B.C. – consent of parties to re-open formal order yields to functus officio

In Leonard v. The Manufacturers Life Insurance Company, 2019 BCSC 598, Mr. Justice J. Christopher Grauer dismissed an application, made on consent of the parties, to certify a class proceeding under B.C.’s Class Proceedings Act, RSBC 1996, c 50 in which the court had already dismissed a prior, unsuccessful application for certification.  Despite arising in a class action context, Grauer J.’s reasons offer insights regarding how applications on consent to re-open final awards could apply in arbitrations undertaken pursuant to statute and for which appeals are limited to questions of law.  A key authority cited by Grauer J. stated that an order cannot be revisited even with consent of the parties because “consent cannot clothe the arbitrator with jurisdiction he [or she] does not have”.

Plaintiffs had earlier applied unsuccessfully, to certify a class proceeding against Defendants, with reasons set out in Leonard v. The Manufacturers Life Insurance Company, 2016 BCSC 534.  In their second attempt at the same result, the parties sought certification on consent of all the parties in order then to obtain a subsequent court order approving a settlement they had negotiated following the earlier, first dismissal.

Grauer J. identified two (2) issues: (i) whether he had jurisdiction to set aside the earlier order dismissing the application for certification; and, (ii) if so, whether he should set aside the earlier order and approve the settlement.

Regarding (i), Grauer J. held that he had no jurisdiction. (As a consequence, he did not have to consider (ii)).

Prior to deciding on jurisdiction, he flagged the circumstances in which the litigation took place, including (i) another pending class proceeding, filed in Ontario under the Class Proceedings Act, 1992, SO 1992, c 6, national in scope, connected to the subject matter of the case before him and (ii) a recently commenced Québec class proceeding, also national in scope, under Québec’s Code of Civil Procedure, CQLR c C-25.01, article 571 et seq.  The certification application in the Québec case had been pleaded and was currently under advisement.  See para. 3.

The class action before Grauer J. only concerned potential members resident in B.C.

After having identified the circumstances in which the parties presented the application on consent, at the close of his reasons he reminded the parties that they were not without options within their control and reiterated those circumstances he had flagged at the onset of his analysis.

[38] But the principal reason is this: this is not a case where declining to set aside the entered order would result in a miscarriage of justice.  While re-opening certification and approving the settlement would undoubtedly offer finality to the parties, and provide for helpful gifts to deserving charities, declining to do so does not preclude the parties from settling or from otherwise resolving the litigation.  They are free to settle on terms similar to those to which they have already agreed, or negotiate new ones.  As it is, the defendants have already undertaken behaviour modification and improved their policies and procedures.  Finally, as the Ehouzou plaintiffs emphatically point out, re-opening and certifying the Leonard action as a class proceeding, and approving the settlement, would seriously impair the ability of the class in Ehouzou to pursue their claims in Québec.

For the sake of his analysis, Grauer J. noted that he was prepared to assume that the settlement was fair and reasonable.  On that assumption, he then considered whether he had jurisdiction to set aside the earlier decision.

Plaintiffs had three (3) arguments to urge Grauer J. to exercise his “inherent jurisdiction”:

(i) the settlement constitutes new evidence not available at the first hearing;

(ii) the parties have assessed the risks and benefits of further litigation and fairness supports not forcing the parties to continue to litigate if they wish to settle; and,

(iii) the settlement would avoid having to appeal the first order and, if successful on appeal, having to conduct a second certification hearing.

Grauer J. distinguished between different statuses of final orders.  He held that where a final order has not been “entered”, the court does have discretion to re-open the hearing and hear new evidence or reconsider the original decision before it enters as a formal order.  The primary factor in such cases is whether a miscarriage of justice would probably occur if the court did not re-open the matter.  See Clayton v. British American Securities Limited, 1934 CanLII 229 (BC CA) and Hodgkinson v. Hodgkinson, 2006 BCCA 158 paras 36-37.

In contrast, once an order has been “entered”, Grauer J. held that the court is functus officio and “there is nothing further the court can do”.  He referred to Chandler v. Alberta Association of Architects, [1989] 2 SCR 848, 1989 CanLII 41 (SCC) and Buchan v. Rome, 2018 BCCA 175.  Grauer J. commented on the purpose of functus officio.

This concept of functus officio prevents litigants from using the trial process as a ‘back-door appeal’ or as a means to re-litigate issues that have already been decided.  In doing so, this doctrine safeguards the finality of judgments, ensures procedural fairness, and protects the integrity of the judicial system: Doucet-Boudreau v Nova Scotia (Minister of Education), [[2003] 3 SCR,] 2003 SCC 62 (CanLII).

Grauer J. found that neither of the two (2) recognized exceptions existed in the case before him which would allow a court to reconsider a matter: “where there has been a slip in drawing up the judgment, or where there has been error in expressing the manifest intention of the court”.  See Paper Machinery Ltd. et Al. v. J.O. Ross Engineering Corp. et Al., [1934] SCR 186, 1934 CanLII 1 (SCC), Doucet-Boudreau v. Nova Scotia (Minister of Education and Harrison v. Harrison, 2007 BCCA 120.

