Québec – lacking jurisdiction over Plaintiff’s claim, court declines to address whether claim subject to arbitration – #361

In Consultants en environnement Eutrotech Inc. v. Bacon, 2020 QCCQ 1727, Mr. Justice Daniel Lévesque dismissed a claim made Plaintiff for monies allegedly owing from an arbitration award which recorded Defendant’s consent to render an accounting.  Lévesque J. stated that jurisdiction was a matter of public order and, in dismissing the claim, declined also to rule on Defendant’s challenge that the claim was subject to arbitration.  The authorities referred to also note that parties cannot by consent give jurisdiction to a court because jurisdiction is a matter of public order.

Co-owners in undivided co-ownership, along with others not involved in the dispute, Plaintiff and Defendant each held varying percentages in two (2) revenue properties from May 21, 2000 until the sale of the properties on May 21, 2014.  During those years, Defendant managed the properties, collected income, paid expenses and had sole authority over the bank account, receiving bank statements and signing cheques. His role stemmed from an undivided co-ownership agreement as well as a management contract.

Following sale of the properties and distribution of the proceeds, Plaintiff and Defendant, along with other co-owners, disputed Defendant’s entitlement to a commission on the sale.  An arbitration was undertaken by Plaintiff, Defendant and other co-owners resulting in a December 12, 2017 arbitration award (“Award”).  As part of the dispositive, the Award recorded an agreement between the arbitration parties by which Defendant undertook to render an accounting of transactions made during the course of his management and of sums held in the bank account. 

After some time, Defendant asserted that he had fulfilled his obligations imposed by the Award and had communicated the information required.  Plaintiff disagreed and initiated a claim in Court of Québec, Small Claims Division, seeking payment of monies it claimed Defendant still owed under the terms of the Award.

Defendant contested jurisdiction.  First, he argued that the Court of Québec, Small Claims Division, had no jurisdiction over Plaintiff’s claim as that claim did not qualify as recovery of a claim within the meaning of article 536 of the Code of Civil Procedure, CQLR c C-25.01 (“C.C.P.”). Defendant argued that the claim made by Plaintiff constituted a challenge to a rendering of account on management of another’s asset.  Second, he argued that Plaintiff and Defendant were bound by an agreement to arbitrate.

Lévesque J. held that a rendering of account was a matter regarding which the C.C.P. devoted an entire section, namely Division IV, articles 675-678 C.C.P., and its own procedure.  The recourse sought by Plaintiff was tributary to a rendering of account and did not constitute a claim within the meaning of the provisions applicable to Court of Québec, Small Claims Division.

Given the nature of the claim, Lévesque J. concluded that he had to decline jurisdiction.  The lack of jurisdiction, he held, was a question of public order.  He dismissed Plaintiff’s claim because he had no jurisdiction and expressly noted that his decision did not decide the claim made by Plaintiff or Defendant’s argument that the matter was subject to arbitration.

urbitral note – First, at footnote 8, Lévesque J. referred to Branchaud v. Branchaud, 2012 QCCQ 171. In that case, the Court of Québec declared that it lacked jurisdiction to conduct a rendering of accounts necessary to liquidate a claim made by an heir under a will.  The Court of Québec noted that article 821 of the Civil Code of Québec, CQLR c CCQ-1991 (“C.C.Q.”) required that the account be rendered in court if an amicable account could not be rendered. The Court of Québec referred to the then article 31 of the now repealed Code of Civil Procedure, CQLR c C-25 (“Former C.C.P.”) which read as follows:

“Article 31 Former C.C.P. The Superior Court is the court of original general jurisdiction; it hears in first instance every suit not assigned exclusively to another court by a specific provision of law”.

That article 31 Former C.C.P. has since been replaced by article 33 of the current Code of Civil Procedure, CQLR c C-25.01 (“C.C.P.”) which now reads as follows:

Article 33 C.C.P. The Superior Court is the court of original general jurisdiction. It has jurisdiction in first instance to hear and determine any application not formally and exclusively assigned by law to another court or to an adjudicative body”.

In Branchaud v. Branchaud, the Court of Québec held that it must decline jurisdiction for the claim, stating that the jurisdiction of the courts is not a simple question of formalities or procedures but actually a question of public order, citing Corporation de Ste-Angèle de Monnoir v. Bérubé, 1986 CanLII 3892 (QCCA)

In Corporation de Ste-Angèle de Monnoir v. Bérubé, the Court of Appeal declined the “seductive” argument that, despite a change in applicable legislation, the parties had accepted the jurisdiction of a particular expropriation tribunal and, in doing so, waived any acquired rights they might otherwise have had under the actual appeal procedure provided in legislation governing municipalities and consented to the transfer for their file to that tribunal.  

Following a hearing, the expropriation tribunal had declared it had no jurisdiction and could not, even by consent, replace the arbitrators whose nomination was now provided for in the municipal legislation.  The lack of transitional provisions did not solve the dilemma experienced by the parties and the legislation did not apply retrospectively to municipal expropriations commenced prior to the new legislation.

[20] In the present appeal, however, all of the parties, the municipality as well as the expropriated parties, contend that, since they accepted the jurisdiction of the Tribunal, waived any acquired rights they might otherwise have had under the Municipal Code appeal procedure and consented to the transfer of the dossier to the Tribunal, the Tribunal should have jurisdiction to decide the indemnity, particularly since the transfer of the dossier to the Tribunal was ordered by the Superior Court and that order was not appealed.

[21] The argument is seductive in the present case where all parties consented to jurisdiction, where the Tribunal has had the dossier since 1978 and where the merits of the indemnity appear to have been heard by the Tribunal over four days. I am certainly mindful of the fact that if the Tribunal was right in its conclusion that it had no jurisdiction to decide the indemnity, all of this time and effort will have been fruitless and the parties may have to begin again before an arbitration panel under the former provisions of the Municipal Code.

[22] Unfortunately, however, Appellant’s argument cannot be accepted. Jurisdiction to hear an appeal is not a procedural matter and a statute changing the jurisdiction of a court or tribunal to hear an appeal does not operate retrospectively. It does not apply to cases pending at the time of its enactment unless the statute clearly indicates that it is to have a retrospective effect. Nor is an appeal jurisdiction something that can be conferred by consent of the parties or accepted by a court or tribunal on that basis. The jurisdiction of courts is conferred by the Legislature and it is modified in the same manner. Had the Legislature intended to confer jurisdiction on the Tribunal with respect to pending municipal expropriations, it would have so provided”.

Second, arbitration parties must exercise care when applying to the courts for a decision on whether a claim is within that court’s jurisdiction or subject to arbitration. A court may well decline jurisdiction because it has no jurisdiction but will also decline to decide if the agreement to arbitrate should apply or not.  Such jurisdiction raises issues of public order and parties cannot consent to give jurisdiction which violates that public order.

While the parties may well decide to abide by a court decision which refers them to arbitration, their decision to do so does not create valid jurisdiction. Rather, their post-decision compliance would serve more as estoppel or deemed consent against a subsequent post-arbitration challenge if the challenger had accepted/acted on that otherwise invalid court decision.