Quebec – Streamlined procedures do not deny party’s ability to its present case – #792

In Gagnon c. Truchon, 2023 QCCA 1053, the Quebec Court of Appeal declined leave to appeal the Superior Court’s earlier decision to dismiss an application to annul an award and instead to enforce it. The Court of Appeal concluded that the Applicants had failed to establish “questions of principle” arising out of a “purement privé” fee dispute between the Applicants and their former lawyer. After failing to object to streamlined procedures selected by the Arbitration Council appointed by the Bureau du Québec, the Applicants could not later complain that they were denied the opportunity to present their case.

The case arose out of a fee dispute between the Applicants and their former lawyer. On February 10, 2022, a three-member Arbitration Council appointed under the Barreau du Québec’s program for arbitration of disputes relating to lawyers’ fees rendered an award granting the lawyer’s fee request in part. The Applicants then applied to annul the award, referring to article 646(4) of the Code of Civil Procedure. It provides that, “the court cannot refuse to homologate an arbitration award unless it is proved that, the party against which the award… is involved was not given proper notice of the appointment of an arbitrator or of the arbitration proceedings, or was for another reason impossible for that party to present its case”. The Applicants claimed that the Arbitration Council had denied them an opportunity to present their case, and that the procedure had not been in accordance with natural justice. 

The Superior Court rejected this application on March 16, 2023, in Gagnon c. Truchon, 2023 QCCS 1118. That judgment began its analysis, at paras. 30-31, by observing that the Superior Court’s powers to annul an arbitration award are limited, and that the fee arbitration process in Quebec is consensual. The client may choose to arbitrate, in which case, it is obligatory for the lawyer to participate. Alternatively, a client may wait to defend if the unpaid lawyer pursues a claim in court.

As the Superior Court noted in para. 32 of its judgment, scrutiny of an award under article 646(4) is limited to the procedure followed by the Arbitration Council, “to which the parties have subscribed” (“et auquel les parties ont souscrit.”). The Superior Court accordingly described the procedure followed in the arbitration in some detail.

The Applicants had chosen to arbitrate the fee dispute, and their request included proposals on several procedural matters. First, at para. 6, when the Applicants elected to arbitrate they proposed that the hearing not be recorded, claimed to need around three hours for the hearing, and stated that they did not intend to call any witnesses. The Arbitration Council scheduled a procedural meeting on April 15, 2021, at which it granted a postponement of the matter to June 2, 2021, in order for the Applicants’ recently-instructed counsel to get up to speed on the file. In the interim, the Arbitration Council issued a procedural order setting a schedule for a one-day hearing and parameters for the filing of documents.

At the June 2, 2021, meeting, the Arbitration Council observed that the parties had not filed documents in accordance with the procedural order. It then issued a further procedural order granting a postponement to September 21, 2021, for a hearing not to exceed two hours, with deadlines for the exchange of documents and the identity of witnesses, if any. The Superior Court specifically noted, at para. 14, that the meeting minutes recorded the Applicants’ counsel as having said about the procedure “it suits him” (“ça lui convient”). The September 21, 2021, hearing proceeded with no witnesses other than the parties, and the Arbitration Council scheduled a further session for the parties’ closing submissions on October 20, 2021. The Arbitration Council then, on February 10, 2022, rendered its award granting part of the fees the former lawyer had sought.

The Applicants applied to the Superior Court to annul the award on the basis that the Arbitration Council’s procedural orders, particularly with respect to scheduling and time allotted for the hearing made it impossible to present their case. The Superior Court disagreed, noting at para. 39, that the Applicants had the assistance of counsel but failed to object to the Arbitration Council’s procedure. It dismissed the application to annul the award.

The Applicants then sought leave to appeal, alleging three reviewable errors, noted in para. 3 of the Court of Appeal judgment: (1) the judge’s having made findings of fact in general, and about the comments of the Applicants’ counsel, without taking into consideration that the recording of the September 21, 2021, hearing could not be obtained; (2) the conclusion that the Arbitration Council did not breach natural justice in setting the procedure; and (3) the rejection of the Applicants’ argument that the streamlined procedures of the arbitration were disproportionate to the sums in dispute.

The Court of Appeal, at para. 8, concluded that the alleged errors did not constitute “questions of principle” justifying leave to appeal. Rather, the Court explained that the alleged errors arose in the context of a private dispute that was factually specific to the parties. Further, at para. 9, it found that the measures adopted by the Arbitration Council to move the case along did not rise to the type of serious procedural irregularity that would be capable of supporting annulment. In support of that conclusion, the Court of Appeal referred to Rhéaume c. Société d’investissements l’Excellence inc., 2010 QCCA 2269, at para. 61, which stated in part: 

it would be wholly inconsistent with the intention of the legislature and the current jurisprudential trend to treat every breach of the applicable procedure, however minor and however inconsequential, as requiring a court to refuse to homologate an award or to annul it if so requested. A court called upon to adjudicate such a proceeding must balance the nature of the breach in the context of the arbitral process that was engaged, determine whether the breach is of such a nature to undermine the integrity of the process, and assess the extent to which the breach had any bearing on the award itself.”

Moreover, the Court of Appeal observed at para. 10 that the Applicants had chosen arbitration after having the benefit of several months to analyze their former lawyer’s accounts. The Court concluded that the Applicants’ appeal could not succeed, especially because the Arbitration Council is empowered to select rules of evidence and procedures which it considers appropriate, and that neither the Applicants nor their counsel objected.

Contributor’s Notes: 

The decisions of the Superior Court and Court of Appeal in this case are not pioneering new law, but they are representative of what parties and their counsel may expect in post-award proceedings seeking to re-litigate either the merits or strategic procedural choices made during an arbitration. Arbitral tribunals wield considerable discretion to fashion procedures to suit the case, and it is important for parties and counsel to raise objections promptly. The decisions affirm the limited grounds and high bars that apply, respectively, to the annulment of arbitration awards for procedural irregularities and leave to appeal.

It is natural for a losing party to be disappointed, although in this case both parties may have had reason to grumble: the Arbitration Council awarded part of the former lawyer’s fee request. Yet these decisions appear to show an element of “sour grapes” regarding the timing of the Plaintiffs’ procedural objections. For example, the Superior Court’s reasoning included the fact that the procedures adopted in the arbitration applied equally to all parties, yet only the Plaintiffs complained after the award was rendered. Similarly, the Court of Appeal pointed out that, under the rules of the Barreau du Quebec’s fee arbitration program, it is the client’s prerogative to choose arbitration”. That decision, it said, at para. 10, was “sans aucun doute pour bénéficier du processus allégé et rapide propre à l’arbitrage conventionnel” (“without doubt to benefit from the informal and rapid process of conventional arbitration.”). 

Choices, as they say, have consequences.