On January 30, 2025, McCarthy Tétrault's National Appellate Litigation Group hosted its first Appellate Quarterly webinar of the year, featuring five appeals of importance to the business community and the law around the country. Partners Patrick Williams, Stephanie Sugar, Steeves Bujold, Lyndsey Delamont, and Brandon Kain discussed these recent appellate developments, as well as upcoming cases and future developments in their respective jurisdictions.
- Owner's obligation to arbitrate as a non-party [Alberta]
In Husky Oil Operations Limited v. Technip Stone & Webster Process Technology Inc.,1 the Court of Appeal of Alberta considered a dispute over allegedly defective generators in an Alberta oil sands project. The case involved two contracts: one between the owner and contractor, and another between the contractor and subcontractor, which allowed the owner to enforce warranties against the subcontractor and included an arbitration clause. The question was whether Husky, the project owner, could be forced to arbitrate under the contract to which it was not a party. The Court of Appeal determined that it could decide the issue without requiring an arbitrator to make findings of fact. While Husky benefitted from particular warranties under the contract, the Court found that it could not be compelled to arbitrate, as generally only signatories to the contract can enforce or be bound by it, and no established exception applied in this case. The Court declined to opine on whether imposing an obligation to arbitrate on a non-party is generally possible in the absence of consent, but held that any requirement to arbitrate on a non-party would have to be made in "clear and explicit language."2 In this case, however, the Court found the language of the contract to be ambiguous. The decision provides guidance on when and how an arbitration clause can bind a non-signatory.
- Notice provisions and forms of delivery in contracts [Ontario]
The Court of Appeal for Ontario recently affirmed the importance of contractual notice and limitations provisions in SpaceBridge Inc. v. Baylin Technologies Inc.3 In an asset purchase agreement between Baylin Technologies and SpaceBridge, the parties were permitted to make claims for indemnification but only through a specific mechanism. Baylin made several indemnity claims, but one was rejected because it failed to adhere to the required notice provisions in the contract. While Baylin sent a claim by registered mail, the agreement specified that claims should be delivered by way of e-mail. The escrow agent objected to the claim, and litigation ensued. The application judge ruled that the Escrow Agreement did not permit delivery by registered mail, and that Baylin's claim failed to follow the agreement's specific notice requirements. The Court of Appeal for Ontario upheld this decision, highlighting that contractual notice provisions are substantive and are meaningful, and must be strictly followed. The wording in these provisions is intentional and must be interpreted as such. The Court also considered whether one of the amended claims fell outside of the limitations period due to the amendment having been made later than the ordinary limitation would permit. The Court affirmed the principle that amended pleadings can be made outside of the limitation period if there is no new cause of action or remedy pleaded. The decision highlights the importance of strictly adhering to contractual terms, particularly notice and limitations provisions which are indeed meaningful and should not be taken for granted, and stresses the need for careful drafting to avoid future disputes.
- Racial profiling and the constitutionality of random police checks [Québec]
Approximately 35 years ago, in R. v. Ladouceur,4 a 5-4 majority of the Supreme Court of Canada ruled that police were permitted to conduct routine checks and stop drivers to, among other things, check a driver's license and insurance, or assess any signs of intoxication. In Procureur général du Québec c. Luamba,5 the Court of Appeal of Québec considered the constitutionality of s. 636 of the Code de la sécurité routière, which codified the common law rule in Ladouceur. In Luamba, a 22-year-old Black student was stopped by police multiple times over an 18-month period. Mr. Luamba challenged s. 636 and the common law rule from Ladouceur, raising concerns about the arbitrary exercise of police discretion, particularly based on race. The Superior Court of Québec found that s. 636 and the common law rule violated ss. 7, 9, and 15 of the Charter, and could not be justified under s. 1. The court acknowledged that racial profiling in police practices is often subtle and indirect, leading to biased decision-making that victims may not be able to prove on an evidentiary record. The Court of Appeal of Québec upheld the trial court's ruling, finding that the law created a distinction based on race under s. 15, and violated s. 9 in ways that could not be justified, contrary to the Supreme Court's holding in Ladouceur. The Court noted that the provision lacked sufficient limits on police discretion and found no evidence suggesting that random traffic stops effectively contribute to road safety. While it refrained from ruling under s. 7, the Court imposed a suspended declaration of invalidity. This decision marks a step forward in addressing systemic racial profiling within the criminal justice system.
