Staying a Court Action in Favour of Arbitration in Ontario

An arbitration clause is a promise not to sue. When a party breaks that promise and commences an action or an application in the Superior Court of Justice, the other party’s remedy is a motion under s. 7 of the Arbitration Act, 1991, S.O. 1991, c. 17 (the “Act”), which provides in subsection (1) that “[i]f a party to an arbitration agreement commences a proceeding in respect of a matter to be submitted to arbitration under the agreement, the court in which the proceeding is commenced shall, on the motion of another party to the arbitration agreement, stay the proceeding.” The Supreme Court of Canada explained in TELUS Communications Inc. v. Wellman, 2019 SCC 19 (“Wellman”) at ¶ 51, that a stay of court proceedings is “an indirect method of enforcing an arbitration agreement,” since “[c]ourts do not compel arbitration; enforcement is negative in that they stay the court proceedings in specified circumstances.” The word in s. 7(1) is “shall,” and Lauwers J.A. held in Haas v. Gunasekaram, 2016 ONCA 744 (“Haas”) at ¶ 12, that “the statutory language in s.7 of the current Arbitration Act is directory, not equivocal. It strongly favours giving effect to an arbitration agreement.”

The law of the stay motion was reorganized by the Supreme Court in Peace River Hydro Partners v. Petrowest Corp., 2022 SCC 41 (“Peace River”), which set out at ¶¶ 76-89 a two-part framework that the Court of Appeal for Ontario adopted in Husky Food Importers & Distributors Ltd. v. JH Whittaker & Sons Ltd., 2023 ONCA 260 (“Husky Food”) at ¶¶ 23-26, in place of the five (5) questions of Haas. The moving party must show an “arguable case” that four (4) technical prerequisites are met, and the stay then follows unless the party resisting it proves, on a balance of probabilities and in a “clear” case, that one of the statutory exceptions applies. The competence-competence principle underlies that framework; a challenge to the arbitrator’s jurisdiction is for the arbitrator in the first instance, and the court decides it only where the challenge raises a pure question of law or a question of mixed fact and law that needs no more than a superficial look at the record, or where arbitration is, in the words of Uber Technologies Inc. v. Heller, 2020 SCC 16 (“Uber”) at ¶ 47, “a brick wall” the party cannot get past. The Court of Appeal has applied the framework in a run of recent decisions, including Goberdhan v. Knights of Columbus, 2023 ONCA 327 (“Goberdhan”), Ismail v. First York Holdings Inc., 2023 ONCA 332 (“Ismail”), and Lochan v. Binance Holdings Ltd., 2024 ONCA 784 (“Binance”), each of which upheld the refusal of a stay, and Irwin v. Protiviti, 2022 ONCA 533 (“Irwin”), where the motion judge left the validity of the clause to the arbitrator and the Court of Appeal quashed the appeal.

This article sets out the law of the stay motion in Ontario as it stands in October 2026. It covers the policy and the text of s. 7, the two-part framework, the arbitration agreement and who is a party to it, the scope of the clause and the characterization of the claims, the competence-competence principle and the two (2) situations in which the court decides jurisdiction itself, the “step in the proceeding” and undue delay, the five (5) exceptions in s. 7(2), partial stays under s. 7(5), the stay of a proceeding that engages an international arbitration agreement under the International Commercial Arbitration Act, 2017, S.O. 2017, c. 2, Sched. 5 (the “ICAA”), the bar on appeals in s. 7(6), the drafting of the clause, and the practical considerations for the party that moves and the party that resists. It deals with commercial arbitration agreements; the consumer and employment cases are discussed where they state the general law, and the position of a receiver or trustee in an insolvency, which was the context of Peace River, is noted but not developed. Our articles on arbitrating a shareholder dispute in Ontario, on setting aside an arbitral award in Ontario, on appealing an arbitral award in Ontario and on enforcing an arbitral award in Ontario deal with what happens once the arbitration is under way and after the award.

The policy and the text of section 7

Section 7 is the product of a change of policy. Lauwers J.A. recorded in Haas at ¶ 11 that the mandatory wording of s. 7 replaced the discretion in the former Arbitrations Act, under which the court “may make an order staying the proceeding,” and Moldaver J. in Wellman at ¶ 48 described the courts of the twentieth century as having displayed “overt hostility” to arbitration, treating it as a “second-class method of dispute resolution.” The Attorney General said when the Act was introduced in 1991, as quoted in Wellman at ¶ 50, that one of its guiding principles was that “the parties to a valid arbitration agreement should abide by their agreements,” and that “the law and the courts will ensure that the parties stick to their agreement to arbitrate.” Moldaver J. held at ¶ 54 that the jurisprudence “has consistently reaffirmed that courts must show due respect for arbitration agreements and arbitration more broadly, particularly in the commercial setting,” at ¶ 55 that limited court intervention is a “fundamental principle underlying modern arbitration law,” embedded in ss. 6 and 7, and at ¶ 56 that s. 6 “signals that courts are generally to take a ‘hands off’ approach to matters governed by the Arbitration Act.” Côté J. put the same point in Peace River at ¶ 49, stating that “[t]he modern view expressed in Canadian arbitration legislation is that parties should be held to their contractual agreements to arbitrate,” which “gives effect to the concept of ‘party autonomy’, according to which parties are free to ‘charter a private tribunal’ to resolve their disputes.”

The section has six (6) subsections. Subsection (1) is the mandatory stay quoted above. Subsection (2) provides that “the court may refuse to stay the proceeding in any of the following cases,” and lists five (5); namely, “1. A party entered into the arbitration agreement while under a legal incapacity. 2. The arbitration agreement is invalid. 3. The subject-matter of the dispute is not capable of being the subject of arbitration under Ontario law. 4. The motion was brought with undue delay. 5. The matter is a proper one for default or summary judgment.” Subsection (3) provides that “[a]n arbitration of the dispute may be commenced and continued while the motion is before the court,” and subsection (4) that, if the court refuses the stay, “no arbitration of the dispute shall be commenced,” an arbitration already commenced “shall not be continued,” and “anything done in connection with the arbitration before the court made its decision is without effect.” Subsection (5) allows a partial stay where the agreement “deals with only some of the matters in respect of which the proceeding was commenced” and “it is reasonable to separate the matters dealt with in the agreement from the other matters.” Subsection (6) provides that “[t]here is no appeal from the court’s decision.”