Plaintiffs raised two (2) arguments in response, claiming that their circumstances were “unique”: first, the settlement was a significant change; and, second, the parties to the action agreed to re-open the matter.

Grauer J. disagreed.  With regard to the first argument, referring to Chandler v. Alberta Association of Architects, [1989] 2 SCR 848, 1989 CanLII 41 (SCC) at pages 861-862, he stated that “a change in circumstances does not displace the principle of finality and is not a basis for revisit an order.”

In addressing Plaintiffs’ second argument, he shed light on how similar issues might be resolved in arbitration proceedings. 

With respect to the issue of consent, Justice MacAdam of the Nova Scotia Supreme Court held that an order cannot be revisited even with consent of the parties because “consent cannot clothe the arbitrator with jurisdiction he [or she] does not have”: Nova Scotia Government and General Employees Union v Capital District Health Authority, 2006 NSSC 16 (CanLII) at paras 20 and 27.

Nova Scotia Government and General Employees Union v. Capital District Health Authority involved labour arbitration, not commercial arbitration.  That said, arbitration practitioners can still borrow that the reasoning for use in arbitrations conducted pursuant to statute, much like an administrative tribunal.

Paras 20 and 27 from Nova Scotia Government and General Employees Union v. Capital District Health Authority referred back to Chandler v. Alberta Association of Architects in which the S.C.C. addressed if and when final orders could be revisited.  The S.C.C.’s reasons point to two (2) factors relevant to deciding those situations in which courts might accept re-opening an order: (i) whether the decision maker was created under statute; and, (ii) if so, whether any appeal is limited to an appeal on a question of law.

Certain legislation in Canada imposes arbitration for parties subject to the scope of that legislation and certain domestic arbitration legislation allows for appeals, either on consent or with leave of the court, on a question of law provided that the applicable conditions are met.  In such situations, the court’s reasons in the following paragraphs from Chandler v. Alberta Association of Architects may allow parties, on consent, to apply for a re-opening of an award without breaching the concept of functus officio.

I do not understand Martland J. [Grillas v. Minister of Manpower and Immigration, [1972] SCR 577, 1971 CanLII 3 (SCC)] to go so far as to hold that functus officio has no application to administrative tribunals.  Apart from the English practice which is based on a reluctance to amend or reopen formal judgments, there is a sound policy reason for recognizing the finality of proceedings before administrative tribunals.  As a general rule, once such a tribunal has reached a final decision in respect to the matter that is before it in accordance with its enabling statute, that decision cannot be revisited because the tribunal has changed its mind, made an error within jurisdiction or because there has been a change of circumstances.  It can only do so if authorized by statute or if there has been a slip or error within the exceptions enunciated in Paper Machinery Ltd. v. J. O. Ross Engineering Corp., supra.

To this extent, the principle of functus officio applies.  It is based, however, on the policy ground which favours finality of proceedings rather than the rule which was developed with respect to formal judgments of a court whose decision was subject to a full appeal.  For this reason I am of the opinion that its application must be more flexible and less formalistic in respect to the decisions of administrative tribunals which are subject to appeal only on a point of law.  Justice may require the reopening of administrative proceedings in order to provide relief which would otherwise be available on appeal.

Accordingly, the principle should not be strictly applied where there are indications in the enabling statute that a decision can be reopened in order to enable the tribunal to discharge the function committed to it by enabling legislation.  This was the situation in Grillas, supra.

Furthermore, if the tribunal has failed to dispose of an issue which is fairly raised by the proceedings and of which the tribunal is empowered by its enabling statute to dispose, it ought to be allowed to complete its statutory task.  If, however, the administrative entity is empowered to dispose of a matter by one or more specified remedies or by alternative remedies, the fact that one is selected does not entitle it to reopen proceedings to make another or further selection.  Nor will reserving the right to do so preserve the continuing jurisdiction of the tribunal unless a power to make provisional or interim orders has been conferred on it by statute.  See Huneault v. Central Mortgage and Housing Corp. (1981), 41 N.R. 214 (F.C.A.)

urbitral note – Arbitral parties enjoy substantial autonomy in how they tailor their process, subject to a limited list of procedural steps which legislation place beyond the reach of parties’ agreements.  Consent of the parties can therefore go far in allowing parties to emerge from a dispute resolution with a solution suitable to their needs.  If they need to re-open a final award to obtain that solution – and do so to avoid one party’s application to court for leave to appeal – the parties’ solution must accommodate how that second award, even on consent, might be viewed by a court tasked with recognizing and enforcing it.   A second award would no doubt make some mention of the earlier award and, in so doing, provide sufficient information to a court deciding in the future whether to recognize and enforce that second award.

International acceptance of arbitration encourages the recognition and enforcement of qualifying awards.  Parties must still be cautious that they do not inadvertently agree to breach the concept of functus officio by requesting a second award on consent from a tribunal and thereby re-open a matter subject to and settled by an earlier final award.  Obtaining a second award on consent to re-open the earlier award may trigger unexpected scrutiny either at the seat of the arbitration or when presented for execution elsewhere. The passage above from Chandler v. Alberta Association of Architects identifies factors which may shield such second awards on consent from a court open to refusing recognition and enforcement if that court considers that the second award violates the principle of functus officio.