Desputeaux v. Éditions Chouette (1987) inc.

Desputeaux v. Éditions Chouette (1987) inc.
Collection
Supreme Court Judgments
Date
2003-03-21
Neutral citation
2003 SCC 17
Report
[2003] 1 SCR 178
Case number
28660
Judges
Gonthier, Charles Doherty; Iacobucci, Frank; Bastarache, Michel; Binnie, William Ian Corneil; Arbour, Louise; LeBel, Louis; Deschamps, Marie
On appeal from
Quebec
Subjects
Arbitration
Notes
SCC Case Information: 28660
Decision Content
Desputeaux v. Éditions Chouette (1987) inc., [2003] 1 S.C.R. 178, 2003 SCC 17
Les Éditions Chouette (1987) inc. and Christine L’Heureux Appellants
v.
Hélène Desputeaux Respondent
and
Régis Rémillard Mis en cause
and
Quebec National and International Commercial Arbitration
Centre, Union des écrivaines et écrivains québécois, Conseil
des métiers d’art du Québec and Regroupement des artistes
en arts visuels du Québec Interveners
Indexed as: Desputeaux v. Éditions Chouette (1987) inc.
Neutral citation: 2003 SCC 17.
File No.: 28660.
2002: November 6; 2003: March 21.
Present: Gonthier, Iacobucci, Bastarache, Binnie, Arbour, LeBel and Deschamps JJ.
on appeal from the court of appeal for quebec
Arbitration — Interpretation of contract between artist and promoter — Copyright — Whether Copyright Act prevents arbitrator from ruling on question of copyright — Copyright Act, R.S.C. 1985, c. C‑42, s. 37 .
Arbitration — Interpretation of contract between artist and promoter — Copyright — Public order — Whether question relating to ownership of copyright falls outside arbitral jurisdiction because it must be treated in same manner as question of public order relating to status of persons and rights of personality — Whether Court of Appeal erred in stating that erga omnes nature of decisions concerning copyright ownership is bar to arbitration proceeding — Civil Code of Québec, S.Q. 1991, c. 64, art. 2639 — Act respecting the professional status of artists in the visual arts, arts and crafts and literature, and their contracts with promoters, R.S.Q., c. S‑32.01, s. 37.
Arbitration — Arbitration award — Validity — Extent of arbitrator’s mandate — Interpretation of contract between artist and promoter — Whether arbitrator exceeded mandate by ruling on question of copyright ownership — Whether award should be annulled because arbitrator did not comply with requirements respecting form and substance of contracts between artists and promoters — Act respecting the professional status of artists in the visual arts, arts and crafts and literature, and their contracts with promoters, R.S.Q., c. S‑32.01, ss. 31, 34.
Arbitration — Arbitration award — Consideration of matter of public order — Limits on review of validity of arbitration awards — Code of Civil Procedure, R.S.Q., c. C‑25, arts. 946.4, 946.5.
Arbitration — Procedure — Natural justice — Methods of proof — Interpretation of contract between artist and promoter — Whether arbitration proceeding conducted in violation of rules of natural justice.
D, L and C formed a partnership for the purpose of creating children’s books. L was the manager and majority shareholder in C. D drew and L wrote the text for the first books in the Caillou series. Between 1989 and 1995, D and C entered into a number of contracts relating to the publication of illustrations of the Caillou character. D signed as author and L signed as publisher. In 1993, the parties signed a contract licensing the use of the Caillou character. D and L represented themselves in it as co-authors and assigned certain reproduction rights to C, excluding rights granted in the publishing contracts, for the entire world, with no stipulation of a term. The parties waived any claims based on their moral right in respect of Caillou. They also authorized C to grant sub-licences to third parties without their approval. A rider signed in 1994 provided that in the event that D produced illustrations to be used in one of the projects in which Caillou was to be used, she was to be paid a lump sum corresponding to the work required. In 1996, faced with difficulties in respect of the interpretation and application of the licence contract, C brought a motion to secure recognition of its reproduction rights. D brought a motion for declinatory exception seeking to have the parties referred to an arbitrator as provided in s. 37 of the Act respecting the professional status of artists in the visual arts, arts and crafts and literature, and their contracts with promoters. The Superior Court, finding that the existence of the contract was not in issue, and that there were no allegations in respect of its validity, referred the case to arbitration. The arbitrator decided that his mandate included interpreting all the contracts and the rider. In the arbitrator’s view, Caillou was a work of joint authorship by D and L. With respect to the licence and the rider, the arbitrator concluded that C held the reproduction rights and that it alone was authorized to use Caillou in any form and on any medium, provided that a court agreed that the contracts were valid. The Superior Court dismissed D’s motion for annulment of the arbitration award. The Court of Appeal reversed that judgment.
