Quebec – The broad powers of an arbitrator as “amiable composer” – #673

In Investissements immobiliers MB inc. c. SMP Direct inc., 2022 QCCS 3315, Justice Godbout affirmed the broad jurisdiction that an arbitrator has to grant remedies in oppression claims, especially when empowered as an ‘amiable composer’. An ‘amiable composer’ may make a binding decision based on equity (rather than law) and without procedural formalities. It is a role that has its roots in civil law (“amiable compositeur”).

In this case, the parties were equal shareholders in an investment company. They participated in an arbitration which resulted in an award requiring the Plaintiff to offer to sell its shares in the company to the Defendant for a set price (almost $1.4 million), among other things. The Plaintiff brought a proceeding in the Québec Superior Court to annul the award on the basis that the arbitrator acted without jurisdiction or exceeded his jurisdiction. The Plaintiff argued that, under the oppression remedy, the arbitrator could not require a party to sell its shares; it could only require a party to buy them. The Plaintiff also argued that the arbitrator did not find that there was a breach of a reasonable expectation, which is a pre-requisite to ordering a remedy for oppression.

Justice Godbout found that the arbitration clause gave the arbitrator the power both of an amiable composer and of a court under the authority of the oppression remedy provision in section 451 of the Québec business corporations statute (Loi sur les sociétés par actions, RLRQ c S-31.1) (the “LSA”).

Justice Godbout, quoting from Coderre c. Coderre, 2008 QCCA 888, explained the role of the amiable composer (at para. 39):

“The status of amiable composer allows its holder to rule in equity, without being bound by the rules of law, substantive and procedural, except of course the rules of public order, in particular the rules of natural justice which provide for impartiality, [the] obligation to give the parties the opportunity to be heard, to give reasons for the arbitration award, etc.

[…]

The difference between the “ordinary” arbitrator and the amiable arbitrator-composer lies mainly in the fact that the former is required to apply the rules of law, first and foremost “positive state law”, to use Professor Brierley’s expression, whether this law is mandatory or suppletive, whereas the latter, who is bound by the rules of public order, including the rules of natural justice, can, in the name of equity, modulate the application of the suppletive rules or perhaps even set them aside by deciding in a manner “in accordance with the general principles of law”, to paraphrase Professor Antaki”. [informal translation]

Justice Godbout rejected the Plaintiff’s arguments, affirming the arbitrator’s jurisdiction both under the LSA and as amiable composer (at paras. 66-71):

“Only one question remains: Could the arbitrator conclude with the “sale” of the shares of MB and not their “purchase”, MB not being obviously in a situation of oppression?

We must conclude in the affirmative, in particular for three reasons.

First, the arbitrator finds a situation of injustice towards SMP, a situation provided for in section 415 LSA.

Second, it is clear from the wording of section 451 LSA that the enumeration provided therein is not exhaustive. Indeed, the article specifies that “the court may make any order it thinks fit, including […]”.

Third, and this is perhaps the main reason, the decision relates strictly to the dispute referred to in the Agreement to Arbitrate which refers to the Notice of Arbitration challenged by a defense and counterclaim.

The arbitrator, an amiable composer, therefore disposed of the dispute that the parties submitted to him, within the powers that they attributed to him. The arbitrator’s conclusion was therefore predictable.”

Contributors Notes:

This decision is a reminder that an arbitrator, and not just a court, can have the broad, flexible powers to grant remedies in response to a claim for oppression under business corporations and other statutes (see Ontario – A reminder of the “hands off” approach of courts in arbitration even with oppression claims and injunctions – #561 and Québec – arbitrator appointment process gives rise to reasonable apprehension of bias – #108).

This decision is also interesting for the way the arbitrator exercised his jurisdiction based on two different bases (the oppression remedy under the LSA and as amiable composer) in a single decision. The arbitration clause itself provided the arbitrator with both these bases of jurisdiction (whether in fact he needed it or not to decide this dispute), and the roles complement rather than conflict given their common themes of flexibility and equitable resolution.

The combination of equitable oppression remedies and the role of amiable composer can be contrasted with mediation-arbitration where the same individual or tribunal exercises the different roles of (non-binding) mediator and (binding) arbitrator sequentially (see, for example, Ontario – mediator appointed as arbitrator for disputes involving settlement negotiated during later arbitration – #403).