R. in right of Newfoundland v. Commission Hydro-Electrique de Québec, [1982] 2 SCR 79

Supreme Court of Canada

R. in right of Newfoundland v. Commission Hydro-Electrique de Québec, [1982] 2 S.C.R. 79

Date: 1982-08-09

Her Majesty The Queen in right of the Province of Newfoundland Appellant;

and

Commission Hydro-Electrique de Québec Respondent;

and

Churchill Falls (Labrador) Corporation Limited Mis en cause;

and

Royal Trust Company and General Trust of Canada Mis en cause.

Churchill Falls (Labrador) Corporation Limited Appellant;

and

Commission Hydro-Electrique de Québec Respondent;

and

Her Majesty The Queen in right of the Province of Newfoundland Mis en cause;

and

Royal Trust Company and General Trust of Canada Mis en cause.

File Nos.: 16052 and 16079.

1981: October 29, November 3; 1982: August 9.

Present: Martland, Dickson, Beetz, Estey, Mclntyre, Chouinard and Lamer JJ.

ON APPEAL FROM THE COURT OF APPEAL FOR QUEBEC

Courts—Jurisdiction—Contract—Clause conferring jurisdiction on Quebec courts—Motion for declaratory judgment filed in Quebec—Newfoundland not a party to contract—Quebec courts lack jurisdiction over Newfoundland—Code of Civil Procedure, arts. 68, 454, 456.

Civil procedure—Motion for declaratory judgment—Contract—Genuine problem of law—Problem due to act of third party—Interest required to obtain declaratory remedy—Exception of lis pendens - Code of Civil Procedure, arts. 55, 453.

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Churchill Falls develops the hydro-electric resources of Churchill Falls under a lease granted by Newfoundland. By contract Hydro-Québec undertook to buy, and Churchill Falls to sell, almost all this production. By Order in Council Newfoundland, claiming to exercise a right under the lease, required Churchill Falls to supply it with 800 megawatts of power commencing on October 1, 1983. When Churchill Falls refused to comply, the Attorney General of Newfoundland brought a declaratory action against it and Hydro-Québec in the Supreme Court of Newfoundland. Hydro-Québec, relying on the clause conferring jurisdiction contained in the Power Contract, filed a motion for a declaratory judgment in the Superior Court for the District of Montreal. A first judgment of the Superior Court allowed the declinatory exception of Newfoundland to the motion, a second the motion to dismiss filed by Churchill Falls. The Court of Appeal reversed both judgments.

Held: The appeal of Newfoundland should be allowed. The appeal of Churchill Falls should be dismissed.

(1) The declinatory exception: A contract does not confer jurisdiction over a person who is not a party to it. In the case at bar, the jurisdiction ratione personae over Churchill Falls which the Power Contract conferred on the Superior Court for the District of Montreal did not extend to Newfoundland which was not a party to the Power Contract. The possible repercussions of Newfoundland’s actions in that province on the Power Contract did not either have the effect of conferring jurisdiction on the Quebec court under art. 68 C.C.P. By seeking specific conclusions against Newfoundland, asking that the judgment to be rendered be made applicable to it, Hydro-Québec exceeded the requirements of art. 454 C.C.P.

(2) The motion to dismiss: In order to use the declaratory action, the interest in obtaining a solution to a genuine problem of law must be real, regardless of whether the problem is due to the act of a third party. Here, Hydro-Québec had a real interest as, ever since the Newfoundland Order in Council was adopted and legal proceedings were brought to oblige Churchill Falls to comply with it, Hydro-Québec entertained doubts as to the legal effect on the Power Contract of the possible obligation of Churchill Falls to meet the request of Newfoundland for power. Finally, there was no lis pendens, or “kind of lis pendens”, between the proceedings brought in the courts of Newfoundland and this motion for a declaratory judgment since the two actions raise different points of law.

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Porter Co. v. Constructions du St-Laurent Ltée, [1952] Que. Q.B. 662; Edelstein v. Kert Manufacturing Co., [1970] R.P. 179; Procon (Great Britain) Ltd. v. Golden Eagle Co., [1976] C.A. 565; Duquet v. Town of Sainte-Agathe-des-Monts, [1977] 2 S.C.R. 1132; Ville de Montréal v. Bureau des examinateurs électriciens de la province de Québec, [1977] C.S. 851; Campisi v. Procureur général du Québec, [1978] C.A. 520, distinguished; Union Oil Co. of Canada Ltd. v. The Queen in right of Canada (1974), 52 D.L.R. (3d) 388, affirmed by [1976] 1 F.C. 74, approved; Attorney-General of Newfoundland v. Churchill Falls (Labrador) Corp. (1980), 109 D.L.R. (3d) 146; Gouvernement de la République démocratique du Congo v. Venne, [1971] S.C.R. 997; Gignac v. Siscoe Metals Ltd., [1944] Que. K.B. 192, referred to.

APPEALS from two judgments of the Court of Appeal of Quebec, [1980] C.A. 203, reversing two judgments of the Superior Court allowing a declinatory exception and a motion to dismiss. Appeal of Newfoundland allowed. Appeal of Churchill Falls dismissed.

Philip Vineberg, Q.C., for the appellant and mis en cause Her Majesty the Queen in right of the Province of Newfoundland.

Claude Tellier, Q.C., for the appellant and mis en cause Churchill Falls (Labrador) Corporation Limited.

Michel Jetté and François Aquin, for the respondent.

Yves Mayrand, for the mis en cause Royal Trust Co.

English version of the judgment of the Court delivered by

BEETZ J.—These are two appeals from two decisions of the Quebec Court of Appeal, [1980] C.A. 203, setting aside two judgments of the Superior Court.

The Commission Hydro-Electrique du Québec (Hydro-Québec) filed a motion for a declaratory judgment in the Superior Court pursuant to art. 453 of the Code of Civil Procedure. In that proceeding Churchill Falls (Labrador) Corporation Limited (Churchill Falls) was the respondent and Her Majesty the Queen in right of the Province of

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Newfoundland (Newfoundland) was one of the mis en cause.

The first decision, rendered by Montgomery, Turgeon and Monet JJ.A. of the Court of Appeal, dismissed a declinatory exception by Newfoundland which Reeves J. of the Superior Court had granted.

In the first appeal Newfoundland is asking that we set aside the decision of the Court of Appeal and allow the declinatory exception.

The second decision, rendered by the same judges of the Court of Appeal, dismissed a motion to dismiss presented by Churchill Falls which the same Superior Court judge had granted.

In the second appeal Churchill Falls is asking that we set aside the decision of the Court of Appeal and grant the motion to dismiss.

I—Facts and proceedings

At this stage the allegations in the motion for a declaratory judgment must be taken as established and we shall cite most of them by way of background to the issue, as did the Court of Appeal and the Superior Court.

