Québec – court denies leave to challenge interim trial level decisions involving role of arbitration award in litigation – #488

In SNC-Lavalin inc. v. Arcelormittal Exploitation minière Canada, 2021 QCCA 849, Madam Justice Christine Baudouin dismissed two (2) applications for leave to appeal interim decisions involving the role an arbitration award played in court.  That award involved some, but not all, of the parties to litigation initiated by A. S and B as non-parties to that award between A and M argued that the judge had unduly limited the scope of the award. Baudouin J.A. disagreed, holding that the opposite prevailed. Subject to what the evidence might eventually establish and limiting her comments to her view of the record, Baudouin J.A. remarked that (i) S and B gave the award a scope which exceeded its conclusions and (ii) the issue addressed in the award was not A’s sole source of recourse against S and B.  Regarding M’s application as party to the award and involved in the court litigation by way of B’s recursory claim against M, Baudouin J.A. did not accept that B’s recursory action was a collateral attack on that award and noted that the inconveniences inherent in a trial do not qualify for leave under article 31 of Code of Civil Procedure, CQLR c C-25.01.

For the earlier Arbitration Matters note on ArcelorMittal Exploitation minière Canada v. SNC-Lavalin Inc., 2021 QCCS 202, see “Québec – no abuse of procedure if losing arbitral party obliges non-parties to litigate their liability for similar claims – #440”. That note contains a fuller outline of the facts and issues raised in the underlying dispute between the parties.

That underlying dispute stemmed from the design and manufacture of grinding equipment sold to ArcelorMittal Exploitation Minière Canada and ArcelorMittal Canada Inc. (“ArcelorMittal”) for use in one of ArcelorMittal’s iron ore concentrate production lines. Disputes arose over the equipment’s capacity, leading ArcelorMittal to initiate Superior Court litigation against BBA Inc. (“BBA”) claiming $204.3 million in damages. SNC-Lavalin Inc. (“SNC”) and Continental Conveyor and Machine Works Ltd. (“Continental Conveyor”) were also named as Defendants.

Despite Metso Minerals Canada inc.’s (“Metso”) involvement in the facts, ArcelorMittal omitted Metso as a Defendant and made no allegations against the company. Instead, ArcelorMittal initiated arbitration against Metso for the same damages amount given a valid arbitration clause binding them (“Arbitration”).  The Arbitration was administered by the International Chamber of Commerce (“ICC”).

Both SNC and BBA applied under article 51 of the Code of Civil Procedure, CQLR c C-25.01 (“C.C.P.”) for dismissal of ArcelorMittal’s action in regard to the AG Mill.  Article 51 C.C.P. provides that a court may declare a judicial application or a pleading abusive based on grounds drawn from the Arbitration between ArcelorMittal and Metso.

Metso was a party to the Arbitration and made a separate application under articles 51 and 168 C.C.P.  The latter provides at article 168(1) C.C.P. that a party may apply for dismissal if there is res judicata.  Michaud J. drew on the component elements of res judicata identified in Bohémier v. Barreau du Québec, 2012 QCCA 308 para. 17.

Michaud J. refused to grant SNC’s and BBA’s and ArcelorMittal’s applications to dismiss which invoked abuse of procedure based on a prior arbitral award between ArcelorMittal and Metso.  ArcelorMittal chose not to involve Metso in the litigation but BBA had forced Metso’s intervention as part of BBA’s defense against ArcelorMittal. Michaud J. held that (i) SNC and BBA were not parties in the arbitration and the arbitration did not address their liability and (ii) Metso could not object to the expense of defending in a second, separate instance in which B had forced Metso’s intervention. Recognizing that Metso had spent millions to successfully contest similar claims by ArcelorMittal in the arbitration, Michaud J. concluded that Metso’s additional expense stemmed from the arbitration clause it had accepted.  Despite a successful result for Metso in the arbitration with ArcelorMittal, Michaud J. observed that the trial judge might draw conclusions similar to or different from the arbitration and eliminating the risks of contradictory judgments was impossible. 

Application for leave to appeal – SNC, BBA and Metso sought leave to appeal Michaud J.’s decisions.  Baudouin J.A. dismissed both applications.

At paras 1-9, Baudouin J.A. outlined the nature of the dispute and summarized the procedural history of the matters before her. At para. 10 she pointed to the standard set by article 31 C.C.P. for proposed appeals of interim orders and flagged a recent statement by Madam Justice Geneviève Marcotte in Procureur général du Québec v. Ungava Mineral Exploration Inc., 2020 QCCA 1652 paras 14-15 reiterating the limited opportunity which article 31 C.C.P. allowed for leaves to appeal.

