Québec’s Court of Appeal in Bard v. Appel, 2017 QCCA 1150 dismissed an appeal from a Superior Court decision in Bard v. Appel, 2015 QCCS 4752 which held that enforcement of a 2002 Florida final arbitration award was prescribed at the time its beneficiaries applied in 2014 in Québec to homologate and enforce.
The arbitration award, issued by a National Association of Securities Dealers tribunal seated in Florida, was rendered December 2, 2002. The successful arbitration parties, Norman Bard and Shirley Bard (“Bard”) took four (4) steps outside of Canada before applying July 11, 2014 to the Québec Superior Court to homologate and enforce the award. Bard claimed that, under the law of the seat, Florida, they had twenty (20) years in which to apply to homologate the award. Defendant, Randal S. Appel (“Appel”), resisted, asserting that a three (3) year prescription applied and that, in any event, no interruption of the prescription period had taken place. In Superior Court, Mr. Justice Louis J. Gouin dismissed Bard’s application, ruling, among other things, that enforcement of the 2002 award was prescribed due to ten (10) year extinctive prescription.
Bard appealed. Respondent, Appel, failed or neglected to file a factum in time and was foreclosed from making argument on the appeal. The Court of Appeal was thus presented with only appellants’ submissions and received no contrary arguments from Respondent.
The Court of Appel’s decision addresses at least two points of interest to commercial arbitration practitioners: whether an arbitral award qualified as a judgment for the purpose of prescription (limitation period); and, what procedural steps applicants need to take to allow Québec courts to apply foreign law in support of their application.
First, Bard did not challenge Gouin J.’s decision that an arbitral award could be assimilated to a “judgment” subject to Québec’s ten (10) year prescription set out in article 2924 C.C.Q. Gouin J. at para. 18 of his reasons in first instance summed up six (6) principles drawn from the caselaw. He applied by analogy the Court of Appeal decision in Barreau du Québec v. Greenbaum, 2002 CanLII 41232 which held that the ten year prescription applied to a Barreau du Québec disciplinary committee decision because the latter qualified as a “judgment” under Québec procedural rules. Gouin J. also relied on Yugraneft Corp. v. Rexx Management Corp.,  1 SCR 649, 2010 SCC 19 para. 28 to determine that Québec’s prescription was intended to apply under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”). In that case, the Supreme Court of Canada had decided that local limitation periods were intended to apply to recognition and enforcement as a “rule of procedure” within the meaning of that term in the New York Convention.
Writing for the Court in Bard v. Appel, Madam Justice Manon Savard only agreed to accept that the ten year prescription would apply because Bard did not challenge that finding on appeal. The Court of Appeal did not expressly endorse this conclusion that an arbitral award was a “judgment.” Rather, it did refer to two earlier decisions and appeared to flag two distinctions made in those cases which may be relevant in future case law in Québec. The Court drew readers’ attention to Dell Computer Corp. v. Union des consommateurs,  2 SCR 801, 2007 SCC 34, para. 51 in which the Supreme Court of Canada, writing about the neutrality of arbitration, commented that “(a)rbitration is part of no state’s judicial system” and “arbitration is a creature that owes its existence to the will of the parties alone“. Having referred to this conclusion by the Superior Court, the Court of Appeal observed that a Barreau disciplinary committee (a) was part of the state’s judicial system and (b) drew its mandate from the law. Regarding the second observation, the Court of Appeal cited para. 39 of Société canadienne des postes v. Rippeur, 2013 QCCA 1893.
The Court in Bard v. Appel appeared to qualify its acceptance of Bard’s concession. Its remarks could be taken to mean that a commercial arbitral award may well qualify as a judgment within the meaning of article 2924 of Québec’s Civil Code of Québec, CQLR c CCQ-1991 (“C.C.Q.”) provided the arbitration tribunal is part of a state’s judicial system and draws its mandate from the law. In Bard v. Appel, the Court observed that the record provided to it did not contain the arbitral process leading to the arbitration award in issue, how it functioned or its effects. The Court’s comments left the door open for a future consideration on this point. For the Court in Bard v. Appel, the qualification of the arbitration award as a judgment was not vital to resolving the appeal as it concluded elsewhere that even if the ten year prescription applied, Bard had failed to interrupt it.