The following are the allegations of Hydro-Québec:

[TRANSLATION] 1. On May 12, 1969 a contract was entered into by applicant and respondent pursuant to which applicant undertook to purchase and respondent undertook to sell almost all the electrical energy generated by a hydro-electric plant that was to be built by respondent at the Churchill Falls, on the Churchill River, in accordance with certain specifications provided for in the contract;

…

3. Under this contract, R-1, the plant was to be capable of delivering to applicant, at the point of delivery specified, a maximum output of 4,383,600 kw during October, November, December, January, February, March, April and May of each year and of 4,163,500 kw during June, July, August and September; this output could be increased, however, by an additional capacity as provided in paragraph 6.4 of contract R-1;

…

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6. In fact the hydro-electric plant provided for in contract R-1 was constructed in such a manner that the effective date and the completion date as defined in title II of paragraph 1.1 of Article I fell on September 1, 1976, copies of two certificates issued by Acres Canadian Bechtel of Churchill Falls attesting to this fact being filed herewith jointly as Exhibit R-2;

7. As appears from paragraph 2.1 of contract R-1, respondent undertook to sell to applicant all the electrical power and energy that the plant could generate, except the quantities referred to in paragraphs 4 and 5 of the present motion;

8. As appears in particular from paragraph 6.6 of contract R-1, however, respondent reserved the right to withhold, on certain conditions and in addition to the quantities referred to in the preceding paragraph of the present motion, certain amounts of power and energy not to exceed a total of 300,000 kw in the case of the power and 2.362 billion kwh per annum in the case of the energy;

…

13. Applicant urgently needed and still needs all electrical energy generated by the harnessing of Churchill Falls to ensure economic growth in the province of Quebec and to meet the present and future needs of consumers of energy in that province;

…

15. In consideration of this express undertaking by respondent, applicant granted it major financial benefits and guarantees without which the project could never have been realized;

…

20. Under Article XV applicant undertook to provide respondent with the interest over and above certain rates, namely 5½ per cent in the case of the first mortgage bonds and 6 per cent in all other cases, that respondent would have to pay on the various loans taken out or to be taken out to implement contract R-1;

21. Under this Article XV applicant has so far disbursed approximately eighty-five million five hundred thousand dollars ($85,500,000.00);

22. None of the above-mentioned financial considerations or guarantees given by applicant to respondent would ever have been granted had it not been for respondent’s firm and unambiguous undertaking to deliver to it all the power and energy produced by the Churchill Falls plant, as mentioned in paragraph 14 of the present motion;

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23. In order to make possible the total financing of the project, applicant itself had to purchase one hundred million dollars ($100,000,000.00) of bonds secured by a general mortgage over all respondent’s assets issued by the latter under a trust deed signed on September 1, 1968 by respondent and General Trust of Canada as trustee pursuant to the laws of the province of Quebec;

…

26. Pursuant to trust deed R-4, respondent assigned, transferred and pledged, for the benefit of its creditors, all its rights under contract R-1 in order to guarantee the obligations it had undertaken;

27. Moreover, it is provided in trust deed R-4, subject, however, to the provisions concerning subordination to the first mortgage bonds, that any default on the part of respondent under contract R-1 may constitute a default under trust deed R-4, with all the resultant consequences;

28. By a lease signed on May 16, 1961 between the Lieutenant-Governor in Council of the Province of Newfoundland and respondent, the former granted to the latter, among other rights, the right to harness the hydraulic forces in that part of the Churchill River referred to in the lease as the “Upper Churchill Watershed”, which includes the Churchill Falls, to develop its hydro-electric resources and to export the power and energy therefrom outside the province of Newfoundland;

…

30. On August 6, 1976, by Order in Council 1001-76, the Government of the province of Newfoundland purported to exercise a right under clause 2(e) of Part I of lease R-5, which reads as follows:

“2. Subject to the provisions, terms, conditions, exceptions and reservations in this Lease, the lease and demise of the Upper Churchill created hereby includes the grant to the Lessee during the term created by this Lease of…

(e) The right to transmit throughout the Province any electric power generated as the result of the harnessing of the whole or any part of the Upper Churchill and to export from the Province such power: Provided that upon the request of the Government consumers of electricity in the Province shall be given priority where it is feasible and economic to do so; and …”;

31. Under this Order in Council referred to in the preceding paragraph, the Government of the province of

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Newfoundland required respondent to comply with the following:

“BE IT THEREFORE ORDERED THAT CFLCo be and it is hereby requested to

(a) supply to Newfoundland and Labrador Hydro, an agent of Her Majesty in right of the Province, a total of 800 Megawatts of power, generated from the waters of the said Upper Churchill Watershed, at a 90% load factor, commencing on October 1, 1983; and

(b) give Newfoundland and Labrador Hydro access to limited quantities of power for commissioning purposes prior to October 1, 1983, all such power

(c) to be supplied at such price and upon such other terms and conditions as may be mutually agreed between CFLCo and Newfoundland and Labrador Hydro, and as shall, in any event, be not less favourable to CFLCo than the price and other terms and conditions prescribed in the Power Contract dated as of the 12th of May, A.D. 1969, and made between Quebec Hydro-Electric Commission and CFLCo; and

(d) to be delivered to Newfoundland and Labrador Hydro at or near Churchill Falls, the exact point or points of delivery to be such as may be mutually agreed between CFLCo and Newfoundland and Labrador Hydro …”.

…

34. On August 31, 1976, in a letter addressed to the Minister of Mines and Energy of the Government of the province of Newfoundland, respondent, through its president, gave notice of its refusal to comply with Order in Council R-6 beyond its ability to comply with it in accordance with the terms of contract R-1, a copy of this letter being filed herewith as Exhibit R-8;

35. On or about September 13, 1976 the mis-en-cause the Attorney General for the Province of Newfoundland, purporting to act on behalf of the Government, took action against respondent as first defendant and against applicant as second defendant, seeking declarations from the Supreme Court of Newfoundland to the following effect:

“(a) A declaration that the Plaintiff is entitled by virtue of paragraphe [sic] (e) of Clause 2 of Part I of the Lease to make the request for eight hundred (800) Megawatts of electric power as set forth in the Order-in-Council;

(b) a declaration that the Plaintiff, by reason of the Financial Agreement, is not prevented or prohibited from commencing this action;

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(c) a declaration that by virtue of Part I of the Lease and Sections 3 and 4 of the Act the First Defendant is obliged to comply with the request set forth in the Order-in-Council;

(d) a declaration that the First Defendant by complying with the request set forth in the Order-in-Council will not be in breach of any warranties contained in the Bond Purchase Agreements;

(e) a declaration that the First Defendant by complying with the request set forth in the Order-in-Council will not be in breach of any of the convenants or agreements contained in

(i) the Power Contract;

(ii) the Bond Purchase Agreements;

(iii) the First Mortgage Trust Deed;

(iv) the General Mortgage Trust Deed, and

(v) the Debenture Indenture;

(f) a declaration that the Power Contract, by its terms, is a contract to be performed substantially in the Province of Newfoundland;

(g) costs; and

(h) such further or other relief as this Court shall deem fit and just in the circumstances.”

