Suncor Energy Inc. v. Alberta, 2013 ABQB 728

Court of Queen ’ s Bench of Alberta Citation: Suncor Energy Inc. v. Alberta, 2013 ABQB 728 Date: 20131210 Docket: 1301 09267 Registry: Calgary Between: Suncor Energy Inc. Applicant - and - Her Majesty the Queen in Right of Alberta Respondent _ ________________________________________ ______________ Reasons for Judgment of the Honourable Chief Justice Neil C.

Wittmann _________________________________________ ______________ [ 1 ] This is an appeal by Her Majesty the Queen in Right of Alberta (the “Crown”) from the decision of an arbitration panel (the “Panel”) in respect of arbitral proceedings commenced against the Crown by Suncor Energy Inc. (“Suncor”) in January 2011, and governed by the provisions of the Arbitration Act , RSA 2000, c A-3 . Background

[ 2 ] On January 29, 2008, the parties entered into the Suncor Royalty Amending Agreement (the “RAA”), the most recent in a series of agreements between the Crown and Suncor with respect to the royalties to be paid by Suncor on the production of mined bitumen. The RAA provides for the establishment by the Crown of a bitumen valuation methodology (“BVM”) which is a factor in the calculation of royalty payments. While the RAA does not prescribe a formula for the BVM, it does set out a number of elements that may be taken into account for the valuation of mined bitumen, including a quality adjustment based on market prices. [ 3 ]

Schedule A of the RAA contains a dispute resolution procedure, and provides that disputes shall be resolved by binding arbitration pursuant to the Arbitration Act . Suncor is of the view that certain quality adjustments made by the Crown under the RAA are unreasonable and unfairly disadvantage Suncor relative to other producers. Suncor served the Crown with a Notice to Commence Arbitration on January 14, 2011.

The Crown filed a Counterclaim in the arbitral proceedings, seeking inter alia a declaration that Suncor is in default of certain obligations under the agreements between the parties and under the Mines and Minerals Act , RSA 2000, c M-17. [ 4 ] By way of a Procedural Order made by the Arbitration Panel on July12, 2012 (the “Procedural Order”), the parties agreed to adopt portions of the Alberta Rules of Court (“ ARC ”) with the Panel having all of the powers and discretion of Justices of the Court of Queen’s Bench of Alberta under the rules adopted.

These included ARC 1.4(1) and (2) in respect of procedural orders, ARC 5.1 to 5.16 providing for the exchange of Affidavits of Records, and ARC 5.33, which provides: 5.33(1) The information and records described in subrule (2) must be treated as confidential and may only be used by the recipient of the information or record for the purpose of carrying on the action in which the information or record was provided or disclosed unless (

a) the Court otherwise orders, (

b) the parties otherwise agree, or (

c) otherwise required or permitted by law.

(2) For the purposes of subrule (1) the information and records are: (

a) information provided or disclosed by one party to another in an affidavit served under this Division; (

b) information provided or disclosed by one party to another in a record referred to in an affidavit served under this Division; (

c) information recorded in a transcript of questioning made or in answers to written questions given under this Division. [ 5 ] On December 21, 2012, Michael Ekelund, the Crown’s representative in the dispute with Suncor, swore a Supplemental Affidavit of Records (the “Supplemental AOR”). At paragraphs (

f) and (

g) under

Schedule 2 to the Supplemental AOR, the Crown listed a number of records (the “Disputed Records”) that it objected to producing: (

f) records, returns, and information that may not be communicated pursuant to

section 50 of the Mines and Minerals Act ... which consist of: financial records that the Crown received from oil sands producers other than Suncor; production records that the Crown received from oil sands producers other than Suncor; technical records, including physical samples, received from oil sands producers other than Suncor; and any other records that the Crown received from oil sands producers other than Suncor that were required under the Mines and Mineral Act...; and (

g) records that fall into 2 or more of the categories described above. [ 6 ] Sections 50 and 51 of the Mines and Minerals Act provide: 50(1) Except as provided under the regulations, no person shall communicate or allow to be communicated any record, return or information obtained under this Act to a person not legally entitled to that information or allow any person not legally entitled to that record, return or information to have access to any record, return or information obtained under this Act.

(1.1) For the purposes of subsection (1), a person is not legally entitled to a record, return or other information simply because the person has a right of access to it under the Freedom of Information and Protection of Privacy Act.

(2) A person who knowingly receives records or information obtained under this Act holds the records or information subject to the same restrictions under subsection (1) that apply to the person from whom the records or information were received.

