In Goberdhan v. Knights of Columbus,[1] the Ontario Court of Appeal heard an appeal from an order dismissing the appellant/defendant’s motion for a stay of proceedings in favour of arbitration.

Background

The appellant/defendant Knights of Columbus (“Knights”) is a fraternal benefit society that offers insurance products to its members. The respondent/plaintiff (the “Plaintiff”) was a field agent who sold insurance through Knights. Knights and the Plaintiff had signed three field agent contracts over an eight-year period, and the Plaintiff’s field agency was subsequently terminated. The Plaintiff sued for wrongful dismissal asserting that he was entitled to severance pay and termination notice pay, based on his claim to be an employee of Knights, as well as outstanding wages and commissions and punitive damages.

Knights moved for an order to stay the wrongful dismissal action pursuant to s. 7(1) of the Arbitration Act, 1991,[2] relying on the mandatory arbitration clauses that were contained in the parties’ second and third contracts.

The motion judge dismissed the motion, having concluded that the Plaintiff was an employee and that the second and third contracts were invalid for want of fresh consideration, as were the mandatory arbitration clauses contained within them.

Knights raised two issues on appeal: whether the motion judge erred in concluding that there was no valid arbitration clause; and whether the motion judge erred in making a decision on its stay motion, about whether the Plaintiff was an employee. The Plaintiff raised a preliminary issue, asserting there was no right of appeal because of s. 7(6) of the Act.

The court’s decision

The Court of Appeal dismissed the preliminary objection based on jurisdiction along with the appeal.

The preliminary challenge

“The motion judge had concluded that there was no consideration given for the two contracts containing arbitration clauses. In other words, there was no subsequent contract, and there was no arbitration clause. As such, the [Act], including s. 7(6) that prohibits an appeal from a decision dismissing a motion to stay, has no application.”[3]

Refusal to stay action

This was a clear case where the motion judge was able to determine the question of whether there was no fresh consideration to support the contracts containing arbitration clauses on the evidence before him.[4]

The motion judge concluded that, on the evidence, the Plaintiff “had no practical choice but to sign the new contracts if he wished to continue to work for [Knights].” There was no error in his approach to and application of the evidence in determining that the second and third contracts, and accordingly the arbitration clauses that they contained, were invalid for lack of fresh consideration.[5]

Finding that the Plaintiff was an employee

Finally, the motion judge’s finding that the Plaintiff was an employee, which was made in the context of the stay motion, was not a final determination, and that issue remained to be determined in the subsequent court proceedings.[6]

Conclusion

While the courts in Ontario are fairly deferential towards arbitration, the mere existence of an arbitration agreement is not determinative. The Act will not apply where an arbitration agreement is ultimately found to be invalid.

[1] 2023 ONCA 327; available online at https://www.canlii.org/en/on/onca/doc/2023/2023onca327/2023onca327.html.

[2] S.O. 1991, c. 17; available online at https://www.canlii.org/en/on/laws/stat/so-1991-c-17/latest/so-1991-c-17.html  (the “Act”).

[3] Supra note 1 at para. 10.

[4] Ibid., para. 16.

[5] Ibid., para. 23.

[6] Ibid., para. 26.