Pilotes du St-Laurent Central Inc. v. Laurentian Pilotage Authority, 2004 FC 1325

Date: 20041001

Docket: T-708-03

Citation: 2004 FC 1325

BETWEEN:

PILOTES DU SAINT-LAURENT CENTRAL INC.,

legal person established for a private interest, having its principal

place of business at 1545 rue Du fleuve,

bureau 200, in the city and district of Trois-Rivières,

province of Quebec G9A 6K4

Applicant/Respondent

- and -

LAURENTIAN PILOTAGE AUTHORITY,

legal person established in the public interest, established pursuant to

the Pilotage Act, R.S.C. 1985, c. P-14,

having its principal place of business at 715 Square Victoria,

in the city and district of Montréal,

province of Quebec H2Y 2H7

Respondent/Appellant

REASONS FOR ORDER

PINARD J.

[1]        The respondent/appellant Laurentian Pilotage Authority (LPA) filed a motion appealing a decision by Prothonotary Richard Morneau of this Court on December 15, 2003. In that decision the prothonotary allowed the motion to homologate the arbitration award made by arbitrator Richard Marcheterre on March 12, 2003, a motion made pursuant to article 946.1 of the Quebec Code of Civil Procedure, R.S.Q., c. C-25 (the C.C.P.).

[2]        The LPA is a federal agency created by the Pilotage Act, R.S.C. 1985, c. P-14 (the Act). Under section 18 of that Act the LPA manages a pilotage service on the St. Lawrence River, which involves providing compulsory pilotage for ships moving in certain areas of the river by pilots whose knowledge of this waterway is well established, so as to ensure the safety of navigation. The applicant/respondent Pilotes du Saint-Laurent Central Inc. (the PSLC) is a legal person established for a private interest which provides the LPA with pilotage services for ships moving along the St. Lawrence River.

[3]        Two of the districts in the region controlled by the LPA are served by corporations consisting of pilots who have a licence for the appropriate sector, pursuant to section 15 of the Act. Pilotage in the waters between Québec and Les Escoumins was the subject of a special contract between the LPA and the Pilotes du Bas St-Laurent Inc. (PBSL), while pilotage in the waters between the St-Lambert lock and Québec was the subject of a contract between the LPA and the PSLC signed on September 7, 1999.

[4]        Clauses 15.02 and 15.03 of Appendix A of the latter contract between the parties to the case at bar deal with pilotage fees. Over a period of four years, the contract provides for annual increases in fees of 3%. Under clause 15.03, one of the parties may reject the 3% increase for the last year of the contract, namely that running from July 1, 2002 to June 30, 2003. The PSLC exercised this right, claiming a 12% increase in its fees for this last year of the contract. As discussions between the parties in this regard did not reach an agreement, the case was taken to an arbitrator pursuant to clause 19 of the contract, to determine the quantum of the fee increase in question.

[5]        On March 12, 2003, the arbitrator rendered his decision, ordering that an increase of 8% in PSLC fees be paid for the period July 1, 2002 to June 30, 2003. The conclusion of his decision reads as follows:

[TRANSLATION]

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

[6]        The PSLC, pursuant to article 946.1 C.C.P., then filed a motion to homologate this arbitration award in this Court. The LPA, for its part, relied on article 947.1 C.C.P. as a basis for objecting to this homologation and asked that the arbitration award be quashed. On December 15, 2003, Prothonotary Morneau allowed the motion to homologate and dismissed the application to quash the arbitration award in question: hence the appeal at bar.

[7]        As the prothonotary's decision disposes of the motions in homologation and to quash, I must exercise my own discretion and reconsider the case de novo (Canada v. Aqua-Gem Investments Ltd., [1993] 2 F.C. 425).

* * * * * * * * * * * *

[8]        The following legislative and contractual provisions are relevant, inter alia:

(a) Code of Civil Procedure, R.S.Q., c. C-25:

(b) Pilotage Act, R.S.C. 1985, c. P-14:

(c) Appendix A of the Pilotage Service Contract concluded between the parties:

[TRANSLATION]

15.02       (a)           As of July 1, 2000, all amounts for pilotage fees contained in Appendix A in effect at June 30, 2000, are increased by a percentage equal to 3%.