Held: The appeal should be allowed. The arbitrator acted in accordance with his terms of reference and made no error such as would permit annulment of the arbitration award.
The parties to an arbitration agreement have virtually unfettered autonomy in identifying the disputes that may be the subject of the arbitration proceeding. Subject to the applicable statutory provisions, that agreement comprises the arbitrator’s terms of reference and delineates the task he or she is to perform. In this case, however, the arbitrator’s terms of reference were not defined by a single document. His task was delineated, and its content determined, by a judgment of the Superior Court, and by an exchange of correspondence between the parties and the arbitrator. The Superior Court’s first judgment limited the arbitrator’s jurisdiction by removing any consideration of the problems relating to the validity of the agreements from him. That restriction necessarily included any issues of nullity based on compliance by the agreements with the mandatory formalities imposed by ss. 31 and 34 of the Act respecting the professional status of artists in the visual arts, arts and crafts and literature, and their contracts with promoters. The arbitrator therefore had to proceed on the basis that this problem was not before him. With respect to the question of copyright, and ownership of that copyright, in order to understand the scope of the arbitrator’s mandate, a purely textual analysis of the communications between the parties is not sufficient. In addition to what is expressly set out in the arbitration agreement, the arbitrator’s mandate includes everything that is closely connected with that agreement. Here, from a liberal interpretation of the arbitration agreement, based on identification of its objectives, it can be concluded that the question of co‑authorship was intrinsically related to the other questions raised by the arbitration agreement.
Section 37 of the Copyright Act does not prevent an arbitrator from ruling on the question of copyright. The provision has two objectives: to affirm the jurisdiction that the provincial courts, as a rule, have in respect of private law matters concerning copyright and to avoid fragmentation of trials concerning copyright that might result from the division of jurisdiction ratione materiae between the federal and provincial courts in this field. It is not intended to exclude arbitration. It merely identifies the court which, within the judicial system, will have jurisdiction to hear cases involving a particular subject matter. By assigning shared jurisdiction ratione materiae in respect of copyright to the Federal Court and provincial courts, s. 37 is sufficiently general to include arbitration procedures created by a provincial statute.
The arbitration award is not contrary to public order. In interpreting and applying the concept of public order in the realm of consensual arbitration in Quebec, it is necessary to have regard to the legislative policy that accepts this form of dispute resolution and even seeks to promote its expansion. Except in certain fundamental matters referred to in art. 2639 C.C.Q., an arbitrator may dispose of questions relating to rules of public order, since they may be the subject matter of the arbitration agreement. Public order arises primarily when the validity of an arbitration award must be determined. Under art. 946.5 C.C.P., the court must examine the award as a whole to determine the nature of the result. It must determine whether the decision itself, in its disposition of the case, violates statutory provisions or principles that are matters of public order. An error in interpreting a mandatory statutory provision would not provide a basis for annulling the award as a violation of public order, unless the outcome of the arbitration was in conflict with the relevant fundamental principles of public order. Here, the Court of Appeal erred in holding that cases involving ownership of copyright may not be submitted to arbitration, because they must be treated in the same manner as questions of public order, relating to the status of persons and rights of personality. In the context of Canadian copyright legislation, although the work is a “manifestation of the personality of the author”, this issue is very far removed from questions relating to the status and capacity of persons and to family matters, within the meaning of art. 2639 C.C.Q. The Copyright Act is primarily concerned with the economic management of copyright, and does not prohibit artists from entering into transactions involving their copyright, or even from earning revenue from the exercise of the moral rights that are part of it. In addition, s. 37 of the Act respecting the professional status of artists in the visual arts, arts and crafts and literature, and their contracts with promoters recognizes the legitimacy of transactions involving copyright, and the validity of using arbitration to resolve disputes arising in respect of such transactions.
