Claim for a 1926 contract: the Supreme Court ruled in favor of Hydro-Québec

The Supreme Court of Canada ruled on Friday in favor of Hydro-Quebec, which forced Resolute Forest Products to pay a claim of more than $ 3 million for a contract dating back to 1926.

In its decision, the highest court in the country concluded that Hydro-Quebec could force a company to pay government royalties under a contract that had been entered into with another electricity company and then transferred to Hydro-Quebec.

It was in November 2011 that the Crown corporation claimed more than $ 3 million from Resolute for the electricity supplied to its plant in Gatineau, in the Outaouais region.

The sum included three years of hydraulic royalties that Hydro-Québec paid to the State, in accordance with the laws in force.

You have to go back to 1926 to understand history. At the time, the Canadian International Paper Company, a paper company that became Resolute Forest Products, entered into a contract with the Gatineau Electricity Company (Electricité Gatineau) in which it agreed to pay the latter for the electricity it needs. ‘it supplied him to operate his factories.

The 40-year agreement was renewable in additional 10-year installments.

After its creation, Hydro-Québec bought most of the shares of Electricité Gatineau. Thus, Hydro-Québec supplied electricity to the paper mill, which paid it for this service, as provided for in the 1926 contract.

In 1982, the paper mill signed a contract with Hydro Quebec to obtain more energy. This contract evoked the one concluded with Electricité Gatineau in 1926. Electricity bills for the paper mill have been issued by Hydro Quebec since at least 1999.

When in 2011, the paper mill received the invoice for $ 3 million, it believed that its contract was with Electricité Gatineau, that it owed nothing to Hydro-Québec and that, even if this was not the case, the transfer of the contract was not authorized. She paid the amount, but turned to the courts for a refund.

A Superior Court judge concluded that Hydro-Québec cannot claim from Resolute Forest Products Canada the reimbursement of the hydraulic royalties that Hydro-Québec pays to the State.

In the Court of Appeal, the judges held that the 1926 contract had been assigned by the effect of the 1965 contract and that the sums in question were “taxes or royalties”. Resolute took the case to the highest court.

On Friday, the majority of the Supreme Court said they agreed with the Court of Appeal, but for different reasons.

They concluded that Hydro-Québec could ask Resolute to pay these taxes or royalties, given that the 1926 contract had been assigned to it and that this contract provided that it could do so.

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