Court of Appeal Decision of the Week

When Mandatory Arbitration Clauses Aren’t

Case: Dewey v Corner Brook Pulp and Paper Limited, 2019 NLCA 14 (CanLII) 

Keywords: Arbitration Clauses; Class Actions

Synopsis:

The Appellants (Richard Dewey, William Perry, Charlotte Jacobs and William Turner) claim their properties are damaged by the operation of Corner Brook Pulp and Paper Limited’s (the Respondent Company) water control and hydroelectric power generating system.

They collectively file a statement of claim and apply for certification under the Class Actions Act, SNL 2001, c. C-18.1. The Respondent Company applies for and is granted a stay of proceedings on the basis that applicable legislation – the Newfoundland Products Corporation Act, 1915 (6 Geo. 5), c. 4 (and its subsequent iterations) – requires the claim to be adjudicated by arbitration.

The Court of Appeal concludes the Applications Judge erred. Pursuant to s. 14 of the Newfoundland Products Corporation Act, 1915 (6 Geo. 5), c. 4 (the “1915 Act”), a party may proceed by way of arbitration or an action in court.

Importance:

The Applications Judge referred to two long-standing decisions of the Supreme Court of Canada in support of its view the arbitration clause contained in the applicable legislation was mandatory:

  • Weber v. Ontario Hydro, 1995 CanLII 108 (SCC), [1995] 2 S.C.R. 929;
  • Bisaillon v. Concordia University, 2006 SCC 19 (CanLII), [2006] 1 S.C.R. 666.

For the Applications Judge, and many others (see, for example, in the case of Bruce v. Cohon, 2017 BCCA 186 (CanLII), leave to appeal denied March 15, 2018), these decisions, particularly Weber, stand for the position that a mandatory arbitration clause generally confers exclusive jurisdiction on tribunals.

Might there be an exception to this rule? Citing Seidel v. Telus Communications Inc., 2011 SCC 15 (CanLII), the Court of Appeal noted the general principle does not apply where the legislation in question “specifically” provides for the option to proceed by way of court action. (See para. 20).

Section 14 of the 1915 Act provides as follows:

Nothing herein or in the Schedule hereto in relation to the settlement of claims by arbitration shall be held or construed to prejudice or exclude the right of any claimant to institute an action in a Court of competent jurisdiction in respect to any such claim. (See para. 9).

Notwithstanding the findings of the Applications Judge below, the Court determined that subsequent amendments to the 1915 Act did not override the clear language of s. 14:

Rather, the amendments, which consistently refer back to the 1915 legislation, make three changes. First, each amendment makes a change to the manner in which arbitrators are to be appointed. Second, the reference to “compensation to be paid” in the 1915 legislation is expanded to include any questions, disputes or differences. Third, arbitration is engaged “on the application of either party”. None of these changes operates to exclude by implication the application of section 14 of the 1915 Act. (See para. 18).

Simply put, the Court of Appeal found that, “[f]rom the beginning”, the legislation offered litigants a choice between arbitration and court proceedings. In other words, for the Court of Appeal, the language contained at s. 14 is specific “legislative language to the contrary” within the meaning contemplated by Binnie J. in Seidel. Moreover, the Court emphasized that, by applying for certification, the Appellants would have a means to address all issues at the same time and forum. (See paras. 19-21).

Counsel for the Appellants: Raymond Wagner Q.C., and Madeleine Carter (Wagners, Halifax); Bob Buckingham (Buckingham Law, St. John’s)

Counsel for the First Respondent: Thomas O’Reilly Q.C. and Richard Gosse (Cox & Palmer, St. John’s)

Counsel for the Second Respondent: Not Participating

Counsel for the Third Respondent: Not Participating

Counsel for the Fourth Respondent: Steve Penney (Stewart McKelvey, St. John’s)

Counsel for the Fifth Respondent: Philip Osborne and Jessica Pynn (Department of Justice & Public Safety (NL), St. John’s)

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Posted: Tuesday, March 26, 2019