Québec’s rules on prescription are contained in Book Eight of the C.C.Q., articles 2875 – 2933. Those articles relevant to the decision are the following:
“Article 2875 Prescription is a means of acquiring or of being released by the lapse of time and according to the conditions determined by law: prescription is called acquisitive in the first case and extinctive in the second.
Article 2889 Prescription may be interrupted naturally or civilly.
Article 2890 Acquisitive prescription is interrupted naturally where the possessor is deprived of the enjoyment of the property for more than one year.
Article 2891 Extinctive prescription is interrupted naturally where the holder of a right, having failed to avail himself of it, exercises that right.
Article 2892 The filing of a judicial application before the expiry of the prescriptive period constitutes a civil interruption, provided the demand is served on the person to be prevented from prescribing not later than 60 days following the expiry of the prescriptive period.
Cross demands, interventions, seizures and oppositions are considered to be judicial applications. The notice expressing the intention by one party to submit a dispute to arbitration is also considered to be a judicial application, provided it describes the subject matter of the dispute to be submitted and is notified in accordance with the rules and time limits applicable to judicial applications.
Article 2921 Extinctive prescription is a means of extinguishing a right owing to its non-use or of pleading a peremptory exception to an action.
Article 2924 A right resulting from a judgment is prescribed by 10 years if it is not exercised.
Article 2925 An action to enforce a personal right or movable real right is prescribed by three years, if the prescriptive period is not otherwise determined.“
Second, the reasons in both instances identified gaps in the file presented by Bard. In seeking to benefit from Florida’s 20 year limitation period or assert the legal effect of having taken certain steps in the U.S. to act on its arbitral award, Bard neither alleged nor proved the foreign law of Florida or New York. The courts in Québec are flexible and ready to take judicial notice where necessary of the law of any jurisdiction outside of Québec provided that law is both alleged and proven.
“Article 2809 Judicial notice may be taken of the law of other provinces or territories of Canada and of that of a foreign state, provided it has been pleaded. The court may also require that proof be made of such law; this may be done, among other means, by expert testimony or by the production of a certificate drawn up by a jurisconsult.
Where such law has not been pleaded or its content has not been established, the court applies the law in force in Québec.“
Because Bard did neither, the Superior Court applied Québec law and not Florida or New York law. The Superior Court was unable to find support in Québec law to give effect to measures taken by Bard in the years since the 2002 award that would have had the effect of interrupting prescription.
The reasons for judgment include an in-depth consideration of the differences between acquisitive and extinctive prescription in real and personal rights and whether certain gestures can serve to effect natural or civil interruption of prescription. Unfortunately for Bard, the facts adduced combined with the failure to allege and prove Florida or New York law left the Superior Court with little choice but to view those facts through the law of Québec.
The Court of Appeal held that a right stemming from a judgment was not a right that could be maintained by use. Rather, a judgment creditor’s title is to the performance by its judgment debtor to an obligation stipulated in the judgment. The creditor can manifest its intention to execute on its judgment by way of juridical acts and not by way of material facts demonstrating the exercise of the rights. Bard’s post-trial examination of Appel as judgment debtor was such a juridical act but took place on July 31, 2013, well after the ten year prescription period accepted to apply to the arbitration award.
The case contains analysis of three other steps taken by Bard in the intervening years including an October 2, 2003 decision of the New York bankruptcy court, a May 18, 2004 homologation of the award in New York and an April 10, 2013 registration of the October 2003 decision in Florida.
Absent evidence of Florida or New York law and the effect of those steps, the Court concluded that none of those steps served to support Bard’s efforts in 2015 to homologate and enforce the 2002 arbitral award. The Court upheld the dismissal of Bard’s application to homologate and enforce the arbitration award, agreeing that it was time-barred in doing so. [:]