- Safety-critical workers and diminished expectations of privacy [Federal]
In Power Workers' Union v. Canada (Attorney General),6 the Federal Court of Appeal was tasked with determining the validity of the Canadian Nuclear Safety Commission's requirement for pre-placement random alcohol and drug testing as conditions of the license for individuals to operate certain facilities. Six affected workers and their unions challenged these requirements, suggesting that their ss. 7, 8, and 15 Charter rights were violated, and that the requirements were administratively unreasonable. The Federal Court found that, in the context of the highly regulated nuclear industry, all of the claims should fail. On appeal, the Federal Court of Appeal focused largely on the s. 8 analysis and upheld the application judge's decision. The Court found that the taking of bodily samples such as breath, urine, or saliva is less intrusive among other body searches, and that the safety-critical workers had a diminished expectation of privacy due to the nature of their work. The challenge under s. 8 failed, as the Court found that the testing procedures were justified under the law and had sufficient safeguards in place. Under s. 7, the Court concluded that the non-invasive nature of the seizure in this case did not constitute a serious or profound level of psychological stress imposed by the state. It also found no evidence of discrimination for the purpose of s. 15. Regarding the administrative law challenge, the Court upheld the Commission's broad powers to set licensing conditions, which provided it with significant discretion. Throughout its analysis, the Court emphasized the importance of procedural safeguards to ensure fairness and transparency in the testing process.
- Duty of good faith in negotiating renewals of contract [Supreme Court of Canada]
In Quebec (Attorney General) v. Pekuakamiulnuatsh Takuhikan,7 the Supreme Court of Canada recently determined that the Government of Canada and the Government of Québec breached their duty of good faith and the honour of the Crown. At the core of this case were a series of agreements between the federal government, the Government of Quebec, and Pekuakamiulnuatsh Takuhikan, a band council, which established the Sécurité publique de Mashteuiatsh, an Indigenous police force. The agreements included a clause allowing for renewal, where the parties could agree to extend the existing terms for up to one year. Over time, the government funding for the Indigenous police force became insufficient, prompting the band council to file a claim based on the private law duty of contractual good faith and the public law obligations flowing from the honour of the Crown. The band council argued that the federal and provincial governments violated both.
An 8-1 majority of the Supreme Court of Canada agreed with the band council, ruling that the governments were required to renegotiate their financial contributions in good faith—a duty they failed to uphold by refusing to meaningfully engage with the band council's proposals. The majority held that, even without an explicit contractual provision requiring certain outcomes, the duty of good faith mandated the governments to not act unreasonably. The duty was said to be grounded in the general obligation to act in good faith under the Civil Code of Québec. Although the government violated this duty, the Court declined to award damages given insufficient evidence regarding the extent of harm caused; nevertheless, the majority awarded damages for the government's violation of the duty flowing from the honour of the Crown. It is true that the Court decided the issues under Québec civil law. However, the decision's implications may extend to both civil and common law jurisdictions, particularly with respect to the obligation to negotiate in good faith and the difficulty of quantifying damages for breaches of this duty. Indeed, the harm in question is primarily the innocent party's lost opportunity to negotiate a better result.
Footnotes
1. Husky Oil Operations Limited v. Technip Stone & Webster Process Technology Inc., 2024 ABCA 369.
2. Ibid at para. 32.
3. SpaceBridge Inc. v. Baylin Technologies Inc., 2024 ONCA 871.
4. R. v. Ladouceur, [1990] 1 S.C.R. 1257.
5. Procureur général du Québec c. Luamba, 2024 QCCA 1387.
6. Power Workers' Union v. Canada (Attorney General), 2024 FCA 182.
7. Quebec (Attorney General) v. Pekuakamiulnuatsh Takuhikan, 2024 SCC 39.
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