APPEAL ALLOWED IN PART
Teal Cedar Products Ltd. v. British Columbia, 2017 SCC 32 (Arbitration – Appeals – Jurisdiction)
On appeal from a judgment of the British Columbia Court of Appeal (2015 BCCA 263) affirming on remand a judgment of the British Columbia Court of Appeal (2013 BCCA 326) setting aside a decision of Bauman C.J. (2012 BCSC 543).
T, a forestry company, holds licences to harvest Crown timber in the province of British Columbia. When the province reduced the volume of T’s allowable harvest and deleted certain areas from the related Crown land base, the parties were unable to settle how much compensation the province owed to T for reducing the latter’s access to certain improvements such as roads and bridges which T used to harvest the timber. Consequently, their dispute was submitted to arbitration in accordance with the Forestry Revitalization Act (“Revitalization Act”). The arbitrator was seized of an issue of statutory interpretation to determine the proper valuation method for the improvements pursuant to the Revitalization Act, which he found to be the depreciation replacement cost method. The arbitrator also ruled on an issue of contractual interpretation, concluding that an agreement reached by the parties prior to arbitration did not exclude interest from the province’s payment of compensation to T for the improvements. Finally, on an issue of statutory application, the arbitrator determined that T was not entitled to compensation for the improvements to which it did not lose access. On appeal, the application judge upheld the arbitrator’s award except in connection with the statutory application issue, which was remitted to the arbitrator and resulted in an additional award in an amount equal to the value of the improvements. A majority of the Court of Appeal reversed the application judge’s decision, finding that the arbitrator had erred on both the statutory interpretation and contractual interpretation issues, as well as in making his subsequent ruling regarding the statutory application issue. On remand for disposition in accordance with Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53,  2 S.C.R. 633, a unanimous Court of Appeal held that its disposition of the appeal was unaltered by Sattva, reaffirming its conclusion that the issues ruled upon by the arbitrator are questions of law subject to appellate review, and that the arbitrator was in error regardless of the standard of review applied.
Held (5-4): The appeal is allowed in part.
Per McLachlin C.J. and Abella, Karakatsanis, Wagner and Gascon JJ.:
The Court of Appeal’s decision on remand cannot stand in light of Sattva. The process for characterizing a question as one of three principal types — legal, factual, or mixed — is well‑established, as confirmed in Sattva: legal questions are questions about what the correct legal test is; factual questions are questions about what actually took place between the parties; and mixed questions are questions about whether the facts satisfy the legal test. While the application of a legal test to a set of facts is a mixed question, if, in the course of that application, the underlying legal test may have been altered, then a legal question arises. Such a legal question, if alleged in the context of a dispute under the Arbitration Act, and assuming the other jurisdictional requirements of that Act are met, is open to appellate review. These extricable questions of law are better understood as a covert form of legal question — where a judge’s (or arbitrator’s) legal test is implicit to their application of the test rather than explicit in their description of the test — than as a fourth and distinct category of questions.
Courts should, however, exercise caution in identifying extricable questions of law because mixed questions, by definition, involve aspects of law. The motivations for counsel to strategically frame a mixed question as a legal question — for example, to gain jurisdiction in appeals from arbitration awards or a favourable standard of review in appeals from civil litigation judgments — are transparent. A narrow scope for extricable questions of law is consistent with finality in commercial arbitration and, more broadly, with deference to factual findings. Courts must be vigilant in distinguishing between a party alleging that a legal test may have been altered in the course of its application (an extricable question of law), and a party alleging that a legal test, which was unaltered, should have, when applied, resulted in a different outcome (a mixed question).
The characterization of a question on review as a mixed question rather than as a legal question has vastly different consequences in appeals from arbitration awards and civil litigation judgments. The identification of a mixed question when appealing an arbitration award defeats a court’s appellate review jurisdiction under the Arbitration Act. In contrast, the identification of a mixed question when appealing a civil litigation judgment merely raises the standard of review.
Given these principles as confirmed in Sattva, a question of statutory interpretation is normally characterized as a legal question. In contrast, identifying a question, broadly, as one of contractual interpretation does not necessarily resolve the nature of the question at issue. Contractual interpretation involves factual, legal, and mixed questions, and characterizing the nature of the specific question before the court requires delicate consideration of the narrow issue actually in dispute. In general, contractual interpretation remains a mixed question, not a legal question, as it involves applying contractual law (principles of contract law) to contractual facts (the contract itself and its factual matrix).