The Court of Appeal also erred in stating that the fact that a decision in respect of copyright may be set up against the entire world, and accordingly the nature of its effects on third parties, is a bar to the arbitration proceeding. The Code of Civil Procedure does not consider the effect of an arbitration award on third parties to be a ground on which it may be annulled or its homologation refused. The arbitrator ruled as to the ownership of the copyright in order to decide as to the rights and obligations of the parties to the contract. The arbitral decision is authority between the parties, but is not binding on third parties.
Finally, by adopting a standard of review based on simple review of any error of law made in considering a matter of public order, the Court of Appeal applied an approach that runs counter to the fundamental principle of the autonomy of arbitration and extends judicial intervention at the point of homologation or an application for annulment of the arbitration award well beyond the cases provided for in the Code of Civil Procedure. Public order will of course always be relevant, but solely in terms of the determination of the overall outcome of the arbitration proceeding.
D has not established a violation of the rules of natural justice during the arbitration proceeding.
Cases Cited
Approved: Laurentienne-vie, compagnie d’assurance inc. v. Empire, compagnie d’assurance-vie, [2000] R.J.Q. 1708; Mousseau v. Société de gestion Paquin ltée, [1994] R.J.Q. 2004; Compagnie nationale Air France v. Mbaye, [2000] R.J.Q. 717; International Civil Aviation Organization v. Tripal Systems Pty. Ltd., [1994] R.J.Q. 2560; Régie intermunicipale de l’eau Tracy, St-Joseph, St-Roch v. Constructions Méridien inc., [1996] R.J.Q. 1236; Régie de l’assurance-maladie du Québec v. Fédération des médecins spécialistes du Québec, [1987] R.D.J. 555; Tuyaux Atlas, une division de Atlas Turner Inc. v. Savard, [1985] R.D.J. 556; referred to: Guns N’Roses Missouri Storm Inc. v. Productions Musicales Donald K. Donald Inc., [1994] R.J.Q. 1183; Canada (Human Rights Commission) v. Canadian Liberty Net, [1998] 1 S.C.R. 626; Ontario (Attorney General) v. Pembina Exploration Canada Ltd., [1989] 1 S.C.R. 206; Automatic Systems Inc. v. Bracknell Corp. (1994), 113 D.L.R. (4th) 449; Weber v. Ontario Hydro, [1995] 2 S.C.R. 929; Auerbach v. Resorts International Hotel Inc., [1992] R.J.Q. 302; Goulet v. Transamerica Life Insurance Co. of Canada, [2002] 1 S.C.R. 719, 2002 SCC 21; Condominiums Mont St-Sauveur inc. v. Constructions Serge Sauvé ltée, [1990] R.J.Q. 2783; Procon (Great Britain) Ltd. v. Golden Eagle Co., [1976] C.A. 565; Société Seagram France Distribution v. Société GE Massenez, Cass. civ. 2e, May 3, 2001, Rev. arb. 2001.4.805; Théberge v. Galerie d’Art du Petit Champlain inc., [2002] 2 S.C.R. 336, 2002 SCC 34; Entreprises H.L.P. inc. v. Logisco inc., J.E. 93-1707; Moscow Institute of Biotechnology v. Associés de recherche médicale canadienne (A.R.M.C.), J.E. 94-1591.
Statutes and Regulations Cited
Act respecting the professional status of artists in the visual arts, arts and crafts and literature, and their contracts with promoters, R.S.Q., c. S-32.01, ss. 31, 34, 37, 42.
Civil Code of Québec, S.Q. 1991, c. 64, arts. 2638, 2639, 2640, 2643, 2848.
Code of Civil Procedure, R.S.Q., c. C-25, arts. 33, 846, 943, 943.1, 944.1 [am. 1992, c. 57, s. 422], 944.10, 946.2, 946.4, 946.5, 947, 947.1, 947.2.
Commercial Arbitration Act, R.S.C. 1985, c. 17 (2nd Supp .), Sched., Art. 5 .
Constitution Act, 1867, ss. 92(14) , 96 , 101 .
Copyright Act, R.S.C. 1985, c. C-42, ss. 2 “work of joint ownership”, 9 [rep. & sub. 1993, c. 44, s. 60], 13, 14.1 [ad. 1985, c. 10 (4th Supp.), s. 4 ], 37 [am. 1997, c. 24, s. 20].
