Arbitration agreement or expert opinion clause, a new judgment on point

A clause referring disputes to accountants, where the word “arbitration” is absent and the accountants also act as auditors of the parties, is a valid arbitration agreement

In a July 18, 2013 judgment (Domtar inc.v. Eacom Timber Corporation, 2103 QCCS 3467), the Quebec Superior Court granted motions by Domtar Inc. seeking to appoint an accountant as arbitrator and to refer to final and binding arbitration a dispute about a purchase price adjustment.

Woods LLP successfully represented Domtar Inc. in these contested motions.

The judgment, currently under appeal, revisits the distinction between arbitration clauses and so-called “expert opinion clauses” laid out by the Supreme Court of Canada in Sport Maska Inc. v. Zittrer, [1988] 1 S.C.R. 564,and confirms the broad and generous interpretation Quebec courts will give to arbitration provisions.

Facts

Domtar Inc. sold one of its divisions to Eacom Timber Corporation Inc.  The agreement contemplated various post-closing adjustments to the purchase price, one of which depended on a post-closing determination of the working capital. The agreement provided that if “disputed matters” arose regarding such determination, they would be submitted to PricewaterhouseCoopers LLP for final and binding decision. The clause did not use the word “arbitration” and PricewaterhouseCoopers LLP was acting as auditors of both parties.

Domtar Inc. gave notice of a dispute, but PricewaterhouseCoopers LLP refused the appointment. Domtar sought the Court’s appointment of other accountants and the referral of the dispute to arbitration. Eacom Timber Corporation Inc. contended that the applicable provision of the agreement contemplated an independent expert opinion, not arbitration.

Decision

The Court agreed with Domtar that the applicable provision contained all of the essential elements of an arbitration agreement. The Court applied the criteria of Sport Maska, stressing however that arbitration provisions were to be interpreted broadly and generously, per Desputeaux v. Éditions Chouette (1987) inc., [2003] 1 S.C.R. 178 andElliott v. Forecam Golf Ltd, 2011 QCCA 1029 (C.A.))

Applying these notions, the Court found that the parties had entered into a valid arbitration agreement despite: (a) the absence of the word “arbitration”; (b) the fact that the accounting firm selected to arbitrate also acted as auditor of both parties; (c) the fact that the clause selected an accounting firm as opposed to individuals; and (d) the fact that the clause did not state that the decision of the accountants had to contain reasons.