In the present case, the statutory interpretation issue, i.e. the issue of selecting a valuation method that complies with the Revitalization Act, involves two types of questions: (1) questions about the broad category of methods that are acceptable under the terms of the Revitalization Act; and (2) questions about the specific method, within that broad category of acceptable methods, that should ultimately be applied. The former questions — the methods that are acceptable under the Revitalization Act — are a matter of statutory interpretation and, accordingly, are questions of law. As a result, the courts have jurisdiction to review the arbitrator’s resolution of the issue in so far as that resolution involves identifying a pool of methodologies consistent with the Revitalization Act.
The latter questions — the preferable method among those that are consistent with the Revitalization Act — are inextricably linked to the evidentiary record at the arbitration hearing, where various experts opined on the virtues of conflicting valuation methodologies. They are mixed questions, if not pure questions of fact. Therefore, the courts lack jurisdiction to review the arbitrator’s selection of a specific methodology among the pool of methodologies which are consistent with the Revitalization Act.
As for the contractual interpretation issue, the courts have no jurisdiction to review the arbitrator’s decision in this regard. The arbitrator, after a lengthy and complex hearing, was best situated to weigh the factual matrix in his interpretation of the parties’ agreement regarding the payment of interest. The fact that he may have placed significant weight on that evidence in interpreting the agreement does not engage a legal question conferring jurisdiction on the courts under the Arbitration Act as it does not alter the underlying test he applied in this case. Further, the arbitrator’s interpretation was rooted in the words of the contract, not overwhelmed by them. While the arbitrator may have placed significant weight on the factual matrix when interpreting the meaning of “compensation”, there is no arguable merit to the claim that he interpreted that matrix isolated from the contract’s words so as to effectively create a new agreement.
Likewise, on the statutory application issue, the courts have no jurisdiction to review the arbitrator’s decision in this regard. The question implicated — whether the arbitrator correctly applied the valuation methodology to a licence — is a mixed question. As such, it is beyond the scope of appellate review.
It follows that the courts’ jurisdiction is limited to the statutory interpretation issue of identifying a pool of methodologies consistent with the Revitalization Act. The decision made on this issue was rendered in an arbitral context pursuant to the Arbitration Act. As confirmed in Sattva, the standard of review on legal questions arising from the arbitrator’s analysis of this statutory interpretation issue is reasonableness, which is almost always the applicable standard when reviewing commercial arbitration awards. This preference for a reasonableness standard dovetails with the key policy objectives of commercial arbitration, namely efficiency and finality. And this preference is not negated here in light of the nature of the question at issue and the arbitrator’s presumed expertise.
It would be an error to claim that all statutory interpretation by an arbitrator demands correctness review simply because it engages a legal question. In contrast, where the decision under review is, for example, a civil litigation judgment, the nature of the question is dispositive of the standard of review, with factual and mixed questions being reviewed for palpable and overriding error and legal questions — including extricable questions of law — being reviewed for correctness. It is therefore critical to bear these distinctions in mind when determining the appropriate standard of review in any given case.
The Court of Appeal erroneously held that the standard of review should be correctness for the statutory interpretation issue. Its decision appears to suggest that questions of law, such as statutory interpretation, necessarily attract a correctness standard of review. In so far as the Court of Appeal intended to make this suggestion, it is incorrect. While the nature of the question (legal, mixed, or fact) is dispositive of the standard of review in the civil litigation context, it is not in the arbitration context.
With respect to the review step of the analysis, the arbitrator’s determination that the depreciation replacement cost method was consistent with the Revitalization Act was reasonable. This decision fell within a range of possible, acceptable outcomes which were defensible in respect of the facts and law, and the decision was justified, transparent, intelligible, and defensible. The claim that this method results in a windfall begs the question, i.e. it assumes that compensation equal to the value of all improvements is excessive in the course of explaining that excess. And the basis for claiming that excessive compensation was paid in this case is the assumption that it was inappropriate for the arbitrator to order compensation in excess of T’s actual costs, despite the absence of any reference in the Revitalization Act limiting T’s compensation to its actual costs or expenses. The full “value of improvements made to Crown land” is the language chosen by the legislature as the quantum for the compensation provision. If the provincial legislature had wanted to pay companies less than the “value of improvements made to Crown land”, it would not have set the amount of compensation “equal to” it. As a consequence, the arbitrator’s reasoning is hardly indefensible, particularly when the wording of the compensation provision so clearly fixes compensation at the specific amount chosen by the arbitrator. In the end, the legislature is entitled to provide forestry companies with statutory compensation that is not quantified on the basis of the nature of their interests in the Crown land at issue and the arbitrator’s interpretation of the compensation provision is accordingly entitled to deference.
