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PARTIES - Assignment of contractual rights - Validity - Necessity for consent - Effect of assignment

Friday, December 11, 2020 @ 4:04 PM  

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Appeal by Resolute FP Canada (Resolute) from a decision of the Quebec Court of Appeal that denied its application for a declaration that it did not owe the amount claimed from it by the respondent Hydro-Quebec. In 2011, Resolute, a forest products company, received an unexpected electricity bill for over $3 million from Hydro-Quebec. Hydro-Quebec relied on a clause of a 1926 power contract to significantly increase the price of electricity purchased from it by Resolute, citing levies Hydro-Quebec paid to the Quebec government that it could, under the 1926 contract, claim from Resolute. The 1926 contract was between Canadian International Paper Company (CIP), Resolute’s corporate predecessor, and the Gatineau Power Company. Article 20 of the 1926 contract provided that CIP would accept any increases in the price of electricity that might result from future increases in taxes or charges levied by the provincial or federal governments. Article 22 of the 1926 contract conferred on the parties a right to assign the contract. Gatineau Power purported to assign the 1926 contract to Hydro-Quebec in 1965 during the nationalization of electricity, though Gatineau Power remained bound by the 1926 contract. The trial judge granted a declaration that Hydro-Quebec could not claim the taxes or charges. She found no assignment and that the parties to the 1926 contract were still Gatineau Power and Resolute. The declaration was overturned on appeal. The Court of Appeal found the levies provided for in s. 32 of the Hydro-Quebec Act and s. 68 of the Watercourses Act constituted taxes or charges payable to Hydro-Quebec under the 1926 contract. It determined the 1926 contract had been assigned to Hydro-Quebec by the 1965 contract.

HELD: Appeal dismissed. Assignment was the legal mechanism by which Gatineau Power transferred its status as contracting party to Hydro-Quebec in a manner that was consistent with the moral foundation of relativity of the original contract. There was no conceptual or moral bar to the assignment of a contract provided the operation protected the interests of the assigned party. The 1965 contract effected an assignment of the entire 1926 contract and did not merely name Hydro-Quebec mandatary of Gatineau Power in relation to its power contracts. The unitary conception of assignment of contract was legitimate in Quebec law. The assignment by Gatineau Power to Hydro-Quebec included not only Resolute’s claim, the supply of electricity, and its debt but also the price increase and assignment clauses. The assigned party’s consent had to be obtained in order for an assignment of contract to be valid but could be given in advance. It was clear from article 22 of the 1926 contract that the parties consented in advance to any possible assignment of the contract. The cause of the price increase was not the assignment of the contract in 1965, but amendments made to legislation in 2007. The assignment did not in itself render Resolute’s obligation more onerous. Article 20 of the 1926 contract applied to the levies imposed on Hydro-Quebec. Dissenting reasons were provided.

Resolute FP Canada Inc. v. Hydro-Québec, [2020] S.C.J. No. 43, Supreme Court of Canada, R. Wagner C.J. and R.S. Abella, M.J. Moldaver, A. Karakatsanis, S. Côté, R. Brown, M. Rowe, S.L. Martin and N. Kasirer JJ., December 11, 2020. Digest No. TLD-December72020011-SCC