(b)           As of July 1, 2001, all amounts for pilotage fees contained in Appendix A in effect at June 30, 2001, are increased by a percentage equal to 3%.

(c)           As of July 1, 2002, all amounts for pilotage fees contained in Appendix A in effect at June 30, 2002, are increased by a percentage equal to 3%.

15.03       Notwithstanding paragraph 15.02(c), either of the PARTIES may, by giving prior written notice to the other 90 days before July 1, 2002, reject the fee increase in this Appendix scheduled for July 1, 2002. The PARTIES shall then negotiate in good faith the fee increase scheduled for the period mentioned in clause 15.02(c), and if no agreement is negotiated in this regard within a reasonable time, the procedure for settlement of disputes or disagreements set out in clause 19 of the Service Contract shall apply to determine the quantum of the fee increase in clause 15.02(c) above.

(d) Pilotage Service Contract between the parties:

[TRANSLATION]

19.09        The arbitrator can neither amend, modify or add to the provisions of this contract. However, the arbitrator enjoys all the powers necessary for the exercise of his jurisdiction, including the power to issue subpoenas.

. . . . .

19.11        Should it become necessary to resort to the courts, the PARTIES agree and guarantee that such court proceedings shall be initiated in the Federal Court of Canada for all cases over which that Court has jurisdiction.

* * * * * * * * * * * *

[9]        The LPA submitted that the prothonotary erred by refusing to recognize that the arbitrator had exceeded his jurisdiction, that his award was contrary to public order, and finally, that the arbitrator did not observe the rules of fundamental justice.

[10]      On the excess of jurisdiction, the LPA relied on article 946.4(4) of the C.C.P. and submitted, first, that the arbitrator assumed that he was required to establish parity between the fees paid to the two corporations of pilots, namely the PSLC and the PBSL, without even taking into account the fact that a significant difference already existed between the remuneration of these parties under the contracts signed. The LPA explained that the fees paid to these two corporations are established by a calculation formula according to which a number of units and a time factor are multiplied by a monetary amount. The LPA noted that this monetary amount was agreed upon between the parties in the negotiation of each of the service contracts and there was a discrepancy in monetary terms between the economic value of the pilotage services provided by the PSLC and those of the PBSL. Accordingly, the LPA submitted that the prothonotary erred by ignoring the fact that the arbitrator assumed the parties had treated pilotage in the two districts as having the same value.

[11]      Secondly, the LPA objected that the arbitrator exceeded his mandate by altering the fees agreed upon for the first three years of the contract. It submitted that the 8% fee increase was based on the discrepancy in increases granted, in the arbitrator's view, to both pilotage corporations since 2000. In the LPA's submission, the arbitrator thus ignored the prior negotiations between the parties to establish remuneration for the fourth year and made a judgment on the years of the contract that were not before him.

[12]      Thirdly, the LPA submitted that the prothonotary erred by homologating the arbitration award because it was not within the arbitrator's jurisdiction to redo its budgetary forecasts so as to assess its ability to pay the 8% fee for the fourth year of the contract.

[13]      Regarding public order, the LPA cited article 946.5 C.C.P. and noted that the arbitration award infringed public order, in light of the very strict financial controls imposed upon it under the Financial Administration Act and the Pilotage Act. The LPA explained that the result of the arbitration award was to require it to take out a loan without having the necessary government approval through public legislation, which tends to illegally bind the exercise of the discretion of the Minister of Finance, the Treasury Board and the Governor in Council.

[14]      Finally, the LPA cited article 946.4(3) C.C.P. and objected that the prothonotary did not regard as a breach of the rules of fundamental justice the fact that the arbitrator prevented it from presenting its case, by denying it the right to question a PSLC representative concerning the latter's expenses.

* * * * * * * * * * * *

[15]      It is impossible for the Court to weigh the LPA's arguments regarding the arbitrator's excess of jurisdiction without examining the merits of the dispute, which it is clearly prohibited from doing by article 946.2 C.C.P. In Desputeaux v. Éditions Chouette (1987) Inc., [2003] 1 S.C.R. 178, at 218, the Supreme Court of Canada specifically considered the application of article 946.2 C.C.P.:

[67]         The legislature has affirmed the autonomy of arbitration by stating, in art. 946.2 C.C.P., that "[t]he court examining a motion for homologation cannot enquire into the merits of the dispute". (That provision is applicable to annulment of an arbitration award by the reference to it in art. 947.2 C.C.P.) In addition, the reasons for which a court may refuse to homologate or annul an arbitration award are exhaustively set out in arts. 946.4 and 946.5 C.C.P.

