Decision renews concerns about bias of judges
NEWFOUNDLAND WAS NEVER MISLED BY HYDRO-QUÉBEC AT ANY TIME AND HASN’T BEEN SUBJECTED TO ANY ACTUAL HARDSHIP AS A RESULT — COLBY COSH
It is my solemn duty to perform one of the important functions of a newspaper columnist: raising one questioning eyebrow. On Friday the Supreme Court issued a judgment in the long battle between Churchill Falls (Labrador) Corp., a subsidiary of Newfoundland and Labrador Hydro, and Hydro-Québec. CFLco is the legal owner of the notorious Churchill Falls Generating Station in the deep interior of Labrador, close to the border with Quebec.
The station was built between 1966 and 1971. Hydro-Québec provided backing when the financing proved difficult for the original owner, an energy exploration consortium called Brinco. This led to the signing of Canada’s most famous lopsided contract: a 1969 deal for Hydro-Québec to receive most of the plant’s output for the next 40 years at a quarter of a cent per kilowatt hour, followed by 25 more years at one-fifth of a cent. The bargain ends in 2041, at which time CFLco will get full use and disposal of the station’s electricity back.
This has been a heck of a deal for Quebec. It took on the risk of financing and building the station in exchange for receiving the electricity at a low fixed price — one that both sides in the court case agree was reasonable at the time. But it meant that Newfoundland saw no benefit from decades of oil price shocks, from the end of nuke-plant construction in the U.S., or from the increasing market advantage hydroelectricity enjoys while dirtier forms of power generation attract eco-taxation.
It has been maddening for Newfoundland to remain poor while Hydro Québec grows fat on the profits from a Newfoundland river. Quebec, for its part, has never been completely convinced of the legitimacy of its border with Labrador, and it sees its good fortune as a sort of angelic reward for having to be part of Confederation. The Churchill Falls deal is (quite reasonably) regarded as proof that Quebec’s homegrown industrialists were able to beat resource exploiting Anglo financiers at their own game. There are thus reasons beyond the bottom line that Quebec has never wanted to renegotiate the Churchill Falls contract. But the bottom line is enough.
The argument CFLco/ Newfoundland has been trying to make in court is that the post-1969 changes in the electricity market were so unforeseeable and dramatic that Hydro-Québec has a “good faith” obligation to renegotiate. There are added wrinkles because Quebec civil law applies, but that is the essence of the matter.
Quebec’s point has always been that the uncertainty of future electricity prices was the whole reason for creating the fixed-price contract in the first place. Quebec insists that “good faith” as it pertains to contracts doesn’t mean one party has a duty to be nice to the other, or should have to forgo disproportionate benefits in divvying up a pie. It just means, mostly, that the parties have to be honest with one another about facts pertaining to the performance of the contract.
Newfoundland was never misled by Hydro-Québec at any time and hasn’t been subjected to any actual hardship as a result of the Churchill Falls deal. It just carelessly allowed someone else to grab the right to a windfall while waiting for the calendar to display the number 2041.
The Superior Court of Quebec took the commonsense view that judges can’t tear up a contract as simple and clear as this one. The Court of Appeal of Quebec took the same view in a 5-0 judgment. And now the Supreme Court has agreed. But its decision was not unanimous: it went 7-1, with the lone dissenter being ... Newfoundland’s Justice, Malcolm Rowe.
Well, this is where one’s eyebrow lifts skeptically. Justice Rowe took a very broad view of the meaning of good faith. Twelve other appellate judges looked at the contract, and eight of the 12 are from Quebec, yet Rowe is pretty sure that they are all wrong about how the law of Quebec applies. This is the sort of partisan split in a judiciary — with the split opening up between regions instead — that leaves liberals perennially screaming in the United States.
I doubt we will make a big deal of it. But if Rowe’s reasoning were at all compelling, should he not have been able to find one Quebec colleague to support it? And, by the same token, should it not have been possible for the majority decision to be written in a way that Rowe could consent to? Was Rowe’s dissent written in a spirit of outright protest, or out of personal identification with Newfoundland values? Are we to pretend that the split is a coincidence?
Since our Supreme Court is chosen on an explicit regional basis, perhaps it is permissible or even welcome for Rowe to all but join Newfoundland’s side of the argument. But the natural corollary is that Quebec and Ontario, being so heavily represented on the court, are destined to win more inter-regional or interprovincial arguments than they otherwise would. One begins to sense why the former chief justice Beverley McLachlin, as a westerner, had such a strong passion for securing unanimity in the court’s voice whenever possible. It helps prevent the asking of awkward questions.