Québec – no abuse of procedure if losing arbitral party obliges non-parties to litigate their liability for similar claims – #440

In litigation instituted by A against S/B, with M forced to intervene by B, Mr. Justice Jean-François Michaud in ArcelorMittal Exploitation minière Canada v. SNC-Lavalin Inc., 2021 QCCS 202 refused to grant S/B’s and M’s applications to dismiss which invoked abuse of procedure based on a prior arbitral award between A and M.  A chose not to involve M in the litigation but B had forced M’s intervention as part of B’s defense against A. Michaud J. held that (i) S/B were not parties in the arbitration and the arbitration did not address their liability and (ii) M could not object to the expense of defending in a second, separate instance in which B had forced M’s intervention. Recognizing that M had spent millions to successfully contest similar claims by A in the arbitration, Michaud J. concluded that M’s additional expense stemmed from the arbitration clause it had accepted.  Despite a successful result for M in the arbitration with A, 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. 

The dispute stemmed from the design and manufacture of grinding equipment sold to Plaintiffs, 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, Arcelor 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”).

As Defendant to ArcelorMittal’s lawsuit, BBA applied to force the intervention of Metso as a Co-Defendant. Intervention is “forced” when a party applies to implead a third party to fully resolve the dispute, to set up the judgment against that third party or when the party intends to exercise a warranty action. In addition to its status as Defendant, BBA as Plaintiff in Forced Intervention applied to include Metso Minerals Canada Inc. as Defendant in Forced Intervention.

Earlier cases and Arbitration Matters notes – See the earlier Arbitration notes involving some of the parties:

(i) “Court offers reminder that arbitration agreements only bind parties – #029

The Quebec Court of Appeal in Metso Minerals Canada Inc. v. BBA inc. 2017 QCCA 1544 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. Given the robust reasoning in first instance, the Court of Appeal’s decision in Metso Minerals Canada Inc. v. BBA inc.  2017 QCCA 1544 is best understood by referring to Michaud J.’s lower court ruling in ArcelorMittal Exploitation minière Canada v. SNC-Lavalin inc. 2017 QCCS 574.

(ii) “Court outlines and upholds confidentiality of what is “said, written or done during” arbitration – #102

In 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.

(iii) “Recognition granted for international award with which respondent had already complied – #307

In Metso Minerals Canada Inc. v. Arcelormittal exploitation minière Canada, 2020 QCCS 1103, Madam Justice Marie-Anne Paquette issued an order recognizing an international commercial arbitration award despite prior compliance with the payment obligations in the award.  Paquette J. underlined that recognition and enforcement were distinct aspects: although an award will not be enforced if it is not recognized, it can be recognized without being enforced.  Paquette J. further noted that the award once recognized could serve other purposes between the same parties, including their other ongoing arbitrations regarding the same grinding mill.

ICC arbitration – Michaud J. noted at paras 15-19 that the ICC arbitration initiated by ArcelorMittal against Metso resulted in a March 20, 2019 award which was homologated March 10, 2020 in Metso Minerals Canada Inc. v. Arcelormittal exploitation minière Canada, 2020 QCCS 1103 by Paquette J.

The Arbitration concerned whether the AG Mill delivered by Metso was too small to allow ArcelorMittal to reach an annual production target.  A majority of the three (3) member panel in the award (“Award”) held that the AG Mill was sufficient, responding to the design criteria provided in the relevant contract.

SNC and BBA applications for dismissal – 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.

Article 51 C.C.P. The courts may, at any time, on an application and even on their own initiative, declare that a judicial application or a pleading is abusive.

Regardless of intent, the abuse of procedure may consist in a judicial application or pleading that is clearly unfounded, frivolous or intended to delay or in conduct that is vexatious or quarrelsome. It may also consist in a use of procedure that is excessive or unreasonable or that causes prejudice to another person, or attempts to defeat the ends of justice, particularly if it operates to restrict another person’s freedom of expression in public debate”.

SNC and BBA raised two (2) grounds:

(1) the arbitral tribunal decided the question involving the AG Mill and it would be abusive for ArcelorMittal to pursue the litigation and incur legal fees and experts costs for a question which had already been decided in the Arbitration; and,

(2) the litigation was destined to fail due to admissions (listed in para. 23 of Michaud J.’s reasons) made in the Arbitration.

Parties’ positions – SNC and BBA invoked the doctrine of ‘abuse of process by relitigation’ as part of their grounds for their application under article 51 C.C.P. Michaud J. remarked traced the doctrine origins to common law jurisdictions and referred to the Supreme Court’s analysis in Toronto (City) v. C.U.P.E., Local 79, 2003 SCC 63 (CanLII), [2003] 3 SCR 77 paras 37, 40 and 51.

Michaud J. affirmed that the doctrine resembled res judicata and can apply in arbitral matters, citing article 642 C.C.P. and referring to Ungava Mineral Exploration Inc. v. Mullan, 2008 QCCA 1354 para. 49 and Syndicat de copropriété du 8980 au 8994 Croissant du Louvre v. Habitations Signature inc., 2019 QCCS 5560 para. 59.  See also the following cited in the latter case at footnote 17: Carboni v. Financière Banque Nationale, 2004 CanLII 76553 (QC CS), [2004] R.J.Q. 1945 (C.S.); 2840-3996 Québec Inc. v. Galibois, [2000] AZ-50187669 (C.S.); and, Bibeau v. Construction A & S Rousseau, 2010 QCCQ 12117.