36. A copy of this action is filed herewith as Exhibit R-9;

37. Upon the application of the mis-en-cause the Attorney General for the Province of Newfoundland, formulated by way of affidavit, this action was served on applicant in Montreal pursuant to an order of A.S. Mifflin C.J. of the Supreme Court of Newfoundland;

…

39. As appears from the action, Exhibit R-9, the mis-en-cause the Attorney General for the Province of Newfoundland was seeking from the Supreme Court of Newfoundland, among other conclusions, a declaration to the effect that in complying with the provisions of Order in Council R-6, respondent would not be in breach of the terms of contract R-1;

40. It is thus clear that the mis-en-cause the Attorney General for the Province of Newfoundland wishes to have the courts of the province of Newfoundland interpret contract R-1 and rule on certain rights and obligations arising therefrom, notwithstanding the terms of paragraph 1.2 of contract R-1, which reads as follows:

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“This Power Contract shall at all times and in all respects be governed by, and interpreted in accordance with, the laws of the Province of Quebec. The only Courts competent to adjudge disputes between the parties hereto arising out of this Contract are, subject to appeal to the Supreme Court of Canada when such appeal lies, the Courts of the Judicial District of Montreal, where for purposes of litigation only as aforesaid, CFLCo elects domicile for service at One Westmount Square in the City of Westmount, District of Montreal or at such other place in the said District of Montreal of which CFLCo may from time to time give written notice to Hydro‑Quebec.”

41. Applicant did not file any appearance under the laws of the province of Newfoundland in response to this action and declined the jurisdiction of the Supreme Court of Newfoundland over certain of the matters which the mis-en-cause the Attorney General for the Province of Newfoundland was attempting to bring before it;

42. More specifically, and without having appeared, as stated above, applicant filed pursuant to the rules of procedure in effect in Newfoundland and argued on March 11, 1977 a notice of motion to quash and set aside the order for service rendered by A.S. Mifflin C.J., Exhibit R-10, as regards paragraphs 3 to 18 and 24 to 27 of the allegations in action R-9 and conclusions (d), (e) and (f) of the same pleading;

43. A copy of this notice of motion presented by applicant is filed herewith as Exhibit R‑11;

44. Goodridge J. of the Supreme Court of Newfoundland now rendered judgment dismissing notice of motion R-11, and applicant appealed from that decision to the Newfoundland Court of Appeal;

45. A copy of the reasons for this judgment is filed as Exhibit R-12;

46. As appears from the reasons for judgment R-l2, Goodridge J. ruled that Hydro-Québec had not appeared and that it had in no way submitted to the jurisdiction of the Newfoundland courts, despite the pleadings it had filed so far;

…

48. Respondent, for its part, has not yet pleaded to action, Exhibit R-9, but has appeared before the Newfoundland Courts, has totally accepted their jurisdiction

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over the proceedings as instituted and has even supported the arguments of the mis‑en‑cause the Attorney General for the Province of Newfoundland against motion R‑11;

49. It is in applicant’s interests to have its rights under contract R-1 determined immediately since respondent may still comply with Order in Council R-6, voluntarily or otherwise, and this will affect applicant’s rights and reduce its ability to meet future energy needs in the province of Quebec;

50. Applicant must have its rights under contract R-1 determined immediately so that it can make plans to meet the province of Quebec’s future electrical energy needs;

51. Applicant’s rights under contract R-1 are being challenged in a forum which it does not recognize as having any jurisdiction in the matter;

52. As appears from action R-9, the mis-en-cause the Attorney General for the Province of Newfoundland sought to link closely in his action the determination of the alleged rights of the Government of the Province of Newfoundland under lease R-5 and Order in Council R-6 with the determination of the rights and obligations of applicant and respondent under contract R-1;

53. The mis-en-cause Royal Trust Company is an interested party, like the mis-en-cause General Trust of Canada, owing to the following factors;

54. By a trust deed in accordance with the laws of the province of Quebec signed on May 15, 1969 between respondent, the mis-en-cause Royal Trust Company, as trustee for the province of Newfoundland, applicant and General Trust of Canada, as intervenors, respondent assigned, transferred and pledged as a guarantee of its obligations all its rights under contract R-1;

55. A copy of this trust deed registered in Montreal on May 20, 1969 as No. 2138791 is filed herewith as Exhibit R-13;

56. Under the terms of trust deed R-13, a default under contract R-1 could constitute a breach with all the resultant consequences;

Before considering the conclusions sought by Hydro-Québec in its motion for a declaratory judgment, it should be noted that certain of the preceding allegations were overtaken by events, as can be seen in part from a decision of the Newfoundland Court of Appeal referred to by Mont-

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gomery J.A. in the Court of Appeal, which has now been reported: Attorney-General of Newfoundland v. Churchill Falls (Labrador) Corp. (1980), 109 D.L.R. (3d) 146.

The judgment rendered by Goodridge J. referred to in allegation No. 44 was affirmed by the Newfoundland Court of Appeal, and leave to appeal to this Court was refused on June 29, 1978, [1978] 1 S.C.R. xi. However, the principal effect of that decision is to confirm the order for service ex juris of Newfoundland’s pleadings on Hydro-Québec.

The remedy sought by Hydro-Québec in the proceeding described in allegation No. 42 was obtained in part in a subsequent proceeding: conclusions (d), (e) and (f) of Newfoundland’s action, cited in allegation No. 35, were ordered struck out by the decision in Attorney-General of Newfoundland v. Churchill Falls (Labrador) Corp., supra. However, the allegations on which these conclusions were based were not themselves struck out, in case they might assist in ruling on the conclusions that had not been struck out.

The following were the conclusions sought by Hydro-Québec in its motion for a declaratory judgment:

[TRANSLATION] STATE AND DECLARE that under contract R-1 only the Courts of the Judicial District of Montreal, subject to the right of appeal to the Supreme Court of Canada, are competent to adjudge disputes between the parties arising out of that contract;

STATE AND DECLARE that under contract R-1 applicant is obliged to purchase and respondent obliged to sell and deliver to applicant all the electrical power and energy that can be generated by the hydro-electric plant currently operated by respondent at Churchill Falls, on the Churchill River, in accordance with the provisions of paragraphs 2.1, 6.2, 6.4 and 6.6 of contract R-1;

STATE AND DECLARE that the failure by respondent to sell and deliver to applicant all the electrical power and energy that can be generated by the hydro-electric plant currently operated by respondent at Churchill Falls, on the Churchill River, in accordance

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with the foregoing conclusion constitutes a breach of contract under contract R-1;

DECLARE the judgment to be rendered on the present motion to be applicable to the mis-en-cause;

II—The declinatory exception

1. The judgment of the Superior Court

The trial judge allowed the declinatory exception chiefly on the ground that arts. 94 et seq. of the Code of Civil Procedure respecting proceedings concerning the Crown apply only to the rights of Her Majesty in right of the Province of Quebec and that there is no legislative provision permitting one to implead the Crown in right of Newfoundland before the Quebec courts. He thus seems to have relied on the principle of Crown immunity in British and Canadian public law. This is not absolutely clear, however, since he also refers to the distinction between acta gestionis and acta imperii, a distinction discussed in public international law with reference to the immunity of sovereign states: Gouvernement de la République démocratique du Congo v. Venne, [1971] S.C.R. 997.

