R. in right of Newfoundland v. Commission Hydro-Electrique de Québec

R. in right of Newfoundland v. Commission Hydro-Electrique de Québec
Collection
Supreme Court Judgments
Date
1982-08-09
Report
[1982] 2 SCR 79
Case number
16052, 16079
Judges
Martland, Ronald; Dickson, Robert George Brian; Beetz, Jean; Estey, Willard Zebedee; McIntyre, William Rogers; Chouinard, Julien; Lamer, Antonio
On appeal from
Quebec
Subjects
Civil procedure
Courts
Decision Content
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. 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. 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 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;
… 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; 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 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; (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: “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 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- 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 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- 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 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 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. 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 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 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. 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 of the Superior Court, with costs throughout.
III