Page: 1 PROVINCE OF PRINCE EDWARD ISLAND IN THE SUPREME COURT - APPEAL DIVISION

Page: 1 PROVINCE OF PRINCE EDWARD ISLAND IN THE SUPREME COURT - APPEAL DIVISION Citation: CUPE v. Residential Services Inc. 2004 PESCAD 2 Date: 20040128 Docket: S1-AD-0997 Registry: Charlottetown BETWEEN: AND: CANADIAN UNION OF PUBLIC EMPLOYEES, LOCAL 3373 APPELLANT QUEENS COUNTY RESIDENTIAL SERVICES INC. RESPONDENT Before: The Honourable Chief Justice G.E. Mitchell The Honourable Mr. Justice J.A. McQuaid The Honourable Madam Justice L.K. Webber Appearances: Kimberley H.W. Turner, Q.C., counsel for the Appellant Ronald MacLeod, counsel for the Respondent Place and Date of Hearing Place and Date of Judgment Charlottetown, Prince Edward Island November 6, 2003 Charlottetown, Prince Edward Island January 28, 2004 Written Reasons by: The Honourable Chief Justice G.E. Mitchell Concurring: The Honourable Madam Justice L.K. Webber Dissenting: The Honourable Mr. Justice J.A. McQuaid

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Page: 3 ADMINISTRATIVE LAW - Arbitration - Arbitrability under collective agreement The Court of Appeal, McQuaid J.A. dissenting, held the arbitration board s decision on arbitrability patently unreasonable. Authorities Cited: Cases Considered by Mitchell C.J.P.E.I.: Dayco (Canada ) Ltd. v. C.A.W.-Canada, [1993] 2 S.C.R. 230; General Truckers Drivers Union, Local 938 et al v. Hoar Transport Co. Ltd., [1969] S.C.R. 634; Re Dominion Consolidated Truck Lines Ltd. And Teamsters, Chauffeurs, Warehousemen & Helpers of America, Local 141 (1975), 60 D.L.R. (3d) 37; Re Canadian Airline Employees et al. and Eastern Provincial Airways (1963) Ltd. 129 D.L.R. (3d) 426 (N.S.S.C.A.D.); United Brotherhood of Carpenters and Joiners of America, Local 579 v. Bradco Construction Ltd., [1993] 2. S.C.R. 316 (SCC); Suresh v. Canada ( Minister of Citizenship and Immigation), [2002] 1 S.C.R. 3 (SCC); District of Parry Sound Social Services Administration Board v. Ontario Public Service Employees Union Local 324, 2003 SCC 42; Montmagney (Ville de) v. Casgrain D.T.E. 2000T -786 (Que. S.C.); S.E.I.U., Local 204 v. Leisureworld Nursing Homes Ltd. (1997), 99 O.A.C. 196 (Ont. Divisional Ct); Pepsi-Cola Beverages v. Dollar, [1999] N.B.J. No.526 (N.B.C.A.); Cases Considered by McQuaid J.A.: Dr. Q v. College of Physicians and Surgeons of British Columbia 2003 SCC 19; (2003), 223 D.L.R. (4 th ) 599 (SCC); Halupa v. Prince Edward Island (Director of Welfare Assistance) 2003 PESCAD 16 (PESCAD); Law Society of New Brunswick v. Ryan 2003 SCC 20; (2003), 223 D.L.R. (4 th ) 577 (SCC); Canada (Director of Investigation and Research) v. Southam Inc., [1997] 1 S.C.R. 748 (SCC); Canadian Union of Public Employees, Local 963 v. New Brunswick Liquor Corp., [1979] 2 S.C.R. 227 (SCC); C.A.I.M.A.W. v. Paccar of Can. Ltd., [1997] 2 S.C.R. 983 (SCC); Canada (Attorney General) v. Public Service Alliance of Canada, [1993] 1 S.C.R. 941 (SCC); United Brotherhood of Carpenters and Joiners of America, Local 579 v. Bradco Construction Ltd., [1993] 2. S.C.R. 316 (SCC); Parry Sound (District) Social Services Administration Board v. Ontario Public Service Employees Union, Local 324 2003 SCC 42 (SCC); Pepsi-Cola Canada Beverages v. Dollar, [1999] N.B.J. No. 526 (N.B.C.A.); Re Kenora Roman Catholic Separate School Board and Ontario English Catholic Teachers Association (1993), 37 L.A.C. (4 th ) 28; Re Canadian Airline Employees et al. and Eastern Provincial Airways (1963) Ltd. (1981), 129 D.L.R. (3d) 426 (N.S.S.C.A.D.) STATUTES CONSIDERED: Labour Act R.S.P.E.I. 1988 Cap. L-1, s.37, s-s.37(1); Labour Relations And Employment Statute Amendment Act, 1995, S.O. 1995, c.1