Three (3) other provisions complete the scheme. Section 1 defines an “arbitration agreement” as “an agreement by which two or more persons agree to submit to arbitration a dispute that has arisen or may arise between them,” and s. 5(3) provides that the agreement “need not be in writing.” Section 5(4) provides that “[a]n agreement requiring or having the effect of requiring that a matter be adjudicated by arbitration before it may be dealt with by a court has the same effect as an arbitration agreement,” which brings the older Scott v. Avery clause within s. 7; Akbarali J. held in Jencel 407 Yonge Street Inc. v. Bright Immigration Inc., 2021 ONSC 6030 (“Jencel”) at ¶ 15, that the arbitration provisions of a commercial lease had that effect. Section 17(1) provides that “[a]n arbitral tribunal may rule on its own jurisdiction to conduct the arbitration and may in that connection rule on objections with respect to the existence or validity of the arbitration agreement,” and s. 17(2) that an arbitration agreement which forms part of another agreement “shall, for the purposes of a ruling on jurisdiction, be treated as an independent agreement that may survive even if the main agreement is found to be invalid.” Lauwers J.A. observed in Haas at ¶ 12 that the policy of s. 7 “is reinforced by s. 17.”

The two-part framework

Peace River arose under the British Columbia statute, whose stay provision uses the Model Law wording, but Côté J. wrote the framework for “the stay provisions in provincial arbitration legislation across the country,” and at ¶ 87 cited s. 7(2) of the Ontario Act as the source of the exceptions in this province. She held at ¶ 76 that those provisions have “two general components”; namely, “(a) the technical prerequisites for a mandatory stay of court proceedings; and (b) the statutory exceptions to a mandatory stay of court proceedings,” and at ¶ 77 that the two (2) components “remain analytically distinct because the burden of proof shifts.” The moving party must establish the technical prerequisites; then, at ¶ 79, “the party seeking to avoid arbitration must show that one of the statutory exceptions applies, such that a stay should be refused,” and “[o]therwise, the court must grant a stay and cede jurisdiction to the arbitral tribunal.”

The four (4) technical prerequisites are listed at ¶ 83, as follows. “(a) an arbitration agreement exists; (b) court proceedings have been commenced by a ‘party’ to the arbitration agreement; (c) the court proceedings are in respect of a matter that the parties agreed to submit to arbitration; and (d) the party applying for a stay in favour of arbitration does so before taking any ‘step’ in the court proceedings.” The standard of proof at this stage is lower than the civil standard. Côté J. held at ¶ 84 that “the applicant must only establish an ‘arguable case’ that the technical prerequisites are met,” and at ¶ 85 that the “arguable case” test and the “prima facie” test of Dell Computer Corp. v. Union des consommateurs, 2007 SCC 34 (“Dell”), are the same in substance. Penny J. explained what the standard means in Crosslinx Transit Solutions General Partnership v. Ontario Infrastructure and Lands Corp., 2023 ONSC 3500 (“Crosslinx”) at ¶ 25, stating that “the moving party is not required to prove on a balance of probabilities that the dispute falls within the terms of the arbitration agreement,” that an arguable case “is clearly something less than the standard of ‘correctness’ or even ‘likely to succeed’,” and that it “is more like ‘a reasonable prospect of success’ or ‘not obviously doomed to fail’.”

The second stage reverses the onus and raises the standard. Côté J. held at ¶ 88 that “the key question is whether, even though the technical requirements for a stay are met, the party seeking to avoid arbitration has shown on a balance of probabilities that one or more of the statutory exceptions apply,” that “[i]f not, the court must grant a stay,” and that “[t]he mandatory nature of stay provisions across jurisdictions in Canada reflects the presumptive validity of arbitration clauses and the principle of party autonomy.” At ¶ 89 she held that “a court should dismiss a stay application on the basis of a statutory exception only in a ‘clear’ case,” and that “[w]here the invalidity or unenforceability of the arbitration agreement is not clear (but merely arguable), the matter should be resolved by the arbitrator,” citing the Court of Appeal’s decision in Dalimpex Ltd. v. Janicki, 2003 CanLII 34234 (ON CA) (“Dalimpex”). The Court of Appeal restated the two (2) steps in Goberdhan at ¶¶ 14-15 and in Husky Food at ¶¶ 24-30, Brown J.A. holding in the latter at ¶ 23 that “[t]he 2016 Haas framework has been superseded by the framework adopted by the Supreme Court in 2022 in Peace River.” The five (5) Haas questions, which asked whether an arbitration agreement exists, what the subject matter of the dispute is, what the scope of the agreement is, whether the dispute arguably falls within it, and whether the court should refuse a stay, still describe the ground the motion covers, and Papageorgiou J. applied the Peace River version of them in Halton Healthcare Services Corp. v. Plenary Health Milton LP, 2025 ONSC 2223 (“Halton Healthcare”) at ¶¶ 9-12.

The arbitration agreement and the parties to it

The first prerequisite is an arbitration agreement, and the first question on many motions is whether one exists. The standard is the arguable case. In Husky Food, the parties had negotiated a distribution agreement that was never signed; the respondent’s draft of April 19, 2020, added standard terms containing an arbitration clause, the appellant’s email of May 15, 2020, said the revised version “has been signed off,” and the appellant then sued in Ontario and pleaded that the parties had “reached agreement on all the material terms as of May 15, 2020.” Brown J.A. held at ¶¶ 28-30 that the arguable case standard applies to the existence of the agreement as it does to the other prerequisites, and at ¶¶ 34-35 that it was arguable on the record that an arbitration agreement existed and that “this is not a case where the parties’ intention regarding the existence of an arbitration agreement can be determined from a superficial review of the record,” so that the question belonged to the arbitrator and the stay was upheld.

