COURT FILE NO.: CV-10-8533-00CL
DATE: 20120125
ONTARIO
SUPERIOR COURT OF JUSTICE (COMMERCIAL LIST)
IN THE MATTER OF THE COMPANIES' CREDITORS ARRANGEMENT ACT, R.S.C. 1985, C-36, AS AMENDED
AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF CANWEST PUBLISHING INC./PUBLICATIONS CANWEST INC., CANWEST BOOKS INC. AND CANWEST (CANADA) INC.
COUNSEL: Jesse B. Kugler, counsel for the Moving Party Communications, Energy and Paperworkers Union of Canada, Local 145 (“CEP”)
Fred Myers and Caroline Descours, counsel for the Respondent Postmedia Network Inc.
Maria Konyukhova, counsel for the Monitor, FTI Consulting Canada Inc.
Pepall J.
ENdorsement
Relief Requested
[1] The Moving Party, the Communications, Energy and Paperworkers’ Union of Canada, Local 145, (“CEP” or the “Union”) represents five retired typographers (the “Retired Typographers”) who worked at The Gazette, an English language newspaper in Montreal which is now owned by the Respondent, Postmedia Networks Inc. A Proof of Claim was filed by CEP on behalf of the Retired Typographers as part of the claims process in the Companies’ Creditors Arrangement Act[^1] proceedings. The Monitor referred the claim to The Honourable Mr. Coulter Osborne as Claims Officer for adjudication. The CEP now requests an order quashing the decision of the Claims Officer and an order declaring that the claim of the Retired Typographers is meritorious. The motion is resisted by the Respondent Purchaser. The Monitor, FTI Consulting Canada Inc., takes no position.
Brief History
[2] In decisions dated January 5, 2011 and July 28, 2011, the facts of the parties’ dispute were described in some detail and while I do propose to refer to some of the facts, I will not recite all of them again. Very briefly, the history of this dispute is as follows.
[3] In 1987, The Gazette, CEP and the then remaining 132 typographers entered into an agreement (the “1987 Agreement”). It included a final best offer mechanism which said:
“Within 90 days before the termination of the collective agreement, the Employer and the Union may initiate negotiations for a new contract. The terms and conditions of the agreement shall remain in effect until an agreement is reached, a decision is rendered by an arbitrator, or until one or the other of the parties exercises its right to strike or lock-out.
Within the two weeks preceding acquiring the right to strike or lock-out, including the acquisition of such rights through the operation of Article X of the present agreement, either of the parties may request the exchange of “Last final best offers,” and both parties shall do so simultaneously and in writing within the following forty-eight (48) hours or another time period if mutually agreed by the parties. The “Last final best offers” shall contain only those clauses or portions of clauses upon which the parties have not already agreed. Should there still not be agreement before the right to strike or lock-out is acquired, either of the parties may submit the disagreement to an arbitrator selected in accordance with the grievance procedure in the collective agreement. In such an event, the arbitrator, after having given both parties the opportunity to make presentations on the merits of their proposals, must retain in its entirety either one or the other of the “Last final best offers” and reject, in its entirety, the other. The arbitrator’s decision shall be final and binding on both parties and it shall become an integral part of the collective agreement.”
[4] As such, if there was no agreement prior to the acquisition of a right to strike or lock-out, either of the parties could require that final best offers be exchanged and submitted to the arbitrator selected in accordance with the grievance procedure contained in the collective agreement. The arbitrator would choose one of the last final best offers which then would be binding on the parties and become part of the collective agreement.
[5] As mentioned in my earlier decisions, on June 3, 1996, the applicable collective agreement being at an end, The Gazette had issued a lockout notice and stopped paying the 11 typographers. That same day the Union had sent a notice to The Gazette asking it to participate in the last final best offer process. The Gazette refused to participate because it thought that the last final best offer exchange provision had been eliminated from the collective agreement as a result of a 1994 arbitral award. The Union and certain typographers including the 5 Retired Typographers challenged The Gazette’s failure to participate in the final best offer procedure outlined in the 1987 Agreement and submitted that they were entitled to salaries and benefits lost since the lockout. Arbitrator Sylvestre found that there was a breach of the 1987 Agreement. He ordered The Gazette to pay for lost compensation commencing at the beginning of the lockout which it did.
