Québec – court could enjoin contract termination to preserve arbitral jurisdiction to determine merits of termination – #313

Despite dismissing the application for provisional injunction, Madam Justice Élise Poisson in Groupe Sidney Santé Inc. v. Centre intégré de santé et de services sociaux de Lanaudière, 2020 QCCS 1068 did determine that applicant demonstrated urgency related to the arbitrator’s jurisdiction and the merits of the dispute. Poisson J. agreed that respondent’s notice to resiliate (terminate) the parties’ contract would affect the status quo and impact on the scope of the arbitrator’s jurisdiction to determine the merits of the notice of termination.  The decision is a rare illustration of a court accepting it could intervene to preserve for arbitration a fuller scope of dispute on the merits.

An intermediate resource under Québec’s Act respecting health services and social services, CQLR c S-4.2 (“Health and Social Services Act”), Groupe Sidney Santé Inc. (“Groupe Sidney”) operates a residential and long-term care centre (“Centre”) located in Terrebonne, Québec in accordance with the Act respecting the representation of family-type resources and certain intermediate resources and the negotiation process for their group agreements, CQLR c R-24.0.2 (“Representation Act”).

Article 302 of the Health and Social Services Act defines an “intermediate resource as a resource operated by a natural person as a self-employed worker or by a legal person or partnership and recognized by an agency for the purpose of participating in the maintenance of users otherwise registered for a public institution’s services in the community or in their integration into the community by providing those users with a living environment suited to their needs, together with the support or assistance services their condition requires.

The Centre Intégré de Santé et des Services Sociaux de Lanaudière (“CISSL”) is the integrated health and social services centre responsible for the region of Lanaudière, one of Québec’s 17 administrative regions, located northeast of Montréal. 

The dispute involved CISSL’s decision to resiliate for cause its December 2013 services contract with Groupe Sidney (“Services Contract”) for operation of the Centre. On March 4, 2020 CISSL communicated its notice of resiliation (“Notice”) with effect March 31, 2020.

Groupe Sidney applied for a provisional injunction to suspend the effect of the Notice. CISSL resisted Groupe Sidney’s application on two (2) grounds. CISSL argued that:

(i) the Superior Court had no jurisdiction given the agreement to arbitrate binding the parties; and,

(ii) Groupe Sidney failed to demonstrate any urgency or irreparable harm and that the balance of inconvenience favoured the users represented by CISSL.

The arbitration referred to by CISSL is imposed by statute. Article 56 of the Representation Act provides that any disagreement on the interpretation or application of a group agreement must be settled according to the procedure provided for in the agreement. Whether or not the parties include any such provision for arbitration, the Act stipulates that the disagreement “must be submitted to an arbitrator”.

Recourse to the “disagreement settlement procedure” interrupts prescription (limitation period).

When the disagreement is arbitrated, sections 100-100.9, 100.11, 100.12 paras a, c, d, e and g, 100.16-101.9 and 139-140 of Québec’s Labour Code, CQLR c C-27with necessary modifications”.

In addition to the Services Contract, further terms governing Groupe Sidney’s services are set out in a national agreement negotiated between the Minister of Health and Social Services and ARIHQ, an association representing intermediate resources (“National Agreement”). The terms of the National Agreement expressly modified the terms of arbitration to stipulate that an arbitrator cannot issue an order to reinstate a services contract once that contract had been resiliated.

The reasons do not record any refusal by Groupe Sidney to undertake arbitration. Rather, Groupe Sidney sought to engage the Superior Court due to the impact of the dispute resolution process’ delays on Groupe Sidney’s rights. The time needed to complete the pre-arbitration discussion phase and, if need be, the appointment of the arbitrator would exceed the March 31, 2020. If and when the arbitrator would be seized of the merits, the Services Contract would already be resiliated and reinstatement would not be an option.

By its provisional injunction, Groupe Sidney sought an order which would preserve its right to request the arbitrator to decide the matter on the merits.

Poisson J. readily dismissed CISSL’s objection to the court’s jurisdiction. She relied on the provisions of article 623 of the Code of Civil Procedure, CQLR c C-25.01 (“C.C.P.”) which provided that the court, on an application, may grant provisional measures or safeguard orders before or during arbitration proceedings.  In addition to article 623 C.C.P., she referred to applications of its provisions or equivalent such as Joli-Coeur v. Joli-Coeur Lacasse Avocats, s.e.n.c.r.l., 2011 QCCA 219, Uragold Bay Resources Inc. v. Golden Hope Mines Ltd., 2016 QCCS 4744 (leave to appeal denied, Uragold Bay Resources Inc. v. Golden Hope Mines Ltd., 2016 QCCA 1772) and Centre intégré universitaire de santé et de services sociaux de la Capitale-Nationale v. Bédard, 2017 QCCQ 14482.  The legislation and case law precedents supported her determination that the Superior Court had jurisdiction to issue interim measures despite mandatory arbitration.

As a result, Poisson J. then considered the application for provisional injunction and whether Groupe Sidney established:

(i) a real and immediate urgency;

(ii) an appearance of right or a serious question to determine;

(iii) serious or irreparable prejudice; and,

(iv) balance of inconvenience favours issuance of the provisional measures.

Though Groupe Sidney failed to establish all the criteria necessary for Poisson J. to consider whether to exercise her discretion and issue provisional measures, her treatment of urgency deserves special notice. 

Groupe Sidney met the criteria of urgency. It argued that it needed to maintain the status quo to avoid the effect of the March 31, 2020 resiliation. It did not require that users be returned to its Centre and, in the facts, all but two (2) had been transferred already to other centres and the remaining residents would also soon leave.