Two (2) decisions of the same year show the clear case on the other side. In Ismail, the stay motion was founded on a share purchase agreement with a company that was never incorporated; Feldman J.A. held at ¶ 3 that “[b]ecause there was no contract, there was no arbitration agreement, and no basis to stay the action,” and at ¶ 46 that the separability principle in s. 17(2) cannot make an arbitration clause survive where no contract was ever made from which it could survive. In Goberdhan, a field agent’s second and third contracts, which added the arbitration clause, were held invalid for want of fresh consideration; the Court of Appeal held at ¶ 16 that “this was a clear case where the motion judge was able to determine the question at issue – whether there was fresh consideration to support the contracts containing arbitration clauses – on the evidence before him,” and that the point “was not a proposition that was ‘merely arguable’,” the respondent’s uncontradicted evidence being that he received nothing beyond continued employment and “had no practical choice but to sign the new contracts” (¶¶ 21-23). Feldman J.A. had drawn the same line in MDG Kingston Inc. v. MDG Computers Canada Inc., 2008 ONCA 656 (“MDG Kingston”) at ¶ 24, holding that where the dispute is whether the agreement was breached and terminated, and whether the termination ended the arbitration clause, “the court is not to determine the merits of that issue on a stay motion,” but that “in cases where the agreement was void ab initio because it was illegal, or where no agreement was ever reached, the arbitration clause will not apply because it was never validly agreed to.”

An agreement that leaves arbitration to later consent is not an arbitration agreement. In Halton Healthcare, the hospital’s project agreement provided that disputes “may” be referred to arbitration “[u]pon the mutual written consent of the parties”; the respondents delivered a notice of arbitration, the parties could not agree on an arbitrator, and the hospital applied to the court. Papageorgiou J. held at ¶¶ 14-17 that the respondents had no arguable case of an agreement to arbitrate, since consent had never been given, and that delivering a notice of arbitration did not change that.

The second prerequisite is that the proceeding was commenced by a “party” to the agreement, and the word reaches beyond the signatories. Côté J. held in Peace River at ¶ 105 that a non-signatory may be bound as a party by operation of law, including “subsidiaries, assignees, trustees and others claiming through or under the named party,” and at ¶ 106 that an assignee enforcing assigned rights can do so only subject to the terms, including the obligation to arbitrate, citing an Ontario decision, ABN Amro Bank Canada v. Krupp Mak Maschinenbau GmbH (1996), 135 D.L.R. (4th) 130 (Ont. Gen. Div.). The Court of Appeal in Dalimpex at ¶¶ 4 and 45 extended the stay of the action against the contracting party to two (2) other defendants who were its privies in interest, since the claims against them stood or fell with the claim against it. A court-appointed receiver may be a party by claiming through or under the debtor (Peace River at ¶ 118), which is how the receiver in that case came to be bound by the agreements it then succeeded in having declared inoperative.

The scope of the clause and the characterization of the claims

The third prerequisite is that the proceeding is “in respect of a matter” that the parties agreed to submit to arbitration, and the plaintiff’s first tactic is often to plead around the clause. Haas is the Court of Appeal’s answer. The investor in a Toronto restaurant sued the other shareholders for fraudulent misrepresentation inducing the shareholders’ agreement, and the motion judge refused a stay on the footing that a fraud claim lay outside the clause. Lauwers J.A. held at ¶ 29 that the clause, which covered “any dispute, difference or question … respecting this Agreement or anything herein contained,” was broad, and that clauses covering disputes “relating to” an agreement “have been generously interpreted to enjoy ‘a wide compass’”; at ¶ 32, adopting the test from Kaverit Steel and Crane Ltd. v. Kone Corp. (1992), 87 D.L.R. (4th) 129 (Alta. C.A.) as applied in Dalimpex at ¶¶ 41-43, that a dispute falls within a clause covering matters “arising out of or in connection with” the agreement where a party relies on a contractual obligation as a necessary element to create or defeat the claim, or the matter is referable to the interpretation or implementation of a provision of the agreement; at ¶ 35 that he “would be reluctant to agree that the presence of tort claims nullifies an arbitration agreement,” since Laskin J.A. had cautioned the court in Piko v. Hudson’s Bay Company (1998), 41 O.R. (3d) 729 (C.A.) at ¶ 9, “to be wary of cases in which a party to an arbitration agreement seeks to avoid it by pleading a common law tort”; and at ¶ 39 that “in cases involving arbitration agreements, fraud does not necessarily vitiate everything. It is a matter of interpretation. … There is no exclusion for tort claims, misrepresentation or fraud.” He identified at ¶ 31 the motion judge’s errors; namely, assuming that tort claims fall outside arbitration agreements, assuming that a fraud claim vitiates an arbitration agreement, failing to advert to the policy of enforcing arbitration agreements and of letting arbitrators decide their own authority, and equating forum selection clauses with arbitration agreements. At ¶ 36 he quoted Ash v. Corp. of Lloyd’s (1992), 9 O.R. (3d) 755 (C.A.) at ¶ 9, for the proposition that “an allegation that a contract is void ab initio does not make it so until a final judgment of the court,” and added that “[t]he court should lean against a result that undermines arbitration agreements.”

The characterization is done in pith and substance. Lauwers J.A. accepted at ¶ 21 that the “pith and substance” approach to characterizing the claims is an acceptable approach to construing the agreement, and held at ¶¶ 26-27 that the misrepresentations pleaded “largely related to failures to perform obligations under the shareholders’ agreement,” so that the motion judge “went too far” in treating the claims as only fraudulent misrepresentation. He noted at ¶ 23 that a plaintiff may amend the claim to try to avoid the arbitration agreement, “[b]ut this does not assist Mr. Haas in resolving the substantive issue.” Perell and Morden’s treatise, The Law of Civil Procedure in Ontario, 5th ed. (LexisNexis), states at ¶ 6.176 that where the scope of the clause bears more than one interpretation, “the court should select the interpretation that provides for arbitration,” and at ¶ 6.181 that oppression claims may fall outside an agreement to arbitrate, but that “the fact that part of the dispute among the parties involves oppressive conduct does not preclude resort to arbitration where the dispute is captured by an arbitration agreement made by the parties.” The arbitration of shareholder and oppression claims is the subject of our article on arbitrating a shareholder dispute in Ontario.

