In A. c. Frères du Sacré-Cœur, 2023 QCCS 2414, the Court determined that a claim adjudication process by two arbitrators pursuant to a class-action settlement agreement (“Agreement”) did not constitute arbitration. Therefore, the Court refused to homologate the arbitrators’ decisions, finding that two key features of arbitration described in Sport Maska Inc. v. Zittrer, [1988] 1 S.C.R. 564 (“Sport Maska”) were not present.
The facts of the case can be summarized as follows. Two separate class-actions were filed against Frères du Sacré-Coeur (“FSC”), a religious order, alleging sexual abuse. FSC settled both class actions and agreed to pay $60 million dollars into a settlement fund. The Agreement provided that the class members would submit claims to “arbitrators” appointed by the class representative to determine each class member’s eligibility for compensation. FSC agreed to be excluded from this process, which was to be entirely under the control of two arbitrators, who were retired Superior Court Justices. The Agreement explicitly provided that the arbitrators’ decisions were final and binding and that FSC could seek their homologation. However, it also provided that the arbitrators’ findings of fact and law could not be used against FSC in any other proceedings.
The claim administration process required that each class member prove that they had been abused by an FSC clergy member. Class members were required to fill out a form and appear before the arbitrators to testify. The arbitrators were entitled to request additional evidence. At the end of the hearing, the arbitrators rendered a decision following a standardized template. Because FSC agreed to be excluded from this process, it waived its right to cross examine members of the class, to adduce controverting evidence or to otherwise oppose a member’s claim. At the end of the process, the arbitrators found that 276 claims were eligible for compensation and dismissed 11 claims.
After the claims adjudication process was completed, FSC asked the Court to homologate the arbitrators’ decisions and their final report because it wanted to use them to advance its third-party claims against the Attorney General of Québec (“AGQ”) and school boards (which were based on the same facts but were proceeding separately from the class action). In particular, FSC indicated that it intended to rely on the decisions to demonstrate that the government and the school boards had committed a fault or to prove the amount of damages incurred by class members.
The AGQ and school boards opposed homologation, arguing that the arbitrators’ decisions did not qualify as “arbitration award[s]” within the meaning of section 645 of the Code of Civil Procedure (hereafter “CCP”). They also argued that the Court could not homologate the arbitrators’ decisions because the monetary orders had been fully satisfied. In their view, the application for homologation of the arbitrators’ decisions and final report was moot and a misuse of the homologation procedure.
The Court found that it was not bound by the term in the Agreement that said the decisions could be homologated, and refused to homologate on the ground that the claim administration process was not arbitration. It recalled the two elements that must be present for a process to constitute arbitration pursuant to the Supreme Court of Canada’s decision in Sport Maska: (i) a dispute; and (ii) the agreement to submit said dispute to a third party meets the following criteria, which determine whether a given process is, in reality, arbitration:
- The language used by the parties;
- A similarity with the judicial process;
- A decision, which is final and binding;
- A third party who decides between contradictory arguments on a given point; and
- It meets the imperative requirements of the CCP and the Civil Code of Québec (“CCQ”).
Applying those factors, the Court found that the claim adjudication process was not arbitration, mainly because the Agreement explicitly provided that the arbitrators’ findings of fact and law could not subsequently be used against FSC.
The Court found that the first requirement was met since there was a dispute that was settled in the Agreement. Had the class actions been decided on their merits, there would have been a judgment on the common issues, followed by individual decisions for each of the class members. The Agreement resolved both these issues, providing that a global sum of $60 million dollars was to be paid by FSC and providing a claim administration process for individual compensation. It is precisely because there was a dispute that each class member received compensation pursuant to the process.
The Court expressed doubt as to whether the second requirement to determine whether the process was an arbitration was met, specifically, that there was an agreement to submit the dispute to a third party. Although the parties used the term “arbitrators”, this alone did not mean that the process was truly arbitration. Furthermore, even though the claim administration process included enough elements of a judicial process, FSC’s waiver of its right to participate in the proceeding remained problematic. Therefore, the Court found that this factor was neutral, at best.
