior Court injunction".(6) The court effectively reaffirmed that the issuance of injunctive relief lies within the specific jurisdiction of the Superior Court, as opposed to an arbitrator's jurisdiction.
Nonetheless, the ruling as a whole underscores the substantial weight which must be placed on the parties' contractual intentions and reinforces that when an undertaking to arbitrate is both valid and conclusive, the Quebec courts must strive to ensure not only that the parties' intention receives full merit, but also that arbitral proceedings should be allowed to proceed - without unnecessary recourse or intervention by the courts. Had the court followed Bérubé's line of reasoning, it would have possibly allowed the claimants to undermine their earlier choice of arbitral proceedings and seek specific performance by way of court intervention, under the guise of injunctive relief.
In the coming months the Quebec Court of Appeal is expected to issue a decision in Nearctic Nickel Mines Inc v Canadian Royalties Inc, and thus offer even further guidance to litigants in relation to the extent of an arbitrator's powers to issue injunctive relief in Quebec.
For further information on this topic please contact Marc Unger at Borden Ladner Gervais LLP by telephone (+1 514 954 2515), fax (+1 514 954 1905), or email [email protected]).
(1)  QCCA 567.
(2)  QCCS 962.
"Subject to RULE 20 herein, a DISPUTE which may be mediated and arbitrated under theses RULES shall mean any disagreement between a MANUFACTURER and its DEALER arising under the terms of the DEALER AGREEMENT or the interpretation or application thereof, including without limitation, any question as to whether the DISPUTE arises under the terms of the DEALER AGREEMENT or the interpretation or application of the terms of the DEALER AGREEMENT, and specifically includes the following DISPUTES as described below: [...]
(l) the MANUFACTURER'S termination, refusal to renew or refusal to extend, without CAUSE, that DEALER'S DEALER AGREEMENT including the awarding of damages, where appropriate, by the Arbitrator for wrongful termination, refusal to renew or refusal to extend the DEALER AGREEMENT."
"All DISPUTES described in Rule 5 may be arbitrated, once STEP ONE has been completed, except for the following matters which are not arbitrable: [...]
(c) Class, multi-party or representative claims against a MANUFACTURER. However, where more than one DEALER files a Request for Arbitration involving the same issues(s) regarding a DISPUTE listed in RULE 5 of these RULES, the Arbitrator can join the individual Requests for Arbitration and hear them in one claim;
(d) A claim related to the discontinuance by a MANUFACTURER of any or all of its product lines which the DEALER had been authorized to sell, service or lease."
(5)  SCC 41;  SCC 2;  SCC 16.
(6)  QCCA 567, para 98 (translation).