Per Moldaver, Côté, Brown and Rowe JJ. (dissenting in part):
Regardless of the applicable standard of review, the arbitrator’s interpretation of s. 6(4) of the Revitalization Act cannot stand. The only interpretation of s. 6(4) that withstands scrutiny on either standard of review is that T, as a licence holder, was entitled to receive compensation only for its limited interest in the improvements. In valuing the improvements under s. 6(4), the arbitrator was required to take into account that T, as a licence holder, did not own the improvements, which belonged to the Crown.
The plain and ordinary meaning of s. 6(4) is that T is entitled to be compensated on a basis that reflects its limited interest in the improvements as a licence holder. This plain meaning of s. 6(4) is consistent with the purpose of the Revitalization Act and its expropriation context. The Revitalization Act’s purpose is to reduce the rights of licence holders — specifically, their rights to harvest timber and use the improvements — and to provide licence holders with compensation for these reductions. As a result of the takebacks at issue, reductions were made to T’s rights to use the improvements — not ownership rights over such improvements. It runs counter to the purpose of the Revitalization Act to award T compensation that exceeds the value of what it lost due to the takebacks.
The cost savings approach applied by the arbitrator may be an appropriate methodology in the context of privately owned land. But the roads and bridges at issue in this case belonged to the Crown. Given that T did not own the improvements and had only a limited interest in the improvements as a licence holder, it cannot be said that it lost the replacement cost of the improvements when the province made reductions to the land base under its licences, nor can it be said that T would pay the full cost to replace the network of improvements at issue.
The arbitrator construed s. 6(4) of the Revitalization Act too narrowly in concluding that the distinction drawn by this provision between the value of the improvements and the value of the harvesting rights means that the market value of the tenure as a whole cannot be considered when determining the value of the improvements. There is nothing in the language or context of the Act to support this unduly restrictive reading of s. 6(4). On the contrary, it was open to the arbitrator to select any valuation method that could evaluate the value of the improvements to T as a licence holder, as long as the approach valued the improvements as separate and distinct from the harvesting rights.
The market value method was available to the arbitrator under s. 6(4) of the Revitalization Act, and yet the arbitrator chose to apply a method that was inconsistent with this provision. This resulted in a substantial windfall for T. The matter of compensation for the improvements relating to the three licences at issue should accordingly be remitted to the arbitrator for reconsideration.
Reasons for judgment: Gascon J. (McLachlin C.J. and Abella, Karakatsanis and Wagner JJ. concurring)
Joint Reasons Dissenting in Part: Moldaver and Côté JJ. (Brown and Rowe JJ. concurring)
Neutral Citation: 2017 SCC 32
Docket Number: 36595
APPLICATIONS FOR LEAVE TO APPEAL DISMISSED
Janssen Inc., The Kennedy Trust for Rheumatology Research v. Hospira Healthcare Corporation, Minister of Health and Attorney General of Canada
Intellectual property – Patents – Medicines
In April 2012, Health Canada changed the Guidance Document: Patented Medicines (Notice of Compliance Regulations) so that submissions that do not require scientific review would be treated as administrative, would not have to comply with s. 5. On November 14, 2012, Celltrion Healthcare Co. Ltd. filed a new drug submission (“NDS”) seeking approval to market its subsequent entry biologic inflectra, which contained the medicinal ingredient infliximab 100 mg/vial in powder for solution dosage. In its NDS, Celltrion sought to demonstrate similarity between inflectra and remicade, for which Janssen Inc. had not yet received a patent. Celltrion’s NDS nominated Hospira to be the distributor for inflectra. On January 15, 2014, the Minister of Health issued a notice of compliance (“NOC”) to Hospira. Janssen sought judicial review of that decision.