However, the Court found that the third criterion to determine whether the process was an arbitration was not met, specifically, that the decision was final and binding. While the Agreement explicitly provided that the arbitrators’ decisions were final and binding, it also provided that their findings of fact and law could not be used against FSC in any other proceedings. According to the Court, this contractual provision was a clear indication that the arbitrators’ decisions were not binding on FSC and that the claim adjudication process was not arbitration.
The Court also expressed doubt as to whether the fourth criterion was met, that there was a third party who was to decide between contradictory arguments on a given point. The Court noted that the arbitrators did not decide “contradictory arguments”, since FSC agreed not to participate in the claims process. That said, it recognized that a process could be characterized as arbitration despite the absence of arguments by a party. Indeed, section 635 CCP provides that an arbitration may go forward when a party does not participate.
Finally, the Court found that the fifth criterion was not met, that it meets the legislative mandatory provisions of the CCP and CCQ, because the Agreement restricted how the arbitrators’ decisions could be used against FSC, which contravenes imperative provisions of the CCP on the final and binding nature of arbitration awards. The Agreement also provided that FSC had no say in the choice of the arbitrators, which contravenes article 2641 CCQ.
Therefore, the Court concluded that the claim administration process did not constitute arbitration, and that the “arbitrators’” decisions and final report could not be homologated as arbitration awards under section 645 CCP.
The court did not indicate whether it would have homologated the decisions if it had decided that they were arbitral awards within the meaning of the CCP. Nor did it comment on whether the decisions would be admissible or have any probative force in FSC’s third-party proceedings against the AGC and the school boards. The Cort held that this question would be the subject of a full debate, if and when FSC chose to file the decisions in the third-party proceedings.
Contributor’s Notes:
This decision is a reminder that courts will seldom allow a party to have its cake and eat it too. Indeed, the Court found that FSC could not seek the benefit of homologation in support of its third-party claims, while at the same time refusing to be bound by the arbitrators’ findings of fact and law.
Having concluded that the claim decisions were not arbitral awards, the Court did not address whether the application for homologation was moot because the arbitrators’ monetary awards had already been paid in full.
This issue was raised in Société des établissements de plein air du Québec c. Station Mont-Sainte-Anne, 2023 QCCS 1147, where a preliminary motion to dismiss an application for homologation was made on that ground. The applicant sought homologation of the award in circumstances where subsequent proceedings were brought in the Superior Court based on the same facts and involving third-party interveners. The respondents argued that the application for homologation should be dismissed because the money ordered to be paid pursuant to the award had been executed and the only remaining parts of the award were declaratory, which should not be homologated. The Court denied the application to dismiss, stating that the CCP does not explicitly prohibit homologation of an award containing only declaratory findings. However, the Court indicated that the issue should be addressed on the merits of the application to homologate. That case proceeded on the merits and the application for homologation was taken under advisement. The decision has not yet been released.
This issue was also raised in the context of international arbitration, in Metso Minerals Canada Inc. c. Arcelomittal exploitation manière Canada, 2020 QCCS 1103. The Court recognized and enforced a foreign arbitration award despite the respondent’s argument that the application should be dismissed because the monetary order made in the award had been executed in full. The Court found that an application for recognition should only be dismissed under the exceptional circumstances set out in section 652 CCP. It held that there is a distinction between the recognition of an award and its enforcement and found that recognition can be sought even if enforcement is not required because the monetary orders have been satisfied. In that case, the parties to the arbitration were involved in pending litigation involving third parties to the arbitration but concerning the same facts. The Court found that whether or not the award would have an effect on third-party claims should be examined in the proceedings regarding these claims, and not in the homologation proceeding. In short, the Court found that the debate over the usefulness of homologation is not a matter for a hearing on the recognition and enforcement of an award under section 653 CCP.
In FSC, the question as to whether an application for homologation of a domestic award should be dismissed as moot where the monetary award has been paid has been executed was left for another day. We look forward to the courts’ guidance on this issue in the coming year, as well as on the related issue regarding the effect of the arbitral award on parallel or subsequent proceeding before the courts involving third parties.