2. The decision of the Court of Appeal

The main reasons of the Court of Appeal were written by Monet J.A. After stating that the rules of international law with respect to immunity must not be confused with those of domestic public law, he characterized Newfoundland’s actions as acta gestionis. (Montgomery J.A. expressed some doubt on this point, in supplementary reasons.) Monet J.A. then went on to hold that if Newfoundland did indeed have immunity, its intermeddling in the contractual affairs of Churchill Falls and Hydro-Québec prevented it from invoking such immunity. He also noted that the petition of right had been abolished a number of years ago and that the motion for a declaratory judgment was based principally on contractual undertakings made in Montreal, and decided that the Montreal courts had jurisdiction in view of art. 68 of the Code of Civil Procedure.

3. Arguments made by Newfoundland

In support of its declinatory exception and against the decision of the Court of Appeal, New-

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foundland raised two arguments it had already made at trial and on appeal.

The first argument: under common law public law, the Crown in right of the Province of Newfoundland enjoys a complete immunity that deprives the Quebec courts of any jurisdiction except with the Crown’s fiat. No legislation has eliminated or derogated from this immunity.

The second argument: in view of art. 68 of the Code of Civil Procedure, the Superior Court of the district of Montreal has no jurisdiction over Newfoundland even if the latter is to be regarded as a mere individual with no form of immunity.

The second argument is well-founded, in my view. I shall not deal with the first one.

4. Article 68 of the Code of Civil Procedure

This article reads as follows:

68. Subject to the provisions of articles 70, 71, 74 and 75, and notwithstanding any agreement to the contrary, a purely personal action may be instituted:

1. Before the court of the defendant’s real domicile or, in the cases contemplated by article 85 of the Civil Code, before that of his elected domicile.

If the defendant has no domicile in the Province but resides or possesses property therein, he may be sued before the court of his ordinary residence, before the court of the place where such property is situated, or before the court of the place where the action is personally served upon him;

2. Before the court of the place where the whole cause of action has arisen; or, in an action for libel published in a newspaper, before the court of the district where the plaintiff resides if the newspaper has circulated therein;

3. Before the court of the place where the contract which gives rise to the action was made.

A contract giving rise to an obligation to deliver, negotiated through a third party who was not the representative of the creditor of such obligation, is deemed to have been made at the place where the latter gave his consent.

The Court of Appeal does not specify which of the paragraphs of this article, in its view, gives the Superior Court of the district of Montreal jurisdiction over Newfoundland. In his reasons Monet J.A. nonetheless states that the motion for a declaratory judgment [TRANSLATION] “is based essentially on contractual undertakings made in

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Montreal”. He thus seems to find the source of the Montreal courts’ jurisdiction in para. 3 of art. 68 of contract R-1 dated May 12, 1969 (the Power Contract) referred to in allegations 1 and 3, supra, inter alia, of Hydro-Québec’s motion for a declaratory judgment. This is also the position taken by Hydro-Québec in its memorandum.

However, this contract was between Hydro-Québec and Churchill Falls. Newfoundland is not a party to it. Newfoundland is a party to the lease it granted to Churchill Falls on May 16, 1961, as stated in allegation No. 28, supra, of the motion for a declaratory judgment. However, Hydro-Québec is not a party to that lease, which moreover is not covered by the motion for a declaratory judgment, even though it is referred to in the allegations.

I do not see how, in a purely personal matter, Newfoundland could be impleaded before the Montreal courts on the basis of a contract, the Power Contract, to which it is a total stranger. The jurisdiction ratione personae over Churchill Falls which the Power Contract confers on the Superior Court does not extend to Newfoundland. As Collier J. rightly stated in Union Oil Co. of Canada Ltd. v. The Queen in right of Canada (1974), 52 D.L.R. (3d) 388, in a note at the foot of p. 393:

The fact that one defendant is properly before the Court, and another party may be a necessary or desirable defendant, does not confer jurisdiction.

(His judgment was affirmed by the Federal Court of Appeal, [1976] 1 F.C. 74.)

The Court of Appeal referred to Newfoundland’s actions, which it characterized as intermeddling in the Power Contract. These actions are Newfoundland’s Order in Council, dated August 6, 1976, cited in allegation No. 31, supra, of Hydro-Québec’s motion for a declaratory judgment, and the declaratory action instituted by Newfoundland with respect to Churchill Falls and Hydro-Québec on September 13, 1976, referred to in allegation No. 35, supra, of Hydro-Québec’s motion. The Court of Appeal held that this

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intermeddling would prevent Newfoundland from invoking its immunity, if any, or, it seems, that it would link Newfoundland with the Power Contract in some way.

Hydro-Québec reiterated this argument in its memorandum, maintaining that the positions taken by Newfoundland mean that the Power Contract can be set up against it, at least for purposes of its interpretation.

Counsel for Newfoundland, for his part, conceded in his memorandum that Newfoundland’s Order in Council dated August 6, 1976 is likely to affect the Power Contract, something which seems possible if the lease of May 16, 1961 is to be given the interpretation advocated by Newfoundland. The same could probably be said of the declaratory action instituted by Newfoundland with respect to Churchill Falls and Hydro-Québec. Counsel for Newfoundland argued, however, and correctly so, in my view, that these possible repercussions of Newfoundland’s actions on the Power Contract do not have the effect of conferring jurisdiction on the Superior Court for the district of Montreal under art. 68 of the Code of Civil Procedure. Neither do they make it possible to set up the Power Contract against Newfoundland.

Whatever interpretation is to be given to the Power Contract, Newfoundland cannot have any rights or obligations under that contract, to which, I repeat, it is a complete stranger. It is conceivable that Newfoundland has rights under the lease of May 16, 1961, and it is these rights that it was trying to assert by the Order in Council of August 6, 1976 and the declaratory action it instituted with respect to Churchill Falls and Hydro-Québec.

However, I do not see how an Order in Council made in Newfoundland, the validity of which is not disputed, or judicial proceedings instituted in Newfoundland and contested in Newfoundland, could confer jurisdiction ratione personae over Newfoundland on the Superior Court for the district of Montreal, by reason of their possible impact on a contract to which Newfoundland is not a party.

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The Court of Appeal also observed that the Superior Court judgment is silent about [TRANSLATION] “the obligations assumed by Newfoundland in the trust contract (Exhibit R‑13)”.

This was a trust deed entered into by Churchill Falls and the Royal Trust Company on May 15, 1969. Hydro-Québec, under section 24, Newfoundland, under section 25, and General Trust of Canada, under section 26, intervened in it.

By its comment the Court of Appeal seems to suggest that this deed, which involved all the parties and which is related to the Power Contract, could confer jurisdiction on the Superior Court. Hydro-Québec argued in its memorandum in this regard that this trust deed indicates the advantage there would be in having the judgment on the motion for a declaratory judgment applicable to all parties.

It should be said first that the fact that it seems desirable for a certain court to have jurisdiction does not create such jurisdiction.

It should also be stated that the motion for a declaratory judgment does not apply to this trust deed and does not in any way require its interpretation. Hydro-Québec acknowledges this in its memorandum, moreover.

