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ARTICLE · 03 NOVEMBER 2016

Strong Support For Arbitration, Even In The Face Of Allegations Of Fraudulent Misrepresentation

Torkin Manes LLP
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The motions judge assumed that a claim based in fraud vitiates an arbitration agreement.

CanadaLitigation, Mediation & Arbitration
Torkin Manes LLP
Torkin Manes LLP
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 The importance of drafting clear arbitration clauses in an agreement was addressed in the recent Ontario Court of Appeal decision of Haas v. Gunasekaram, 2016 ONCA 744 ["Haas"]. In this case, the plaintiff brought an action alleging that he was induced to sign a shareholders' agreement respecting an Italian restaurant located in Toronto based on fraudulent misrepresentations regarding the restaurant's business prospects and management, after the restaurant failed. Haas sought to recover his investment of $200,000.

The shareholders' agreement contained an arbitration clause. As such, the defendants moved to stay the action under section 7 of the Arbitration Act, S.O. 1991, c. 17 [the "Act"], in favour of the arbitration clause. The motions judge refused to stay the action. The defendants appealed the motion judge's decision.

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