Where the scope is in doubt, the arbitrator decides it. The Court of Appeal held in Dalimpex at ¶ 21, adopting Gulf Canada Resources Ltd. v. Arochem International Ltd. (1992), 43 C.P.R. (3d) 390 (B.C.C.A.), that “it is not for the court on an application for a stay of proceedings to reach any final determination as to the scope of the arbitration agreement or whether a particular party to the legal proceedings is a party to the arbitration agreement, because those are matters within the jurisdiction of the arbitral tribunal,” that the court reaches a final determination “[o]nly where it is clear that the dispute is outside the terms of the arbitration agreement, or that a party is not a party to the arbitration agreement, or that the application is out of time,” and that “[w]here it is arguable that the dispute falls within the terms of the arbitration agreement or where it is arguable that a party to the legal proceedings is a party to the arbitration agreement then, in my view, the stay should be granted.” Penny J. applied the rule in Crosslinx, where the contractor said the arbitration clause in minutes of settlement did not reach its application about the operator of the Eglinton Crosstown line, holding at ¶ 28 that “it is not the job of the court on this motion to decide who is ‘correct’ in this disagreement,” at ¶ 30 that the Crown entities had “raised an arguable case that this dispute falls under the arbitration clause in the Minutes,” and at ¶ 31 that the risk of additional delay and cost if the arbitrator later finds the dispute outside the clause “is, however, except in the most obvious of cases, a necessary consequence of the competence competence approach endorsed by the Supreme Court.” The application was stayed with costs of $60,000 (¶¶ 39, 41).

Competence-competence and when the court decides

The competence-competence principle is the reason the standard at the first stage is an arguable case and the exceptions at the second stage must be clear. Côté J. described it in Peace River at ¶ 39 as “a principle that gives precedence to the arbitration process,” under which “arbitrators should be allowed to exercise their power to rule first on their own jurisdiction,” and held at ¶ 41 that “it is well established in Canada that a challenge to an arbitrator’s jurisdiction should generally be decided at first instance by the arbitrator.” In Ontario the principle is codified in s. 17(1), and s. 17(8) provides that, where the tribunal rules on a jurisdictional objection as a preliminary question, a party may within thirty (30) days apply to the court to decide the matter, from which decision s. 17(9) allows no appeal.

The principle “is not absolute,” as Côté J. said at ¶ 42, and the two (2) exceptions are from Dell and Uber. The majority in Uber set out the Dell framework at ¶¶ 31-32, with the citations omitted, as follows. “Where pure questions of law are in dispute, the court is free to resolve the issue of jurisdiction. Where questions of fact alone are in dispute, the court must ‘normally’ refer the case to arbitration. Where questions of mixed fact and law are in dispute, the court must refer the case to arbitration unless the relevant factual questions require ‘only superficial consideration of the documentary evidence in the record’.” The essential question, at ¶ 36, “is whether the necessary legal conclusions can be drawn from facts that are either evident on the face of the record or undisputed by the parties.” The Court of Appeal applied that test in Irwin, where a managing director with a base salary of $350,000 sued for constructive dismissal and said the negotiated arbitration clause, which excluded costs and punitive damages, was unconscionable; the Court held at ¶ 11 that “[t]he rule, then, is that questions of jurisdiction are to be arbitrated,” that a court “has the discretion to decide otherwise, but only where the jurisdictional question is based on a pure question of law, or of mixed fact and law requiring not more than a superficial consideration of evidence,” and at ¶ 12 that “[t]he determination of unconscionability is a ‘probing factual inquiry’” which “would risk turning the motion into a mini-trial,” so that the motion judge was entitled to leave the issue to the arbitrator.

The second exception is for the party who cannot get to the arbitrator at all. The majority in Uber held at ¶¶ 37-38 that Dell assumed that, if the court does not decide an issue, the arbitrator will, and “did not contemplate a scenario wherein the matter would never be resolved if the stay were granted”; at ¶ 39 that arbitration may be “fundamentally too costly or otherwise inaccessible,” where the fees are significant relative to the claim, the plaintiff cannot reasonably reach the physical location, or “a foreign choice of law clause … circumvents mandatory local policy”; at ¶ 44 that the court first asks “whether, assuming the facts pleaded to be true, there is a genuine challenge to arbitral jurisdiction,” and then “whether there is a real prospect that, if the stay is granted, the challenge may never be resolved by the arbitrator”; and at ¶ 46 that “a court should not refer a bona fide challenge to an arbitrator’s jurisdiction to the arbitrator if there is a real prospect that doing so would result in the challenge never being resolved.” The driver in Uber faced up-front fees of about US$14,500 to arbitrate in Amsterdam against earnings of $400 to $600 a week, and the majority held at ¶ 47 that “[t]he fees impose a brick wall between Mr. Heller and the resolution of any of the claims he has levelled against Uber.” The assessment, at ¶ 45, “must not devolve into a mini-trial,” and “[g]enerally, a single affidavit will suffice.”

Binance is the Court of Appeal’s application of both exceptions to a commercial clause. The click-through terms of a cryptocurrency exchange required arbitration; the motion judge found that accounts were opened “in under 30 seconds” with roughly fifty (50) pages of terms, that the exchange could change the arbitration agreement unilaterally and had changed the forum and governing law four (4) times, at one point to “an unspecified location, under unspecified law,” and that the starting cost of about $36,000 plus fees and travel to Hong Kong against an average claim of about $5,000 “could effectively amount to a grant of immunity to Binance.” The Court of Appeal held at ¶ 16 that, before a court can entertain an argument that a clause is void for unconscionability or public policy, “it must first be satisfied that the circumstances fall within an exception to the application of the competence-competence principle,” at ¶¶ 21-24 that both exceptions were engaged, since the standard form terms raised a legal issue on a superficial documentary review of the kind done in Uber, and the cost, distance and choice of law brought the case within the Uber exception, and at ¶ 28 dismissed the appeal with costs of $30,000. Irwin at ¶ 14 shows the other side of the same line; none of the access-to-justice concerns of Uber was present where a professional with counsel had agreed to arbitrate in Ontario under Ontario law, with no suggestion that the costs were disproportionate or that any barrier “would effectively leave the appellant without remedy.”