Furthermore, there is reason to doubt, in principle, that art. 68 of the Code of Civil Procedure allows a court to assume jurisdiction over a contract that is outside its jurisdiction simply because it is related to another contract which is within its jurisdiction. The Court of Appeal has already decided this by a majority in Gignac v. Siscoe Metals Ltd., [1944] Que. K.B. 192. The relevant provision at the time was art. 94(5) of the Code of Civil Procedure, now replaced by art. 68(3). McDougall J. wrote at pp. 198-99:

The first rule of art. 94, and the rule which I take to be the general rule, is that a party is summoned before the Court of his domicile. Jurisdiction of the Courts other than those of the domicile are by way of exception in special cases. The history of art. 94 shows that jurisdiction based on grounds other than domicile was introduced by amendments from time to time. At least

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there is no doubt that s. 5 was introduced long after the original article.

Sect. 5 merely refers to “the contract” and, in cases such as the one now under consideration, where two contracts are required to complete the chain between the appellant and respondent, if s. 5 is to be applied, one of them must govern. By the contract of 1942, respondent agreed to pay the royalty payable under the contract of 1924. Without the contract of 1942, there would be no lien de droit between the appellant and respondent, and, failing some express provision or implication that the general rule of art. 94 would not apply, I can see no reason for holding that, so far as respondent is concerned, the 1924 contract is “the contract” within the meaning of s. 5. There is nothing in the contract of 1942 which would take it out of the general rule. However, appellant urges that the clause of the contract dealing with notices is sufficient. That clause cannot be extended beyond its express terms and cannot apply to give jurisdiction to the Courts. On the whole, in my opinion, the better view is that the contract which will govern is the contract whereby respondent became obligated to appellant.

When s. 5 speaks of the contract it contemplates the usual case of a contract entered into by the parties to the action. Now the present action is one between one of the parties to the 1924 contract and one of the parties to the 1942 contract. Appellant is not a party to the 1942 contract, and respondent is not a party to the 1924 contract. There is, therefore, no common contract, and the condition of s. 5 is not complied with, unless it be said that appellant, by his action, accepted the stipulation and thus became a party to the 1942 contract, making it the common contract. If this is so, the action having been served in Montreal, that would be the place of the contract, and jurisdiction of the Court in the district of Quebec would be denied. If the premise that there is no common contract is sound, there would at least be grave doubt whether s. 5 applies, and as the section is one of exception, I would interpret it strictly and in favour of respondent.

St-Jacques J. seems to have been in agreement with McDougall J., and the other judges of the majority did not express any disagreement.

Be that as it may, what is decisive in the case at bar are the actual provisions of the trust deed. Hydro-Québec’s intervention in this deed is governed by section 24.01, paragraph (13) of which provides that the rights and obligations arising

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under this section shall be interpreted in accordance with the laws of Quebec and shall be adjudicated by the courts of the district of Montreal.

As for the intervention of Newfoundland, it is governed by section 25.01, paragraph (9) of which reads as follows:

(9) All rights and obligations arising under this Section 25.01 shall at all time and in all respects be governed by, and interpreted in accordance with, the laws of the Province of Newfoundland and the only courts competent to adjudge disputes arising under this Section 25.01 are, subject to appeal to the Supreme Court of Canada, where such appeal lies, the courts of Newfoundland.

This provision deprives the courts of the district of Montreal of jurisdiction in so far as Newfoundland’s intervention in the trust deed is concerned and prevents this intervention from being linked with the Power Contract so as to confer jurisdiction over Newfoundland on the Superior Court.

In its memorandum Hydro-Québec argued that by serving Newfoundland with its motion for a declaratory judgment, it was merely complying with art. 454 of the Code of Civil Procedure, which provides that the motion must be served “upon all interested persons and all parties to the document”.

It is not obvious that Newfoundland is an “interested person” within the meaning of this provision since it is not a party “to the document”, namely the Power Contract. Even if we admit, however, for purposes of discussion, that Newfoundland has an interest in the motion since the latter deals with certain actions on its part, and that Newfoundland could or should be served with it, and that it could have accepted the jurisdiction, the requirements of art. 454 were greatly exceeded. Hydro-Québec did not merely serve the motion on Newfoundland. It sought specific conclusions against it, by asking that the judgment be made applicable to it. Article 456 of the Code of Civil Procedure reads as follows:

456. A declaratory judgment rendered in accordance with this chapter has the same effect and is subject to the same recourses as any other final judgment.

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For all practical purposes and despite the fact that Newfoundland was designated as a mis en cause, such proceedings make the latter a co-defendant. Newfoundland was thus impleaded mandatorily before the Superior Court, where it was declared that the judgment to be rendered would be binding on it.

Montgomery J.A. stated with regard to this conclusion specifically sought by Hydro-Québec against Newfoundland that it should perhaps not be granted [at p. 210]:

It may be that this conclusion should not be granted, but it does not follow that the proceedings should be dismissed as far as Newfoundland is concerned. That province obviously has a lively interest in the present proceedings and should be a party thereto.

It is possible that Newfoundland does in fact have a lively interest in the motion for a declaratory judgment, but, and I say this respectfully, that is not sufficient to confer jurisdiction on the courts of the district of Montreal without Newfoundland’s consent.

In its memorandum Hydro-Québec referred the Court to several decisions and judgments, including: Porter Co. v. Constructions du St-Laurent Ltée., [1952] Que. Q.B. 662; Edelstein v. Kert Manufacturing Co., [1970] R.P. 179; Procon (Great Britain) Ltd. v. Golden Eagle Co., [1976] C.A. 565. The first two cases decided that it is the court of the place of the contract which is competent to hear a claim for breach of contract, rather than the court of the place where the contract was breached. In the third case a declinatory exception was dismissed even though the action was not instituted in the court of the place of the contract because the action was based on extra-contractual fault.

None of these decisions supports Hydro-Québec’s position; in none of them was it decided that a contract may confer jurisdiction over a person who is not a party to it.

5. Conclusion

I would allow the appeal, set aside the decision of the Court of Appeal and restore the judgment

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of the Superior Court, with costs throughout.

III—The motion to dismiss

1. Judgment of the Superior Court

The Superior Court granted the motion to dismiss. The trial judge was of the opinion that in order for the Court to be required to provide a solution to a problem in a declaratory judgment, the problem would have to be one of law and not of fact resulting from the action of a third party.

Although in the case at bar Hydro-Québec is in fact somewhat concerned about whether or not Churchill Falls will perform its obligations under the Power Contract, there would not appear to be any uncertainty between the parties with respect to the law.

Moreover, the trial judge was of the opinion that to grant Hydro-Québec the conclusions in its motion for a declaratory judgment as worded would give it a [TRANSLATION] “purely theoretical satisfaction” and would not be of any [TRANSLATION] “concrete and determined usefulness”.

Finally, the trial judge stated that the Superior Court has no jurisdiction, in the context of a motion for a declaratory judgment, to rule on Newfoundland’s Order in Council or the action for a declaratory judgment which it instituted.

However, the trial judge did not allow the exception of lis pendens invoked in the alternative by Churchill Falls in support of its motion to dismiss.