Authors Cited
Antaki, Nabil N. Le règlement amiable des litiges. Cowansville, Qué.: Yvon Blais, 1998.
Bachand, Frédéric. “Arbitrage commercial: Assujettissement d’un tribunal arbitral conventionnel au pouvoir de surveillance et de contrôle de la Cour supérieure et contrôle judiciaire d’ordonnances de procédure rendues par les arbitres” (2001), 35 R.J.T. 465.
Baudouin, Jean-Louis, et Pierre-Gabriel Jobin. Les obligations, 5e éd. Cowansville, Qué.: Yvon Blais, 1998.
Blessing, Marc. “Arbitrability of Intellectual Property Disputes” (1996), 12 Arb. Int’l 191.
Brierley, John E. C. “Chapitre XVIII de la convention d’arbitrage, articles 2638-2643” dans La réforme du Code civil: obligations, contrats nommés, t. 2. Textes réunis par le Barreau du Québec et la Chambre des notaires du Québec. Ste-Foy, Qué.: Presses de l’Université Laval, 1993, 1067.
Brierley, John E. C. “La convention d’arbitrage en droit québécois interne”, [1987] C.P. du N. 507.
Brierley, John E. C. “Une loi nouvelle pour le Québec en matière d’arbitrage” (1987), 47 R. du B. 259.
Brun, Henri, et Guy Tremblay. Droit constitutionnel, 4e éd. Cowansville, Qué.: Yvon Blais, 2002.
Fortier, L. Yves. “Delimiting the Spheres of Judicial and Arbitral Power: ‘Beware, My Lord, of Jealousy’” (2001), 80 Can. Bar Rev. 143.
Fouchard, Gaillard, Goldman on International Commercial Arbitration, edited by E. Gaillard and J. Savage. The Hague: Kluwer Law International, 1999.
Goudreau, Mistrale. “Le droit moral de l’auteur au Canada” (1994), 25 R.G.D. 403.
Grantham, William. “The Arbitrability of International Intellectual Property Disputes” (1996), 14 Berkeley J. Int’l L. 173.
Racine, Jean-Baptiste. L’arbitrage commercial international et l’ordre public, t. 309. Paris: L.G.D.J., 1999.
Royer, Jean-Claude. La preuve civile, 2e éd. Cowansville, Qué.: Yvon Blais, 1995.
Thuilleaux, Sabine. L’arbitrage commercial au Québec: droit interne – droit international privé. Cowansville, Qué.: Yvon Blais, 1991.
APPEAL from a judgment of the Quebec Court of Appeal, [2001] R.J.Q. 945, 16 C.P.R. (4th) 77, [2001] Q.J. No.1510 (QL), reversing a decision of the Superior Court. Appeal allowed.
Stefan Martin and Sébastien Grammond, for the appellants.
Normand Tamaro, for the respondent.
Pierre Bienvenu and Frédéric Bachand, for the intervener the Quebec National and International Commercial Arbitration Centre.
Daniel Payette, for the interveners the Union des écrivaines et écrivains québécois and the Conseil des métiers d’art du Québec.
Louis Linteau, for the intervener the Regroupement des artistes en arts visuels du Québec.
English version of the judgment of the Court delivered by
LeBel J. —
I. Introduction
1 The friendly face of Caillou, with his round cheeks and expression of wide‑eyed surprise, has delighted countless young children and won over their parents and grandparents. Today, this charming little character, a creation that sprang from the imagination and from the art of form and colour, is moving out of the world where he welcomes his new baby sister, or gets ready for kindergarten. Unintentionally, no doubt, he is now making a contribution to the development of commercial arbitration law in the field of intellectual property. What has happened is that the people who consider themselves to be his mothers are engaged in battle for him. The respondent claims exclusive maternity. The appellants believe it was a joint effort. The manner in which their dispute is to be resolved has itself become the subject of a major disagreement, and that is what is now before this Court.