Two (2) consequences follow. First, the court that leaves a question to the arbitrator decides nothing about it, and the court that decides a question on the motion decides it for the motion only; the Court of Appeal noted in Goberdhan at ¶ 26 that a finding made on a stay motion is not a final determination of the issue in the action. Second, the exceptions do not reward delay. The majority in Uber noted at ¶¶ 42-43 that Dell permits a court to refer to the arbitrator a challenge that is “a delaying tactic,” and that security for costs and costs awards are the safeguards against misuse of the second exception, and the Court of Appeal in Irwin at ¶ 10 read Uber as allowing the court to decide a mixed question only where it “is convinced the challenge is not a delaying tactic or will not prejudice recourse to the arbitration.” The party who loses on jurisdiction before the arbitrator is not without recourse; s. 17(8) allows an application to the court within thirty (30) days of a preliminary ruling, and a ruling made in the award can be challenged under s. 46, as our article on setting aside an arbitral award in Ontario explains.

The step in the proceeding and undue delay

The fourth technical prerequisite is that the moving party asks for the stay “before taking any ‘step’ in the court proceedings,” and the fourth exception in s. 7(2) is that “[t]he motion was brought with undue delay.” The two (2) overlap, and the cases treat them together. Côté J. held in Peace River at ¶ 97 that the question is whether the party should be held impliedly to have affirmed the correctness of the proceedings and its willingness to go along with a court determination instead of arbitration, and that a step is “something in the nature of an application to the Court, and not mere talk between solicitors … nor the writing of letters,” and at ¶ 98 that requesting an extension of time to file a defence is not a step.

Halton Healthcare is the recent Ontario illustration of a party that took steps. The respondents to the hospital’s application accepted service, delivered a notice of appearance, attended Civil Practice Court, consented to a timetable and complied with it, delivered affidavits on the merits “prepared in response to the Application,” and conducted cross-examinations, and then served their stay motion a year later with their responding record. Papageorgiou J. held at ¶¶ 19-22 that those were substantive steps, at ¶ 26 that by conducting cross-examinations the respondents “sought to take the benefit of this litigation and should not be able to then opt for arbitration after having done so,” at ¶¶ 27-28 that filing a responding record on the merits “in case” summary judgment was argued was no excuse, since the respondents “did not need to engage with the merits in order to bring the stay motion at first instance,” and at ¶¶ 30-31 that she was “satisfied on a balance of probabilities that the Respondents did move with undue delay and that they did not bring their motion for a stay at the earliest opportunity.” She adopted at ¶ 29 Penny J.’s statement in Crosslinx at ¶ 32 that “undue delay has occurred where the respondent has failed to advance its position in favour of arbitration at the ‘earliest opportunity’ and has participated in a litigation process which it subsequently seeks to stay,” with considerations akin to waiver, attornment and estoppel. Penny J. had found no undue delay in Crosslinx itself, holding at ¶ 35 that participation in the thirty-day independent certifier step under the project agreement was not litigation; “[t]here was no ‘litigation horse’ being ridden until the Applicants commenced this application. HMKE never ‘rode’ that horse.”

A party that never moves gets no stay. In Paulpillai Estate v. Yusuf, 2020 ONCA 655 (“Paulpillai”), the partnership agreement provided for arbitration, the responding parties said in their affidavits that the matter should have gone to arbitration, and they filed numerous affidavits, called viva voce evidence, conducted cross-examinations and brought an oral motion to remove counsel, but never moved under s. 7. Jamal J.A. recorded at ¶ 43 the motion judge’s finding that s. 7(1) “makes it clear that the action can only be stayed by way of motion, and even then, the court has the discretion to refuse to grant the stay if the motion is not made in a timely manner,” and at ¶ 46 that, since the responding parties “had failed to bring a motion as required by s. 7,” it was not open to her to grant a stay. The contrast is Goberdhan, where the defendant filed a notice of intent to defend and then moved at once under Rule 21.01(3) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the “Rules”), and s. 106 of the Courts of Justice Act, R.S.O. 1990, c. C.43 (the “CJA”), for a stay under s. 7(1) (¶ 3), and Jencel, where the tenant served but did not file a notice of intent to defend and then moved (¶ 12); in neither case was the step held against the moving party. Perell and Morden state at ¶ 6.173 that a party “may waive the right to have an action stayed and the matter referred to arbitration if it takes steps in the action.”

The five exceptions in section 7(2)

Section 7(2) is the second stage of the framework, and the onus and the standard are the resisting party’s. Feldman J.A. described the five (5) exceptions in MDG Kingston at ¶ 36 as “all cases where it would be either unfair or impractical to refer the matter to arbitration; unfair because there was no legal agreement to arbitrate or because a party effectively waived the agreement by undue delay in objecting to the court action, or impractical because a party was not disputing the claim or it was a claim that was clear and could be resolved by summary judgment without a referral to arbitration,” and at ¶ 37 as “a limited exception to the mandatory requirement that courts enforce arbitration clauses and not take jurisdiction where the parties have legitimately agreed to arbitrate their disputes.” Moldaver J. adopted the description in Wellman at ¶ 65, and the Court of Appeal in Goberdhan at ¶ 15 repeated that a stay should be refused on an exception only in a “clear case.” Professor Tamar Meshel’s treatise, Arbitration Law: Statutes, Cases and Commentary (LexisNexis), at § 3.09[5][a], collects the first-instance decisions to the effect that the onus is on the party opposing arbitration to show a clear case on a balance of probabilities, that the exceptions “should be narrowly construed,” that some of them, undue delay and summary judgment among them, “are outside the operation of the competence-competence principle” and “are exclusively for the court to decide,” and that, even where an exception is made out, “the court retains the discretion to grant a stay.” The word in s. 7(2) is “may.”