[16]      In Gazette v. Blondin (August 6, 2003), 500-09-011439-015, the Quebec Court of Appeal said the following regarding article 946.4(4) C.C.P.:

[TRANSLATION]

[50]         Pursuant to article 946.4(4) C.C.P., however, we must also ask whether the Sylvester award No. 2 contains "decisions on matters beyond the scope of the [arbitration] agreement". Considering the meaning to be given to this phrase, our colleague Thibault J.A. wrote in Laurentienne-vie (La), compagnie d'assurances inc. v. Empire (L'), compagnie d'assurance-vie, [2000] R.J.Q. 1708, [44]:

It would appear that, in deciding whether the arbitration award goes beyond the scope of the arbitration agreement, we should disregard the interpretation leading to the result and concentrate on the result. This interpretation of the basis for annulment mentioned in article 946.4 (4) C.C.P., in addition to being consistent with article 946.2 C.C.P., which prohibits a court considering a motion to annul the arbitration award from inquiring into the merits of the dispute, is consistent with the approach taken by the writer Sabine Thuilleaux.

[Emphasis added.]

[17]      In the case at bar, if in the same way we confine ourselves to the result, that is the arbitrator's specific conclusion in his arbitration award, it is impossible to conclude that the question he decided has no connection with the case before him: quite the contrary. By deciding on an 8% fee applicable in the fourth year of the contract, as appears in the conclusion of his decision (paragraph 151), the arbitrator simply exercised his mandate in accordance with the intention of the parties as expressed in clause 15.03 of Appendix A of their Pilotage Service Contract. As it is necessary to disregard the interpretation leading to that result, it is not for the Court to take the arbitrator's place in weighing the evidence that was before him in the five days of hearing, during which the LPA called four witnesses, including an expert witness, and the PSLC three witnesses, including an expert witness. The Court does not have to determine whether the arbitrator was wrong to consider a degree of parity between the PSLC and PBSL, or whether he misinterpreted the evidence regarding the LPA's ability to pay, or finally whether the arbitrator allowed the PSLC fees to bridge the gap. What matters is to note that in assigning an 8% fee increase to the fourth year of the contract the arbitrator was only carrying out his function, that he acted in accordance with his duty. As the Quebec Court of Appeal noted in Gazette v. Blondin, supra, at paragraph 51:

[TRANSLATION]

A detailed review of the reasons on which the arbitrator relied might perhaps indicate that another arbitrator would have disposed differently of one or other of the questions submitted to the arbitrator Sylvestre. However, that is not the question: a court having before it a motion to annul pursuant to article 947 cannot, I repeat, inquire into the merits of the dispute . . .

[Emphasis added.]

[18]      On the question of public order, I cannot see how this can be affected in the circumstances by the setting of a fee percentage. The LPA negotiated a contract which contains an arbitration clause giving the arbitrator jurisdiction to determine the amount of the PSLC fee increase scheduled for July 1, 2002. It has to be assumed that the LPA negotiated the terms of this contract in good faith. It is not justified in then arguing that it does not have the means to pay, that the effect of the arbitration award was to force the hands of public agencies and that there was accordingly a breach of public order. First, the arbitrator concluded that the LPA was able to pay, and as I have already said, it is not for this Court to review the validity of that conclusion by examining the merits of the dispute. Then, it is important to avoid widespread recourse to public order in the field of the arbitration system, so as to preserve the decision-making independence of arbitration. The fact that the outcome of the dispute may have an impact on third parties, in any case, is not a factor that can be a basis for denying homologation. All these rules are clearly stated by the Supreme Court of Canada in Desputeaux v. Éditions Chouette, (1987) Inc., supra, in particular at 211 to 216:

[52]         . . . The development and application of the concept of public order allows for a considerable amount of judicial discretion in defining the fundamental values and principles of a legal system. In interpreting and applying this concept in the realm of consensual arbitration, we must therefore have regard to the legislative policy that accepts this form of dispute resolution and even seeks to promote its expansion. For that reason, in order to preserve decision-making autonomy within the arbitration system, it is important that we avoid extensive application of the concept by the courts. Such wide reliance on public order in the realm of arbitration would jeopardize that autonomy, contrary to the clear legislative approach and the judicial policy based on it . . .

