In Dewey v. Corner Brook Pulp and Paper Limited, 2019 NLCA 14, Newfoundland and Labrador’s Court f Appeal held that the applications judge had erred in ordering a stay of a proposed class action when he found that the dispute could only be resolved by mandatory arbitration. Based on its interpretation of the legislation first introduced in 1915 and amended subsequently, the Court held that the legislation, from the onset and despite amendments, provided for the option of arbitration or court proceedings. The Court identified the result as an exception, based on “legislative language to the contrary”, to courts enforcing mandatory arbitration.
Corner Brook Pulp & Paper Limited (the “CB Pulp & Paper”) applied for an order under Section 97 of the Judicature Act, R.S.N.L. 1990, c. J-4 to stay the class proceedings pending the arbitration of Plaintiffs’ claim as required by legislation applicable in Newfoundland and Labrador.
Plaintiffs commenced their proposed class action against five (5) defendants on May 22, 2015: CB Pulp & Paper; the Town of Deer Lake (the “Town”); Her Majesty the Queen in Right of Newfoundland and Labrador (the “Province”); Kruger Inc.; and, Deer Lake Power Company Limited (collectively “Defendants”).
The class action asserts a cause of action against Defendants arising from the creation and operation of a “Water Control System” related to a hydroelectric power generating system providing power to the CB Pulp & Paper’s paper Corner Brook mill.
CB Pulp & Paper’s application to stay proceedings is opposed by Plaintiffs, and by the Town and the Province. Neither Kruger Inc nor Deer Lake Power Company Limited took part.
The applications judge in a December 15, 2107 decision in Dewey v. Kruger Inc., 2017 CanLII 85310 (NL SC) granted the stay based on his interpretation of various (i) legislative instruments dating back to 1915 which first introduced arbitration and later modified the applicable provisions and (ii) agreements incorporated into that legislation, namely:
(i) An Act for the Confirmation of a Contract with the Newfoundland Products Corporation, Limited (the “1915 Act”) and the attached Schedule (the “1915 Agreement”);
(ii) An Act for the Confirmation of a Contract with the Newfoundland Products Corporation, Limited (the “1923 Act”) and Part I of the Schedule to the 1923 Act and Part II of the Schedule to 1923 Act (the “1923 Agreements”); and,
(iii) An Act for the Confirmation of an Agreement between the Government and International Paper Company and Newfoundland, Limited (the “1927 Act”) and the attached Schedule (the “1927 Agreement”).
On the onset of the legislative trail, Clause 15 of the Schedule to the 1915 Act introduced arbitration to settle issues of compensation for any damage caused by certain works involving water and power rights granted to CB Pulp & Paper. The wording made the process mandatory:
“If the Company, in or by reason of the exercise of any of the rights hereby granted, submerge, destroy, damage or injuriously affect any private rights, interests, lands or property, and shall be unable to agree with the owner thereof as to compensation to be paid therefor, the Company, with the consent of the Governor in Council, may proceed with the exercise of the said rights, …and the compensation to be paid by the Company to the owner, for or in respect to such rights, interests, lands or property, shall be settled by arbitration in the manner hereinbefore provided.”
However, at the same date, Section 14 of the 1915 Act provided an option of initiating an action in court:
“Nothing herein or in the Schedule hereto in relation to the settlement of claims by arbitration shall be held or construed to prejudice or exclude the right of any claimant to institute an action in a Court of competent jurisdiction in respect to any such claim.”
In its interpretation of the legislative steps, the applications judge had held that:
(i) the post-1915 changes had not displaced the undertaking to arbitrate at Clause 15 of the Schedule to the 1915 Act which the he considered mandatory;
(ii) Clause 2(n) of the Schedule to the 1927 Act had only removed Section 14 of the 1915 Act, thereby eliminating the optional nature of arbitration.
In the result, based on his interpretation of the legislation, the applications judge considered the 1915 version of the arbitration process as being mandator and unaffected by later legislative changes.
On appeal, Court of Appeal reversed that determination and granted the appeal.
First, the Court held that none of the legislative changes subsequent to 1915 had altered the original status of arbitration which it determined as being an option for dispute resolution rather than a mandatory one.
“From the beginning, the legislation provided for the choice of arbitration or a court proceeding. Nothing in the subsequent amendments changed that.” The Court held that Clause 15 in the Schedule to the 1915 Act, by itself, did impose mandatory arbitration but “that result is overridden by the clear language in section 14” of the same 1915 Act. The Court further held that the post-1915 legislation had not affected the nature of arbitration first introduced in 1915. “Nowhere in subsequent legislation is the option to proceed in court removed.”
Second, the Court determined that the facts fell within an exception, identified in earlier case law, arising from express legislative language.
“[20] The applications judge referred to the decisions in Weber v. Ontario Hydro, 1995 CanLII 108 (SCC), [1995] 2 S.C.R. 929, at paragraph 67, and Bisaillon v. Concordia University, 2006 SCC 19 (CanLII), [2006] 1 S.C.R. 666, at paragraph 47, for the proposition that a mandatory arbitration clause will generally confer exclusive jurisdiction on the tribunal. However, that general principle does not apply where the legislation specifically provides for the option to proceed by way of court action. That distinction is referenced in Seidel v. Telus Communications Inc., 2011 SCC 15 (CanLII), [2011] 1 S.C.R. 531. Binnie J., for the majority, explained:
[42] For present purposes, the relevant teaching of Dell and Rogers Wireless is simply that whether and to what extent the parties’ freedom to arbitrate is limited or curtailed by legislation will depend on a close examination of the law of the forum where the irate consumers have commenced their court case. [Dell Computer Corp. v. Union des consommateurs, [2007] 2 SCR 801, 2007 SCC 34] and [Rogers Wireless Inc. v. Muroff, [2007] 2 SCR 921, 2007 SCC 35] stand, as did [Desputeaux v. Éditions Chouette (1987) inc., [2003] 1 SCR 178, 2003 SCC 17], for the enforcement of arbitration clauses absent legislative language to the contrary. [Italics in the original.]
[21] Section 14 of the 1915 Act is, in fact, legislative language to the contrary which operates to give the parties to a dispute the option of court proceedings or arbitration. The applications judge’s error in concluding that section 14 had been rendered inoperative resulted in further error by leading him to determine that the exception arising from express legislative language was not engaged.”
Based on its interpretation of the wording of the legislation, the Court held that the applications judge had erred in ordering a stay of the proposed class action when finding that the dispute could only be resolved by arbitration. The Court held that the legislation, from the onset and despite amendments, provided for the option of arbitration or court proceedings and not mandatory arbitration. The Court made no order for costs, as per section 37 of the Class Actions Act, SNL 2001, c C-18.1.