Ontario – court rejects re-using arbitral awards against non-parties despite litigants’ flexibility – #153

In Restoule v. Canada (Attorney General), 2018 ONSC 7701, Madam Justice Patricia C. Hennessy dismissed an attempt to re-use arbitral awards as evidence against litigants who were not parties to the related arbitrations. Despite a collaborative, flexible approach by the litigants to presenting sprawling, complex facts necessitating the use of extensive primary and secondary documentary sources as well as expert and community leaders testimony providing historical context, Hennessy J. drew limits to that collaborative flexibility and underscored the limited role arbitral awards play beyond the parties who, by contract, agreed to submit to and be bound by arbitration.

Hennessy J. was asked to interpret the terms of two (2) treaties dating to 1850 in which the Anishinaabe of the upper Great Lakes ceded territory in Northern Ontario in exchange for other considerations including a lump sum and the promise by the Crown to pay a perpetual annuity to the Anishinaabe. The litigation involved, at the first of three (3) stages, an application for summary judgment to determine the nature of the annuity and the conditions under which increases to that annuity would be made.

At the very onset of her 600+ paragraphs, Hennessy J. signalled that she determined that the Crown did have an obligation to increase the annuities, subject to conditions that the Crown not incur a loss but also that it exercise its discretion honourably.

[3] I find that the Crown has a mandatory and reviewable obligation to increase the Treaties’ annuities when the economic circumstances warrant. The economic circumstances will trigger an increase to the annuities if the net Crown resource-based revenues permit the Crown to increase the annuities without incurring a loss. The principle of the honour of the Crown and the doctrine of fiduciary duty impose on the Crown the obligation to diligently implement the Treaties’ promise to achieve their purpose (i.e. of reflecting the value of the territories in the annuities) and other related justiciable duties.

[4] While there may be steps within the implementation process where the Crown has discretion, this discretion must be exercised honourably and with a view to fulfilling the Treaties’ promise. The discretion is not unfettered and is subject to review.

Her reasons explore the foundational principle of the honour of the Crown at paras 476-481 as well as the duties which draw their source from that honour, introduced at paras 482-483. See Mikisew Cree First Nation v. Canada (Governor General in Council), 2018 SCC 40.  That honour governs the relationship between the Crown and Aboriginal peoples, recognizing the tension stemming from European assertion of sovereignty and pre-existing Aboriginal sovereignty, rights and occupation, creating a special relationship between the two and requiring that the Crown act honourably in its dealings with Aboriginal peoples. The underlying purpose of the honour is to facilitate reconciliation, promote negotiation and the just settlement of Aboriginal claims in lieu of dispute resolution and outcomes imposed by courts.

At the onset of her reasons, Hennessy J. underlined not only the complexity of the evidence but the collaborative efforts the parties made to present the complex facts to her for the purpose of the summary judgment on the first of three (3) stages of the case. In addition to calling eighteen (18) witness – eleven (11) experts, four (4) Elders and three (3) Chiefs – the parties filed a joint book of 30,000 pages of primary sources as well as an equivalent volume of secondary sources.

[12] There were very few disputes concerning the admissibility of evidence. The parties exchanged expert reports well before the hearing commenced. All parties showed a keen appreciation of the need to provide the court with the best possible evidence, sometimes making new transcriptions of hand-written primary documents during the course of the hearing. There was no disagreement that all types of evidence, if relevant and depending on cogency, had value. Evidence was not discounted because it came from an unusual source. The evidence of both the Anishinaabe perspective and the Euro-Canadian perspective came before the court on equal footing.[16] It was understood that the Plaintiffs had the burden, on the basis of persuasive evidence, to establish their claim on a balance of probabilities.

Limits existed to the collaboration and Hennessy J. focused in on one of the “very few disputes”, namely an objection raised by Anishinaabe to the Crown’s attempt to file arbitration awards as part of its case addressing revenues and losses on which increases to the annuities, if need be, would be calculated. The were not party to those arbitrations and despite their demonstrated and extended willingness to be flexible, the Anishinaabe drew a limit line and would not allow such evidence to be adduced against them. Hennessy readily agreed.

[542] Ontario relies on the arbitrations in the 1890s, where Canada and Ontario sought to determine responsibility for various debts and liabilities that predated Confederation, to show the understandings of the Crown. I agree with the Plaintiffs that it was in the interest of both Canada and Ontario to agree and to keep revenues as low as possible and expenses as high as possible. Further, and most importantly, the First Nations were not a party to the arbitrations. For these reasons, I do not find the arbitration characterization of relevant expenses and revenues to be helpful for the purposes of setting the principles for the calculation of net Crown revenues or for ascertaining the intentions and understandings of the Crown in 1850.

The use of arbitration between only two (2) parties – Federal and provincial Crowns – as evidence regarding revenues and expenses remained inopposable to those not party to those arbitrations. The reasons demonstrate that even the most flexible approaches to the determination of facts maintain this limit well-known to arbitration practitioners. Arbitration awards bind only the parties to the arbitration and are not opposable to non-parties, absent further, specific facts, such as contractual guarantees, assignment of interests, bankruptcy/insolvency or insurance subrogation, or legislation not raised on the facts in the present case.

See an earlier ArbitrationMatters note the Federal Court of Appeal’s mention of arbitration undertaken by the Federal and provincial governments in the 1890’s: “Federal Court of Appeal notes 1890’s provincial undertakings to arbitrate with other provinces as predecessor to current court rule on jurisdiction”.