Québec – unfounded challenges to final award declared abusive, exposes Respondents to damages – #167

Applying Québec’s Code of Civil Procedure, CQLR c C-25.01, Mr. Justice Gérard Dugré in Leduc v. Ayoub, 2019 QCCS 457 declared that Respondents’ challenges to a final arbitration award were manifestly unfounded and abusive, exposing Respondents to damages.  Dugré J. determined that Respondents’ challenges amounted to an indirect appeal of the award and would require the court to exceed the limited role given to it when recognizing and enforcing awards.

Claimants successfully arbitrated their claims against Respondents, resulting in a March 28, 2018 final award. The reasons comprised of 26 pages, 143 paragraphs, and answered 12 questions stated by the parties.

Respondents failed to comply with the dispositive orders in the award leading Claimants to apply for recognition and enforcement of the award pursuant to Articles 645 et seq of the Code of Civil Procedure (“C.C.P.”).  Québec has a single set of rules for both international commercial and domestic arbitration. That single set is identical to  other provinces’ international commercial arbitration legislation and limits the court’s role:

Article 653 C.C.P. The court examining an application for recognition and enforcement of an arbitration award or a provisional or safeguard measure cannot review the merits of the dispute.

A party against which an award or a measure is invoked cannot oppose its recognition and enforcement unless the party proves that
(1) one of the parties did not have the capacity to enter into the arbitration agreement;
(2) the arbitration agreement is invalid under the law chosen by the parties or, failing any indication in that regard, under the law of the place where the award was made or the measure decided;
(3) the procedure for the appointment of an arbitrator or the arbitration procedure was not in accordance with the arbitration agreement or, failing such an agreement, with the law of the place where the arbitration proceedings were held;
(4) the party against which the award or the measure is invoked was not given proper notice of the appointment of an arbitrator or of the arbitration proceedings, or it was for another reason impossible for that party to present its case;
(5) the award pertains to a dispute not referred to in or covered by the arbitration agreement, or contains a conclusion on matters beyond the scope of the agreement, in which case only the irregular provision is not recognized and declared enforceable if it can be dissociated from the rest; or
(6) the award or measure has not yet become binding on the parties or has been annulled or stayed by a competent authority of the place where or under whose law the arbitration award was made or the measure decided.
The court may also deny an application for recognition and enforcement of a provisional or safeguard measure if the arbitrator’s decision to require a suretyship was not complied with, if the measure was revoked or stayed by the arbitrator or if the measure is incompatible with the powers conferred on the court unless, in the latter case, the court decides to reformulate the provisional measure to adapt it to its own powers and procedures without modifying its substance.

Dugré J. examined each of Respondents’ many reproaches made against the award and dismissed each of them. Respondents argued not only breaches of natural justice and public order but also claimed that the arbitrator was partial. Dugré J. determined that none of Respondents’ grounds were valid, finding each of them manifestly unfounded.

Regarding the alleged bias, Dugré J. excerpted Respondents’ allegations in full at para. 48 of his reasons Dugré J. determined that Respondents’ allegations were not serious and certainly could not support a claim of bias. Relying on the tests stated in Committee for Justice and Liberty et al. v. National Energy Board et al., [1978] 1 SCR 369, 1976 CanLII 2, C.U.P.E. v. Ontario (Minister of Labour), [2003] 1 SCR 539, 2003 SCC 29 and Oiknine v. Rosenberg-Solny, 2009 QCCS 5106, Dugré J. held that Respondents failed to meet the heavy burden that rested on them to prove a reasonable apprehension of bias and dismissed this challenge as well.

But he was not finished. Claimants had also applied under Article 51 C.C.P. for a declaration from Dugré J. that Respondents’ challenges were abusive.  Article 51 C.C.P. is contained in the same set of rules which include those set out about for recognition and enforcement of arbitration awards.

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.

Dugré J. granted Claimants’ application. He determined that Respondents’ manifestly unfounded challenges to the award were not only insufficient to trigger the relief available when such challenges were well founded but that they were also abusive. In addition, Dugré J. reserved Claimants’ rights to claim damages for that abusive procedure. A Québec court’s jurisdiction to do so is set out at Articles 53 and 54 C.C.P.

Article 53 C.C.P. If there has been an abuse of procedure, the court may dismiss the judicial application or reject a pleading, strike out a conclusion or require that it be amended, terminate or refuse to allow an examination, or cancel a subpoena.

If there has been or if there appears to have been an abuse of procedure, the court, if it considers it appropriate, may do one or more of the following:
(1) impose conditions on any further steps in the judicial application or on the pleading;
(2) require undertakings from the party concerned with respect to the orderly conduct of the proceeding;
(3) stay the proceeding for the period it determines;
(4) recommend that the chief justice or chief judge order special case management; or
(5) order the party that initiated the judicial application or presented the pleading to pay the other party, under pain of dismissal of the application or rejection of the pleading, a provision for costs, if the circumstances so warrant and if the court notes that, without such assistance, that other party’s financial situation would likely prevent it from effectively conducting its case.

The result of a declaration of abuse triggers other relief which the court can grant.

Article 54 C.C.P. On ruling on whether a judicial application or pleading, including one presented under this division, is abusive, the court may order a provision for costs to be reimbursed, order a party to pay, in addition to legal costs, damages for any injury suffered by another party, including to cover the professional fees and disbursements incurred by that other party, or award punitive damages if warranted by the circumstances.
If the amount of the damages is not admitted or cannot be easily calculated at the time the application or pleading is declared abusive, the court may summarily determine the amount within the time and subject to the conditions it specifies or, in the case of the Court of Appeal, refer the matter back to the court of first instance for a decision.