(3) With respect to any record, return or information obtained under this Act that would reveal geological work or geophysical work, subsection (1) prevails despite the Freedom of Information and Protection of Privacy Act for a period of 15 years following the end of the year in which the record, return or information was obtained.

(4) With respect to information that (

a) was obtained on a royalty return, (

b) appears on a royalty account, invoice or statement, (

c) was obtained for the purposes of determining or verifying royalty liability or collecting or forecasting royalty,

(

d) was obtained for the purposes of determining, prescribing or verifying an amount, factor or other component that is used to calculate royalty, or (

e) was obtained for the purposes of, or in connection with, the collecting, managing, processing, reprocessing, transporting, storing or disposing of the Crown’s royalty share of a mineral, or of a product obtained from a mineral, taken in kind, subsection (1) prevails despite the Freedom of Information and Protection of Privacy Act for a period of 5 years following the end of the year to which the information relates. 51 Notwithstanding any other Act or law, no Minister of the Crown and no person who is or was employed or engaged in the administration or enforcement of this Act shall be required, other than in proceedings relating to the administration or enforcement of this Act, to give evidence relating to any record, report, return, estimate, declaration, plan, map, survey or other information that is obtained under this Act or to produce anything containing that record, report, return, estimate, declaration, plan, map, survey or other information. [ 7 ] Suncor brought an application before the Panel to compel production of the Disputed Records.

The Crown counter-applied under s.8(2) of the Arbitration Act , which provides: 8(2) On the application of the arbitral tribunal, or on a party’s application with the consent of the other parties or the arbitral tribunal, the court may determine any question of law that arises during the arbitration. [ 8 ] The questions of law that the Crown sought to have referred to the Court are: (

a) Are other parties entitled to notice of Suncor’s application; (

b) Does the Panel have jurisdiction to determine the application of

section 50 of the Mines and Minerals Act to the production of those records identified at

Schedule 2(

f) of the Crown’s supplementary affidavit of record; and (

c) If the Panel does not have the jurisdiction to determine the application of

section 50 of the Act, is Suncor entitled to the relief sought in paragraph 1(

a) of its application, which by agreement applies only to the Records? The Decision of the Panel [ 9 ] In an oral ruling on June 25, 2013, the Panel declined to direct questions of law to the Court of Queen’s Bench. Counsel for the Crown immediately sought an adjournment on the basis that the Crown would appeal this decision, and the adjournment was granted. In written reasons dated July 4, 2013, the Panel held: This is not an application for the production of documents in the possession or control of third parties. This is an application to compel the Crown to produce documents which it has identified as relevant and material in its possession and control…

Section 17 of the Arbitration Act provides that an arbitral tribunal may rule on its own jurisdiction and may determine any questions of law that arise during the arbitration. It is our view that

Section 17 and the case of Jardine Lloyd Thompson Canada Inc. v. Western Oil Sands Inc. , 2006 ABCA 18 … are ample authority for this Panel to determine if production by the Crown of the relevant and material records in its possession is prohibited by Sections 50 and 51 of the Act. We find that this panel has the jurisdiction and the duty to decide these issues and to determine if the Crown is prohibited by

Section 50 and 51 of the Act from producing the relevant and material documents at issue in these applications … The Rules of Court which govern this Arbitration have by Rule 5.33 codified the implied undertaking prohibiting misuse of produced documents. This panel in carrying out its duties can, like a court, order the parties before it to limited access to and use of the information that is produced. As both Sections 50 and 51 do not provide unqualified confidentiality, we do not believe that we should order notice to non-party producers in this confidential proceeding.

The Act does not specify this and we have been provided with no authority for such notice in arbitral or for that matter, judicial proceedings. The rules, the law, and this Panel’s mandate provide adequate authority to ensure that the information will be used for the sole purpose of this arbitration. The Preliminary Issue [ 10 ] At the hearing of this matter, the parties agreed to limit the issue at this initial stage to the question of whether the decision of the Panel is properly subject to appeal under the provisions of the Arbitration Act .

In the event that it is determined that the decision of the Panel may be appealed, the parties have agreed to appear at a later date to argue the issues of whether notice of this application should be provided to third party producers so that they may seek standing in this action, and the merits of the Panel’s decision with respect to s.50 of the Mines and Minerals Act and the production of the Disputed Records.