2 A decision of the Quebec Court of Appeal annulled the arbitration award made by the mis en cause Rémillard, who had found in part for the appellants on the question of the intellectual property in the Caillou character. The respondent Desputeaux is seeking to have that judgment affirmed. In her submission, the arbitrator did not remain within the bounds of his terms of reference. She contends, as well, that he disposed of an issue that is not a proper subject of arbitration: copyright ownership. She further submits that the arbitration proceeding was conducted in violation of the fundamental principles of natural justice and procedural fairness. Her final argument is that the arbitrator’s decision violated the rules of public order. The appellants dispute those contentions and argue that the Court of Appeal’s judgment should be set aside and the arbitration award restored, in accordance with the disposition made by the Superior Court. For the reasons that follow, I am of the opinion that the appeal must be allowed. The arbitrator acted in accordance with the terms of reference he was given. The allegation that the rules of natural justice were violated has not been substantiated. The arbitrator had the authority to dispose of the issues before him. As well, there was no violation of the rules of public order that would justify the superior courts in annulling the award.
II. Origin of the Case
3 In 1988, the respondent and the appellants Christine L’Heureux and Les Éditions Chouette (1987) inc. (“Chouette”) formed a partnership for the purpose of creating children’s books. The appellant L’Heureux was the manager and majority shareholder in Chouette. The first books in the Caillou series were published in 1989. While the respondent drew the little fictional character, L’Heureux wrote the text for the first eight books. Between May 5, 1989, and August 21, 1995, the respondent and the appellant Chouette entered into a number of contracts relating to the publication of illustrations of the Caillou character in the forms of books and derivative products. All those contracts were for a period of ten years and were signed by the respondent, as author, and the appellant L’Heureux, as publisher. The parties were using standard forms drafted as provided in an agreement between the Association des éditeurs and the Union des écrivaines et écrivains québécois. The parties inserted only the particulars that related specifically to them, such as the title of the work, the territory covered, the term of the agreement and the percentage of royalties payable to the author.
4 On September 1, 1993, the parties signed a contract licensing the use of the fictitious Caillou character. The respondent and the appellant L’Heureux represented themselves in it as co‑authors of a work consisting of a fictitious character known by the name Caillou. They assigned the following rights (“reproduction rights”) to the appellant Chouette, excluding rights granted in the publishing contracts, for the entire world, with no stipulation of a term:
[translation]
(a) The right to reproduce Caillou in any form and on any medium or merchandise;
(b) the right to adapt Caillou for the purposes of the creation and production of audio and/or audiovisual works, performance in public and/or communication to the public of any resulting work;
(c) the right to apply, as owner, for registration of the name Caillou in any language whatsoever, or of the graphic representation of Caillou, as a trademark;
(d) the right to apply, as owner, for registration of any visual configurations or characteristics of Caillou as an industrial design.
5 The parties waived any claims based on their moral right in respect of Caillou. Their agreements also authorized Chouette to grant sub‑licences to third parties, without the approval of the other parties to the contracts. On December 15, 1994, the parties added a rider to the agreement of September 1, 1993, which neither replaced nor cancelled the previous publishing contracts, but amended the contract of September 1, 1993, as it related to the royalties payable in respect of the licence for the use of the fictitious Caillou character. In the event that Desputeaux produced illustrations to be used in one of the projects in which the character was to be used, she was to be paid a lump sum corresponding to the work required. Neither the rider nor the licence contract specified the term of the agreement between the parties.
6 In October 1996, difficulties arose in respect of the interpretation and application of the licence contract, and Chouette brought a motion for a declaratory judgment. The applicant’s purpose in bringing the motion was to secure recognition of its entitlement to exploit the reproduction rights. The respondent then brought a motion for declinatory exception seeking to have the parties referred to an arbitrator. On February 28, 1997, Bisaillon J. of the Superior Court allowed the declinatory exception and referred the case to arbitration: [1997] Q.J. No. 716 (QL). He found, based on the relief sought by the parties in the two motions, that the existence of the contract was not in issue, and that there were no allegations in respect of the validity of the contract.
7 After hearing the case, the arbitrator appointed by the parties, Régis Rémillard, a notary, concluded that Chouette held the reproduction rights sought and that it alone had the right to use the Caillou character. The Superior Court dismissed a motion for annulment of the award. The appeal from that judgment was unanimously allowed by the Court of Appeal, which annulled the award, and it is that decision which has been appealed to this Court.
III. Relevant Statutory Provisions
8 Copyright Act, R.S.C. 1985, c. C‑42
2. . . .
“work of joint authorship” means a work produced by the collaboration of two or more authors in which the contribution of one author is not distinct from the contribution of the other author or authors;
13. . . .
