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Jurisdiction of Federal vs. Provincial Courts Over a Federal Corporation

Conseil des Mohawks de Kanesatake c. Kanesatake Health Centre Inc. (October 2013), the Superior Court of Québec ruled on who has jurisdiction to hear a judicial review of certain decisions of the board of directors of a federal corporation, the corporate defendant, Kanesatake Health Centre ("KHC"):  the Federal Court of Canada or the Superior Court of Québec.  It also ruled on whether that jurisdiction was exclusive or non-exclusive.

1. Facts

The corporate defendant, KHC, was incorporated in 2006 as a corporation without share capital under Part II of the Canada Corporations Act (the "CCA").  The plaintiff, Mohawk Council of Kanesatake (the "Council") is an aboriginal custom band council exercising, among other things, the powers set out in a Special Act of the federal government, the Kanesatake Interim Land Base Government Act (the "Kanesatake Special Act").

At the heart of the dispute were the following governance decisions:

  • the decision of the Grand Chief of the Council to withdraw the health portfolio form one chief and assign it to another chief;
  • KHC's compliance with that decision;
  • the failure of KHC to recognize the validity of the resolutions of certain resolutions adopted by the chiefs of the Council; and
  • the appointment of officers to KHC's board of directors.

The threshold jurisdiction question was whether the judicial review of these decisions was a matter for the provincial court (as Council contended) or for the Federal Court (as KHC contended).

The Council argued that various sections of the CCA expressly conferred jurisdiction on the provincial court on matters concerning the administration of the corporation.

2. Ruling

However, Justice Dugré of the Superior Court of Québec ruled in favour of KHC, holding that the Federal Court had exclusive subject matter jurisdiction to conduct the judicial review and therefore that the jurisdiction of the provincial court was ousted.

Citing the 1986 Supreme Court of Canada decision in ITO-International Terminal Operator v. Miida Electronics, the court began its analysis by stating that Federal Court has jurisdiction if the following three conditions are met;

  • There is a statutory grant of jurisdiction by federal Parliament.
  • There is an existing body of federal law which is essential to the disposition of the case.
  • The law on which the case is based is a law of Canada.

The first condition was met because the Federal Courts Act (the "FCA") confers jurisdiction on the Federal Court to issue certain statutory remedies (including declaratory relief and writs of certiorari and mandamus) against any federal board, commission or other tribunal, which is defined broadly in the FCA and the Supreme Court jurisprudence (citing A.G. v. TeleZone).

The court also held that the Council and KHC were both "federal boards, commissions or other tribunals" within the meaning of the FCA.  KHC had jurisdiction conferred by the Kanesatake Special Act over the health and quality of life of the residents of the Kanesatake territory.

The second condition (an existing federal body of law) was met on various grounds, including the Kanesatake Special Act, the Indian Act, the Indian Band Council Procedure Regulations and customary rules of governance of a band. These federal laws are satisfy the third condition to conferring jurisdiction on the Federal Court.

Once the Federal Court is found to have subject matter jurisdiction, the court turned back to the FCA, which expressly provides that such jurisdiction is exclusive.  Therefore, the provincial court must decline jurisdiction.

3. Key Observations

Kanesatake Health Centre is significant not only for federal not-for-profit corporations the governance of which is under the control of band councils but also for other governance cases in which the impugned decisions could be characterized as those of a "federal board, commission or other tribunal" as broadly defined in the FCA and the Supreme Court jurisprudence.  Therefore, it will be important to consider whether the substance of the dispute falls within the FCA definition of a "federal board, commission or other tribunal" before commencing proceedings seeking to review governance decisions relating to a corporation.

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