You Snooze You Lose: Court Declines to Stay Proceeding Despite Existence of Arbitration Clause

In the recent decision Paulpillai v. Yusuf, 2020 ONSC, the Superior Court of Justice refused to stay litigation in favour of arbitration, because the Respondent delayed in seeking the stay.

In this case, the Applicant and Respondent signed a partnership agreement which contained an arrangement to arbitrate any disputes. The Applicant passed away, and contentions arose between the Respondent and the Applicant’s estate. The parties attempted to divide the partnership enterprise, and the Applicant’s estate commenced a court application. For the next seven months, the parties made court appearances for several interlocutory motions. At the hearing itself, the Respondent wished to rely on the arbitration agreement to seek a stay of proceedings. The court declined to grant this stay.

The court held that it had jurisdiction to hear the application because the Respondent took steps in moving matters forward, and neglected to bring a motion to stay the application in advance of the hearing. The court relied on the provision of the Arbitration Act, 1991, which allows courts to stay a proceeding if an arbitration agreement exists, but on motion of the other party. The exception to this rule is that such motion must be brought without undue delay.

In this case, though the Respondent indicated in his affidavit evidence that this matter should proceed by way of an arbitration, he failed to bring a motion, or do so in a timely manner. Once the Respondent took steps in advancing the proceeding, he abandoned his right to have the matter be determined by an arbitration.

This decision serves as a cautionary tale for parties wising to continue by way of arbitration when a proceeding has already commenced. In such cases, counsel should bring a motion to stay the matter immediately at the commencement of the proceeding. A party is deemed to acquiesce to the proceeding if they take actions to move the litigation along. This can result in the party forfeiting their right to have the action or application stayed at a later time.