Pilotes du St-Laurent Central Inc. v. Laurentian Pilotage Authority, 2003 FC 1470

Date: 20031215

Docket: T-708-03

Citation: 2003 FC 1470

BETWEEN:

PILOTES DU SAINT-LAURENT CENTRAL INC.

Applicant

and

LAURENTIAN PILOTAGE AUTHORITY

Respondent

REASONS FOR ORDER

RICHARD MORNEAU, PROTHONOTARY

Introduction

[1]        Pilotes du Saint-Laurent Central Inc. (referred to henceforth, however, as "the Corporation" since the applicant is known in the record and in the field by that name) filed with the Court pursuant to article 946.1 of the Code of Civil Procedure (C.C.P.) a motion to homologate an arbitral award (the award) made on March 12, 2003, by the arbitrator designated by the parties to resolve any dispute between them.

[2]        In opposition to that motion, the Laurentian Pilotage Authority (the L.P.A.) is seeking to have the award quashed.

Parties

[3]        The L.P.A. is a federal government body created by the Pilotage Act, R.S.C. 1985, c. P-14 (the Act) and under section 18 of the Act its objects are to establish, operate, maintain and administer an efficient pilotage service in the interests of the safety on the St. Lawrence River.

[4]        The Corporation is a private legal entity that includes, and acts on behalf of, pilots of ships plying the St. Lawrence River between Québec and Montréal. Another corporation, the Corporation des pilotes du Bas Saint-Laurent (hereinafter "Pilotes du Bas Saint-Laurent") includes the only other pilots also subject to the L.P.A. who are associated to form a corporation.

[5]        Pilotes du Bas Saint-Laurent operates on the river between Québec and les Escoumins and on the Saguenay. The districts of the Corporation and of Pilotes du Bas Saint-Laurent are the only ones where pilotage is compulsory under the Act, except for pilotage in the Port of Montréal where pilots are employees of the L.P.A. We will have occasion to return to Pilotes du Bas Saint-Laurent later.

[6]        The pilotage service administered by the L.P.A. entails the compulsory requirement of assigning pilotage of ships operating in certain zones of the St. Lawrence to pilots whose knowledge of the river is well established, as a means of ensuring safe navigation.

[7]        Sections 15(1) and (2) and 18 of the Act reads as follows:

Legal ties between the parties

[8]        A contract for services (the contract) was concluded between the parties pursuant to section 15(2) of the Act.

[9]        The contract contained an Appendix A dealing with pilotage fees. Clauses 15.02 and 15.03, set out below, deal more specifically with the dispute that was submitted to the arbitrator whose decision is the subject of the motion at bar:

[TRANSLATION]

15.02(a)      As of July 1, 2000, all amounts of pilots' fees contained in Appendix A in effect at June 30, 2000, are increased by a percentage equal to 3.0%;

(b)     As of July 1, 2001, all amounts of pilots' fees contained in Appendix A in effect at June 30, 2001, are increased by a percentage equal to 3.0%;

(c)     As of July 1, 2002, all amounts of pilots' fees contained in Appendix A in effect at June 30, 2002, are increased by a percentage equal to 3.0%.

15.03           Notwithstanding paragraph 15.02(c), one or other of the PARTIES may by giving 90 days' prior notice to the other before July 1, 2002, reject the fee increase in this Appendix scheduled for July 1, 2002. The PARTIES shall then in good faith negotiate an increase in fees scheduled for the period covered by paragraph 15.02(c), and if no negotiated agreement is reached on this matter within a reasonable time the procedure for the settlement of disputes or disagreements set out in clause 19 of the contract for services shall apply to determine the quantum of the fee increase in paragraph 15.02(c) above.

[10]      Clause 15.03 accordingly provided for the possibility that one of the parties could reject the fee increase scheduled for the last year of the contract, from July 1, 2002 to June 30, 2003, (clause 15.02(c)).

[11]      Clause 15.03 further provided that if no negotiated agreement was reached the matter would be referred to an arbitrator to determine the quantum of the fee increase for the last year of the contract.

[12]      Accordingly, the matter was referred to an arbitrator in the case at bar to determine the quantum of the pilotage fee increase for the last year of the contract, since the Corporation duly rejected the fee increase mentioned in paragraph 15.02(c) of Appendix A of the contract and the parties were unable to reach a negotiated agreement on the point.

[13]      Clause 15.03 of Appendix A provides that any dispute will be submitted to the procedure for settling disputes or disagreements set out in clause 19 of the contract.

[14]      That clause contains a compulsory arbitration clause allowing the parties, without intervention by courts of law, to resolve disagreements that might arise in the course of their contractual relations.

[15]      Clause 19.10 of the contract provides that the arbitrator's decision is final and binding, like a judgment rendered by a competent court, subject to the formalities set out by law.

[16]      Clauses 19.01, 19.03, 19.09 and 19.10 provide inter alia that the arbitrator has exclusive jurisdiction to interpret and apply the contract. To do this, the parties gave him all the powers necessary for the exercise of his jurisdiction. The arbitrator could also resolve any question relating to compliance with the agreed conditions.

Provisions of C.C.P. and rules of precedent pertaining to them

[17]      For an arbitral award to be executory it must be homologated pursuant to article 946 C.C.P. The relevant provisions of the C.C.P. read as follows:

            943. The arbitrators may decide the matter of their own competence.

                943.1. If the arbitrators declare themselves competent during the arbitration proceedings, a party may within 30 days of being notified thereof apply to the court for a decision on that matter.

