CITATION: Nemak of Canada Corporation v. UNIFOR Local 200, 2022 ONSC 1732
DIVISIONAL COURT FILE NO.:: 446/21 DATE: 20220322
ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT
MacLeod R.S.J., Swinton and Lederer JJ.
BETWEEN:
NEMAK OF CANADA CORPORATION
Applicant
– and –
UNIFOR LOCAL 200
Respondent
Michael A. Wills, for the Applicant
Anthony F. Dale, for the Respondent
HEARD at Toronto (by videoconference): March 2, 2022
Swinton J.
Overview
[1] Nemak of Canada Corporation (the “Employer”) has brought an application for judicial review of an arbitration award of Norman L. Jesin dated May 6, 2021, which held that the Employer had violated the collective agreement between the parties by ceasing to produce engine blocks at its Windsor plant.
[2] For the reasons that follow, I would dismiss the application, as the decision of the arbitrator was reasonable.
Background
[3] At issue before the arbitrator was the interpretation of a “sole source” clause found in a Memorandum of Settlement dated February 26, 2016. The parties agreed to extend their collective agreement, entered into in 2015, from January 2019 to February 2022 in return for the following production commitment by the Employer with respect to certain aluminum engine blocks:
Nemak commits to placing the awarded General Motors blocks and bedplate in Windsor if the extension Agreement is ratified.
Based on the current volume projections the Company will designate WAP Cast Line D as the sole source for the General Motors blocks and bedplate (awarded). This assumes that the WAP Cast Line D will be able to meet customer volume demand, delivery and quantity requirements.
[4] The projected volumes for the General Motors engine blocks did not materialize. As a result, the Employer estimated that the Windsor plant would lose millions of dollars from 2019 to 2021 if it continued to operate. In 2019, it announced its intention to close the Windsor plant by July 2020, with the remaining work under the General Motors contract to be performed by Nemak Mexico, a separate corporation. The respondent Union grieved, arguing that the collective agreement prevented the Employer from stopping production of the engine blocks at the Windsor plant.
[5] In a first award dated November 29, 2019, the arbitrator dismissed the grievance, finding that there was no violation of the collective agreement. That award was quashed by the Divisional Court on October 6, 2020 (2020 ONSC 5944), because the arbitrator had unreasonably held that the differences between the draft of a Union proposal during negotiations and the final version of the sole source clause “must be given meaning.” The Court stated (at para. 23):
No inference can be drawn that the Union believed the term, as agreed, had a materially different meaning than the term it had proposed previously, let alone the meaning vested in it by the Arbitrator. As a matter of logic, it can be presumed that Unifor would agree to language that it believed came close to or corresponded substantively to its initial position.
The Court then stated that the interpretation of the contested clause should be made in the entire context of the negotiations and not based on “a close textual analysis of a contractual term based on one prior draft of that term” (at para. 24).
[6] The matter was referred back to the same arbitrator. In his second award, he acknowledged the Divisional Court’s determination that he had improperly relied on a change from the proposed draft to the final agreement in a manner that was not consistent with the context of the negotiations. The arbitrator stated (Application Record, p. 26),
The Court makes it clear that as a matter of logic in the context of this case, the Union should be presumed to have agreed to a final version that it believed corresponded to its position …. In the end, I am left with the task of interpreting the language of the final agreement in a context in which the Union sought to obtain a “sole source” commitment for Windsor in return for granting the Employer’s request to extend the term of the collective agreement.
[7] The arbitrator’s conclusion is summarized as follows (Application Record, p. 27),
Having considered the language of the final agreement in this context it is my determination that the final agreement reached by the parties requires that if the Employer is to perform any of the work under the contract at issue, it must perform all of that work in the Windsor facility, unless the Windsor Cast Line was not capable of meeting demand requirements. In my view, the phrase “Based on the current volume projections” when considered in the context of what the parties were negotiating, is simply supportive of the caveat which allows the Employer to move the work that cannot be met by the Line’s capacity. That is in keeping with the presumption made by the Employer’s operations personnel of what the projected volumes would be. Based on those projections it was presumed that Windsor could be the “sole source” of the work under the contract. However, the parties expressly left the Employer the ability to move (and thereby maintain) the work if it could not be handled by the Windsor Cast Line.
[8] While the arbitrator allowed the grievance, he remain seized to deal with the issue of remedy, in particular the issue of damages.
Prematurity of the application for judicial review
[9] While the arbitrator has not yet dealt with the issue of remedy, both parties asked that this Court deal with the application for judicial review prior to a remedy hearing.
[10] At the hearing of the application, this Court ruled that the application would be heard, despite the fact that the arbitration process is not fully complete, and the second award can be characterized as interim in nature. A reviewing court has the discretion to hear an application for judicial review, despite its prematurity, if there are exceptional circumstances. Here, it makes good labour relations and economic sense to deal with the application for judicial review at this point in the proceedings, given that the remedy stage will likely be complex and costly.
The Issues
[11] The Employer argues that the arbitrator’s award is unreasonable because he made a number of fatal errors:
• first, he improperly elevated the language of the Divisional Court quoted above in para. 5 - that it “can” be presumed that the Union agreed to final language that was the same or close to its draft - to “it should be presumed” that the Union agreed to a final version that it believed corresponded to its initial position.
• Second, he erred in relying on the parol evidence of the Union president at the time, Chris Taylor, with respect to the latter’s subjective interpretation of the meaning of the clause, while failing to make any finding with respect to the conflicting testimony of Louise Gaudette, the Employer’s Human Resources Manager.
