Churchill Falls (Labrador) Corp. v. Hydro- Québec, 2018 SCC 46

At the Supreme Court of Canada, Hydro-Québec was successful in defeating a claim brought by Churchill Falls (Labrador) Corporation Limited (CFLCo) seeking to increase the price paid by Hydro-Québec for electricity purchased from the Churchill Falls Power Plant pursuant to a 65-year contract entered into in 1969.

A judgment favourable to Hydro-Québec was rendered by the Québec Superior Court in 2016. CFLCo’s appeal before the Court of Appeal of Québec was heard on December 5, 2017. In a judgment rendered in November, the Supreme Court of Canada rejected CFLCo’s attempt to reopen the Power Contract, thereby confirming the earlier rulings by the Québec Court of Appeal and the Québec Superior Court.

The majority of the Supreme Court held that the significant increase in the market value of electricity since the Power Contract was entered into did not impose on Hydro-Québec an obligation to renegotiate the agreement’s pricing terms. In this regard, the Court confirmed that Québec civil law does not recognize the doctrine of “unforeseeability” and noted, in any event, that the Power Contract did not create a situation of hardship for CFLCo.

Moreover, the majority of the Court rejected CFLCo’s argument that the civil law concepts of contractual good faith and equity required the Power Contract’s renegotiation. According to the majority, the duty to cooperate with the other contracting party does not mean that one must sacrifice one’s own interests. In insisting that the bargain reflected in the Power Contract’s pricing terms be respected, Hydro-Québec was not acting unreasonably, the Court found.

The Court further confirmed that the interpretation and characterization of the Power Contract were questions of mixed fact and law and that the trial judge’s findings could not be overturned absent a palpable and overriding error.

Finally, the Supreme Court of Canada found that the Power Contract was neither a joint venture — lacking the intent of the parties to enter into a partnership or to cooperate beyond the simple cooperation required to perform their respective prestations — nor a relational contract, lacking flexible economic coordination and important undefined prestations. It does not suffice that a contract be long-term and require some measure of collaboration to be qualified as relational.

Norton Rose Fulbright Canada LLP represented the respondent before the Québec Superior Court, the Québec Court of Appeal and the Supreme Court of Canada. The team was led by Pierre Bienvenu, AdE, and included Sophie Melchers, Andres C. Garin, Horia Bundaru, William Hesler, QC, Vincent Rochette and Dominic Dupoy. In-house counsel for Hydro-Québec was Lucie Lalonde.

The appellant was represented by Douglas Mitchell and Audrey Boctor of IMK LLP, and by Patrick Girard of Stikeman Elliott LLP.