                While such a case is pending, the arbitrators may pursue the arbitration proceedings and make their award.

                946. An arbitration award cannot be put into compulsory execution until it has been homologated.

                946.1. A party may, by motion, apply to the court for homologation of the arbitration award.

                946.2. The court examining a motion for homologation cannot enquire into the merits of the dispute.

                946.3. The court may postpone its decision on the homologation if an application has been made to the arbitrators by virtue of article 945.6.

                If the court acts pursuant to the first paragraph, it may, on the application of the party applying for homologation, order the party to provide security.

                946.4. The court cannot refuse homologation except on proof that

                1) one of the parties was not qualified to enter into the arbitration agreement;

                2) the arbitration agreement is invalid under the laws elected by the parties or, failing any indication in that regard, under the laws of Québec;

                3) the party against whom the award was invoked was not given proper notice of the appointment of an arbitrator or of the arbitration proceedings or was otherwise unable to present his case;

                4) the award deals with a dispute not contemplated by or not falling within the terms of the arbitration agreement, or it contains decisions on matters beyond the scope of the agreement; or

                5) the mode of appointment of arbitrators or the applicable arbitration procedure was not observed.

                In the case of subparagraph 4 of the first paragraph, the only provision not homologated is the irregular provision described in that paragraph, if it can be dissociated from the rest.

                946.5. The court cannot refuse homologation of its own motion unless it finds that the matter in dispute cannot be settled by arbitration in Québec or that the award is contrary to public order.

                946.6. The arbitration award as homologated is executory as a judgment of the court.

                947. The only possible recourse against an arbitration award is an application for its annulment.

                947.1. Annulment is obtained by motion to the court or by opposition to a motion for homologation.

                947.2. Articles 946.2 to 946.5, adapted as required, apply to an application for annulment of an arbitration award.

(My emphasis.)

[18]      The Court has had an opportunity to summarize the rules of precedent pertaining to these provisions in a fairly recent case involving the same parties as the case at bar. In that case, Pilotes du Saint-Laurent Central Inc. v. Laurentian Pilotage Authority, Prothonotary Morneau, on November 20, 2000, case T-1032-00, affirmed on appeal on August 8, 2002, by Pelletier J. (as he then was), citation 2002 FCT 846, the following was stated at paragraphs [22] to [28]:

[22]         First, it seems that the burden of proof rests with the party seeking to object to homologation and that the latter will only be refused if one aspect of arts. 946.4 or 946.5 C.C.P. is clearly established. As the Superior Court indicated in Entreprises Apac Inc. v. Université Bishop's, J.E. 98-740 (S.C.), at p. 5:

[TRANSLATION]

                Homologation is not an appeal procedure and it is clear that the court's powers of intervention are limited.

                When the court has before it a motion to homologate and/or quash an arbitral award, it cannot examine the merits of the dispute.

                Further it may only quash such an award in whole or in part for the reasons stated in the aforesaid arts. 946.4 and 946.5 C.C.P.

                Consequently, if the party applying to quash does not establish one of those reasons or show some serious departure from a rule of natural justice, the award must be homologated.

[23]         The writer Donald Béchard, in "Homologation et annulation de la sentence arbitrale", Développements récents en arbitrage civil et commercial (1997), vol. 94, Cowansville, Les éditions Yvon Blais, at pp. 122 and 125, says the following:

[TRANSLATION]

1.4          Burden of proof

                Who has the burden of proof in a homologation matter? The answer to this question is provided by the beginning of art. 946.4 C.C.P., which reads as follows:

The Court cannot refuse homologation except on proof that . . . [Emphasis added.]

                The burden is thus on the party seeking to prevent homologation. Further, the second paragraph of art. 2803 C.C.Q. (the old art. 1203 C.C.L.C. was essentially to the same effect) may serve as support to this statement:

. . . . .

A person who alleges the nullity, modification or extinction of a right shall prove the facts on which he bases his allegation.

                Finally, Prof. Marquis is of the view that a presumption of validity applies to an arbitral award:

. . . a presumption of validity applies to the award. It is thus up to the party alleging a ground of nullity to present evidence of this within the parameters laid down by the Code of Civil Procedure.

                                                                (References omitted)

1.6.2       Reasons in art. 946.4 C.C.P. are restrictive and must be given a limiting interpretation

                The reasons in art. 946.4 C.C.P. are restrictive and must be given a limiting interpretation, as appears inter alia from the following judgments:

(Case references omitted)

[24]         Secondly, this Court cannot review anything relating to the merits of the dispute, including the interpretation of a statute, a regulation or the contract on which the dispute before the arbitrator was based in whole or in part (see Fortin v. Centre communautaire juridique du Nord-Ouest, [1984] C.A. 662, at 666).

[25]         Third, the arbitration agreement must be given a broad and liberal interpretation. As indicated in CJMF-FM Ltée v. Paré, D.T.E. 92T-6 (S.C.), at pp. 15 et seq.:

                As John E.C. Brierly writes, "The key concept in arbitration is to rely on the will of the parties. It is their agreement which forms the background to the arbitration, sets out the limits of the arbitrator's authority on the matter submitted to them and indicates how the arbitrators are to proceed".