Meanwhile, in Pfizer Canada Inc. v. Canada (Health), 2014 FC 1243, the Federal Court had decided that the Minster’s decision to issue a NOC in relation to an administrative ANDS without requiring the generic company to address the patent for the innovator’s drug was to be reviewed on a correctness standard, and that the decision was incorrect, so it set the Minister’s decision aside. Pfizer sought judicial review of that decision. On consent, and in order to allow the appeals to be heard together, the Federal Court set aside the decision to issue the NOC to Hospira, without prejudice to the right to appeal so that the parties could have the appeals heard together. Teva appealed the former decision (A-27-15), as did the Attorney General of Canada and the Minister of Health (A-28-15). Hospira appealed the latter decision (A-172-15), as did the Attorney General of Canada and the Minister of Health (A-143-15). Those two appeals were also consolidated. The Court of Appeal ordered that both consolidated appeals be heard together. It allowed the appeals, setting aside the judgment of the Federal Court and dismissing the applications for judicial review. Janssen and the Kennedy Trust apply for leave to appeal.
Barejo Holdings ULC v. Her Majesty the Queen
Taxation – Income tax
The parties submitted a pre-hearing question to the Tax Court under Rule 58 of the Tax Court of Canada Rules (General Procedure), S.O.R./90-688a regarding two contracts, entitled “Notes” and issued for $998 million by affiliates of two Canadian banks and guaranteed by them. The Notes were held by St. Lawrence Trading Inc. (“SLT”), an open-ended investment fund incorporated under the laws of the British Virgin Islands. The question was whether the Notes constituted debt for the purposes of the Income Tax Act. The issue raised concerns about whether Barejo Holdings ULC was required to include its share of SLT’s foreign accrual property income pursuant to s. 94.1 of the Act. The provision would only apply if the Notes constituted “debt” within the meaning of s. 94.1. The Federal Court of Appeal dismissed the appeals without determining the issue on the merits.
Chief Ronald Michel, Chief of the Peter Ballantyne Cree Nation, on his own behalf and on behalf of all other members of Peter Ballantyne Cree Nation and Peter Ballantyne Cree Nation v. Attorney General of Canada, Government of Saskatchewan, Saskatchewan Power Corporation, Hudson Bay Mining and Smelting Co. Limited, Churchill River Power Corporation Limited
- and between -
Saskatchewan Power Corporation v. Chief Ronald Michel, Chief of the Peter Ballantyne Cree Nation, on his own behalf and on behalf of all other members of Peter Ballantyne Cree Nation and Peter Ballantyne Cree Nation, Attorney General of Canada, Government of Saskatchewan, Hudson Bay Mining and Smelting Co. Limited, Churchill River Power Corporation Limited
- and between -
Government of Saskatchewan v. Chief Ronald Michel, Chief of the Peter Ballantyne Cree Nation, on his own behalf and on behalf of all other members of Peter Ballantyne Cree Nation and Peter Ballantyne Cree Nation, Attorney General of Canada, Saskatchewan Power Corporation, Hudson Bay Mining and Smelting Co. Limited, Churchill River Power Corporation Limited
Aboriginal law – Indian bands – Indian reserves
The plaintiffs, Peter Ballantyne Cree Nation (“PBCN”) et al., commenced an action against Canada, Saskatchewan, and the Saskatchewan Power Corporation (“SaskPower”), seeking declarations and damages for breach of the honour of the Crown, breach of fiduciary duties, and trespass (including continuing trespass), arising from the construction and operation of a nearby hydroelectric dam operated by SaskPower. The dam’s operation regularly results in a portion of PBCN’s reserve being continuously flooded, from the original operation of the dam in the 1940s to the present day. The defendants brought third party indemnity claims against the dam’s original builder and operator. The defendants also applied for summary judgment, arguing that all of PBCN’s claims should be dismissed by operation of applicable provincial limitation periods.