The first exception, legal incapacity, is rare. The second, that “[t]he arbitration agreement is invalid,” is where most of the argument happens, and the cases above settle its limits. An agreement that was never reached, as in Ismail, or that fails for want of consideration, as in Goberdhan, is invalid, and the court may say so where the point is clear. An agreement attacked as unconscionable is invalid if the attack succeeds, which is why Moldaver J. said in Wellman at ¶ 85 that unfairness in standard form arbitration clauses is “better dealt with directly through the doctrine of unconscionability,” but the attack is for the arbitrator unless a Dell or Uber exception applies, as Irwin and Binance show from either side. An agreement whose appointment mechanism was drafted for two (2) parties is not invalid because a third has been added; Lauwers J.A. held in Haas at ¶¶ 46-49 that the mechanism worked, with the court appointing a third arbitrator if needed. A statutory rescission of the main contract does not make the arbitration clause invalid; Feldman J.A. held in MDG Kingston at ¶ 25 that nothing suggested fraud or that the agreement was void ab initio, and at ¶ 33 that “[t]he two issues of whether, on the merits, the franchisee was entitled to rescind the agreement, and the jurisdiction of the arbitrator, were for the arbitrator to determine.”

The third exception, that the subject-matter “is not capable of being the subject of arbitration under Ontario law,” is about the kind of dispute. Consumer claims are the clearest example, since the Consumer Protection Act, 2002, S.O. 2002, c. 30, Sched. A, shields consumers from arbitration clauses, which is why the consumer claims in Wellman proceeded in court while the business customers’ claims were stayed (¶¶ 96-102). The oppression remedy is the example that arises in commercial disputes. In Toronto Standard Condominium Corporation No. 1628 v. Toronto Standard Condominium Corporation No. 1636, 2020 ONCA 612 (“TSCC 1628”), the motion judge had found that some of the claims between two (2) condominium corporations were arbitrable and that the oppression remedies under s. 135 of the Condominium Act, 1998, S.O. 1998, c. 19, might not be available in arbitration (¶¶ 18-20), which raised the partial-stay question discussed below. The insolvency cases are the third example; the Supreme Court held in Peace River at ¶ 8 that insolvency alone is not enough, and that the party seeking to avoid arbitration must establish on a balance of probabilities that a stay would compromise the integrity of the insolvency proceedings.

The fourth exception, undue delay, is discussed above. The fifth, that “[t]he matter is a proper one for default or summary judgment,” is the one a plaintiff with a liquidated claim reaches for, and MDG Kingston confines it. The motion judge there had refused the stay, granted partial summary judgment on the franchisee’s rescission claim and directed a trial of damages; Feldman J.A. held at ¶ 37 that the exception arises “where the case is properly one for summary judgment, i.e., there are no genuine issues for trial, and therefore, as with a default situation, there are no issues that require the assistance of an arbitrator,” at ¶ 38 that by ordering partial summary judgment on liability and a trial on damages “the motion judge failed to give effect to the purpose of the exception for summary judgment in s. 7(2)5, which is to avoid referral to arbitration where further adjudication is unnecessary,” and at ¶ 39 that the matter did not fall within the exception “because the whole matter was not a proper matter for summary judgment.” Akbarali J. applied the exception in Jencel, a landlord’s action for arrears of rent, holding at ¶¶ 18-19 that, after Hryniak v. Mauldin, 2014 SCC 7, “the question is not whether the responding party to the summary judgment motion has no basis to dispute the claim, but rather whether the responding party has raised genuine issues requiring a trial,” and at ¶¶ 33-34 that “[t]he case is a proper one for summary judgment. Arbitration would be an impractical alternative in these circumstances,” with the observation at ¶ 35 that the lease’s requirement of three (3) arbitrators was “an unnecessary and disproportionate expense for the parties in the context of this dispute.” In Ismail at ¶¶ 21-22, by contrast, the Court of Appeal refused to adjourn the motion so that a defence could be delivered and the summary judgment exception assessed, since the facts “were far from clear and did not suggest that summary judgment would be available.”

Partial stays under section 7(5)

Section 7(5) is the provision for the proceeding that mixes arbitrable and non-arbitrable matters, and Wellman decided what it does and does not allow. The Court of Appeal had held in Griffin v. Dell Canada Inc., 2010 ONCA 29 (“Griffin”), that s. 7(5) gave the court a discretion to refuse to stay even the arbitrable claims where it was not reasonable to separate them, and the motion judge in Wellman had used that discretion to let the business customers’ claims proceed in court alongside the consumer claims. Moldaver J. held at ¶ 8 that “s. 7(5) of the Arbitration Act does not grant the court discretion to refuse to stay claims that are dealt with in an arbitration agreement,” at ¶¶ 66-70 that the subsection has two (2) preconditions, that the agreement deals with only some of the matters and that it is reasonable to separate them, and then a discretion to let the other matters continue in court, “though it must nonetheless stay the court proceeding in respect of the matters that are dealt with in the agreement,” and that where the preconditions are not met, “unless one of the five exceptions listed in s. 7(2) applies, the general rule under s. 7(1) would apply, meaning that the proceeding must be stayed.” The multiplicity of proceedings that results is the legislature’s choice; s. 138 of the CJA directs the court to avoid a multiplicity only “as far as possible” (¶ 90), and access to justice “cannot, absent express direction from the legislature, be permitted to overwhelm the other important objectives pursued by the Arbitration Act, including ensuring that parties to a valid arbitration agreement abide by their agreement” (¶ 83). Moldaver J. gave at ¶ 101 the example of a proceeding that combines an overbilling claim within the clause and a collection claim outside it.

The five-judge panel in TSCC 1628 at ¶¶ 5-7 confirmed that Wellman overturned Griffin on s. 7(5), and held that a motion judge who, applying Griffin, refused to stay any part of the proceeding “granted relief that was unavailable under s. 7(5) or elsewhere in s. 7,” so that his decision was not one made under s. 7 at all. Two (2) further points come from Haas. Lauwers J.A. held at ¶ 44 that “[u]ntil the arbitrator decides his or her jurisdiction, a motion under s. 7(5) is premature,” and at ¶¶ 50-58 that the prospect of a multiplicity of proceedings, there because a co-defendant had not appealed, was not dispositive, since “the court should not lightly depart from the strong policy support for enforcing arbitration agreements.” Where the non-arbitrable claims are against privies of the contracting party, Dalimpex at ¶ 45 shows that the stay follows them too.