                It is apparent that since the 1986 legislation on arbitration the legislature has clearly and unequivocally indicated that it intends to create and to legitimize a dispute settlement system separate from the "ordinary" courts.

                The legislature has said that any dispute may be submitted to arbitration except one concerning status and capacity, family order and public order (1926.2).

                As Mr. Brierly writes, "The Quebec legislature has taken care in its new legislation to convey the message that arbitration is no longer to be regarded as an exceptional institution and thus subject in principle to a limiting interpretation".

                Accordingly, an arbitration agreement is subject to broad interpretation and is so distinct that nullity of the contract does not necessarily mean nullity of the arbitration agreement (1626.5).

(References omitted)

and at p. 21:

[TRANSLATION]

                In light of the present legislation on arbitration by agreement and the Court's powers to rule on the arbitrator's jurisdiction, in my opinion even in cases of doubt the agreement of the parties must be given "breathing room" and allowed to take effect, to use the helpful expression of Viau J.

[26]         Fourthly, the fact that the outcome of the dispute, as issued by the arbitrator, has an impact on third parties is not a factor that can be used to prevent giving effect to the arbitration agreement.

[27]         In this connection, in Guns N'Roses Missouri Storm Inc. v. Productions musicales Donald K. Donald Inc., [1994] R.J.Q. 1183 (C.A.), at 1186, the Court said the following:

On the second question, I do not see why an arbitration clause agreed upon by two parties should necessarily become inapplicable merely because the dispute also involves a third party or third parties. In the Mont Saint-Sauveur case (supra), for example, the arbitration clause had formed part of a contract between a builder and an owner contemplating the construction of a condominium project. The owner then sued the builder and the architect. The presence in the dispute of the third party architect was held not to prevent the application of the arbitration clause which the builder and the owner had agreed upon.

I do not believe that the presence of a third party in the dispute, or even the fact that a third party has initiated proceedings, should, in itself, render the arbitration clause inapplicable and deprive the parties of a forum for the settlement of their disputes which they have chosen in their contract. It is not difficult to imagine any number of commercial disputes where it would be entirely appropriate to proceed to arbitration under the arbitration clause agreed upon between two parties notwithstanding a claim against one of the parties by a third party.

[28]         In a situation very similar to our own, the Superior Court made the following observations at pp. 13 and 14 of Corporation des pilotes du Bas Saint-Laurent v. Administration de pilotages des Laurentides, No. C.S.Q. 200-05-012157-991, November 9, 1999, per Roger Banford J.S.C.:

[TRANSLATION]

                The legal argument based on public order does not appear any more persuasive. The Authority maintained that the arbitral award had the effect of enabling the Corporation to unilaterally impose operating costs on third parties, the shipowners, contrary to the provisions of the law, in particular s. 35 of the Regulations, which would be contrary to public order.

                Nevertheless, the decision is only designed to resolve a dispute between two parties to a contract. It does not in any way alter the date given by the Authority for the end of the winter navigation period in 1998 or in the future. It has no retroactive effect. It does not in any way alter the provisions of the Act or limit the powers of the Authority under s. 35 of the Regulations. It only recognizes a failure to correctly perform a contractual obligation.

                Further, under the terms of the agreement, it is the Authority alone which has the duty of paying for the pilots' services. If the bill could be passed on to the shipowners, this might result from the regulations in effect or the agreements binding on the parties. The disputed award does not in any way affect these rules.

                The arbitrator's decision does not vary the Pilotage Regulations either. It only concludes that the Authority did not comply with them in a particular situation. If third parties suffer consequences as a result of the award, this cannot be due to the award itself but is the consequence of the legislation, regulations or agreements affecting these third parties and the Authority. If the third parties, such as the shipowners, are adversely affected by the decision, they should not make their objections to the Authority but to the perpetrator of the illegally committed act.

[19]      On the standard of review by which we should generally be guided, Pelletier J., supra, paragraph [16], said the following at paragraph [28] of his judgment:

[28]         What is the standard of review by the Court of the arbitrator's decision in a situation where there has been an application to homologate and to quash? The Corporation argued, and I agree, that the question of the standard of review is dealt with by art. 946.2 C.C.P., which provides that the Court examining a motion for homologation cannot inquire into the merits of the dispute. Additionally, art. 946.4 C.C.P. requires the Court to grant the motion to homologate except where the respondent can show that one of the obstacles mentioned in the article exists. Accordingly, there is no question of the Court examining the arbitral award in order to find errors of law. That would be to consider the merits of the dispute, which is expressly prohibited: Corporation des pilotes du Bas Saint-Laurent v. Administration de pilotage des Laurentides, [1999] J.Q. No. 5368, at para. 10.