(3) Where the author of a work was in the employment of some other person under a contract of service or apprenticeship and the work was made in the course of his employment by that person, the person by whom the author was employed shall, in the absence of any agreement to the contrary, be the first owner of the copyright, but where the work is an article or other contribution to a newspaper, magazine or similar periodical, there shall, in the absence of any agreement to the contrary, be deemed to be reserved to the author a right to restrain the publication of the work, otherwise than as part of a newspaper, magazine or similar periodical.
14.1 (1) The author of a work has, subject to section 28.2, the right to the integrity of the work and, in connection with an act mentioned in section 3, the right, where reasonable in the circumstances, to be associated with the work as its author by name or under a pseudonym and the right to remain anonymous.
(2) Moral rights may not be assigned but may be waived in whole or in part.
(3) An assignment of copyright in a work does not by that act alone constitute a waiver of any moral rights.
(4) Where a waiver of any moral right is made in favour of an owner or a licensee of copyright, it may be invoked by any person authorized by the owner or licensee to use the work, unless there is an indication to the contrary in the waiver.
37. The Federal Court has concurrent jurisdiction with provincial courts to hear and determine all proceedings, other than the prosecution of offences under section 42 and 43, for the enforcement of a provision of this Act or of the civil remedies provided by this Act.
Act respecting the professional status of artists in the visual arts, arts and crafts and literature, and their contracts with promoters, R.S.Q., c. S‑32.01
31. The contract must be evidenced in a writing, drawn up in duplicate, clearly setting forth
(1) the nature of the contract;
(2) the work or works which form the object of the contract;
(3) any transfer of right and any grant of licence consented to by the artist, the purposes, the term or mode of determination thereof, and the territorial application of such transfer of right and grant of licence, and every transfer of title or right of use affecting the work;
(4) the transferability or nontransferability to third persons of any licence granted to a promoter;
(5) the consideration in money due to the artist and the intervals and other terms and conditions of payment;
(6) the frequency with which the promoter shall report to the artist on the transactions made in respect of every work that is subject to the contract and for which monetary consideration remains owing after the contract is signed.
34. Every agreement between a promoter and an artist which reserves, for the promoter, an exclusive right over any future work of the artist or which recognizes the promoter’s right to determine the circulation of such work shall, in addition to meeting the requirements set out in section 31,
(1) contemplate a work identified at least as to its nature;
(2) be terminable upon the application of the artist once a given period agreed upon by the parties has expired or after a determinate number of works agreed upon by the parties has been completed;
(3) specify that the exclusive right ceases to apply in respect of a reserved work where, after the expiration of a period for reflection, the promoter, though given formal notice to do so, does not circulate the work;
(4) stipulate the duration of the period for reflection agreed upon by the parties for the application of paragraph 3.
37. In the absence of an express renunciation, every dispute arising from the interpretation of the contract shall be submitted to an arbitrator at the request of one of the parties.
The parties shall designate an arbitrator and submit their dispute to him according to such terms and conditions as may be stipulated in the contract. The provisions of Book VII of the Code of Civil Procedure (chapter C‑25), adapted as required, apply to such arbitration.
42. Subject to sections 35 and 37, no person may waive application of any provision of this chapter.
Civil Code of Québec, S.Q. 1991, c. 64 (“C.C.Q.”)
2639. Disputes over the status and capacity of persons, family matters or other matters of public order may not be submitted to arbitration.
An arbitration agreement may not be opposed on the ground that the rules applicable to settlement of the dispute are in the nature of rules of public order.
2640. An arbitration agreement shall be evidenced in writing; it is deemed to be evidenced in writing if it is contained in an exchange of communications which attest to its existence or in an exchange of proceedings in which its existence is alleged by one party and is not contested by the other party.
2643. Subject to the peremptory provisions of law, the procedure of arbitration is governed by the contract or, failing that, by the Code of Civil Procedure.
2848. The authority of a final judgment (res judicata) is an absolute presumption; it applies only to the object of the judgment when the demand is based on the same cause and is between the same parties acting in the same qualities and the thing applied for is the same.
However, a judgment deciding a class action has the authority of a final judgment in respect of the parties and the members of the group who have not excluded themselves therefrom.
Code of Civil Procedure, R.S.Q., c. C‑25 (“C.C.P.”)