International arbitration agreements

Where the arbitration agreement is international and commercial, the stay comes from the ICAA, whose s. 9 provides that, “[w]here, pursuant to article II (3) of the Convention or article 8 of the Model Law, a court refers the parties to arbitration, the proceedings of the court are stayed with respect to the matters to which the arbitration relates.” Article 8(1) of the UNCITRAL Model Law on International Commercial Arbitration (the “Model Law”), which is Schedule 2 to the ICAA, provides that “[a] court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed,” and art. 8(2) that arbitral proceedings “may nevertheless be commenced or continued, and an award may be made, while the issue is pending before the court.” Article II(3) of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “Convention”), Schedule 1 to the ICAA, is to the same effect. The two (2) statutes are mutually exclusive under s. 2(1) of the Act, and the majority in Uber held at ¶¶ 19-28 that the ICAA applies only to agreements that are both “international” and “commercial,” that “a court must determine whether the ICAA applies by examining the nature of the parties’ dispute, not by making findings about their relationship,” and that an employment dispute is not commercial, so that the Act governed the driver’s claim.

The framework is the same. Brown J.A. held in Husky Food at ¶ 26 that, “[w]hile the Peace River framework was crafted in the context of domestic arbitration legislation, in my view it applies equally to stays sought under s. 9 of the ICAA in respect of international commercial arbitration agreements,” and Binance was decided under s. 9 as well. The exceptions are different in form and narrower in substance. Côté J. held in Peace River at ¶ 124 that “the sole basis upon which a party may sue to enforce a contract and yet avoid the obligation to arbitrate is that the arbitration agreement has been found by a court to be void, inoperative, or incapable of being performed,” and at ¶ 134 that a narrow interpretation of those words “promotes the enforcement of arbitration agreements.” She defined them at ¶¶ 136-145. “Void” is confined to the rare case where the agreement is “intrinsically defective” under the ordinary rules of contract law, including fraud, undue influence, unconscionability, duress, mistake or misrepresentation. “Inoperative” describes agreements which “have ceased for some reason to have future effect” or “have become inapplicable to the parties and their dispute,” through frustration, discharge by breach, waiver or a later agreement, and “matters such as inconvenience, multiple parties, intertwining of issues with non-arbitrable disputes, possible increased cost, and potential delay generally will not, standing alone, be grounds to find an arbitration agreement inoperative.” “Incapable of being performed” describes the case in which “the arbitral process cannot effectively be set in motion” because of a physical or legal impediment beyond the parties’ control, including irremediable inconsistency or vagueness in the agreement, the unavailability of the named arbitrator, the dissolution of the chosen institution, or political circumstances at the seat. The last of those was the issue in Dalimpex, where the motion judge had found the clause incapable of being performed because the named Polish tribunal no longer existed; the Divisional Court and the Court of Appeal held at ¶¶ 26-27 that the question is whether the language, reasonably interpreted, is capable of being construed as encompassing the successor tribunal, and at ¶ 22 that, where it is not clear that the agreement is null and void, inoperative or incapable of being performed, “it may be preferable to leave any issue related to the ‘existence or validity of the arbitration agreement’ for the arbitral tribunal to determine in the first instance under article 16.”

The timing rule is written into art. 8(1) itself; the request must be made “not later than when submitting his first statement on the substance of the dispute,” which in practice means before the statement of defence or the responding record is delivered. The appeal route differs too. The ICAA has no equivalent of s. 7(6), so the orders in Husky Food and Binance were appealed as of right, and Brown J.A. held in Husky Food at ¶¶ 16-17 that an order granting or refusing a stay under s. 9 is final for the purpose of the route of appeal, “as it finally determines the forum in which the dispute between the parties is to be resolved.”

The bar on appeals in section 7(6)

Section 7(6) provides that “[t]here is no appeal from the court’s decision,” and Moldaver J. held in Wellman at ¶ 91 that, “[g]iven the absence of any qualifying language, s. 7(6) must be taken as referring to a ‘decision’ made under any subsection contained in s. 7,” including “a decision to stay the proceeding under s. 7(1), a decision to refuse a stay under s. 7(2), or a decision to order a partial stay under s. 7(5).” The Court of Appeal applied the bar in Irwin at ¶¶ 15-16, quashing the appeal from the stay with costs of $10,000, and in Paulpillai at ¶ 47, holding that it “applies to any decision under s. 7, including a decision to refuse a stay under s. 7(2).”

The bar has one (1) opening, and it is the one that explains why Goberdhan and Ismail reached the Court of Appeal. Under the line of authority that begins with Huras v. Primerica Financial Services Ltd. (2000), 137 O.A.C. 79 (C.A.) (“Huras”), a decision that no arbitration agreement applies to the dispute is not a decision under the Act at all, so the Act’s bar does not reach it. Jamal J.A., for a five-judge panel in TSCC 1628, held at ¶ 4 that Huras “held that if a motion judge decides that an arbitration agreement does not apply to the dispute before the court, then the Arbitration Act also does not apply, including the bar on appeals in s. 7(6),” that Huras “has been followed by this court in seven unanimous decisions, including by two five-judge panels,” and at ¶ 6 that, “although Wellman overturned Griffin on the interpretation of s. 7(5), it did not disturb the Huras line of cases on the interpretation of s. 7(6). In my view, the Huras line of cases was correctly decided.” Feldman J.A. applied the rule in Ismail at ¶¶ 23-25, holding that “where the decision to refuse a stay is based on a finding that there is no arbitration agreement, then the decision to refuse a stay is not made under the Act, and therefore an appeal is not barred by s. 7(6),” and the Court of Appeal applied it in Goberdhan at ¶¶ 6-10 to hear the appeal from the finding that the contracts containing the clauses were invalid for want of consideration. Perell and Morden summarize the line at ¶¶ 6.185-6.187; no appeal lies where the court holds that the clause applies or that the arbitrator should decide whether it applies, and an appeal lies where the court holds that the dispute is not subject to arbitration. The order that is appealable is a final order, as Brown J.A. noted in Husky Food at ¶ 16, since it “finally determines the forum in which the dispute between the parties is to be resolved.”

The arbitration clause

The stay motion is won or lost on the words of the clause as often as on the conduct of the parties, and six (6) drafting points follow from the cases.