Poisson J. acknowledged that the urgency stemmed ‘solely’ from the impact that the Notice would have on the remedies available to the arbitrator. Once resiliation took place, the only remedy available would be compensatory damages if Groupe Sidney established that the Notice was not based on sufficiently serious grounds.  Poisson J. expressly held that the urgency was a real and immediate result of the situation created by the Notice.

On the other criteria, Groupe Sidney was able only to meet the appearance of right.  Poisson J. dismissed the application for provisional injunction.

urbitral note – First, the case provides a rare illustration of a Superior Court being petitioned to issue a provisional measure in order to preserve an arbitrator’s jurisdiction to determine the merits of a dispute and related remedies. If the arbitrator determined that the Notice was invalid, then the resiliation would be a non-event. Once that resiliation took place, the arbitrator would have a reduced scope of remedies to grant, limited principally to compensatory damages.

Poisson J. expressly determined that Groupe Sidney did demonstrate urgency. The latter’s rights to arbitrate the merits of the Notice would be compromised without a court order enjoining the Notice from taking effect.

Second, an arbitrator does not issue injunctive relief but can issue measures to safeguard the arbitral parties’ rights. Chapter IV, entitled “Exceptional Measures”, at article 638 C.CP. et seq. includes, among other provisions on exceptional measures, the following:

Article 638 C.C.P. The arbitrator may, on a party’s request, take any provisional measure or any measure to safeguard the parties’ rights for the time and subject to the conditions the arbitrator determines and, if necessary, require that a suretyship be provided to cover costs and the reparation of any prejudice that may result from such a measure. Such a decision is binding on the parties but one of them may, if necessary, ask the court to homologate the decision to give it the same force and effect as a judgment of the court.

Article 639 C.C.P. In an urgent situation, even before a request for a provisional or safeguard measure is notified to the other party, the arbitrator may issue a provisional order for a period which may in no case exceed 20 days. The arbitrator requires the party that requested the order to provide a suretyship unless, in the arbitrator’s opinion, it is inappropriate or of no use.

The provisional order must be notified to the other party as soon as it is issued, with all the evidence attached. It is binding on the parties and cannot be homologated by the court”.

Third, the Representation Act imposing mandatory arbitration provides for no opt-out to arbitration and Poisson J.’s reasons disclose no amendments made (or tolerated) to the arbitration imposed by that legislation. In such a case, any resulting award may well be subject to the new, clarified standard of review of applicable in administrative tribunal matters which issued in Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65 (“Vavilov”). 

That case clarified the approach established in Dunsmuir v. New Brunswick, 2008 SCC 9 for the standard of judicial review of administrative tribunal decisions.  The updated standard eliminates application of a contextual analysis in favour of a rebuttable presumption that standard of reasonableness applies. On statutory appeal of administrative tribunal, unless legislation authorizing appeal provides otherwise, a court now applies appellate standard of correctness on questions of law and palpable and overriding error for questions of fact or mixed fact and law.

The release of Vavilov may raise concern whether courts might apply appellate standard to appeals from consensual arbitration awards subject to appeals under domestic arbitration legislation.

In Québec, post-Vavilov, the courts have continued to follow the rules applicable to consensual arbitration and not administrative law principles. For example, in Khalilian v. Murphy, 2020 QCCS 831 the court resisted parties’ joint submission that a court’s intervention on a challenge to an arbitrator’s award on jurisdiction was a judicial review subject to administrative law standards of review.  Referring to Québec’s Code of Civil Procedure, doctrine and case law in Québec, the court emphasized that an arbitrator in a contractual arbitration does not qualify as a tribunal subject to a court’s control and supervision. See the earlier Arbitration Matters note “Court’s intervention on challenge to award on jurisdiction is not judicial review”.

This approach is consistent with that established before the release of Vavilov. In Boisvert v. Selvaggi, 2019 QCCS 1673, the court held that arbitration remains consensual if the legislation imposing it allows opportunity to renounce its application.  Being consensual, such arbitrations are subject not to judicial review but to annulment proceedings based on limited grounds familiar to practitioners practicing international commercial arbitration. See the earlier Arbitration Matters note “Arbitration imposed by statute remains consensual if opportunity available to renounce”.

In Cove Contracting Ltd v. Condominium Corporation No 012 5598 (Ravine Park), 2020 ABQB 106, the court held that Vavilov had not changed the standard of review for consensual arbitrations from reasonableness to correctness and denied leave to appeal. Court postponed hearing to give the parties the opportunity to argue the role of Vavilov. See the earlier Arbitration Matters note “Alberta & Manitoba – courts take different paths to different outcomes following same S.C.C. case”.

In similar manner, the court in Ontario First Nations (2008) Limited Partnership v. Ontario Lottery And Gaming Corporation, 2020 ONSC 1516 held that Vavilov does not refer to Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 or Teal Cedar Products Ltd. v. British Columbia, 2017 SCC 32.  As a result, it was not reasonable to conclude that Supreme Court meant to overrule its own decisions without making any reference to them or to the area of law to which they relate. See the earlier Arbitration Matters note “Vavilov does not overrule Teal Cedar or Sattva Capital”.

The courts readily apply Vavilov to situations to which it does apply, such as appeals from insurance arbitration mandated by legislation. In Allstate Insurance Company v. Her Majesty the Queen, 2020 ONSC 830, the court held that a statutory appeal mechanism signals legislative intent that courts perform an appellate function in respect of administrative decision and apply appellate standards of review. In this case, the arbitration was mandatory for both parties. See the earlier Arbitration Matters note “Vavilov standard applies to statutory insurance arbitration but not private commercial arbitration”.