Page: 4 TEXTS CONSIDERED by McQuaid J.A.: Brown and Beatty: Canadian Labour Arbitration, 3rd ed. (Canada Law Book Limited, 1988, Aurora) Reasons for judgment: MITCHELL C.J.P.E.I.: [1] This is an appeal from a Trial Division judge s decision on an application for judicial review of an arbitration board s ruling in respect to the arbitrability of a dispute between the appellant and the respondent. [2] The case arose from the dismissal of a unionized employee by the respondent. It is common ground the appellant did not refer the dispute to arbitration within the time prescribed for doing so by the collective agreement. The delay was only four days and did not result in any prejudice to the respondent. However, there was no mutual agreement of the parties to extend the time limit. [3] The first issue before the board was whether the failure to comply with the time limit was fatal. The majority of the board ruled it was not and that the arbitration could proceed. The Trial Division judge reviewed the board s decision on this issue according to a correctness standard and found it defective. As a result he declared the decision a nullity. [4] I would dismiss the appeal. However, as will be seen, my reason for quashing the board s decision is different from that of the Trial Division Judge. [5] The relevant provisions of the collective agreement are as follows: ARTICLE 10 - GRIEVANCE PROCEDURE 10:01 Grievance is defined as any dispute arising out of interpretation or alleged violation of the Collective Agreement. 10:02 Step I - The aggrieved employee, accompanied by his/her Shop Steward, or the Steward only in the event a group of employees is involved, shall submit the grievance in writing to the immediate Supervisor within five (5) working days from the date that the incident giving rise to the dispute occurred. The Supervisor will have a maximum of five (5) working days to render his/her decision. Step II - If the decision of the immediate Supervisor is unacceptable to the Union, the Union shall submit the matter in writing to the CEO of the Queens County Residential Services, Inc. within five (5) working days from the date on which the immediate Supervisor rendered his

Page: 5 decision. The CEO will have a maximum of five (5) working days in which to render a decision. Step III - Failing satisfactory settlement being reached in Step II, the Union shall within ten (10) working days from the day the CEO rendered a decision, refer the dispute to arbitration. 10:03 Where a dispute involving a question of general application or interpretation occurs or where a group of employees or the Union has a grievance, Step I of this Article may be by-passed. 10:04 For the purpose of this Agreement, working day will exclude Saturday, Sunday and Statutory Holidays as outlined in this Agreement. If advantage of the grievance procedure has not been taken within the time limits specified in this Agreement, the alleged grievance shall be deemed to have been abandoned and cannot be reopened. 10:05 The time limits specified in this Article may be extended by mutual agreement of the parties. 10:06 Replies to grievances will be in writing at all stages. ARTICLE 11 - ARBITRATION 11:01 Where either party requests that a grievance be submitted to arbitration, the request shall be made in writing to the other party indicating the name and address of its nominee to an Arbitration Board. The two nominees will then select an impartial Chairman. A single Arbitrator may be appointed by mutual agreement between the parties. 11:02 If the party receiving the notice fails to appoint an Arbitrator, or if the two appointees fail to agree upon a Chairman within ten (10) working days of their appointment, the appointment will be made by the Minister of Labour for the Province of Prince Edward Island upon requests of either party. 11:03 The decision of the majority shall be the decision of the Board. Where there is no majority decision, the decision of the Chairman shall be the decision of the Board. The decision of the Board of Arbitration shall be final, binding and enforceable on all parties and may not be changed. The Board of Arbitration shall not have the power to change this Agreement or to alter, modify or amend any of its provisions. 11:04 Should the parties disagree as to the meaning of the Board s decision, either party may apply to the Chairman of the Board of Arbitration to reconvene the Board to clarify the decision which it shall do within one (1) calendar week.