[20]      Even more recently, on August 6, 2003, the Quebec Court of Appeal in Gazette (The), une division de Southam inc. v. Blondin, D.T.E. 2003T-789, recalled as follows at paragraph [43] and [44] of its judgment the complete structure of the C.C.P. that deliberately limits judicial review in order to give full effect to the independence of the arbitration proceeding:

[TRANSLATION]

[43]         Article 940.3 sets the tone of Book VII of the Code of Civil Procedure. In the case of proceedings covered by articles 33 and 846 C.C.P., review of the legality of decisions by an ordinary court of law is usual, but the legislature may limit the ordinary court of law's powers to intervene, an option which it usually exercises by a privative clause. In the case of consensual arbitral tribunals, the reverse is now the rule. As article 940.3 C.C.P. states, a judge can only intervene where the law permits. Article 946.2 C.C.P. states that a judge who has an application to homologate or annul an arbitral award before him or her cannot inquire into the merits of the dispute, and it is impossible for the parties to an arbitration agreement to avoid this rule by agreement. They also cannot depart from paragraph 4 of article 946.4 C.C.P., the only ground of an annulment (or refusal of homologation) that could be applied in the present circumstances. Once again pursuant to article 940, other provisions of Title I of Book VII are also of public order, and concern decisions which the judge may be called on to render to appoint an arbitrator (941.3), to rule on recusation or revocation of his appointment (942.7), to recognize his jurisdiction (943.2) or to preserve the rights of parties pending an arbitral award (945.8). By determining that these court decisions are final and without appeal, the Code seeks to reinforce the independence of the arbitral proceeding, where its operation is concerned. By limiting the grounds of annulment or refusal of homologation of an award, the Code seeks to reinforce the independence of the arbitral proceeding, where its outcome is concerned. The adoption of these provisions "marked a turning-point in Quebec legislation governing conventional arbitration", as Thibault J.A. properly observed, speaking for the Court, in Laurentienne-vie (La), compagnie d'assurances inc. v. Empire (L'), compagnie d'assurance-vie [see note 16 below]. In reintroducing by review of the arbitral award a complete examination of the points of law the arbitrator may have had to decide, an examination similar to judicial review or indeed appeal, we risk moving towards reversing this development.

Note 16: [2000] R.J.Q. 1708, [23].

[44]         Quite recently, in Desputeaux v. Éditions Chouette (1987) Inc. [see note 17 below], the Supreme Court of Canada, per LeBel J., made the following comments on a related question, public order as mentioned in article 946.5 C.C.P.:

Note 17: 2003 SCC 17">2003 SCC 17, [68].

Despite the specificity of these provisions of the Code of Civil Procedure [the articles here were 946.2, 946.4,, 946.5 and 947.2] and the clarity of the legislative intention apparent in them, there have been conflicting lines of authority in the Quebec case law regarding the limits of judicial intervention in cases involving applications for homologation or annulment of arbitration awards governed by the Code of Civil Procedure. Some judgments have taken a broad view of that power, or sometimes tended to confuse it with the power of judicial review provided for in arts. 33 and 846 C.C.P. (On this point, see the commentary by F. Bachand, "Arbitrage commercial : Assujettissement d'un tribunal arbitral conventionnel au pouvoir de surveillance et de contrôle de la Cour supérieure et contrôle judiciaire d'ordonnances de procédure rendues par les arbitres" (2001), 35 R.J.T. 465.) The judgment in issue here illustrates this tendency when it adopts a standard of review based on simple review of any error of law made in considering a matter of public order. That approach extends well beyond the cases intended by the legislature. It ignores the fact that the legislature has voluntarily placed limits on such review, to preserve the autonomy of the arbitration system. Public order will of course always be relevant, but solely in terms of the determination of the overall outcome of the arbitration proceeding, as we have seen.

These parameters being indicated, we must look at the arguments of the parties concerning the award at issue here.

(My emphasis.)

[21]      On paragraph 4 of article 946.4 C.C.P., a paragraph which is of central importance here according to the L.P.A., the Quebec Court of Appeal in the same case said the following at paragraphs [50] and [51]:

[TRANSLATION]

[50]         Still in accordance with paragraph 4 of article 946.4 C.C.P., however, the question also arises whether the Sylvestre No. 2 award contains "des décisions qui . . . dépassent les termes [de la convention d'arbitrage]" - whether, according to the English version of article 946.4, paragraph 4, the award "contains decisions on matters beyond the scope of the [arbitration] agreement". Examining the meaning that should be given to this periphrase, our colleague Thibault J. wrote in Laurentienne-vie (La), compagnie d'assurances inc. v. Empire (L'), compagnie d'assurance-vie [see note 21 below]:

Note 21: See supra, note 16, [44].

It would appear that, in order to decide whether an arbitral award goes beyond the terms of the arbitration agreement, we should disregard the interpretation which led to the result and concentrate on the latter. This interpretation of the ground for annulment mentioned in article 946.4 paragraph 4 C.C.P., as well as being consistent with article 946.2 C.C.P., which prohibits a court examining a motion to annul the arbitral award from inquiring into the merits of the dispute, is consistent with the approach taken by the writer Sabine Thuilleaux.

There follows a quotation from the writer Sabine Thuilleaux which LeBel J. in turn adopted in Desputeaux v. Éditions Chouette (1987) inc. [see note 22 below]: "Consideration of this grievance will depend on the connection of the question to be disposed of by the arbitrators with the dispute submitted to them" [See note 23 below].

Note 22: See supra, note 17, [35].

Note 23: L'arbitrage commercial au Québec - Droit interne - Droit international privé, Cowansville, Les Éditions Yvon Blais inc., 1991, p. 115.