[54]         Public order arises primarily when the validity of an arbitration award must be determined. The limits of that concept's role must be defined correctly, however. First, as we have seen, arbitrators are frequently required to consider questions and statutory provisions that relate to public order in order to resolve the dispute that is before them. Mere consideration of those matters does not mean that the decision may be annulled. Rather, art. 946.5 C.C.P. requires that the award as a whole be examined, to determine the nature of the result. The Court must determine whether the decision itself, in its disposition of the case, violates statutory provisions or principles that are matters of public order. In this case, the Code of Civil Procedure is more concerned with whether the disposition of a case, or the solution it applies, meets the relevant criteria than with whether the specific reasons offered for the decision do so.    . . . And lastly, in considering the validity of the award, the clear rule stated in art. 946.2 C.C.P., which prohibits a court from inquiring into the merits of the dispute, must be followed. In applying a concept as flexible and changeable as public order, these fundamental principles must be adhered to in determining the validity of an arbitration award.

. . . . .

[60]         Accordingly, the award in issue in this case does not deal with a matter that by its nature falls outside the jurisdiction of the arbitrators. It is therefore not contrary to public order; if it had been, a court would have been justified in annulling it (art. 946.5 C.C.P.). On the contrary, it is a valid disposition of a matter, ownership of copyright, that is one of the primary elements of the dispute between the parties in respect of the interpretation and application of the agreements between them.

. . . . .

[62]         First, the Code of Civil Procedure does not consider the effect of an arbitration award on third parties to be a ground on which it may be annulled or its homologation refused (art. 946.4 C.C.P.).

[Emphasis added.]

[19]      Finally, the LPA's argument that the arbitrator prevented it from presenting its case is without foundation. After hearing the parties, the arbitrator did not allow the examination application made by the LPA, as he found it to be irrelevant. Here again, it is not for the Court to review the merits of the dispute and determine whether the PSLC expenses, in performance of the latter's mandate to manage pilot fees, were inadmissible in evidence in determining the fees of those pilots under clauses 15.02(c) and 15.03 of Appendix A of the Service Contract in question. Further, the LPA was able to present its viewpoint before the arbitrator decided this matter. Finally, as the Supreme Court of Canada indicated in Desputeaux, supra, at 220:

[70]         . . . The methods by which evidence may be heard are flexible and are controlled by the arbitrator, subject to any agreements between the parties.

* * * * * * * * * * * *

[20]      For all these reasons, I conclude that the arbitrator acted in accordance with his duties and made no error which could be a basis for annulling the arbitration award. The prothonotary was accordingly right to homologate the award and the motion appealing his decision is dismissed with costs.

                                                                                                                                      "Yvon Pinard"                  

                                                                                                                                                   Judge                        

OTTAWA, ONTARIO

October 1, 2004

Certified true translation

Jacques Deschênes, LLB

                                                             FEDERAL COURT

                                                      SOLICITORS OF RECORD

DOCKET:                                                                   T-708-03

STYLE OF CAUSE:                                                   PILOTES DU SAINT-LAURENT CENTRAL INC. v. LAURENTIAN PILOTAGE AUTHORITY

PLACE OF HEARING:                                             Montréal, Quebec

DATE OF HEARING:                                               September 14, 2004

REASONS FOR ORDER BY:                                  Pinard J.

DATED:                                                                      October 1, 2004

APPEARANCES:

André Baril                                                                    FOR THE APPLICANT/RESPONDENT

Mario St-Pierre                                                             FOR THE RESPONDENT/APPELLANT

Guy Major

SOLICITORS OF RECORD:

McCarthy, Tétrault, s.r.l.                                                FOR THE APPLICANT/RESPONDENT

Montréal, Quebec

Dunton, Rainville, s.e.n.c.                                               FOR THE RESPONDENT/APPELLANT

Montréal, Quebec