Québec – parties prompted to consider consent award, not litigate whether settlement occurred

In Syndicat de la copropriété Marché St-Jacques v. 9257-3302 Québec inc., 2020 QCCS 975, Mr. Justice Sylvain Lussier refused to homologate a transaction (settlement agreement) and reminded the parties that their contract contained an agreement to arbitrate further to which they could obtain a consent award recording their settlement.  Lussier J. reviewed the purported settlement and determined that it lacked most of the essentials to qualify as a transaction such as a mention of the exact disputes, the parties’ respective claims made leading up to the settlement, any judicial/arbitral proceeding settled, a release or payment.

Syndicat de la copropriété Marché St-Jacques (“Syndicat Marché”) applied to the Superior Court under article 528 Code of Civil Procedure, CQLR c C-25.01 (“C.C.P.”) to homologate a transaction or, to paraphrase, to recognize and enforce a settlement agreement.  Three (3) terms merit explanation:

(a) Syndicat – Under Québec’s Civil Code of Québec, CQLR c CCQ-1991 (“C.C.Q.”), articles 1038 C.C.Q. et seq., co-owners of an immovable can declare that ownership of their immovable is divided into fractions belonging to one (1) or several persons.  Such co-ownership resembles condominium-style arrangements in common law jurisdictions.

Provided/once they publish that declaration, the co-owners together constitute a legal person (“Syndicate” in English/“Syndicat” in French) whose objects include preservation of the immovable, maintenance and administration of the common portions, protection of the rights appurtenant to the immovable or the co-ownership, as well as all business in the common interest.

(b) Transaction – A “transaction” is a specific type of contract in civil law, identified under article 2631 C.C.Q., which has, even prior to homologation, heightened effects.

 “Article 2631 C.C.Q. Transaction is a contract by which the parties prevent a future contestation, put an end to a lawsuit or settle difficulties arising in the execution of a judgment, by way of mutual concessions or reservations.

A transaction is indivisible as to its subject.

Article 2633 C.C.Q. adds that a transaction has, between the parties to it, the authority of res judicata but, like an arbitral award, is not subject to forced execution until homologated by the Court. 

(c) Homologation – Articles 527-528 C.C.P. provide for the authorization, approval and homologation of a juridical act in the nature of a decision or an agreement such as a settlement agreement.

Article 528 C.C.P. Homologation is approval by a court of a juridical act in the nature of a decision or of an agreement. It gives the homologated act the same force and effect as a judgment of the court.

The homologating court only examines the legality of the act; it cannot rule on its advisability or merits unless a specific provision empowers it to do so”.

A third party impleaded, Syndicat des copropriétaires du 1125, rue Ontario, supported Syndicat Marché’s application.  The promoter of the condominium project, 9257-3302 Québec Inc. (“Promoter”) objected, arguing that the Protocole d’entente (“Protocol”) was not a transaction within the meaning of article 2631 C.C.Q. and the attempt to have the Protocol enforced as a judgment of the court was inadmissible.

(1) Lussier J. observed that the case law had set a high bar before a court will declare a proceeding inadmissible and that the principles, stated repeatedly in various cases, were well known: Bohémier v. Barreau du Québec, 2012 QCCA 308 para. 17.  Facts alleged as well as exhibits adduced are taken as true and the court decides whether juridically they give rise to the remedy sought.  See Imperial Tobacco Canada Ltd. v. Québec (Procureur général), 2010 QCCS 5208 , leave to appeal refused, Québec (Procureur général) v. Imperial Tobacco Canada Ltd., 2011 QCCA 132

Lussier J. identified three (3) key components of a valid transaction: a litigious situation (lawsuit, difficulties, future contestation); a renunciation of jurisdictional recourse; and, reciprocal concessions or reserves. Establishing those components had ‘important if not draconian’ effects.  The procedural speed with which a party can get to a hearing on the merits was unlike other cases in the C.C.P. and, once before a judge, the latter could not opine on the advisability or merits of the agreement.  Other C.C.Q. provisions limited attempts to undo or annul the transaction and not all contracts could qualify as a transaction.