[51]         Judging by the outcome, that is, the specific conclusions of the arbitrator in the Sylvestre No. 2 award, it is impossible to conclude that the question decided here by the arbitrator had no connection with the dispute submitted to him: on the contrary, it was the very matter which was at the heart of the dispute between the parties. A detailed review of the grounds on which the arbitrator relied might indicate that another arbitrator could have disposed of one or more of the questions submitted to the arbitrator Sylvestre in a different way. However, that is not the question: I repeat, a court hearing an application to annul made pursuant to article 947 cannot inquire into the merits of the dispute. The question might arise in another light if the arbitrator had not complied with the order contained in The Gazette (No. 1), but nothing of the sort has occurred here.

(My emphasis.)

Analysis

[22]      The L.P.A. objected to homologation of the award and asked that it be annulled (articles 947.1 and 947.2 C.C.P.) based on five reasons, namely:

            (a)        maintaining parity between fees paid to the two pilotage corporations is not a dispute covered by the arbitration agreement;

            (b)        the arbitrator [TRANSLATION] "went beyond his mandate" by altering the fees agreed upon for the other years in the contract;

            (c)        it was not within the arbitrator's jurisdiction to redo the analysis of the respondent's financial situation;

            (d)        by denying the L.P.A. an opportunity to question a representative of the Corporation about its expenses the arbitrator prevented the L.P.A. from making its case;

            (e)        the award is contrary to public order, since it contravenes legislation of public order and its effect is to encumber the powers of supervisory bodies to authorize the respondent's loans.

[23]      Bearing in mind the very limited authority this Court has regarding any challenge made to the award, are any of the arguments made by the L.P.A. such as to lead the Court to deny homologation of the award?

[24]      For the purposes of this analysis it appears that, to begin with, arguments (a) to (c) raised by the L.P.A. can be considered together. As indicated above, these arguments, which all have to do with excess of jurisdiction covered by article 946.4 paragraph 4 C.C.P., contend that:

            (a)        maintaining parity between fees paid to the two pilotage corporations is not a dispute covered by the arbitration agreement;

            (b)        the arbitrator [TRANSLATION] "went beyond his mandate" by altering the fees agreed upon for the other years in the contract;

            (c)        it was not within the arbitrator's jurisdiction to redo the analysis of the respondent's financial situation.

[25]      To properly understand the background to these arguments, we have to realize at the outset that the pilotage fees paid to the Corporation and to Pilotes du Bas Saint-Laurent are determined by a formula that takes the features of the ship and the time spent on the voyage into consideration.

[26]      This formula, which is common to both contracts, makes it possible to calculate a number of "units" and a "time factor", components which are multiplied by a monetary value, and this ultimately gives the fees to be paid for pilotage services (the formula).

[27]      For example, the monetary value attributable to "units" and the "time factor" looked like this in 2002:

Les Pilotes du Bas Saint-Laurent                        The Corporation

By unit               $16.19 $23.92

By time factor                $9.36                                                               $11.82

[28]      Since the monetary value paid to the Corporation and to Pilotes du Bas Saint-Laurent differs under each component or factor in the formula, the pilotage fees ultimately paid to those corporations are naturally different depending on whether the ship is navigating in one or other of the districts.

[29]      It has to be said that the arbitrator, throughout his award, was fully aware of the preceding points, and thus of the formula and the factors that go to make it up _ factors which the arbitrator described as the objective criteria used in calculating the pilotage fees for both corporations.

[30]      At paragraph 15 of the award, the arbitrator indicated:

[TRANSLATION]

. . . the fees paid to the pilots have no relation to the Corporation's expenses. Instead, they are determined by objective criteria mentioned in the contract, namely "units" and the "time" factor . . .

[31]      Then, at paragraphs 30 and 31:

[TRANSLATION]

30.           Further, the pilots' fees are determined according to the two criteria mentioned in the contract, neither of which concerns the Corporation's expenses. They are two objective criteria directly associated with the pilotage activity, "units" and the "time" factor.

31.           Accordingly, an arbitrator clearly cannot be asked to create other criteria for the calculation of pilots' fees as he would be adding to the contract, which he does not have the power to do, since he is bound by its terms.

[32]      At paragraphs 104 and 105, he indicated:

[TRANSLATION]

104.         No one denies that the principal component of the calculation formula is the "unit" factor, while at most the "time" factor represents 17.5% of the value of the fees. The "unit" factor is an objective one and invariable for a particular ship. That is why it has so much importance in the formula.

105.         This also means that the parties did not intend to attach such great importance to the subjective or variable components for a particular ship, such as travel time, depending on the environmental conditions at the time of the movement. This at once excludes any question of the "occupational burden" and other subjective components. This is explained, in particular, by the fact that as Mr. Dubé pointed out pilotage revenue is determined first by the size of ships, not by pilotage time.

[33]      The arbitrator, who felt he was bound at the outset by the formula for the setting of pilotage fees, determined in the course of his analysis of the evidence and the parties' arguments that the formula represented the economic value of pilotage activity taken separately (in other words, what pilotage activity is worth) and that historically the parties have intended that ultimately this economic value be equivalent between the Corporation and Pilotes du Bas Saint-Laurent. At paragraphs 68 and 90, the arbitrator indicated:

[TRANSLATION]

68.           The economic value, as determined in the contract, is only intended to reflect what the pilotage exercise is worth taken separately. This is why the fees are established by vessel (unit) and by voyage (time) for each pilotage undertaking, using two factors which do not always give the same result because they are essentially variable, depending on the size of the ships and the pilotage time.