Analysis: Jurisdiction and Appeal Under the Arbitration Act [ 11 ] The Court’s intervention into matters referred to arbitration under the Arbitration Act is expressly limited under s.6, which provides: 6 No court may intervene in matters governed by this Act, except for the following purposes as provided by this Act:

(

a) to assist the arbitration process; (

b) to ensure that an arbitration is carried on in accordance with the arbitration agreement; (

c) to prevent manifestly unfair or unequal treatment of a party to an arbitration agreement; (

d) to enforce awards. [ 12 ] The authority of an arbitration panel to rule on its own jurisdiction, and to determine questions of law and rule on objections, is set out in s.17 of the Arbitration Act , the relevant portions of which provide: 17(1) An arbitral tribunal may rule on its own jurisdiction to conduct the arbitration and may in that connection rule on objections with respect to the existence or validity of the arbitration agreement.

(2) The arbitral tribunal may determine any question of law that arises during the arbitration.

(6) A party who objects that the arbitral tribunal is exceeding its jurisdiction shall do so as soon as the matter alleged to be beyond the tribunal’s jurisdiction is raised during the arbitration.

(8) The arbitral tribunal may rule on an objection when it is raised or may deal with it in an award.

(9) If the arbitral tribunal rules on an objection as a preliminary question, a party may, within 30 days after receiving notice of the ruling, make an application to the court to decide the matter. [ 13 ] A party may appeal an award made by an arbitration panel under s.44 of the Arbitration Act which states as follows: 44(1) If the arbitration agreement so provides, a party may appeal an award to the court on a question of law, on a question of fact or on a question of mixed law and fact.

(2) If the arbitration agreement does not provide that the parties may appeal an award to the court on a question of law, a party may appeal an award to the court on a question of law with leave, which the court shall grant only if it is satisfied that (

a) the importance to the parties of the matters at stake in the arbitration justifies an appeal, and (

b) determination of the question of law at issue will significantly affect the rights of the parties.

(3) Notwithstanding subsections (1) and (2), a party may not appeal an award to the court on a question of law that the parties expressly referred to the arbitral tribunal for decision. [ 14 ] The Crown asserts a right to relief under both s.17(9) and s.44 of the Arbitration Act .

It contends that none of the RAA, the Arbitration Act , nor the Procedural Order grant the Panel the jurisdiction to affect the rights of third party producers and, because any decision on Suncor’s application would necessarily deny these third party producers their rights to the statutory protections provided by s.50 of the Mines and Minerals Act , the Panel has no jurisdiction to make such a ruling.

The Crown cites three authorities in support of this proposition. [ 15 ] In MJS Recycling Inc. v Shane Homes Ltd. , 2011 ABCA 221 , the Alberta Court of Appeal concluded that an arbitrator had exceeded his jurisdiction in affecting the rights of parties who were not before him. The parties before the arbitrator were a home builder and a waste management company. The allegation made by the waste management company was that the home builder was not meeting its obligation under an agreement to provide a certain amount of waste management business.

Though only the home builder and the waste management company were before the arbitrator, there were a number of other parties to the agreement, and the arbitrator effectively concluded that as a result of the breach of the agreement by one home builder, the entire agreement, including the waste management company’s obligations to other parties, had come to an end. The Alberta Court of Appeal concluded, at para. 29: The arbitrator found, first, that MJS was not responsible for any of the payments to the members of the Builders’ Group, even though only Shane was before him as a party to the arbitration.

He was not entitled to determine the rights of the other builders.

Their entitlements were not submitted to him for determination, and his decision that MJS was not required to pay the other builders went beyond the scope of the agreement. [ 16 ] In Jardine Lloyd Thompson Canada Inc. v Western Oil Sands , 2006 ABCA 18 , the issues were whether an arbitral tribunal governed by the International Commercial Arbitration Act , RSA 2000, c.I-5, which incorporates the Model Law on International Commercial Arbitration, had jurisdiction to order that certain employees and former employees of a third party be examined for discovery prior to the hearing, and (on cross-appeal) whether the tribunal had jurisdiction to compel parties to the arbitration to provide a copy or disclose contents of a confidential agreement with a third party.

At para. 25, O’Brien JA pointed out that parties cannot themselves craft an arbitration agreement to “exercise powers over third persons”, before concluding, at para. 43: It is correct, of course, that the parties themselves cannot by their own agreement intrude into the affairs of a third person so as to entitle them to take evidence of any nature from such person. But the Model Law empowers a tribunal to seek the assistance of the court to take evidence in a manner consistent with the laws of the place of the arbitration.

The policy of the law is to provide assistance to tribunals in appropriate circumstances where the tribunal has satisfied itself that the evidence is relevant to the issues before it. [ 17 ] With respect to the cross-appeal, concerning the production of a confidential standstill agreement between one of the parties to the arbitration and a third party, O’Brien JA concluded, at para. 51: As held by the tribunal, and affirmed by the chambers judge, the test for production is relevance. No ground of privilege recognized by law has been asserted.

