In Langlois v. Langlois, 2020 QCCS 2959, Mr. Justice Éric Hardy endorsed the court’s reliance on an arbitration award, which issued after a trial decision, to determine the amount of the value under dispute in court at trial. Hardy J. accepted that the court could use the award to calculate court costs according to a court tariff. The court trial had ordered a buyback of Plaintiffs’ shares due to oppression but also ordered the parties to engage in arbitration to determine the narrower issue of share valuation, as agreed to in their shareholders agreement.
The dispute between shareholders lead to Plaintiffs initiating litigation for oppression under article 450 of Québec’s Business Corporations Act, CQLR c S-31.1 (“B.C.A.”). Following a trial in first instance, Mr. Justice Michel Beaupré issued a September 10, 2015 trial decision, rectified October 7, 2015, by which he granted Plaintiffs’ action and ordered Defendants to pay $495,965.80 to Plaintiffs. See Langlois v. Langlois, 2015 QCCS 4203 (“Trial Decision”). Despite initiating an appeal, Defendants desisted April 21, 2017.
In his Trial Decision, Beaupré J. at para. 301 held that he would not proceed to a determination of the share value because the parties had by agreement to arbitrate in their shareholders agreement submitted such disputes to arbitration The clause in the shareholder agreement required arbitration before a panel of three (3) arbitrators. By verbal amendment during the hearing, to which Defendants did not object, Plaintiffs sought an order appointing a single arbitrator instead of three (3).
Plaintiffs argued that the value of the shares was $3,923,815.40 whereas Defendants set the value at $3,883,756.80, a difference of $40,058.60. The sole arbitrator designated by the parties issued an award November 5, 2018 (“Award”) in which he held in favour of Plaintiffs.
Plaintiffs sought costs under the now abrogated Tariff of judicial fees of advocates, CQLR c B-1, r 22 (“Former Tariff”) which, at article 42 allowed successful parties to claim an additional fee. In particular, for actions in which the amount of the value under dispute is greater than $100,000.00, the party can obtain an additional fee of one percent (1 %) calculated on the amount exceeding the $100,000.00.
On May 6, 2019, Plaintiffs sought taxation for an action in which the value was $3,923,815.40 and claimed costs of $46,192.31. Defendants resisted, arguing that the real value was only the disputed gap of $40,058.60 and, as a consequence, justified no further amount under article 42. See the process for taxing costs set out in Chapter III “Costs” articles 477-481 of the now abrogated Code of Civil Procedure, CQLR c C-25 (“Former C.C.P.”). The current version is the Code of Civil Procedure, CQLR c C-25.01 (“C.C.P.”)
The special clerk agreed with Plaintiff and ordered that costs be paid for the higher amount sought. Defendants applied to the Superior Court for revision of the clerk’s decision.
Defendants argued that the clerk had committed two errors. First, the clerk ought not to have considered the value of the shares determined in arbitration as the value in dispute before the court. Second, if that arbitration was relevant, the disputed amount was the gap in calculations, namely $40,058.60 and not $3,923,815.40.
Defendants also argued that the value cannot be calculated by reference to a determination which ‘crystalized’ after the court decision, referring to Labrie c. Assurance-Vie Desjardins inc. J.E. 95-1013 (C.S.). In response, Plaintiffs relied on Kruger Inc. v. Kruco Inc., [1988] R.D.J. 2015 (C.A.) and on Fils spécialisés Cavalier inc., Re, 2005 CanLII 36373 (QC CS) which observed that the real issue was not whether the value was indeterminate but whether it was not capable of determination. To determine the value, evidence could be adduced at a later point before the clerk tasked with determining the costs.
Hardy J. referred to Commission hydro-électrique du Québec v. Churchill Falls (Labrador) Corp., 1991 CanLII 3251 (QC CA) in which the Court of Appeal cautioned litigants not to conflate the economic value of a dispute with the value in dispute. See paras 34-35.
Hardy J. held that the clerk did not have to require evidence to establish an objective value of the interest in dispute and that the clerk could rely on the Award. Even though the value of the shares had not been determined by Beaupré J. in his Trial Decision, Hardy J. held that the clerk was perfectly justified in taking the Award into consideration to establish the value of the disputes which Beaupré J. had disposed of in his Trial Decision.
Hardy J. spoke to the purpose of the Former Tariff and article 42. That Former Tariff issued in light of the provisions of the Former C.C.P. article 479 which ‘distracted’ the costs in favour of the attorney, not the party.
“Article 479 C.C.P. Former C.C.P. 479. Every condemnation to costs involves, by operation of law, distraction in favour of the attorney of the party to whom they are awarded. Nevertheless the party himself may execute for the costs if the consent of his attorney appears on the writ of execution”.
Article 42 of the Former Tariff sought to reward the successful attorney as a function of the pecuniary risk confided by the client. Defendants had refused the forced buyback of the Plaintiffs’ shares. Hardy J. held that the fact that the value was determined after the trial decision by reason of an agreement to arbitrate changed nothing.
Hardy J. therefore dismissed Defendants’ argument based on the value of the dispute being determined after the Trial Decision.
Hardy J. dismissed Defendants’ second argument focusing on the gap in the valuations as being a proxy for the value of the dispute. He held that Defendants had contested the buyback in the courts and not the gap in the arbitration. He conceded that the opposite would have held true if the court action had involved the valuation of the shares. But it did not because that dispute had been given to the arbitrator to decide.
urbitral note – First, in his Trial Decision, Beaupré J. addressed various modalities to the arbitration once ordered, including that the arbitrator would be bound to use certain amounts determined by Beaupré J. in his own decision for those disputes within his jurisdiction. See paras 301-307.
See para. 368 of Beaupré J.’s decision in which, as part of the dispositive of his order, ordered
– an arbitration be conducted in accordance with the shareholders agreement;
– the arbitration be conducted by a sole arbitrator;
– the parties proceed to the nomination of the arbitrator within 45 days of the Trial Decision failing which either party could apply to the court for the appointment under the C.C.P.;
– the parties choice or consent to a proposal of an arbitrator by Plaintiffs could be expressed by Co-Defendants by majority vote;
– the costs of arbitration were to be born by the corporation in which the shares were held; and,
– Defendants must collaborate with the arbitrator in order to give the arbitrator access to any document or information which the arbitrator deemed necessary to consult for the purpose of his mandate.
Second, Beaupré J.’s orders provide insights into the scope of support which the courts can offer parties engaging in arbitration, willingly or not. The terms of the dispositive focus on Defendants and do not include ordering Plaintiffs to collaborate. As trial judge, Beaupré J. likely formed his own idea as to which dispositive orders might be necessary to conclude resolution of the oppression remedy.
Third, there is no mention in Beaupré J.’s reasons that the oppression remedy was beyond the jurisdiction of an arbitrator per se. Rather, his reasons merely confirm that the parties had agreed only to submit the valuation to arbitration. Other cases acknowledge that jurisdiction for oppression matters can be given to arbitrators.
Fourth, Beaupré J.’s orders anticipated a potential dispute among Co-Defendant shareholders and imposed a solution that a majority of shares was deemed sufficient to confirm the sole arbitrator’s nomination.