90.           The tribunal considers that if it had to undertake an elaborate exercise the effect of which would be to modify the result of calculation of fees for a particular ship, for example because there are more small vessels in a particular district than in another, which would result in a lower net fee, it would be adding to the calculation formula and departing from the economic value of the pilotage, which is intended to be universal or equivalent regardless of region. That at least is what the parties intended, by keeping the same formula over the years in both the Bas St-Laurent and St-Laurent Central regions.

[34]      When after analyzing the evidence the arbitrator came to the conclusion that the parties have always sought equivalence between the economic value of pilotage activity in either district, it cannot be said that in so doing he forgot that the monetary value allocated to the objective criteria in the formula is and always has been different from one district to another.

[35]      It is clear from reading his award that the arbitrator considered the evidence showed that the parties have always sought to give the two corporations of pilots equivalent standing. This conclusion does not deny, and does not contradict, the fact that the formula for doing this nevertheless has always had different monetary values from one district to another.

[36]      Consideration of the arbitrator's award must begin with these conclusions in mind.

[37]      At the outset, the arbitrator clearly identified the mandate which the parties had given him in the contract. This is apparent from paragraphs 3, 25 and 45 of the award.

[TRANSLATION]

3.             As the Corporation rejected the increase mentioned in paragraph (c) of clause 15.02 and the parties were unable to reach agreement on this matter, they entrusted the tribunal with the function of determining the pilots' fees for the period beginning July 1, 2002, in accordance with the provisions of clause 15.03 of the contract.

25.           The tribunal derives its authority from the contract binding on the parties, not from the law, which gives the arbitrator no guidance and imposes no criteria upon him. The mandate of the undersigned relates only to pilots' fees for the period from July 1, 2002 to June 30, 2003, in accordance with clause 15.02 of the contract, and these are not pilots' salaries but the remuneration paid to the Corporation for the pilotage service which it provides on the St. Lawrence.

45.           The parties requested the tribunal to set fees to be paid to pilots or to their Corporation for the last year of the contract affecting them, from July 1, 2002 to June 30, 2003.

[38]      The final conclusion of the award deals directly with the mandate and reads as follows, at paragraphs 151 and 152:

[TRANSLATION]

151.         For these reasons, the tribunal raises the fees of pilots of St-Laurent Central by 8% for the fourth year of their contract, namely from July 1, 2002 to June 30, 2003.

152.         It accordingly orders the Authority to pay the Corporation an amount equivalent to the adjustment of fees provided for in clause 4 of the contract, calculated in accordance with the preceding paragraph, retroactive to the anniversary of July 1, 2002, and to increase the said fees by 8% until June 30, 2003, based on the actual pilotage activities during the period from July 1, 2002 to June 30, 2003.

[39]      It can be seen from the contract that, in order to determine the increase in pilotage fees for the last year of the contract, neither the latter nor the Act provides criteria or parameters that should guide the arbitrator. The parties chose to leave the arbitrator free in this respect. In order to carry out his mandate, therefore, the arbitrator considered the approaches presented by each of the parties.

[40]      It should be noted that the L.P.A. invited the arbitrator to apply practical or operational distinctions for pilotage in one district or another, such as for example travel time or waiting time, riverbeds, tides, ice and so on (the occupational burden approach).

[41]      The Corporation suggested that the arbitrator not accept this approach, but base his analysis instead on the economic value of a pilotage service, as an assessment factor. At paragraph 46 of his award, the arbitrator indicated:

[TRANSLATION]

46.           The Corporation maintained that the historical factor applied by the parties over the years to determine pilotage fees was the economic value of pilotage service. In its submission, to arrive at this value one should compare primarily the fees paid to pilots in the Lower St. Lawrence who are also subject to the L.P.A., and are the only other pilots who form a corporation, which is separate from the one at issue.

[42]      The arbitrator went on to discuss the L.P.A. approach, that is the occupational burden approach, and decided to reject it in favour of the economic value approach suggested by the Corporation.

[43]      This is what the arbitrator said at paragraphs 59 to 61 about the route he took in performing his function of setting the pilotage fee increase for the last year of the contract:

[TRANSLATION]

59.           The only factor which can be considered reliable is that of the economic value of pilotage service. Not only is there evidence by which this can be validated, but it is clear that over the years this is what was taken into account by the parties in setting pilotage fees. That is admitted.

60.           The tribunal considers in this regard that the economic value of pilotage in either district is equivalent and does not warrant a discrepancy between the pay of pilots who belong to the Corporation du St-Laurent Central and the pay of pilots in the Corporation du Bas St-Laurent.

61.           The tribunal considers that the economic value of pilotage service is a more stable and traditionally more verifiable factor than the variables relating to daily work (occupational burden), especially as what is at issue here is not to determine the pay of St-Laurent Central pilots, but the fees paid to their Corporation for the pilotage service which it performs for the Authority, through a contract for services.

[44]      Accordingly, the arbitrator said that in performing his function he would use the only reliable factor presented by the evidence, namely the economic value of pilotage service. At paragraph 76 he once again recognized that the formula, in itself, embodies this economic value:

[TRANSLATION]

76.           The tribunal therefore considers that the parties have already done the first part of the analysis of remuneration by basing it on pilotage activities by unit, the same calculation formula existing for the Lower St. Lawrence and the Central St. Lawrence.