Analysis
[12] A reviewing court, on judicial review, must pay careful attention to the reasons of the administrative decision maker. Those reasons must be read as a whole. The role of the Court is to determine if the reasoning process is intelligible, transparent and justified, and the outcome is reasonable, given the facts and applicable law (Canada (Minister of Employment and Immigration) v. Vavilov, 2019 SCC 65 at paras. 100-101).
The arbitrator did not misinterpret the reasons of the Divisional Court
[13] The arbitrator did not misinterpret the reasons of the Divisional Court. The fact that he said “should” and the Court said “can”, as described above, is not significant, when one reads the award as a whole. The arbitrator understood the direction from the Divisional Court – namely, he was not to assume that there must be a difference in the meaning of the sole source clause because of the difference between the language of the draft and the final language. Rather, he was to consider the words of the clause in the Memorandum of Settlement and interpret them in light of the entire context. Those circumstances included a very brief period of negotiations and the Union’s agreement to a three year extension of the existing collective agreement.
The arbitrator did not err in the treatment of the parol evidence
[14] The Employer argues that the arbitrator treated the evidence of Ms. Gaudette improperly. She had testified that she expressed concerns to Mr. Taylor during negotiations that production volumes could decrease. According to the Employer, the arbitrator did not adequately address her evidence and improperly relied on Mr. Taylor’s evidence that he would not have signed the agreement, if the sole source clause were to give no protection if the volume of production fell below current values.
[15] The arbitrator dealt with the evidence of both witnesses. He concluded that the language of the clause did not support Ms. Gaudette’s position. He noted the words of the clause permitting the Employer to source the product at a different plant, if Windsor could not meet high production volumes:
I am not discounting the evidence that Ms. Gaudette expressed a concern regarding the possibility that actual volumes would fluctuate below protected volumes. However, unlike the wording regarding fluctuations above the Line’s capacity, there is no wording defining the circumstance in which the work could be moved because of volumes below projections. It was certainly open to the parties to negotiate a clear threshold, below which the Employer would maintain the ability to move the work to another facility. No such wording can be found in the final agreement. In that regard I accept the evidence of Mr. Taylor, that if the Employer had proposed that the work could be moved simply if volumes fell below projections, he would not have signed the agreement. In my view, the language of the final agreement, when viewed in the context of the entire negotiation and the surrounding circumstances, does not support an “economic sustainability” pre-condition to the “sole source” commitment made by the Employer. Nor does it support a conclusion that Employer could move the work elsewhere if volumes did not meet projections (Application Record, pp. 27-28.)
[16] The arbitrator was not required to accept Ms. Gaudette’s version of events. He had evidence from production employees of the Employer in addition to her evidence. Those employees had given projections about the amount of work to be performed under the General Motors contract, and they had represented “that it was their expectation that actual volumes to be manufactured would fall somewhere between 91% to 115% of the projected volumes” (Application Record, p. 17).
[17] Moreover, the arbitrator did not improperly accept parol evidence, as the Employer has argued. The Employer submits that the arbitrator relied on Mr. Taylor’s subjective interpretation of the words, evidence that is inadmissible in contract interpretation because of the parol evidence rule. The Employer supports its argument by relying on para. 59 of the Supreme Court of Canada’s decision in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53.
[18] In Sattva, the Supreme Court emphasized that the starting point for the interpretation of a written agreement will always be the wording of the contract itself. Surrounding circumstances will be considered in interpreting the contract, but the intent of that evidence is to deepen the decision maker’s understanding of the mutual and objective intentions of the parties expressed in the words of the contract (at para. 57).
[19] The parol evidence rule precludes the use of evidence outside the wording of the contract which seeks to add to, subtract from, vary or contradict the written words of the contract. This includes evidence about the subjective intention of the parties (at para. 59). It applies with particular force when a party seeks to put in evidence that the document does not mean what it says. However, consideration of surrounding circumstances does not offend the parol evidence rule (at para. 59), because evidence of surrounding circumstances “is used as an interpretive aid for determining the meaning of the written words chosen by the parties, not to change or overrule the meaning of those words” (at para. 60).
[20] Measured against these principles, it was open to the arbitrator to consider evidence about the reason the sole source clause was required, the proposals that were put forward by the parties for inclusion in the contract, and the mutual understanding of its meaning. Mr. Taylor’s evidence that he would not have agreed to a term permitting transfer of the work if demand fell below a certain level is admissible as part of the context. It is evidence to support the objective meaning of the words used and is not evidence that seeks to derogate from those words.
[21] In my view, the arbitrator did not make fundamental errors in reaching his decision. His award meets the requirements of justification, intelligibility and transparency, and the outcome is reasonable, given the evidence of context and the words of the sole source clause.
Conclusion
[22] Accordingly, the application for judicial review is dismissed. Costs to the Union are fixed at the agreed sum of $5,000.00 all inclusive.
Swinton J.
I agree _______________________________
MacLeod R.S.J.
I agree _______________________________
Lederer J.
Date of Release: March 22, 2022
CITATION: Nemak of Canada Corporation v. UNIFOR Local 200, 2022 ONSC 1732
DIVISIONAL COURT FILE NO.:: 446/21 DATE: 20220322
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
MacLeod R.S.J., Swinton and Lederer JJ.
BETWEEN:
NEMAK OF CANADA CORPORATION
Applicant
– and –
UNIFOR LOCAL 200
Respondent
REASONS FOR JUDGMENT
Swinton J.
Date of Release: March 22, 2022