2. Decision of the Court of Appeal

According to the Court of Appeal, the genuine problem that Hydro-Québec is interested in having resolved judicially is the issue of whether Churchill Falls would be in default under the Power Contract if it were to deliver hydro-electric energy it produced as directed by Newfoundland rather than in accordance with the Power Contract. As I understand its decision, the Court of

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Appeal decided implicitly that this was a question of law justifying a motion for a declaratory judgment. Monet J.A. stated the following in his reasons [at pp. 209-10]:

[TRANSLATION] The allegations in the motion for a declaratory judgment describe a legal situation in which Hydro’s rights under the power contract are threatened and indicate an interest in having this genuine problem resolved judicially.

Moreover, the genuine problem results from the action not of Churchill but of Newfoundland. Does this mean that the motion must be dismissed? I do not think so. Certainly we must avoid a proliferation of motions under art. 453 C.C.P. On the other hand, we must be careful not to add conditions that are not there; it is not stated that the genuine problem must necessarily result from the action of the respondent. I am therefore of the view that Hydro-Québec has an interest, in the context of art. 453 C.C.P., in having the courts declare that CFLCo would be in default if it delivered power in accordance with Newfoundland’s directives rather than as stipulated in the contract.

In this regard, and with all due respect for the contrary view, I am in agreement with the Court of Appeal.

The Court of Appeal was in agreement with the trial judge that the exception of lis pendens should be dismissed.

3. Arguments raised by Churchill Falls

Churchill Falls reiterated the arguments accepted by the trial judge. It added that it had categorically refused to comply with Newfoundland’s Order in Council and that it intended to comply with the Power Contract.

In the alternative, Churchill Falls maintained that there was lis pendens as a result of Newfoundland’s action against Churchill Falls and Hydro-Québec in the Newfoundland courts.

4. Applicability of art. 453 of the Code of Civil Procedure

Article 453 of the Code of Civil Procedure reads as follows:

453. Any person who has an interest in having determined immediately, for the solution of a genuine problem, either his status or any right, power or obligation

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which he may have under a contract, will or any other written instrument, statute, order in council, or resolution or by-law of a municipal corporation, may, by motion to the court, ask for a declaratory judgment in that regard.

This remedy was introduced into Quebec law by the new Code of Civil Procedure in 1966. The following are the comments of the Commissioners who prepared the draft Code:

This Chapter is new law. The Commissioners have already explained the reason which led them to propose the declaratory action, as a means of preventive justice. They have even thought it opportune to adopt a simplified procedure for certain cases.

The cases provided for will usually raise only a pure question of law, for the solution of which a written contestation would be superfluous. However, it appeared necessary to give the court the power to permit such a contestation or even to order the trial of such questions as it considers useful for the solution of the problems raised.

The introduction of this remedy into Quebec law necessitated a change in the concept of interest found in arts. 76 and 77 of the old Code of Civil Procedure. We should now examine the interest of plaintiff or applicant, as the case may be, in light of art. 55 of the Code of Civil Procedure:

55. Whoever brings an action at law, whether for the enforcement of a right which is not recognized or is jeopardized or denied, or otherwise to obtain a pronouncement upon the existence of a legal situation, must have a sufficient interest therein.

In order to shed light on the requirements that must be met by a person wishing to proceed by way of a motion for a declaratory judgment, I think it would be useful to cite here certain passages from the Commissioners’ Report with respect to art. 55:

This Article corresponds to Articles 76 and 77 of the Code, to which a three-fold change is made:

…

2. It sets out, in unequivocal terms, that one can invoke the aid of justice not only for the sanction of a legal right that has been violated but also to safeguard a right that is threatened, or otherwise to obtain a court pronouncement upon the existence or the status of a legal situation,.,

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In the present state of things, one may say, in a general way, that rights are sanctioned only by the condemnation of the person who has violated them; it is only exceptionally, in effect, that the litigant may invoke the aid of justice before the actual violation of his right has taken place.

There would be little to say against this curative justice if rights were never violated other than by deliberate intention. But, observation reveals that often the litigant wants only his rights, but he is not aware of their precise limits because of the obscurity of the law or of the agreement which governs them. Not knowing what he must do—or what he must not do—to stay within the law, the litigant is in a dilemma, whether to deprive himself of exercising all his rights through fear of going beyond their legal limits, or to run the risk of being sued for having crossed the limit which he could not know.

…

It is, therefore, extremely desirable that there should be put at the disposal of the litigants a means which permits them to determine in advance in certain conditions the true nature of the juridical situation in which they find themselves. But the means required for this are declaratory procedures under which, when two litigants are in disagreement as to their reciprocal rights and obligations, one of them may demand from the tribunal, a declaration as to what his rights are. This declaration will not involve any condemnation, but, having the force of chose jugée, it will compel the respect of the parties.

…

The objections that one could raise against this form of preventive justice are:

1. That the Courts do not have as their function the giving of opinions; and

2. That declaratory actions risk causing the blocking of the Courts.

To that one must answer that the declaratory judgment is not the giving of an opinion but a decision with the force of chose jugée; and that the means of avoiding the abuse which one fears— “… is not to be opposed systematically to this procedure but to be very strict in the appreciation of the interest alleged by requiring that, on the one hand the danger be grave and serious to the point of creating from that moment a definite difficulty, and on the other hand, the judicial declaration sought be of such a nature as to offer to the plaintiff not merely a purely theoretical satisfaction but a concrete and determined usefulness”. (SOLUS et PERROT, Droit judiciaire privé, t. 1, No. 233.)

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But one will see that these methods are provided for in the title of “Judgments”.

3. The Article provides, moreover, for the necessity of an interest in order to exercise a recourse in justice; but contrary to Article 77 C.P. by whose terms “this interest may only be eventual”, the proposed text requires a “sufficient interest”. As it is universally admitted that the interest required to take legal action must exist at the moment when the recourse is instituted, it is clear that the terminology of the code is not rigorously exact; what one intended to say without doubt is not that one can invoke justice when one has not yet an interest in doing so, but rather that the interest required to institute proceedings may flow from a right which itself would only be eventual, which is not at all the same thing. And as the measure of interest is always a question of fact, the rule must be set out in terms which leave to the courts the problem of determining it empirically. Hence the proposed change, which is, moreover, essential if one admits the declaratory action.

It was not argued that Hydro-Québec should have proceeded by action rather than by a motion for a declaratory judgment. The case at bar accordingly differs in this respect from that decided in Duquel v. Town of Sainte-Agathe-des-Monts, [1977] 2 S.C.R. 1132, in which Pigeon J., speaking for the Court, observed that the distinction between preventive and curative justice should not be treated as if it had been incorporated in the legislation by the Commissioners.

Essentially, the question is as to whether Hydro-Québec has an interest in having determined immediately the solution to a genuine problem which it may have under one of the written instruments mentioned in art. 453 of the Code of Civil Procedure.

In order to answer this question, it is necessary to look at the legal situation in which Hydro‑Québec is at present. This legal situation is the result of a series of events disclosed in the allegations of the motion for a declaratory judgment, cited above, and they must be taken as proven.

What emerges from these events? Primarily the following: although in fact Churchill Falls refused to comply with the Newfoundland Order in Coun-

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cil, it is possible that as a result of the steps taken by the latter it could be obliged to comply with that Order for legal reasons. The effect of this would probably be to make it almost impossible for Churchill Falls to carry out its commitments to Hydro-Québec in accordance with the Power Contract.