[6] Arbitrator Sylvestre’s decision made its way to the Quebec Court of Appeal in 1999. The Court of Appeal concluded firstly that The Gazette was entitled to effect a lockout and was not required to pay the typographers during that time. Secondly, The Gazette had breached the 1987 Agreement by refusing to exchange final best offers. Thirdly, the Court determined that the typographers were entitled to damages provided that the lock-out was unduly prolonged due to the employer’s refusal to participate in the process. The Court of Appeal was of the view that the arbitrator should decide that question. The matter was remitted back to the Arbitrator.
[7] The Arbitrator made an interim ruling that the damages of the typographers were limited to compensation for lost salary and benefits during the lockout and that the period of potential entitlement was limited to June 4, 1996 to January 21, 2000, when The Gazette submitted its final best offer. This interim ruling was challenged but upheld by the Court of Appeal in 2003.
[8] The Arbitrator still had to determine whether the lockout had been unduly prolonged so as to justify an award of damages. In deciding whether the lockout had been unduly prolonged, the Arbitrator interpreted the issue to be considered as requiring him to determine whether there had been an abuse of rights by The Gazette which unduly prolonged the lockout. His decision was again challenged.
[9] In 2008, the Court of Appeal determined that by addressing the issue of abuse of rights, Arbitrator Sylvestre had addressed the wrong question. The only issue that needed to be addressed was whether the lockout would have ended earlier than January 21, 2000 had the exchange of final best offers taken place following the Union’s request. The Court of Appeal remitted the matter back to Arbitrator Sylvestre for determination. Pelletier J.A. wrote:
…The Gazette was required to exchange its last final best offers with the Union no later than May 2, 1996. The Gazette did not do so and it is that fault that our Court pointed to as having possibly caused damage. That being so, what the arbitrator had to do was determine whether the contractual breach had had that effect in reality and, if so, determine the appropriate amount of compensation.[^2]
[10] The Court of Appeal broke the issue down into three questions for the Arbitrator to answer: (i) if the exchange of offers had taken place normally, when would the collective agreement have been finalized or, in other words, when would the lockout have ended; (ii) what wages and benefits would the typographers have been entitled to as of the end of the lockout; and (iii) would they have been lower than the minimum guaranteed in the 1987 Agreement?
Arbitrator Sylvestre’s 2009 Decision
[11] Before Arbitrator Sylvestre, the Union maintained that The Gazette should pay damages for the entire period of June 4, 1996 until January 21, 2000. In contrast, The Gazette argued that any wrong on its part was of no consequence since it had had no effect on time frames. Even if The Gazette had participated in the final best offer procedure, the Union had not been prepared to enter into an exchange of offers evidenced by the fact that no offers could ever be found. Furthermore argued The Gazette, the Union’s real interest was to adopt a different strategy. This was to first pursue grievance arbitration (to circumvent another arbitrator’s award that had rendered the last final best offer procedure optional) before proceeding with the interest arbitration. This strategy would have resulted in delay as it contemplated two stages of adjudication. It was The Gazette’s position that its failure to submit a final best offer had in fact had the effect of shortening the time frame.
[12] Arbitrator Sylvestre rendered his decision in January, 2009. He considered the questions posed by the Quebec Court of Appeal in 2008 and the evidence before him and made findings of fact in that regard. He concluded that the Union was not ready to exchange its last final best offer and indeed never produced one. He was of the view that the Union preferred that their disagreement with The Gazette be heard by a grievance arbitrator before proceeding with the interest arbitration and this would have had an impact on the time frame in issue. Ultimately he determined that had the last final best offer procedure been adhered to by The Gazette, the lockout would have lasted until May, 1999. Therefore the typographers were entitled to damages covering the nine month period from May, 1999 to January, 2000.