Lussier J. also commented on the marked advantage a party obtains once a transaction is homologated.  The homologated transaction can be enforced against the other party and failure to respect the obligations to do or not do can draw contempt of court proceedings.  The party in breach of the homologated transaction is denied the opportunity to justify/explain its breach and its defense is thereby severely limited.

The party seeking to homologate the transaction has the burden to establish that one exists.

(2) Lussier J. then turned to examine the Protocol.

Though not determinative of the parties’ intent, Lussier J. did note that the Protocol contained no mention, as is common, that the Protocol qualified as a transaction under article 2631 C.C.Q.  Lussier J. therefore examined the text of the Protocol to determine if the elements together met the three (3) key components identified above.  The Protocol was silent on a number of critical elements common to agreements to settle disputes:

– did not mention anywhere one (1) or more disputes;

– did not set out the parties’ respective claims made leading up the Protocol;

– did not identify a single judicial or arbitral proceeding settled;

– did not provide for a release;

– did not provide for payment of any indemnity.

The Protocol, Lussier J. acknowledged, did contain various specific steps which would be taken in regard to individual units and certain common spaces.  Syndicat Marché urged that several of those steps implied divergent visions of how to organize those spaces. Lussier J. replied that not every difference in vision can be litigated.  Instead, at the start, one needs to affirmation of respective rights which conflict and have a juridical basis, such as a contract or a legal relationship confirmed by law such as a shared common wall.

Lussier J. added that a desire to reorganize private and common spaces is not met with a judgment and negotiation, coupled with concessions, is not in and of itself uniquely characteristic of an out-of-court settlement or prevention of future litigation.  Lussier J. also noted that one of the items listed in the Protocol, a dispute over whether a co-owner had bought a parking spot, was a right belonging to the co-owner and not the Syndicat Marché.

Syndicat Marché adduced the minutes of a general assembly which did not add detail to the Protocol and meet the key components.   A statement that the parties had ‘negotiated in good faith despite the complexity of the file’ added little and did not automatically give rise to a transaction.

Lussier J. concluded that nothing in the Protocol, the minutes of general assembly or the affidavit material gave him the details, ‘however minimal’, of the existence of several disputes settled by the Protocol or the reciprocal concessions made by the parties thereto.

In light of the above, and despite the reserve given to dismissing proceedings, Lussier J. held that nothing in the file permitted him to conclude that the Protocol qualified as a transaction and, if so, whether all the affected parties were involved in the proceedings before him.

Lussier J. concluded that, should the Syndicat Marché believe the Promoter had breached its obligations under the Protocol, regarding which Lussier J. commented the file set out no such breaches, it could file an action and have a full debate with the Promoter.  Lussier J. granted Promoter’s motion to dismiss.

Prior to concluding his reasons, Lussier J. paused.  At para. 29, he pointed out that, in the declarations which bound the co-owners, the parties had agreed to engage in mediation and arbitration, to the exclusion of the courts.  He added that, under article 642(4) C.C.P., arbitrators can issue an award which records a settlement of a dispute.  He observed that the exhibits contained no evidence of a notice of arbitration having been given.

urbitral note – First, Lussier J. did not opine that the Protocol met any of the criteria necessary to justify issuing a consent award.  His comments noted only the dispute resolution method already chosen by the parties to the contracts and urged them to engage in that.  Implicit in those comments are those which preceded them, namely that parties should they have actual disputes stemming from competing positions based in law, and, in the event of a settlement, consider the possibility of a consent award.

Second, the C.C.Q. divides its provisions into “Books” and, within those books, “Titles” and then “Chapters”.  Book Five “Obligations”, Chapter XVIII on “Transaction”, comprising articles 2631-2637 C.C.Q., appears just before Chapter XVIII on “Arbitration Agreements”.

Third, the C.C.Q. divides its provisions into “Books” and, within those books, “Titles” and then “Chapters”.  Book Five “Obligations”, Chapter XVIII on “Transaction”, comprising articles 2631-2637 C.C.Q., appears just before Chapter XVIII on “Arbitration Agreements”.