First, the clause should be mandatory. The consent-based clause in Halton Healthcare, under which disputes “may” be referred to arbitration “[u]pon the mutual written consent of the parties,” produced no arbitration agreement at all, and the hospital’s application proceeded in court. A clause that says disputes “shall be finally resolved by arbitration” engages s. 7(1); a clause that contemplates a later agreement does not.

Second, the scope should be wide and should say so. The words “arising out of or in connection with this Agreement” bring in the tort and fraud claims that a plaintiff pleads to avoid the clause, under the Kaverit test adopted in Dalimpex and Haas, and a clause that covers only “disputes concerning the interpretation of this Agreement” invites the argument that a claim in deceit or for oppression falls outside it. Where the parties want injunctive relief available from the court, the clause should say so in terms, as the partnership agreement in Paulpillai did (¶ 42); where they want the arbitrator to have the oppression remedy, the clause should confer the remedial powers in terms, for the reasons given in our article on arbitrating a shareholder dispute in Ontario.

Third, the mechanism should work for the parties who will use it. The two-party appointment mechanism in Haas survived the addition of a third party only because the court could appoint the third arbitrator (¶¶ 46-49); the lease in Jencel required three (3) arbitrators for a rent dispute, which Akbarali J. called “an unnecessary and disproportionate expense” (¶ 35) on the way to refusing the stay; and the named institution in Dalimpex had ceased to exist. A clause should name an institution and its rules as they may be amended from time to time, provide for a sole arbitrator below a stated amount in dispute, and provide a default appointing authority.

Fourth, the clause should bind everyone who might sue. Guarantors, affiliates and assignees are bound only as parties or as persons claiming through or under a party (Peace River at ¶¶ 105-106), and the privies in Dalimpex were stayed only because their claims stood or fell with the contracting party’s. Where a group of companies or a set of individuals is on one side of the bargain, each of them should sign the clause or a joinder to it.

Fifth, the clause should be supported by consideration and be accessible. The clause added to the second and third contracts in Goberdhan failed because the employee received nothing for it, and the clauses in Uber and Binance failed because the cost, the distance and the choice of law made arbitration a wall rather than a forum. A commercial clause between parties with counsel, providing for arbitration in Ontario under Ontario law, with the costs of the arbitration in the arbitrator’s discretion, is the clause the Court of Appeal upheld in Irwin.

Sixth, the clause should carry the words that decide the later stages, which our other articles explain; namely, “final and binding” to remove the appeal under s. 45, and a provision that the award may be enforced in any court of competent jurisdiction.

Practical considerations

For the defendant who wants the arbitration, the rule is to move first and move at once. A notice of intent to defend may be served, as it was in Goberdhan and Jencel, and an extension of time to defend may be requested, as Peace River at ¶ 98 confirms; a statement of defence, a cross-examination, a consent to a timetable and a responding record on the merits are the steps that cost the respondents in Halton Healthcare their stay. The motion is brought under s. 7(1) with Rule 21.01(3) and s. 106 of the CJA, on an affidavit that exhibits the agreement containing the clause and the pleading, and that says no more about the merits than the arguable case requires. The moving party should ask for a stay of the whole proceeding and, in the alternative, a stay under s. 7(5) of the matters the clause covers, and should remind the court that the scope and validity of the clause are, under s. 17(1) and the competence-competence principle, for the arbitrator unless the case is clear. Section 7(3) allows the arbitration to be commenced while the motion is pending, and a notice of arbitration served with the motion record shows the court that the moving party means to arbitrate.

For the plaintiff who wants to stay in court, the task is to find a clear case, because an arguable one goes to the arbitrator. The strongest positions are those of Ismail and Goberdhan; namely, that no contract was ever made or that the agreement containing the clause fails for want of consideration, on evidence that is undisputed or evident on the face of the record. The next are the exceptions the court decides for itself; namely, undue delay, proved by a record of the defendant’s steps and the dates of them, and summary judgment, proved by showing that the whole matter can be decided without a trial, as in Jencel, and unlike MDG Kingston, where only the liability half could be. An unconscionability argument needs the Dell or Uber gateway before the court will hear it, and Irwin shows that a negotiated commercial clause between advised parties does not pass through it. A plaintiff who pleads fraud or a tort to escape the clause should expect the Haas analysis, and a plaintiff whose claims are partly outside the clause should expect, under Wellman, that the claims inside it will be stayed whatever happens to the rest.

Costs follow the event on these motions and on the appeals that the Huras opening allows. The appellants in Husky Food and Binance each paid $30,000, the appellant in Goberdhan $19,000, the appellant in Irwin $10,000 on the quashed appeal, the appellant in Ismail $6,000, and the respondent in Haas $7,500 on the appeal and $14,000 on the motion; the Crown entities in Crosslinx recovered $60,000 on the stay of an application, and the landlord in Jencel $5,000 on the refusal of one. The larger cost is the one Penny J. identified in Crosslinx at ¶ 31; a party that litigates the scope of the clause in court, loses, and then arbitrates has paid for the question twice.

How we can help

Grigoras Law acts as counsel in commercial arbitrations seated in Toronto, in shareholder, partnership, contract, lease, franchise and fraud disputes, and in the court proceedings that surround them, including motions to stay an action or application under s. 7 of the Act and s. 9 of the ICAA, the responses to such motions where the clause does not reach the dispute or the case for an exception is clear, applications under s. 17(8) from a tribunal’s preliminary ruling on jurisdiction, and the appeals that the Huras line permits. We also draft and review the arbitration clauses that decide these motions before they are brought. Our arbitration practice and our commercial litigation practice are described on the pages linked here, our shareholder disputes practice covers the oppression and partnership claims in which the stay motion most often arises, and our appellate practice covers the appeals discussed above. Our articles on arbitrating a shareholder dispute in Ontario, on evidence in a commercial arbitration in Ontario, on setting aside an arbitral award in Ontario, on appealing an arbitral award in Ontario and on enforcing an arbitral award in Ontario take the dispute from the arbitration itself to the award and its enforcement.

This article is general information about the law of Ontario as of October 2026 and is not legal advice. Whether a proceeding will be stayed depends on the words of the arbitration agreement, the claims pleaded, the steps taken and the evidence on the motion, and the authorities cited should be read in full before they are relied on.