How is this impossibility to be interpreted in light of the Power Contract? This is essentially the genuine problem, clearly of a legal nature, raised by the present circumstances in which the parties to the Power Contract find themselves.

Hydro-Québec is in a position of uncertainty as to the legal effect on the Power Contract of the possible obligation of Churchill Falls to comply with the Order in Council. In its submission, it identified more specifically the questions of law which the Court will be required to resolve and which clearly disclose the genuine problem of law which Hydro-Québec is liable to confront:

[TRANSLATION] We submit that, in the circumstances, respondent could legitimately pose the following questions for decision by the Quebec courts:

(a) assuming it was correct, does the request by Newfoundland based on clause 2(e) of Part I of lease R-5 constitute an Act of God within the meaning of the power contract, one which appellant could set up against respondent?

(b) should the implied terms in the power contract be read as meaning that all its provisions are subject to the prior and predominant rights of the Government of Newfoundland under lease R-5?

(c) …

The conclusions of the motion for a declaratory judgment, as worded, must be seen in this context. The conclusions are of course written in the affirmative: they are only the solution suggested by respondent to the questions raised by it. This is what appellant refused to see in its submission, and its entire argument was based on an idiosyncratic perception of the conclusions of the action, regardless of the legal context in which they were made.

Moreover, the conclusions of the principal motion could always be amended, if necessary, to correspond more closely with the issue submitted.

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This is exactly what counsel for Hydro-Québec did at the hearing in this Court. He requested leave to amend the third conclusion of the motion for a declaratory judgment so that it now reads:

[TRANSLATION] STATE and DECLARE that the failure by respondent to sell and deliver to applicant all the electrical power and energy that can be generated by the hydro-electric plant currently operated by respondent at Churchill Falls, on the Churchill River, in accordance with the foregoing conclusion, constitutes a breach of contract under contract R-1, and a failure notwithstanding, inter alia, the arguments presented by Newfoundland in Attorney-General of Newfoundland v. Churchill Falls (Labrador) Corporation Ltd. et al., 1976-812, Supreme Court of Newfoundland;

Among the arguments made by Newfoundland and referred to by Hydro-Québec in this amended conclusion are paragraphs 24 et seq. of the statement of claim of the Newfoundland action, Exhibit R-9, attached to the motion of Hydro-Québec. These paragraphs read as follows:

24. The Plaintiff says that by virtue of (a) Part I of the Lease and (b) Sections 3 and 4 of the Act the First Defendant is obliged to comply with the request set forth in the Order-in-Council, notwithstanding the provisions contained in the Power Contract.

25. In the alternative the Plaintiff says that the request set forth in the Order‑in‑Council constitutes Force Majeure as such term is defined under the Power Contract, and therefore the First Defendant will not be subject to any penalties under the provisions of the Power Contract or incur any other liability to the Second Defendant by reason of complying with such request, and the Power Contract shall not be in default or breached. The Plaintiff repeats the allegations contained in paragraphs 6 and 7 hereof.

26. Further in the alternative, the Plaintiff says the Second Defendant was at all times aware or should have been aware that, notwithstanding the provisions of the Power Contract, upon the request of the Government, the First Defendant would be obligated under the Lease to give priority to the consumers of electricity in the Province of Newfoundland, and by reason thereof it was or ought to have been the

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understanding of the First Defendant and the Second Defendant that there is an implied term of the Power Contract that the obligation on the part of the First Defendant as contained in the Power Contract to deliver to the Second Defendant hydroelectric power and energy would be subject at all times to the obligation of the First Defendant, as set forth in paragraph (e) of Clause 2 of Part I of the Lease, to give, upon the request of the Government priority to the consumers of electricity in the Province of Newfoundland. The Plaintiff repeats the allegations contained in paragraphs 6 and 7 hereof.

27. The Plaintiff says that by complying with the request set forth in the Order-in-Council the First Defendant will not be in breach of any of the warranties contained in the Bond Purchase Agreements or in breach of any of the provisions contained in (i) the Power Contract, (ii) the Bond Purchase Agreements, (iii) the First Mortgage Trust Deed, (iv) the General Mortgage Trust Deed, or (v) the Debenture Indenture.

Pursuant to s. 50 of the Supreme Court Act, I would allow the motion by Hydro-Québec for leave to amend.

If any doubt existed as to the genuine questions of law which Hydro-Québec is asking the Court to consider, I feel that the effect of this amendment to the conclusions of the motion is to resolve that doubt.

Essentially, Hydro-Québec wishes to know whether the fact that Churchill Falls is unable to carry out its commitments under the Power Contract on account of its possible obligation to meet the demand of Newfoundland for electrical energy constitutes a case of default or a case of Act of God under the Power Contract.

The question is an important one, since clause 17.1 of the Power Contract sets forth the effects of an Act of God on the mutual rights and obligations of the parties.

I am therefore of the view that the difficulty is one of law and not of fact resulting from a contract, for the solution of which Hydro-Québec can appeal by a motion for a declaratory judgment.

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Churchill Falls contended that the only apparent problem is due to the Order in Council, which constituted an act by a third party, and that for its part it has always made clear its intention to comply with the Power Contract.

It is true that the threat and the problem were not caused directly by the act of Churchill Falls. However, the purpose of the proceedings brought by Newfoundland is essentially to force Churchill Falls to comply with the Order in Council. It is no longer exclusively a matter for Churchill Falls whether it complies with that Order in Council. It is now the Newfoundland courts which will decide in law, among other things they will have to decide, whether Churchill Falls should refuse to comply with the Order in Council, and the latter will be obliged to carry out the order of the Court.

Hydro-Québec is therefore now threatened with seeing Churchill Falls compelled to refuse to perform its obligations under the Power Contract, and it understandably wants to know how this refusal will affect the rights of the parties to the Power Contract.

Further, it is not necessary for Churchill Falls to have already refused to perform the Power Contract in order for the Superior Court to rule on the rights of the parties to the contract. The value of the new declaratory action which Hydro-Québec is seeking to use lies precisely in the fact that it allows the litigant to protect a threatened right. As the Commissioners observed, “the interest required to institute proceedings may flow from a right which itself would only be eventual”. What matters is that the interest in obtaining a solution to a genuine problem is real. I consider that Hydro-Québec does really possess such an interest.

It might be otherwise if, without any indication of intent on the part of Newfoundland to rely on clause 2(e) of Part I of the lease, Hydro-Québec entertained doubts as to the effect of a possible request for power by Newfoundland, pursuant to this clause, on the legal situation of the parties to the power contract. In that case, Hydro-Québec’s interest in seeking a declaratory judgment from the Court would perhaps be uncertain, and there

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might be reason to say that the judgment on the motion would only provide a “purely theoretical satisfaction” and would not be of any “concrete and determined usefulness”.

That is not the situation here. The Order in Council of Newfoundland has in fact been adopted and legal proceedings intended to oblige Churchill Falls to comply with it have in fact been brought.

The problem which had only been a potential one materialized and became a reality, and so did the interest which Hydro-Quebec might conceivably have in a ruling to resolve the ambiguity of the legal situation in which the parties to the Power Contract could be placed.