The chambers judge granted the defendants’ motion for summary judgment, and dismissed all claims against all defendants, including all third party claims; the chambers judge found that there was no triable issue as a result of the application of provincial limitations legislation. The Saskatchewan Court of Appeal allowed PBCN’s appeal in part, only to the extent of allowing PBCN to pursue its claim of trespass as against Saskatchewan and SaskPower, given that the trespass in question was “continuing” and therefore fell within an exception to the applicable provincial limitations legislation. The Court of Appeal remitted the claim of trespass (including issues related to consent and to damages, if any) back to the Court of Queen’s Bench, for determination. In all other respects, the Court of Appeal upheld the chambers judge’s decision to dismiss all other claims against all defendants and third party defendants. The Court of Appeal subsequently dismissed two applications for rehearing filed by both PBCN and SaskPower. PBCN, SaskPower and Saskatchewan all seek leave to appeal the Court of Appeal decision.
Chief John Ermineskin, Lawrence Wildcat, Gordon Lee, Art Littlechild, Maurice Wolfe, Curtis Ermineskin, Gerry Ermineskin, Earl Ermineskin, Rick Wolfe, Ken Cutarm, Brian Lee, elected Chief and Councillors of the Ermeineskin Indian Band and Nation suing on their own behalf and on behalf of all the other members of the Ermineskin Indian Band and Nation v. Her Majesty the Queen in Right of Canada, Minister of Indian Affairs and Northern Development and Minister of Finance
- and -
Attorney General of Alberta
Constitutional law – Aboriginal law – Treaty rights
In 1946, the applicant First Nation surrendered their mineral interests in their reserve to the Crown, which permitted the Crown to grant leases to oil and gas companies, who then paid royalties to the Crown in trust for the First Nation. In 1973, Canada developed a national strategy to deal with the effects of rapidly rising international oil prices, including the implementation of an export tax (and later, an export charge) on oil export sales. The tax or charge was levied on any exported oil produced on the reserve between 1973 and 1985. In 1992, the First Nation brought an action in Federal Court asserting a number of claims against Canada arising out of these facts, alleging that the regulated price regime constituted, among other things, a breach of the Crown’s trust and fiduciary duties, as well as infringements of treaty rights and obligations. The federal Crown brought a motion for summary judgment, seeking the dismissal of the claim as being time-barred by a six-year statutory limitation period.
The Federal Court granted the Crown’s motion for summary judgment against the First Nation, on the basis that their claim raised no triable issue in light of the application of statutory limitation periods. A majority of the Federal Court of Appeal dismissed the First Nation’s appeal, finding no error in the Federal Court’s reasoning and decision. In the Court of Appeal’s view, the motions judge properly applied the existing jurisprudence which confirms that limitation periods are applicable to all Aboriginal claims, including those based on infringements of treaty rights.
Chief Victor Buffalo acting on his own behalf and on behalf of all the other members of the Samson Indian Nation and Band, Samson Indian Band and Nation v. Her Majesty the Queen in Right of Canada, Minister of Indian Affairs and Northern Development and Minister of Finance
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Attorney General of Alberta
Constitutional law – Aboriginal law – Treaty rights
In 1946, the applicant First Nation surrendered their mineral interests in their reserve to the Crown, which permitted the Crown to grant leases to oil and gas companies, who then paid royalties to the Crown in trust for the First Nation. In 1973, Canada developed a national strategy to deal with the effects of rapidly rising international oil prices, including the implementation of an export tax (and later, an export charge) on oil export sales. The tax or charge was levied on any exported oil produced on the reserve between 1973 and 1985. In 1989, the First Nation brought an action in Federal Court asserting a number of claims against Canada arising out of these facts, alleging that the regulated price regime constituted, among other things, a breach of the Crown’s trust and fiduciary duties, as well as infringements of treaty rights and obligations. The federal Crown brought a motion for summary judgment, seeking the dismissal of the claim as being time-barred by a six-year statutory limitation period.
The Federal Court granted the Crown’s motion for summary judgment against the First Nation, on the basis that their claim raised no triable issue in light of the application of statutory limitation periods. A majority of the Federal Court of Appeal dismissed the First Nation’s appeal, finding no error in the Federal Court’s reasoning and decision. In the Court of Appeal’s view, the motions judge properly applied the existing jurisprudence which confirms that limitation periods are applicable to all Aboriginal claims, including those based on infringements of treaty rights. In partial dissent, one judge of the Court of Appeal would have allowed the First Nation’s appeal to the extent of permitting its claim that Canada improperly collected a tax to continue, in relation to amounts collected in the six years prior to the First Nation filing its statement of claim.
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