943. The arbitrators may decide the matter of their own competence.
943.1 If the arbitrators declare themselves competent during the arbitration proceedings, a party may within 30 days of being notified thereof apply to the court for a decision on that matter.
While such a case is pending, the arbitrators may pursue the arbitration proceedings and make their award.
944.1 Subject to this Title, the arbitrators shall proceed to the arbitration according to the procedure they determine. They have all the necessary powers for the exercise of their jurisdiction, including the power to appoint an expert.
944.10 The arbitrators shall settle the dispute according to the rules of law which they consider appropriate and, where applicable, determine the amount of the damages.
They cannot act as amiable compositeurs except with the prior concurrence of the parties.
They shall in all cases decide according to the stipulations of the contract and take account of applicable usage.
946.2. The court examining a motion for homologation cannot enquire into the merits of the dispute.
946.4. The court cannot refuse homologation except on proof that
(1) one of the parties was not qualified to enter into the arbitration agreement;
(2) the arbitration agreement is invalid under the law elected by the parties or, failing any indication in that regard, under the laws of Québec;
(3) the party against whom the award is invoked was not given proper notice of the appointment of an arbitrator or of the arbitration proceedings or was otherwise unable to present his case;
(4) the award deals with a dispute not contemplated by or not falling within the terms of the arbitration agreement, or it contains decisions on matters beyond the scope of the agreement; or
(5) the mode of appointment of arbitrators or the applicable arbitration procedure was not observed.
In the case of subparagraph (4) of the first paragraph, the only provision not homologated is the irregular provision described in that paragraph, if it can be dissociated from the rest.
946.5. The court cannot refuse homologation of its own motion unless it finds that the matter in dispute cannot be settled by arbitration in Québec or that the award is contrary to public order.
947. The only possible recourse against an arbitration award is an application for its annulment.
947.1. Annulment is obtained by motion to the court or by opposition to a motion for homologation.
947.2. Articles 946.2 to 946.5, adapted as required, apply to an application for annulment of an arbitration award.
IV. Judicial History
A. Arbitration Award (Régis Rémillard, Notary) (July 22, 1997)
9 The arbitrator first decided that his mandate included interpreting the contract concerning the licence as well as the rider and the publishing contracts, to determine the method of commercial exploitation provided for by the licence. After examining the publishing contracts, he stated the opinion that the fact that the respondent had signed as “author” did not reflect reality. In his view, both Desputeaux and L’Heureux could, under the Copyright Act, R.S.C. 1985, c. C‑42 , claim the status of author in respect of Caillou, the appellant L’Heureux in respect of the literary portion of the original texts and the respondent in respect of the illustration and the physical aspect of the character. In the arbitrator’s view, the involvement of the respondent and the appellant L’Heureux in the development of the Caillou character was indivisible. The work was therefore a work of joint authorship, within the meaning of s. 2 of the Copyright Act .
10 The licence contract for the fictitious Caillou character must therefore be considered in its context. It was signed after protracted negotiations between the parties, who were assisted by their lawyers. At that time, the respondent and the appellant L’Heureux each mutually recognized the other’s status as co‑author of the Caillou character, as confirmed by letters that were exchanged after the agreement was signed, which were submitted to the arbitrator. The arbitrator therefore quickly rejected the argument that the contract was a sham. In the agreement, the co‑authors assigned the appellant Chouette all of the rights that were needed for the commercial exploitation of Caillou in the entire world. While the arbitrator did not refer to the public order provisions of the Act respecting the professional status of artists in the visual arts, arts and crafts and literature, and their contracts with promoters (“Act respecting the professional status of artists”), he stated the opinion that because the parties had not stipulated a time limit, the contract was protected under s. 9 of the Copyright Act , for 50 years after the death of the last co‑author. With respect to the rider of December 15, 1994, he said that the obligation to consult the respondent did not create a veto right. By his interpretation, neither the rider nor the licence contract imposed any obligation to account.
11 In conclusion, the arbitrator pointed out that the licence and the rider related solely to future works by the authors with the Caillou character as their subject. On this point, he stated that because Chouette held the reproduction rights, it was the only one authorized to use the Caillou character in any form and on any medium, provided that a court agreed that the contracts were valid. Mr. Rémillard refrained from stating an opinion on that subject. In my view, the judgment referring the matter to arbitration reserved that question to the Superior Court.