[45]      Since the arbitrator concluded that equivalence had always existed in the economic value of pilotage activities regardless of district, it was logical, reasonable and proper for the arbitrator to determine as his next step whether a difference had arisen in this value, and if it had, to make the fee increase which he was required to determine in accordance with that difference. At paragraphs 77 and 107 the arbitrator stated:

[TRANSLATION]

77.           Since the evidence showed that the said formula was intended to reflect the economic value of pilotage work, traditionally, it only remains to try and maintain a similar reflection of economic value in pilotage from one region to another. Accordingly, the question is whether in a district the same pilotage activity pays a pilot more or less, regardless of the average annual result.

107.         Subject to the following heading concerning capacity to pay, the tribunal concludes that because the evidence showed that before this increase there was a difference unfavourable to St-Laurent Central, amounting to 8% (the witness Dubé), the tribunal concludes, without evidence to the contrary based solely on the economic value, that it must, in order to maintain equivalent representation for the same pilotage service with a comparable economic value, grant an increase on the order of 8% in the said pilotage fees covered in Appendix A, calculated in accordance with clauses 4 and 15.02.

[46]      Contrary to what the L.P.A. argued, therefore, I do not think it can be said that the arbitrator made it his function to maintain parity. The arbitrator quite clearly identified his function several times (see paragraphs 3, 25 and 45 cited above, paragraph [37]), and it was in keeping with the approach he chose to take in performing his function that he applied a factor which required that there be no difference between the corporations.

[47]      The first argument made by the L.P.A. therefore cannot be accepted. It cannot be concluded in accordance with article 946.4 paragraph 4 that the arbitrator's award did not deal with the dispute before him.

[48]      It also cannot be concluded, as the L.P.A. argued in its second ground of challenge, that the arbitrator went beyond his mandate by altering the pilotage fees agreed upon for the prior years of the contract.

[49]      Even if it can be assumed that the arbitrator arrived at the 8% based on information he set out in paragraph 102 of his award, information referring to differences between the corporations for the years 2000 to 2002, it still cannot be said that the arbitrator altered the fees agreed upon between the parties for past years. In his final conclusion the arbitrator dealt only with the year 2002-2003. Nothing was said about altering past rates. In order to arrive at his final conclusion, evidence which he accepted led him to consider how the difference had occurred. The arbitrator's analytical approach cannot be confused with the final conclusion.

[50]      As its third argument raised under article 946.4 paragraph 4 C.C.P., the L.P.A. maintained that it was not within the arbitrator's powers to redo the analysis of the L.P.A.'s financial situation.

[51]      It should be recalled that in his analysis the arbitrator indicated at paragraph 48 of his award that the comparison which the Corporation proposed, and which he accepted, should nevertheless take into account the L.P.A.'s ability to pay, as its income derived exclusively from pilotage fees charged to shippers.

[52]      According to the L.P.A., it gave the arbitrator budgetary forecasts approved and verified, which if one understands the L.P.A. correctly would be more or less binding on the arbitrator and lead him directly to the conclusion that the L.P.A. did not have the ability to pay the 8% imposed by the arbitrator. The arbitrator, who was responsible for weighing the evidence, considered the information provided by the L.P.A. and concluded that the evidence showed that the latter had an ability to pay greater than what it was suggesting. At paragraphs 112, 130, 132, 138 and 148 the arbitrator said the following:

[TRANSLATION]

112.         However, although potentially the Agency can also consider on another occasion that the pilotage fees which the Authority wishes to charge shippers are unreasonable and unfair, for the same reasons the tribunal considers that the evidence established facts at the time of the hearing which indicated an ability to pay greater than what the Authority suggested.

130.         Based on these figures, the tribunal must consider that the additional income increased by non-recurring expenses gives a total greater than the increase requested ($1,692,000 versus $1,527,272).

132.         On this basis, therefore, the tribunal considers that for the 2002-2003 period the Authority received an amount sufficient to handle the 8% pilotage fee increase requested.

138.         The tribunal consequently feels that while it is true that the Authority has problems because of the Agency's position, it cannot speculate on what the latter will do in future as that question is exclusively a matter for the Agency. The tribunal can therefore only assume that the rate will be at least the same for the coming year, and that being the case the Authority will be able to handle the Corporation's request.

148.         For all the foregoing reasons, the tribunal considers that the evidence showed that the Corporation's request was not something the Authority could not handle.

[53]      Outside the arbitral context, the L.P.A. is free to rely on the forecasts it submitted to the arbitrator. The latter did not rewrite or redo anything and impose it on the L.P.A. The arbitrator could - and even had to - weigh all the evidence, and that is what he did.

[54]      Accordingly, this third ground of challenge by the L.P.A. under article 946.4 paragraph 4 cannot be accepted.

[55]      As its fourth ground of challenge, the L.P.A. maintained that by being denied the right to question a Corporation representative about the latter's expenses the L.P.A. was denied the right to present its case, pursuant to article 946.4 paragraph 3.

[56]      In my opinion, there is no basis for this argument.

[57]      The arbitrator here, after hearing both parties at length on the purpose of the L.P.A.'s request for examination, decided with reasons in support to dismiss the L.P.A.'s request because it was irrelevant.