[13] As mentioned, The Gazette had paid salaries and benefits between February 5, 1998 and October 30, 1998 as a result of an arbitral award that was ultimately reversed. In February, 2001, The Gazette commenced a civil action against the typographers to recover these amounts and this dispute had been referred to Arbitrator Sylvestre for determination.
[14] As The Gazette’s request for reimbursement was still outstanding and had to be addressed, in his January, 2009 decision, Arbitrator Sylvestre did not order the nine months of damages due to the typographers to be paid. Instead, he gave the parties an opportunity to settle the issue but retained jurisdiction. They did not settle and the Union and the typographers then challenged Arbitrator Sylvestre’s January, 2009 decision by bringing a motion in annulment.
[15] Article 946.4 (4) of the Quebec Code of Civil Procedure addresses a motion in annulment. It provides that an award may be set aside if it is established that “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.” It is acknowledged that under this provision, there is no inquiry into the merits of the dispute.
[16] The LP Entities were granted protection from their creditors by the Court pursuant to the CCAA on January 8, 2010. Proceedings against the LP Entities were stayed including those involving The Gazette and the typographers.
Proof of Claim
[17] On May 17, 2010, an order was granted approving an Amended Claims Procedure and an Asset Purchase Agreement (“APA”) dated May 10, 2010, in which the purchaser bought certain assets and assumed certain liabilities of the LP Entities. The APA was subsequently assigned by the purchaser to Postmedia Networks Inc. (the “Postmedia or the Respondent Purchaser”). In June 2010, the Plan was sanctioned. Postmedia acquired The Gazette’s claim under the CCAA Plan.
[18] CEP filed a proof of claim. It claimed $500,000 in respect of each Retired Typographer. The claim represented damages claimed against The Gazette for lost salaries and benefits resulting from The Gazette’s lack of participation in the exchange of last final best offers. The Monitor has reserved 55,490 shares for the claims of the Retired Typographers in the Disputed Claims Reserve. They are the only shares remaining in the Disputed Claims Reserve, all other distributions having been effected.
[19] The CEP claim was disputed and the Monitor referred the claim to the Claims Officer.
Directions for Claims Officer
[20] My July 28, 2011 decision contained directions for the Claims Officer. For the reasons described in my decision, he would be limited by the determination of the nine month period of damages previously established by Arbitrator Sylvestre but subject to consideration of whether the motion in annulment proceeding brought by CEP in April, 2009 before the Quebec Superior Court was meritorious. If the motion in annulment was meritorious, the Claims Officer could authorize the Retired Typographers to bring a motion to lift the stay or to make any other order the Claims Officer felt was appropriate. If the motion in annulment was found not to be meritorious, the Claims Officer would quantify the Retired Typographers’ salary and benefits for the period between May, 1999 and January 21, 2000 and also consider any appropriate claim for setoff.
Decision of Claims Officer
[21] The Honorable Coulter Osborne granted an Interim Award on November 24, 2011 in which he determined that it was plain and obvious that the motion in annulment was not meritorious. It was an interim award because, on consent of the parties, the issues of quantification and setoff were not addressed. Subject to determination of the issue before me, the parties expect to be able to settle these outstanding issues.
Appeal of Decision
[22] The Amended Claims Procedure Order provides that a creditor may appeal a Claims Officer’s determination in respect of a claim. The appeal is based on the record before the Claims Officer and is not a hearing de novo.
[23] CEP has appealed the Interim Award.
[24] As I understand its position, the CEP submits that the Claims Officer made an error in law because he did not consider Arbitrator Sylvestre’s failure to apply the mandate dictated by the Quebec Court of Appeal in its 2008 decision. The mandate of the arbitrator was found in the questions the Court of Appeal had directed the Arbitrator to answer the first of which was: “If the exchange of offers had taken place normally, after the sending of the April 30, 1996 notice, when would the collective agreement have been finalized or, in other words, when would the lockout have ended?” CEP submits that the Arbitrator did not answer this question but instead dealt with matters beyond the scope of his mandate in that he concluded that the Union had not been ready to exchange its last final best offer. This falls within the ambit of Article 946.4 of the Civil Code and as such, the Claims Officer should have considered the motion to annul to be meritorious.