B. Quebec Superior Court (March 13, 1998)
12 Desputeaux then challenged the arbitration award, and asked the Superior Court to annul it. She argued, inter alia, that the arbitrator had ruled on a dispute that was not before him, the intellectual property in the Caillou character and the status of the parties as co‑authors. She also criticized the arbitrator for failing to apply the mandatory provisions of the Act respecting the professional status of artists. In her submission, their application would have justified annulment of the agreements between the parties. The respondent also criticized Mr. Rémillard for ruling on the main issues without evidence and for conducting the arbitration without regard for the fundamental rules of natural justice.
13 In a brief judgment delivered from the bench, Guthrie J. of the Superior Court dismissed the application for annulment. In his opinion, none of the grounds of nullity argued was material or well‑founded. However, the judgment was mainly restricted to a summary of the content of the annulment proceeding and reference to the most important statutory provisions applicable, including the articles of the Code of Civil Procedure of Quebec relating to judicial review of the validity of arbitration decisions. Desputeaux then appealed to the Quebec Court of Appeal.
C. Quebec Court of Appeal (Gendreau, Rousseau‑Houle and Pelletier JJ.A.), [2001] R.J.Q. 945
14 The Quebec Court of Appeal took a more favourable view of the application for annulment made by Desputeaux. It unanimously allowed the appeal and annulled the arbitration award. To begin with, in the opinion of Rousseau‑Houle J.A., the award was null under s. 37 of the Copyright Act . According to her interpretation, that provision requires that disputes as to ownership of copyright be heard by the Federal Court or the superior courts, and therefore does not authorize arbitration, even commercial arbitration, in that realm. In her opinion, the award exceeded the strict interpretation of the contract documents, in respect of which arbitration would have been possible: [translation] “In deciding the legal status [of the respondent] and [of the appellant L’Heureux] in respect of the Caillou character, a work protected by the [Copyright Act ], the arbitrator assumed a competence he did not have” (para. 32). Then, examining the case from the standpoint of the principles of the civil law, Rousseau‑Houle J.A. added that disputes over the status and capacity of persons or other matters of public order may not be submitted to arbitration (art. 2639 C.C.Q. and art. 946.5 C.C.P.). She concluded, on this point, that the paternity of the respondent’s copyright was a moral right that attached to her personality. Accordingly, art. 2639 C.C.Q. exempted it from the arbitrator’s jurisdiction (at paras. 40 and 44):
[translation] The right precisely to credit for paternity of a work, like the right to respect for one’s name, gives a purely “moral” connotation to the dignity and honour of the creator of the work. From these standpoints, the question of the paternity of copyright is not a matter for arbitration.
. . .
In ruling on the question of the monopoly granted by the [Copyright Act ] to an author, the arbitrator made a decision that not only had an impact on the right to paternity of the work, but could be set up against persons other than those involved in the dispute submitted for arbitration.
15 In the opinion of Rousseau‑Houle J.A., the award also had to be annulled because the arbitrator had not applied, or had misinterpreted, ss. 31 and 34 of the Act respecting the professional status of artists, which lays down requirements in respect of the form and substance of contracts between artists and promoters. For one thing, the contracts did not state the extent of the exclusive rights granted, the frequency of the reports to be made or the term of the agreements. The violation of these rules of public order resulted in the nullity of the agreements and the award. The appellants were then granted leave to appeal to this Court. In addition, there are still other proceedings underway in the Superior Court in respect of various aspects of the legal relationship between the parties.
V. Analysis
A. The Issues and the Positions of the Parties and Intervenors
16 There are three categories of problems involved in this case, all of them connected to the central question of the validity of the arbitration award. First, we need to identify the nature and limits of the arbitrator’s terms of reference. We will then have to identify the issue that was before the arbitrator, in order to determine whether and how those terms of reference were carried out. In considering that question, we will have to examine the grounds on which the respondent challenged the conduct of the arbitration proceeding, such as the violation of the principles of natural justice and the rules of civil proof. We shall then discuss the main issues in this appeal, which relate to the arbitrability of copyright problems and the nature and limits of judicial review of arbitration awards made under the Code of Civil Procedure. That part of the discussion will involve an examination of how rules of public order are applied by arbitrators and the limits on the powers of the courts to intervene in respect of decisions made in that regard.
17 The parties argued diametrically opposed positions, each of them