A recent decision of the Ontario Superior Court of Justice
highlights the importance of drafting arbitration clauses with
care. In 2156775 Ontario Inc. v. Just Energy,
the court dismissed a motion to stay an action in favour of
arbitration, finding that the dispute was not captured by the
The plaintiff customer allegedly entered into contracts with the
defendant Just Energy in 2008 and 2010. The 2008 contract did not
include an arbitration clause, but "standard form" terms
appended to the 2010 contract did include an arbitration clause
that provided, in part:
"Dispute Resolution, Binding
Arbitration. Customer may contact Just Energy with regard to a
concern or dispute under this Agreement. . . . Both parties
will, in good faith, use commercially reasonable efforts to resolve
a dispute. If not resolved within 45 days, such dispute will be
referred to and finally resolved by binding arbitration pursuant to
Governing Law, before a single arbitrator, without the right of
appeal to law and/or facts, at an arbitration services organization
to be chosen exclusively by Just Energy. . . ." (emphasis
added by authors)
The plaintiff commenced a court action in 2013, seeking a
declaration that the 2008 and 2010 contracts were void, as well as
damages for misrepresentation and negligence, among other things.
It also named as a personal defendant an individual who provided
marketing services to Just Energy. Relying on the arbitration
clause in the 2010 agreement, Just Energy moved to stay the action
in favour of arbitration. The personal defendant, who was not a
party to either contract, consented to the dispute proceeding by
way of arbitration.
Although Superior Court Justice Wendy Matheson endorsed the
principle that parties should be required to resolve their disputes
by arbitration where they have agreed to do so, the case was
allowed to proceed in the courts. The court set out a two-step
framework for analyzing whether a case should proceed by way of
arbitration in accordance with an arbitration clause:
Does the dispute fall within the scope of the arbitration
If yes, should the court exercise its discretion to stay the
proceeding (for example, because of the invalidity of the
arbitration agreement or other possible reasons set out in section
7(2) of the Ontario Arbitration Act, 1991)?
In the Just Energy case, the parties moving to stay the
case in favour of arbitration failed on the first question. The
court reasoned that the arbitration clause in the alleged 2010
agreement applied only to disputes "under" the agreement
(i.e. the discharge of rights and obligations under the agreement),
and not to a challenge to the existence of the agreement
itself. The court contrasted the arbitration clause at issue
with clauses in other cases that used broader wording such as
"in connection with" or "arising out of" or
"touching or concerning." The court also noted that
certain arbitration clauses expressly cover disputes relating to
the validity of an agreement, and that the clause at hand made no
mention of validity. As such, the court concluded that the dispute
between the parties – which challenged the validity of the
alleged agreements – fell outside the scope of the
On its face, the decision is a curious one. The court thoroughly
canvassed the authorities in Ontario that are increasingly sending
disputes to arbitration, including two recent decisions of the
Ontario Court of Appeal; Nazarinia Holdings Inc. v. 2049080 Ontario
Inc. in 2010 and Ontario Medical Association v. Willis Canada
Inc. in 2013. Among other things, the court in Ontario
Medical Association held that courts should stay an action in
favour of arbitration where it is (merely) "arguable"
that the dispute falls within the arbitration clause. Notably, this
is also consistent with English law. For example, in Premium Nafta Products Ltd. v. Fili Shipping
Company Ltd., a leading 2007 decision from the U.K. House
of Lords, Lord Hoffmann stated that arbitration clauses should be
interpreted from the baseline presumption that parties are likely
to have intended any dispute arising out of their
relationship to be decided by arbitration, unless language in the
arbitration clause makes clear that certain questions were intended
to be excluded from the arbitrator's jurisdiction. Yet, the
court in Just Energy came to the opposite result.
The Just Energy decision signals that if a party relies
on an arbitration clause in an attempt to compel arbitration,
courts will closely scrutinize the wording of the clause.
"Boilerplate" or "standard terms" clauses can
be expected to be viewed with heightened scrutiny. Parties who wish
to take advantage of the benefits of arbitration should incorporate
clauses that clearly set out the types of disputes that are subject
to arbitration and those that are not. Failure to do so might
result in being required to resolve a future dispute in court,
despite an intention to the contrary and despite a growing body of
law in Ontario that is otherwise very favourable to
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