Article 31 C.C.P. A judgment of the Superior Court or the Court of Québec rendered in the course of a proceeding, including during a trial, is appealable as of right if it disallows an objection to evidence based on the duty of discretion of public servants, on professional secrecy or on the protection of the confidentiality of a journalistic source.

Such a judgment may be appealed with leave of a judge of the Court of Appeal if the judge considers that it determines part of the dispute or causes irremediable injury to a party, including if it allows an objection to evidence.

The judgment must be appealed without delay. The appeal does not stay the proceeding unless a judge of the Court of Appeal so orders. If the judgment was rendered in the course of the trial, the appeal does not stay the trial; however, judgment on the merits cannot be rendered nor, if applicable, the evidence concerned heard until the decision on the appeal is rendered.

Any other judgment rendered in the course of a trial, except one that allows an objection to evidence, may only be challenged on an appeal against the judgment on the merits”.

To similar effect, see Ville de Salaberry-de-Valleyfield v. Groupe Beau-Val inc., 2020 QCCA 1332 and Malo v. Desjardins Assurances générales inc., 2019 QCCA 2038 also referred to by Baudouin J.A.

Baudouin J.A. held that neither SNC and BBA nor Metso satisfied the requirements of article 31 C.C.P.  She held that Michaud J.’s decisions did not decide the parties’ matters and did not cause them an irreparable prejudice. She observed that the inconveniences inherent in a trial do not qualify under article 31 C.C.P.

SNC and BBA submitted that Michaud J. had unduly limited the scope of the arbitration award on which they relied. Baudouin J.A. disagreed. Subject to what the evidence might eventually establish and limiting her comments to her view of the record, she determined that the opposite prevailed. Rather, she commented that SNC and BBA gave the award a scope which exceeded its conclusions. Baudouin J.A. remarked that the issue addressed in the arbitration award was not ArcelorMittal’s sole source of recourse against SNC and BBA and the allegations of fault in their regard appeared broader given that those allegations targeted SNC’s and BBA’s potential liability as designers of the new line in its entirety.

Baudouin J.A. added that the proposed appeal by SNC and BBA would not serve the purpose of justice and was destined to fail because the evidence necessary to a full examination of the relationship and contractual obligations between the parties must be evaluated by a trial judge tasked with deciding the merits of the dispute.

With regard to Metso’s proposed appeal, Baudouin J.A. referred back to the Court of Appeal’s earlier decision regarding BBA’s right to institute a recursory action and not simply a subrogated claim and added that the arbitration award did not change that situation.  She refrained from commenting on the merits but only added that, at this stage, one could not conclude that BBA’s recursory action was a collateral attack on that arbitration award.

Baudouin J.A. dismissed both applications for leave to appeal, holding that a “detour” to the Court of Appeal served ‘no useful purpose’ in the circumstances.

urbitral notes – First, though Baudouin J.A. did not identify the earlier Court of Appeal decision when addressing BBA’s recursory action, see the earlier Arbitration Matter’s note “Québec – court offers reminder that arbitration agreements only bind parties – #029” regarding Metso Minerals Canada Inc. v. BBA inc. 2017 QCCA 1544.  In that decision, the Court of Appeal firmly resolved irreconcilable procedural demands created when only some of the parties to a dispute had agreed to submit to arbitration. Weighing the competing inconveniences to the parties, the Appeal Court upheld a Quebec Superior Court decision and subordinated one party’s access to arbitration to another party’s reliance on court rules. 

Second, for a decision involving confidentiality of the arbitral process, see the earlier Arbitration Matters note “Québec – court outlines and upholds confidentiality of what is “said, written or done during” arbitration – #102” regarding SNC-Lavalin Inc. v. ArcelorMittal Exploitation minière Canada, 2018 QCCS 3024. Michaud J. maintained the confidentiality of materials prepared for use in an arbitration limited to two parties and prevented communication of those materials to other parties involved in litigation involving related, overlapping disputes. By maintaining the arbitral parties’ objections based on the confidentiality of arbitration as established by legislation and the arbitral parties’ agreement, Michaud J. held that third parties seeking access to those materials must demonstrate necessity and not merely relevance and convenience of obtaining access. The legislated protection applied only to what is “said, written or done during” arbitration and did not shield access to relevant, admissible documents which existed independent of the arbitration.