Executive Summary: Key Legal and Evidentiary Issues

• The plaintiffs sought to enjoin an arbitrator from hearing a jurisdictional challenge before the court ruled on a related motion.

• A key issue was whether the arbitrator or the court should first decide the arbitrator’s jurisdiction.

• The court reaffirmed the competence-competence principle, giving precedence to arbitrators in jurisdictional questions.

• The plaintiffs failed to establish a serious issue to be tried or irreparable harm if the injunction was denied.

• Parallel court and arbitration proceedings were deemed permissible and not inherently harmful.

• The motion for an injunction was dismissed, allowing arbitration to proceed without court interference.

Facts and procedural background

Anthony and Bibi Fredericks, along with their company 1000715830 Ontario Inc., sold two corporations to South Western Insurance Group Limited in a $40 million transaction. The share purchase agreement contained an arbitration clause. After the deal closed in January 2024, South Western alleged that the Fredericks had breached representations and warranties under the agreement. The parties disagreed on post-closing adjustments and engaged independent accountants in accordance with the agreement’s dispute resolution provisions. In October 2024, both parties jointly appointed the Hon. Frank Newbould, K.C., as arbitrator.

The arbitration proceeded without issue until December 31, 2024, when the Fredericks changed legal counsel. They subsequently launched a civil action in the Superior Court and brought a motion within the arbitration challenging Mr. Newbould’s jurisdiction. The civil action sought declarations of monies owed under the agreement, damages for breach and dishonest performance, a finding that no misrepresentations were made, and a court order to set aside the arbitration agreement and permanently stay the arbitration.

South Western responded by bringing a motion to stay the civil action under section 7(1) of the Arbitration Act, 1991. The Fredericks filed a cross-motion to set aside the arbitration agreement. Both motions were scheduled to be heard in December 2025. Meanwhile, the Fredericks’ jurisdictional challenge in arbitration was scheduled for August 25, 2025. On July 14, 2025, the Fredericks sought an interlocutory injunction from the court to prevent Mr. Newbould from hearing the jurisdictional challenge until the court ruled on their cross-motion to set aside the arbitration agreement.

Court’s analysis and decision

The court assessed the injunction request under the three-part test from RJR—MacDonald Inc. v. Canada (Attorney General): a serious issue to be tried, irreparable harm, and balance of convenience.

The court held that there was no serious issue to be tried. It confirmed that the arbitrator must be the first to decide questions about his own jurisdiction, consistent with the competence-competence principle affirmed in cases such as Dell v. Union des consommateurs, Uber v. Heller, and Lochan v. Binance Holdings. The legislature granted arbitrators this power through the Arbitration Act, and courts have shown deference to arbitrators' authority. The Fredericks’ arguments did not meet even the low threshold for a serious question under this part of the test.

The court also found no irreparable harm would result if the injunction were not granted. The Fredericks would have an opportunity to argue jurisdiction before Mr. Newbould, and any errors could be addressed later through legal remedies. The concern about parallel proceedings was rejected as the Arbitration Act contemplates such a possibility. The court further noted that any procedural complications were a result of the Fredericks’ own decisions, including launching the civil action and delaying the arbitration challenge.

Given the plaintiffs’ failure to meet the first two parts of the injunction test, the court did not consider the balance of convenience. The motion was dismissed, and the arbitration proceeding, including the jurisdictional hearing before Mr. Newbould, was allowed to proceed.

Conclusion

The Superior Court refused to intervene in the arbitration process, upholding the principle that arbitrators have the authority to determine their own jurisdiction. The plaintiffs’ attempt to delay the arbitration was unsuccessful, and the matter remains within the arbitral process for the time being.