Précis: The court had no discretion to not enforce an arbitration clause in a charter party/booking note.
Facts: The defendant was the operator of the “Orient I”, a special livestock carrier. The plaintiff entered into a voyage charter of the vessel for a single voyage between Canada and Russia. The charter party was apparently contained in a booking note issued in Belgium. The booking note incorporated an arbitration clause in favour of London and a choice of law clause selecting English law. The booking note also contained an ice clause which gave the defendant the option of loading the cargo in St. John, New Brunswick if the port of Becancour, Quebec was not in ice free condition. The defendant in fact did sail to St. John because of forecasted ice conditions at Becancour. The loading of the cargo at St. John increased the plaintiff’s costs by $250,000. The plaintiff claimed this amount from the defendant alleging it had no right to change the port of loading to St. John. The defendant brought this motion for a stay of proceedings on the basis of the arbitration clause in the booking note.
At first instance (reported at 2013 FC 1239), the Prothonotary dismissed the motion for a stay of proceedings. The Prothonotary held that s. 46 of the Marine Liability Act did not apply as the contract between the parties was a charter party. However, he also held that the Court had discretion to grant a stay under s. 50 of the Federal Courts Act and that the plaintiff had discharged the heavy burden of establishing the existence of strong grounds for denying the stay on this basis. The Prothonotary noted that there was nothing linking this matter to England and that an arbitration in England would result in prohibitive costs for the plaintiff, a small company of 6 employees. The defendant appealed.
Decision: Appeal allowed.
Held: With respect to the standard of review applicable in this case, the refusal to grant a stay of proceedings is a discretionary order vital to the final issues in the case. Therefore the Court can proceed with a de novo review on this appeal.
The Prothonotary correctly held that s. 46 of the Marine Liability Act did not apply as the contract was a charter party and s. 46 does not apply to charter parties. However, the Prothonotary was in error when he held the Court had discretion to grant a stay under s. 50 of the Federal Courts Act. Article 8 of the Commercial Arbitration Code removes any discretion to grant a stay as was held by the Federal Court of Appeal in Nanisivik Mines Ltd v FCRS Shipping Ltd, 1994 CanLII 3466.