I do not believe that Hydro-Québec is merely seeking a repetition of the unambiguous provisions of the Power Contract. It is true that, taken in isolation, the first two conclusions of its motion for a declaratory judgment seem somewhat tautological. However, counsel for Churchill Falls, who wondered what would happen, with such conclusions, if he confessed judgment, carefully refrained from doing so. These conclusions must be read in light of the allegations of the motion and the context described by them. The must also be read in light of the third conclusion, which is not tautological, although it lacked precision before it was amended. Furthermore, Hydro-Québec can again amend in the Supreme Court if it thinks this is necessary and obtains leave to do so: purely procedural considerations should not be an obstacle to the solution of a genuine problem to which art. 453 of the Code of Civil Procedure applies, and once again, that problem consists in categorizing, in light of the interpretation that must be given to the Power Contract, the difficulty in which Churchill Falls is likely to be.

With respect for the opposite view, I do not think the Court is being asked to interpret the Order in Council adopted by Newfoundland. What is being asked of the Court is, inter alia, to decide whether the fact that one party to the Power Contract is prevented from fulfilling its contractual obligations, as the result of demand

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from Newfoundland, constitutes a default under the contract. What must be interpreted is the Power Contract, not the Order in Council of Newfoundland.

I accordingly conclude that Hydro-Québec has met the conditions necessary to move for a declaratory judgment, and I would dismiss the first argument submitted by Churchill Falls against the motion for a declaratory judgment.

5. The exception of lis pendens

As an alternative argument for dismissing the motion for a declaratory judgment, Churchill Falls contended that there was lis pendens as a result of the declaratory action brought by Newfoundland against Churchill Falls and Hydro-Québec in the Newfoundland courts.

The Superior Court and the Court of Appeal dismissed this alternative argument, concluding that the three identities of cause, subject and parties which characterize lis pendens were not present between the two proceedings. I consider that they were correct.

However, Churchill Falls argued that it was not suggesting the classic lis pendens, but the “kind of lis pendens” referred to by Pigeon J. in the following passage from Duquet, supra, at p. 1138:

With respect, I must say that the decision of the Court of Appeal is tantamount to deleting art. 453 from the Code. Can there be a “genuine problem” which does not constitute an “issue”, as this word is understood in this context? This is not a situation where another suit has already been filed: that would be quite a different situation, a kind of lis pendens.

What Pigeon J. was attempting to explain, I think, is that a litigant must be prevented from resorting to declaratory actions in order to avoid the jurisdiction of a court whose authority is not and cannot be disputed, and which already has before it a case raising the same questions of law.

This, moreover, is the sense in which the phrase must be taken in Ville de Montréal v. Bureau des examinateurs électriciens de la province de

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Québec, [1977] C.S. 851, and Campisi v. Procureur général du Québec, [1978] C.A. 520.

In the first case, the City of Montreal was seeking from the Court by means of a motion for a declaratory judgment a ruling that certain of its signalling apparatus was not subject to the Electricians and Electrical Installations Act. In the mistaken belief that criminal informations had already been laid against the City of Montreal under that Act and that they were still before the Court of Sessions of the Peace, Gratton J. was of the opinion that this “kind of lis pendens” existed between the two proceedings.

At pages 852-53 he said the following:

[TRANSLATION] In the case at bar applicant is seeking to remove itself from application of c. 152 of the Revised Statutes of Quebec, 1964, by means of a declaratory judgment holding that its variable function signalling system is not an electrical installation within the meaning of s. 2(3). It would accordingly not be required to apply for a licence or be subject to control by inspectors and would avoid the criminal proceedings contemplated in ss. 34 and 40 of the Act.

Applicant alleged an interest, but the threat, so grave and serious as to cause a specific problem, results from informations laid with the Court of Sessions of the Peace. There is here a kind of lis pendens, which is quite a different situation, as Pigeon J. observed. Even if the motion under 453 C.C.P. were to be made extensively applicable, this could not go so far as to deprive a lower court of its jurisdiction, as Bélanger J.A. pointed out.

…

Although applicant cited Duquet v. Town of Ste-Agathe in response to the objection, there is a fine difference between the two situations. In that case the issue had developed between the parties under the jurisdiction of the Superior Court. In the case at bar the Court of Sessions of the Peace is hearing the case and has all the necessary powers to dismiss the information if it sees fit. There is accordingly “a kind of lis pendens” here, to use the phrase employed by Pigeon J.

This judgment was reversed by an unreported decision of the Court of Appeal (C.A.M. 500‑009-001317-775, dated January 8, 1981) because of an error of fact made by the trial judge, but the Court of Appeal did not reverse his finding on the law.

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Bélanger J.A., rendering judgment for the Court of Appeal, wrote:

[TRANSLATION] It may be that with the information provided to him, the decision of the trial judge was justified, but I am not required to decide that point.

In Campisi, a motion was made for a declaratory judgment relating to interpretation of s. 73(a) of the Charter of the French language. However, applicants, who had been refused the right to enrol their children in the English sector of two school commissions, appealed this decision to the Appeal Commission created under the Charter. The Court of Appeal held that the motion for a declaratory judgment was inadmissible, as applicants had submitted their problem to the Appeal Commission and its decisions could not be appealed. The Court held that there was a “kind of lis pendens” within the meaning of Duquet, supra. Turgeon J.A. added that even if the Superior Court had concurrent jurisdiction with the Appeal Commission, the Court of Appeal should refrain from deciding the case so as to avoid contradictory decisions.

I do not believe that in the case at bar this lis pendens can be found between the proceedings brought in the courts of Newfoundland and this motion for a declaratory judgment.

I think it is impossible to conclude that Hydro-Québec sought to avoid the jurisdiction of the Newfoundland courts, when under the terms of the Power Contract itself only the courts of the district of Montreal have jurisdiction to hear any issue arising between the parties to the contract.

Furthermore, if there was originally a risk of contradictory decisions in the two proceedings because of the wording of conclusions (d), (e) and (f) of the Newfoundland action, this danger has now disappeared with the decision of the Court of Appeal of Newfoundland to delete these paragraphs from the conclusions sought.

I think it is clear that the two actions in question raise different points of law. In the action brought in Newfoundland, the Court is required to interpret the lease contract made between the Govern-

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ment of that province and Churchill Falls. In the action brought in Quebec, the Court is required to interpret the Power Contract binding Hydro-Québec and Churchill Falls.

I would therefore dismiss this second argument made by Churchill Falls against the motion for a declaratory judgment.

6. Conclusion

I would dismiss the appeal with costs.

Appeal of Newfoundland allowed. Appeal of Churchill Falls dismissed.

Solicitors for the appellant and mis en cause Her Majesty the Queen in right of the Province of Newfoundland: Phillips & Vineberg, Montreal.

Solicitors for the appellant and mis en cause Churchill Falls (Labrador) Corporation Limited: Desjardins, Ducharme, Desjardins & Bourque, Montreal.

Solicitors for the respondent: Geoffrion & Prud’Homme, Montreal.

Solicitors for the mis en cause Royal Trust Co.: Lavery, O’Brien, Montreal.