Québec – court upholds tribunal’s dismissal of jurisdictional challenge based on alleged settlement – #033

Madam Justice Lucie Fournier in Demers v. Conseil d’arbitrage des comptes d’avocats du Barreau du Québec, 2017 QCCS 1084 held that a consensual arbitration tribunal had the jurisdiction to consider the existence and effect, if any, of any alleged settlement in deciding its own jurisdiction.  Fournier J. also held that a non-party to a settlement could not rely on the terms of the settlement to resist arbitration of a dispute involving her. The litigation stemmed from a disagreement over the amount of fees alleged to be owing by a client to her lawyer.  The lawyer had represented her client in litigation against the client’s sibling in which the siblings disputed terms for the care of their parent.  At one point in the litigation, the court issued an order homologating an agreement between the siblings.  The court order included terms on the division and payment of legal fees.  The siblings agreed that each pay 50% of the legal fees, with one sibling drawing her payment from the assets of the parent up to a maximum of $17,500.00. The lawyer subsequently issued an invoice which her client disputed.   

In Québec, disputes over lawyers’ fees can be submitted to conciliation and then to arbitration under Québec’s Regulation respecting the conciliation and arbitration procedure for the accounts of advocates, CQLR c B-1, r 17 which is issued pursuant to the Act respecting the Barreau du Québec, CQLR c B-1.

The Regulation stipulates that a lawyer may not institute court proceedings to recover her professional fees once the syndic has notified her of a client’s application for conciliation with respect to a particular account for fees.  The prohibition against court litigation continues until the expiry of the prescribed period for the filing of an application for arbitration, or, if arbitration is applied for, until the arbitration tribunal has rendered its decision.   A client whose application for conciliation is unsuccessful may apply for arbitration but must do so within 30 days of the sending of the conciliation report. 

The arbitration tribunal, called the “council of arbitration“, is composed of three arbitrators when the amount in dispute is $7,000.00 or more, and of a single arbitrator in all other cases. The Bâtonnier of Québec appoints the members of the council of arbitration.  The Regulation sketches the bare lines of how the arbitration should take place, the issuance of the resulting award and its effects. Once filed, the application for arbitration may be withdrawn only in writing and only with the lawyer’s consent. 

In the present case, the client invoked the procedure for arbitration of lawyers’ accounts provided by the Regulation. The lawyer responded, raising a preliminary objection.  She claimed that that agreement, endorsed by the court, represented a binding transaction between her and her client on the payment of her legal fees and that her client could not question the amount owing to her.  She applied to have the arbitration tribunal decline jurisdiction.   

The tribunal reviewed the facts and heard the parties.  It decided that it did have jurisdiction.  Its understanding of the order led it to conclude that the amounts to be paid to the lawyer were to be discussed further.  Given that the amounts had not been adjudicated by the court, the arbitration tribunal had jurisdiction to resolve the dispute. 

The lawyer applied to the Québec Superior Court under article 632 of the Code of Civil Procedure, CQLR c C-25.01. 

Article 632  Arbitrators conduct the arbitration according to the procedure they determine; they are required, however, to see that the adversarial principle and the principle of proportionality are observed. 

Arbitrators have all the necessary powers to exercise their jurisdiction, including the power to administer oaths, the power to appoint an expert and the power to rule on their own jurisdiction. 

If an arbitrator rules on the arbitrator’s own jurisdiction, a party, within 30 days after being advised of the decision, may ask the court to rule on the matter. A decision of the court recognizing the jurisdiction of the arbitrator cannot be appealed. 

Fournier J. wrote that article 632 C.C.P. was not for judicial review but an independent action. Relying on the Québec Court of Appeal in Conseil d’arbitrage des comptes des avocats du Barreau du Québec v. Marquis, 2011 QCCA 133,  Fournier J. reiterated that the arbitration provided in the Regulation was consensual and not statutory.   Following the lead given in Desputeaux v. Éditions Chouette (1987) inc., [2003] 1 SCR 178, 2003 SCC 17, Fournier J. noted that the arbitration tribunal’s jurisdiction goes beyond the strict limits of the amount of the fees but extends to everything that may be closely related to its mandate and maintains a close link with it.  Such matters include accessory issues such as solidarity between debtors as held in Patti v. Hammerschmid, 2012 QCCA 627.

Fournier J. framed her task as having to determine if article 632 C.C.P. allowed her to review the arbitration tribunal’s decision on the ground that it had mistakenly assumed jurisdiction by concluding there was no res judicata on the fees.    

She referred to Québec’s Civil Code of Québec, CQLR c CCQ-1991 (“C.C.Q.”) which provides specific rules on the effect of a certain type of settlement which the civil law qualifies as a “transaction”. 

Article 2631  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, the authority of res judicata.  A transaction is not subject to forced execution until it is homologated.  The effect provides a powerful presumption in disputes between the parties to the transaction. 

Article 2848  The authority of 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 res judicata with respect to the parties and the members of the group who have not excluded themselves therefrom. 

Fournier J. held that the issue of res judicata and the effect of the transaction fell within the jurisdiction of the arbitration tribunal and were accessory to the issue it had to decide.  Whether the existence of the transaction was a question of mixed fact and law or a question of fact, Fournier J. wrote that the conditions for the transaction were set out in article 2631 C.C.Q. and had a binding effect as provided by article 2848 C.C.Q. 

Fournier J. also concluded that the attempt to apply the presumption of res judicata as a preliminary objection to the arbitration tribunal’s jurisdiction must fail because the lawyer was not a party to it.  The lawyer was ad litem in the court order and was neither bound or benefited by it. 

Fournier J. dismissed the lawyer’s application under article 632 C.C.P.  

Note:  On a similar issue of the role of settlements, see Lithium One Homes Ltd. V. Abakhan & Associates Inc., 2017 BCSC 2189 and the case note “B.C. court reverses arbitrator, ruling arbitrator has no jurisdiction due to parties’ settlement” at Urbas Arbitral’s Arbitration Matters.