Even if this Court could intervene regarding this issue, which I do not decide, I am satisfied that the tribunal has

the jurisdiction exercised by it in this case. [ 18 ] The Crown also relies upon the decision of the Ontario Superior Court of Justice in Farah v Sauvageau Holdings Inc ., 2011 ONSC 1819 . In that case Perrell J. determined that the arbitrator did not have jurisdiction to make an “arbitral-Mareva injunction”, which purported to bind third party financial institutions, requiring them to freeze the assests of a party to the arbitration. Perrell J. held, at paras. 57-58: Domestic arbitrators… depend upon the Arbitration Act, 1991 and the arbitration agreement for their jurisdiction.

Contrary to Sauvageau Holdings’ argument, the Legislature has not given arbitrators injunctive power over third parties and the private agreement of the parties to the agreement to arbitrate cannot invade the rights of non-parties.

It is precisely because the Arbitration Act, 1991 recognizes that arbitrators do not have jurisdiction over third parties who are strangers to the arbitration agreement that the Act acknowledges the court’s jurisdiction to come to the aid of the arbitrator… [ 19 ] I am not convinced that these authorities support the proposition that the Panel does not have jurisdiction to make an order in respect of notice to third parties and production of the Disputed Documents. The question in MJS was whether the arbitrator, in his final order, could grant a remedy against non-parties.

The question on appeal in Jardine Lloyd-Thompson was whether, under the International Commercial Arbitration Act , the arbitrator could compel third parties to attend at examinations for discovery, absent the assistance of the Court. The issue in Farah was whether the arbitrator had the jurisdiction to grant a Mareva injunction, an extraordinary remedy founded upon the inherent jurisdiction of the superior courts. [ 20 ] The key distinguishing characteristic, in all of these cases, is that the award at issue would apply directly to non-parties to the arbitration.

What Suncor has asked the arbitrator to determine is its entitlement to the production of documents within the possession of the Crown. Any order made by the Panel in this regard would not bind non-parties to the arbitration; it would bind only the Crown. I recognize that the Disputed Documents have been provided to the Crown by third party producers with the statutory promise of confidentiality set out in s.50 of the Mines and Minerals Act .

But, without getting too far into the merits of the issue, it should be noted that the statutory promise of confidentiality does not create a privilege over otherwise relevant and material documents. Also, this arbitration is, by virtue of the Procedural Order, subject to the implied undertaking contained in ARC 5.33.

In considering the scope and particulars of an order to disclose the Disputed Documents, the Panel has the same ability that this Court has to fashion an order that is appropriately mindful of the confidentiality interests of third parties. [ 21 ] This Court has had a number of opportunities in recent years to consider the general scheme of the Arbitration Act and its appeal provisions, and has concluded that the Legislature clearly intended to limit judicial intervention: Ellsworth v Ness Homes Ltd ., 1999 ABQB 287 at para. 13 ; Frank v Vogel , 2012 ABQB 432 at para. 17 ; Capital Power Corp v Lehigh Hanson Materials Ltd ., 2013 ABQB 413 , at para. 42 .

In Inforica Inc. v CGI Information Systems and Management Consultants Inc ., 2009 ONCA 642 , Sharpe JA considered the largely identical provisions of Ontario’s Arbitration Act , SO 1991, and held at para. 14: It is clear from the structure and purpose of the Act in general, and from the wording of s.6 in particular, that judicial intervention in the arbitral process is to be strictly limited to those situations contemplated by the Act.

This is in keeping with the modern approach that sees arbitration as an autonomous, self-contained, self-sufficient process pursuant to which the parties agree to have their disputes resolved by an arbitrator, not the courts… [ 22 ] In Inforica , the arbitrator had made an award for security for costs, which was set aside by the Chambers Judge on the basis that the arbitrator had no jurisdiction to make the order because in her view such an order was not merely a matter of procedure.

The Ontario Court of Appeal concluded that the Chambers Judge herself did not have jurisdiction to entertain the application to set aside the order for security for costs.

First, Sharpe JA considered ss.17(1), (5), (7) and (8) of the Ontario Act, which are identical to ss.17(1), (6), (8) and (9) of Alberta’s Act, and held at para. 16: To establish the application judge's jurisdiction to entertain Inforica’s application under ss. 17(5), (7) or (8) as an application to set aside the arbitrator’s ruling “as a preliminary question”, Inforica must bring the arbitrator's ruling that he had jurisdiction to entertain the CGI's application for security for costs within s. 17(1).