Standard of Review
[25] First I must consider the appropriate standard of review to be applied to the decision of the Claims Officer by this court.
[26] CEP submits that the standard of review is correctness. Postmedia submits that the Claims Officer’s decision was discretionary in nature and should only be overruled if he erred “in principle or in law or failed to take into account a proper factor or took into account an improper factor, which led to a wrong conclusion.”: Impact Tool & Mould Inc. (Trustee of) v. Impact Tool & Mould (Windsor) Inc. (Receiver of)[^3].
[27] The appropriate standard of review for the appeal of a decision of a CCAA Claims Officer was described by Morawetz J. in General Motors Corporation v. Tiercon Industries Inc.[^4]:
(a) With respect to pure questions of law, the standard of review is correctness.
(b) With respect to questions of fact, the standard of review is that such findings are not to be reversed unless it can be established that the decision maker made a palpable and overriding error.
(c) With respect to questions of mixed fact and law, the standard of review, is that, in the absence of an “extricable” legal error or a palpable and overriding error, a finding of the decision maker should not be interfered with.
(d) With respect to the assessment of damages, a damage assessment should not be overturned unless it is based upon a wrong principle of law or the damage is so inordinately high or low that it must be an erroneous estimate of damages.
(e) With respect to the appeal of the cost award, a high degree of deference is accorded to discretionary decisions with respect to an award of costs assessed following a hearing and the decision should be respected unless the decision maker failed to consider relevant factors, reached an unreasonable conclusion, made an error in principle or if the costs award is plainly wrong. (Citations omitted.)
Discussion
[28] The Claims Officer considered the nature of the motion in annulment and determined that it was plain and obvious that such a motion was not meritorious as it relied on alleged errors of fact and law which were not reviewable in the annulment process. In my view, he made no error in principle or in law and indeed was correct in his conclusion. In addition, he considered the question that was to be answered by Arbitrator Sylvestre and was satisfied that it had been answered.
[29] Furthermore, even if I were to examine the case de novo, I would come to the same conclusion as the Claims Officer. Arbitrator Sylvestre did exercise the jurisdiction ascribed to him. It framing the questions it did, the Quebec Court of Appeal clearly contemplated that Arbitrator Sylvestre would decide whether The Gazette’s breach had caused damages “in reality” and that he would consider the evidence before him in reaching his decision. Having done so, he concluded that the lockout would have ended in May, 1999 had The Gazette complied with the last final best offer procedure. Arbitrator Sylvestre did not rule on something other than what had been intended in the Quebec Court of Appeal’s judgment. He was asked to make findings of fact and did so. In these circumstances, it was appropriate that the Claims Officer determined that the motion in annulment was not meritorious.
[30] Accordingly, the appeal from the Claims Officer’s decision is dismissed. The parties should attempt to resolve the issue of costs, failing which, they may make brief written submissions.
Pepall J.
Released: January 25, 2012
COURT FILE NO.: CV-10-8533-00CL
DATE: 20120125
ONTARIO
SUPERIOR COURT OF JUSTICE (COMMERCIAL LIST)
IN THE MATTER OF THE COMPANIES' CREDITORS ARRANGEMENT ACT, R.S.C. 1985, C-36, AS AMENDED
AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF CANWEST PUBLISHING INC./PUBLICATIONS CANWEST INC., CANWEST BOOKS INC. AND CANWEST (CANADA) INC.
ENDORSEMENT
Pepall J.
Released: January 25, 2012
[^1]: R.S.C., c. C-36 as amended. [^2]: At para. 24. [^3]: (2006), 2006 CanLII 7498 (ON CA), 79 O.R.(3d) 241 (C.A.). [^4]: 2009 CanLII 72341 (ON SC), aff’d 2010 ONCA 666.