Conflicting arbitration clauses keep US$1 million financing dispute in Manitoba court

An international financing dispute involving US$1 million in unreturned deposits can proceed in Manitoba after the province’s appeal court found the contracts’ conflicting arbitration provisions could not be put into effect.

In Bains v. Loader, 2026 MBCA 66, released July 23, 2026, the Court of Appeal of Manitoba dismissed two appeals by Rory Loader and Sortepax Holdings Limited. They had sought to stop related court claims on jurisdictional grounds or have the dispute referred to arbitration.

The unanimous decision allows the claims to be heard in Manitoba. It does not determine whether the alleged fraud or other misconduct occurred, and it does not award repayment of the deposits.

Financing failed to arrive

The dispute arose from arrangements intended to turn standby letters of credit into financing for private health-care projects. Dalbir Bains and his Manitoba company were involved in agreements with Sortepax, which Loader controlled. The transaction linked participants in Manitoba, Alberta, New York, South Africa and the Seychelles, with financial institutions in Asia and Europe.

Two deposits totalling US$1 million were required. Under the arrangement, they were to be repaid as part of the financing or within 10 days if the letters of credit did not issue or the financing proceeds were not received. The parties agreed that the financing proceeds were never received and the deposits were not returned.

One proceeding was brought by Bains and his company. The other involved a related third-party claim brought by Bains and his wife. Their allegations included fraudulent misrepresentation, conspiracy, breach of fiduciary duty and unjust enrichment. Loader and Sortepax had not filed pleadings before seeking to stay the proceedings.

Why Manitoba could hear the claims

Loader and Sortepax argued that Manitoba lacked jurisdiction, that another place was a more suitable forum, and that an arbitrator should decide the jurisdictional question.

Writing for the court, Justice David Kroft explained that the first two questions are distinct. A court must first have a real and substantial connection to the dispute. Even where that connection exists, it may decline to hear the case if the opposing party establishes that another forum is clearly more appropriate.

For the purposes of the stay motions, the evidence supported connecting the alleged misrepresentation and conspiracy to Manitoba. That included Bains’ evidence about conversations with Loader while Bains was in Manitoba, written responses to questions sent from the province, and the place where the alleged representations were received and acted upon.

The motion judge had accepted that evidence despite Loader’s disagreement about the timing and nature of the representations. The appeal court found those preliminary findings were available on the documentary record.

The international features of the transaction did not displace the Manitoba connection. The court also rejected the argument that the motion judge had improperly mixed up the jurisdiction and more-appropriate-forum analyses. Read as a whole, her reasons addressed the separate questions properly.

The appeal court did not need to decide whether the electronically exchanged contracts were legally made in Manitoba. The other connecting factors were sufficient.

Arbitration remained the starting point

The court nevertheless corrected part of the motion judge’s arbitration analysis. Under Manitoba’s International Commercial Arbitration Act, arbitrators generally decide questions about their own jurisdiction first. A party seeking a stay initially needs only an arguable case that the required conditions for arbitration are met.

Here, there was an arguable case that the broadly worded arbitration clauses covered the claims, including the fraud allegations. Alleging fraud in the wider transaction did not automatically invalidate the separate agreement to arbitrate.

But that was not the end of the analysis. The parties resisting arbitration established the statutory exception for an agreement incapable of being performed. That required proof on a balance of probabilities, rather than merely an arguable objection.

Contradictory instructions defeated the clauses

The provisions referred inconsistently to arbitration rules associated with Paris and Philadelphia, relied on an International Chamber of Commerce document the motion judge found did not exist, and described an award as binding while providing for further proceedings in London if a party refused the result.

The appointment procedure also failed to resolve its own deadlock: if two arbitrators could not agree on a third, those same two were nevertheless supposed to appoint the third jointly. Kroft additionally noted conflicting language about whether a party could choose arbitration or had to use it.

The appeal court upheld the finding that the inconsistencies and flaws made the arbitration arrangements incapable of performance. It expressly declined to endorse the separate conclusions that the clauses were also null and void or inoperative.

Both appeals were dismissed with costs, with no amount specified in the reasons. The decision illustrates the importance of workable arbitration procedures while preserving the general rule favouring arbitration. It does not establish that fraud allegations alone allow a party to avoid an arbitration clause.