Section 17(1) defines the parameters of s. 17, allowing an arbitrator to rule on his “own jurisdiction to conduct the arbitration”. In my opinion, on a fair reading of that language in light of the modern approach that respects the autonomy of the arbitral process and discourages judicial intervention, s. 17(1) is concerned with only the arbitrator’s jurisdiction to entertain the subject matter of the dispute. Asking an arbitrator to decide whether he has jurisdiction to order security for costs does not amount to asking him whether he has jurisdiction to conduct the arbitration.

The words “jurisdiction to conduct the arbitration” in s. 17(1) connote jurisdiction over the entire substance or subject matter of the case, not jurisdiction to make interlocutory or procedural orders that do not determine the merits of the dispute and that are made along the way to final resolution of the issues. [ 23 ] I agree with Sharpe JA’s

interpretation of the scope of the arbitrator’s jurisdiction with respect to interlocutory or procedural orders under s.17(1). Section 17(9), upon which the Crown relies, must be read in this context. It is the preliminary question of the arbitral tribunal’s jurisdiction to conduct the arbitration that is subject to review under s.17(9), not the tribunal’s determination of procedural issues that arise in the course of the proceedings. [ 24 ] Sharpe JA also considered s.46(1) of the Ontario Act, which allows for an appeal, on specified grounds, from the decision of an arbitrator. This

section differs in material ways from the appeal provision at s.44 of the Alberta Act, but both provisions share the crucial characteristic of allowing for appeals from an “award”, a term that has a very specific meaning in the context of the review of arbitral decisions. Sharpe JA held, at para. 29: In my view, the arbitrator's order for security for costs was not an “award” within the meaning of s. 46(1). The arbitrator aptly labelled his order as a “Procedural Order” and not as an “award”.

The Act does not define the term “award”, but the term has been held to connote the judgment or order of an arbitral tribunal that “disposes of part or all of the dispute between the parties”: Environmental Export International of Canada Inc. v. Success International Inc ., supra , at para. 13. J. Kenneth McEwan & Ludmila B. Herbst, Commercial Arbitration in Canada, (Aurora, Ont.: Canada Law Book, 2008) state at 9:30.10: “Only decisions determining the substantive issues should be termed ‘awards’. Matters relating to the conduct of the arbitration are not awards but, rather, are procedural orders and

directions”. [ 25 ] This

interpretation was echoed in Mathieu v JR Stephenson Mfg Lt d., 2013 MBQB 64 . In that case, the arbitrator made an order for the production of documents.

Considering ss. 44(1) and 44(2) of Manitoba’s Arbitration Act , CCSM cA120, which are identical to ss. 44(1) and 44(2) of the Alberta Act, Mainella J. held, at para. 56: … applying the principles of statutory construction to s. 44 of the Act, absent express provision in the arbitration agreement to the contrary, no appeal lies under ss. 44(1) or 44(2) of the Act from a decision of an arbitrator unless that decision finally determines all or part of the substantive dispute between the parties.

Unless that occurs, an arbitrator’s decision is not an “award,” regardless of what label the arbitrator places on their decision. A procedural or interlocutory order of an arbitrator will typically not amount to an award. Conclusion [ 26 ] The determination of whether the Crown may be compelled to produce relevant documents within its possession and control, and whether notice should be given to third parties in respect of the application to compel production of relevant documents, falls within the scope of the Panel’s jurisdiction under the RAA, the Arbitration Act and the Procedural Order.

This Court therefore does not have jurisdiction to entertain the Crown’s appeal under s.17(9). The Panel’s July 4, 2013 order dismissing the Crown’s application to refer the issue of the Panel’s jurisdiction to compel production of the Disputed Documents to the Court of Queen’s Bench, and refusing to order notice of Suncor’s application to non-party producers is an interlocutory order within the scope of the Panel’s jurisdiction, not an award subject to appeal under s.44 of the Act. This Court does not have jurisdiction to entertain the Crown’s appeal under s.44. In the result, this appeal is dismissed.

Heard on the 6 th day of November, 2013. Dated at the City of Calgary, Alberta this 10 th day of December, 2013. Neil C. Wittmann C.J.C.Q.B.A. Appearances: Michael W. McCachen Michael A. Dixon Carla Hunt for Suncor Energy Inc. Michael A. Thackray, Q.C. Andrew E. Stead Todd Nahirnik

Kristen Haines for Her Majesty the Queen in Right of Alberta