[58]      In the arbitrator's view his mandate, essentially, related to pilotage fees, a situation which involved the Corporation and the L.P.A., and not pilots' fees, a situation concerning the pay of pilots by the Corporation. At paragraphs 36, 41 and 44 the arbitrator concluded as follows:

[TRANSLATION]

36.           Accordingly, pilots' pay does not correspond to the fees paid by the L.P.A. but to what the Corporation pays them after administering its activities on their behalf. What is paid to pilots as salaries does not therefore depend exclusively on the pilotage fees paid by the Authority and does not directly concern the latter.

41.           The evidence in fact showed that the legal fees and hearing fees on which the L.P.A. wished to question Mr. Drouin concerned relations between the parties. Counsel for the L.P.A. might well say that he did not want to go into detail about these expenses, but one fact remains: once the subject was broached, by what rule of evidence could the tribunal limit the examination when the subject was necessarily considered relevant?

44.           On December 5, 2002, the tribunal sent the parties a summary of its interlocutory award allowing the Corporation's objection. At that time he had summarily established his reasons which should be set out here, as a conclusion to this decision on this matter:

DECISION

For these reasons, the tribunal allows the CORPORATION's objection.

The expenses or management of the CORPORATION in its mandate as manager of pilots' fees are inadmissible in evidence in the context of establishing the fees of pilots in the Central St. Lawrence pursuant to clauses 15.02(c) and 15.03 of the contract for services binding upon the parties.

[59]      Accordingly, after hearing the parties the arbitrator reached his decision without accepting a request for an examination made by one of the parties, the L.P.A. It cannot seriously be argued that it was impossible for the L.P.A. to present its case within the meaning of 946.4 paragraph 3 C.C.P.

[60]      As its final ground of challenge the L.P.A. argued that the award was contrary to public order, since it contravened legislation of public order and its effect was to encumber the exercise of powers of supervisory bodies to authorize L.P.A. loans. This argument was made pursuant to article 946.5 C.C.P.

[61]      We may note at the outset that no one appeared to question the fact that the L.P.A. in its capacity as a Crown corporation is subject to very strict financial controls, in particular under the Act and under the Financial Administration Act, R.S.C. 1985, c. F-11, which makes the L.P.A. subject to the supervision of the Government of Canada in the performance of certain major administrative actions.

[62]      Consequently, the L.P.A. cannot on pain of nullity borrow money without prior authorization from the Minister of Finance, the Treasury Board and the Governor in Council.

[63]      According to the L.P.A., its written and oral evidence clearly indicated that any increase in pilotage fees of the Corporation greater than 3% would necessarily require the L.P.A. to obtain a loan.

[64]      Based on his analysis of the evidence - which the Court cannot revisit in a homologation proceeding - the arbitrator came to the conclusion that the L.P.A. could handle the 8% increase without having to go beyond its currently authorized loan capacity. At paragraphs 135 to 138 of the award the arbitrator said:

[TRANSLATION]

135.         The evidence established above regarding non-recurring expenses however casts serious doubt on the explanation given by Mr. Martel, who obtained a large part of the reference figures from Mr. Pouliot, and the latter often only assumed the results of analyses he had conducted on pilotage activities, and sometimes altered them in the Corporation's favour when questioned by the latter's counsel, for example regarding waiting time.

136.         Little reliance could be placed on Mr. Pouliot's testimony and it could not support that of Mr. Martel when the latter testified based on his figures, especially as it dealt only with one aspect of the question, namely the "time" factor, which only accounts for about 17% of pilotage fees.

137.         Additionally, while the evidence showed that the federal government does not systematically absorb the Authority's operating deficits, it also showed that the latter has borrowing power sufficient to meet its obligations, despite the Agency's refusal to award it the pilotage tariffs that it wanted to charge shippers. The evidence did not establish the contrary.

138.         The tribunal consequently feels that while it is true that the Authority has problems because of the Agency's position, it cannot speculate on what the latter will do in future as that question is exclusively a matter for the Agency. The tribunal therefore can only assume that the level of fees will be at least the same for the coming year, and that being the case the Authority will be able to handle the Corporation's request.

[65]      Accordingly, it cannot be said that the result of the award, the final conclusion, namely an increase of 8%, is as such contrary to public order within the meaning of 946.5 C.C.P.

[66]      Like the other grounds of challenge presented by the L.P.A., this final ground cannot be accepted.

[67]      For all these reasons, the Corporation's motion to homologate an arbitral award must be allowed and the application to annul the said award made by the L.P.A. dismissed, with costs to the Corporation.

Montréal, Quebec,

December 15, 2003

Certified true translation

Suzanne M. Gauthier, C. Tr., LL.L.

                                                             FEDERAL COURT

                                                      SOLICITORS OF RECORD

DOCKET:                                                                   T-708-03

STYLE OF CAUSE:                                                   PILOTES DU SAINT-LAURENT CENTRAL INC.

Applicant

and

LAURENTIAN PILOTAGE AUTHORITY

Respondent

PLACE OF HEARING:                                             Montréal, Quebec

DATE OF HEARING:                                               November 5, 2003

REASONS FOR ORDER BY: RICHARD MORNEAU, PROTHONOTARY

DATED:                                                                      December 15, 2003

APPEARANCES:

André Baril                                                                    for the applicant

Mario St-Pierre                                                             for the respondent

Guy P. Major                                                               

SOLICITORS OF RECORD:

McCarthy, Tétrault                                                        for the applicant

Montréal, Quebec

Dunton, Rainville                                                            for the respondent

Montréal, Quebec

Guy P. Major                                                               

Montréal, Quebec