SNC and BBA argued that ArcelorMittal’s action was destined to fail and that the doctrine of abuse of procedure covered that situation. 

Michaud J. therefore analysed at paras 37-69 whether ArcelorMittal sought to challenge the question already determined.  In his careful reading of the grounds set out in the Award, Michaud J. at para. 53 determined that the Arbitration did not deal with the same question as the one before the court and at para. 64 also noted that the majority’s conclusions did not address the liability of SNC and BBA.

Michaud J. at para. 66 also observed that the questions in the Arbitration were answered in light of the contractual obligations between ArcelorMittal and Metso which were different than those of SNC and BBA and he concluded that the issues and scope of the disputes exceeded those of the AG Mill.  Based on his overall analysis, he determined that ArcelorMittal did not seek to reconsider a question answered in the Arbitration and that the doctrine of abuse of procedure had no application.

At paras 70-81, Michaud J. considered and dismissed SNC’s and BBA’s additional ground that ArcelorMittal’s action was destined to fail. Despite acknowledging distinct arguments made by SNC and BBA on the record, Michaud J. observed that certain had not been submitted in the Arbitration and he did not accept at this stage of the proceedings that ArcelorMittal’s action was destined to fail.

Metso’s application for dismissal – 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.

As noted above, in ArcelorMittal Exploitation minière Canada v. SNC-Lavalin inc. 2017 QCCS 574 Michaud J. had already addressed Metso’s role as Defendant in Forced Intervention and the Arbitration and referred to that decision at para. 88 when introducing his analysis of Metso’s application for dismissal.

[informal translation] ‘The fact that an arbitral award has been issued changes nothing about the situation and has no impact on the present action.  As the arbitral process was not then opposable to BBA, it is no more opposable today.  The arbitral award cannot have the effect of withdrawing the jurisdiction of the court which it already had’.

At para. 94, Michaud J. also dismissed the role of the Award for any question of solidary liability under articles 1480, 1523 and 2118 of the Civil Code of Québec, CQLR c CCQ-1991 (“C.C.Q.”).

[informal translation] ‘If the majority of the arbitrators concluded that Metso was not liable to ArcelorMittal, they did not also rule on BBA’s liability or Metso’s to BBA’.

At para. 99 Michaud J. expressly dismissed Metso’s argument that res judicata would assist Metso in a claim by BBA.  He reiterated the finding he had made in 2017 on Metso’s earlier application and the Court of Appeal’s support of that same determination.   He added that Metso’s submissions overlooked its potential liability for solidary obligations, an issue which had not been settled in the Arbitration and which could still be engaged in a claim between BBA and ArcelorMittal.

Michaud J. did acknowledge valid arguments made in regard to Metso’s legal or extracontractual liability at that it was too early in the proceeding to accept that no liability existed.  See para. 113.

Based on the record before him and the early stage of the litigation, Michaud J. concluded to dismiss the applications for dismissal. 

[informal translation] ‘Metso objects that it will have to incur important costs to defend itself, despite having spent millions to contest ArcelorMittal’s claims before the arbitral tribunal.  As the undersigned mentioned in 2017, those inconveniences stem from the arbitration clause it accepted’.

After referring at para. 119 to the Court of Appeal’s own comments in its decision upholding Michaud J.’s 2017 decision and at para. 120 that ArcelorMittal had offered to set aside the arbitral process to unify the dispute resolution, Michaud J. concluded that Metso’s complaints about defending itself in two (2) venues were misplaced.

In concluding, Michaud J. did express understanding for SNC and BBA wishing to eliminate a $200,000,000.00 claim but remarked that doing so would amount to a denial of justice for ArcelorMittal.

[informal translation] ‘The trial judge might conclude like the majority of the arbitrators or even differently.  All depends on the evidence submitted to the judge.  In the context of the present matter, it is impossible to eliminate the risks of contradictory judgments between the arbitration and the action before the court.  That is just simply due to the fact that the arbitration concerned only two of the parties potentially involved in the damage fact.  It involves circumstances likely to arise in construction and from which the parties could have protected themselves’.

urbitral notes – First, for a recent illustration of the role of article 51 C.C.P. involving arbitration and the courts, see the earlier Arbitration Matters note “Alleged abuse of procedure in court prior to referral to arbitration is subject to court sanction not arbitration – #438”.

Despite the brevity of her decision, Madam Justice Carole Therrien in Dupont v. Langlois, 2021 QCCS 136 underscored a key distinction between the court’s oversight triggered by parties litigating before the court despite a binding agreements to arbitrate.  Though Plaintiff voluntarily discontinued his action following Defendant’s application to decline jurisdiction, Therrien J. held that Defendant’s claim for abuse of procedure pursuant to articles 51-56 of the Code of Civil Procedure, CQLR c C-25.0 was made before Plaintiff’s discontinuance and in the context of management of the litigation.  Acknowledging that the action stemmed from a dispute involving the contract, Therrien J. determined that the alleged procedural abuse by Plaintiff took place in the context of a judicial procedure before the Superior Court and it is the court which had the authority to sanction abuse, if need be.