Page: 6 11:05 Each party will pay: I) the fees and expenses of the nominee it appoints; and ii) one-half of the fees and expenses of the Chairperson. 11:06 The time limits outlined in this article may be extended by mutual agreement of the parties. ANALYSIS [6] The decision of the board under consideration concerned the arbitrability of a matter according to the time limits specified under the terms of the collective agreement. Accordingly, I do not agree with the Trial Division judge that the board s decision had to be correct. An arbitrator has jurisdiction to interpret the provisions of a collective agreement in the course of determining the arbitrability of matters under that agreement. Any judicial review of that interpretation must only be on a standard of patent unreasonableness. See: Dayco (Canada) Ltd. v. C.A.W.-Canada, [1993] 2 S.C.R. 230 at p. 251. In the case at bar, the issue of whether the grievance was arbitrable involved the interpretation and application of time lines provided for in the collective agreement, a matter that was within the jurisdiction of the board and therefore, its decision ought to be reviewed according to a patently unreasonable rather than a correctness standard. In any event, although he applied the correctness standard, the Trial Division judge seemed also to be of the view that the decision was patently unreasonable, and on that, I am in accord with him. [7] The key issue the board had to resolve was whether or not the time limit for referral of the dispute to arbitration provided for in Article 10:02 of the collective agreement was mandatory. The determination of this issue required an analysis of relevant provisions of the collective agreement. There should be little difficulty in concluding the time limits are mandatory in cases where the agreement uses imperative language, expressly states the grievance is deemed abandoned and cannot be reopened in the event of failure to comply, and expressly provides that the time limits may be extended by mutual consent of the parties. See: General Truckers Drivers Union, Local 938 et al v. Hoar Transport Co. Ltd., [1969] S.C.R. 634, Re Dominion Consolidated Truck Lines Ltd. And Teamsters, Chauffeurs, Warehousemen & Helpers of America, Local 141 (1975), 60 D.L.R. (3d) 37, Re Canadian Airline Employees Association et al. and Eastern Provincial Airways (1963) Ltd., 129 D.L.R. (3d) 426. However, in the case at bar the majority of the board of arbitration found the time limit for referral to arbitration was not mandatory even though Article 10: 02 employs imperative language, even though Article 10:04 expressly provides that failure to comply with the time limits results in irreversible abandonment of the grievance, and even though Article 10:05 expressly provides the

Page: 7 method by which time limits could be altered. The question is whether the decision of the board is patently unreasonable so that this court should interfere. I think it is. [8] In the context of a collective agreement a decision will be patently unreasonable if it results in an interpretation that is not reasonably attributable to its language. See: United Brotherhood of Carpenters and Joiners of America, Local 579 v. Bradco Construction Ltd., [1993] 2. S.C.R. 316 at para 40. The grounds upon which a decision can be found patently unreasonable also include a failure to take account all of the appropriate factors or legal principles. See: Suresh v. Canada (Minister of Citizenship and Immigration), [2002] 1 S.C.R. 3 at para 29, and District of Parry Sound Social Services Administration Board v. Ontario Public Service Employees Union Local 324, 2003 SCC 42 at para 60. In the case at bar the decision of the arbitration board is patently unreasonable because their interpretation strains the language of the collective agreement beyond what it can reasonably bear. In reaching its decision the majority violated applicable legal principles by their disassembling and re-structuring of the collective agreement and they totally failed to consider a relevant factor, namely Article 10:05. [9] The foundations of the board s decision are the majority s conclusions that referral to arbitration was not a step in the grievance procedure and that the time limit provided for referral to arbitration was directory rather than mandatory. Those conclusions are plainly wrong because they do not give effect to provisions of the contract which clearly and unequivocally indicate that referral to arbitration is a part of the grievance procedure and the time limit for doing so was intended by the parties to be mandatory. Instead, the majority, in effect, amended the agreement by removing Step III from the grievance procedure set out in Article 10 and by reducing the application of Article 10:04. However, as is stated in Article 11:03, the board had no authority to change the agreement or to modify, alter, or amend any of its provisions. The majority s decision based, as it was, on findings that referral to arbitration was not a step in the grievance procedure and that the limits imposed for doing so were not mandatory clearly contradicts the agreement and constitutes an obvious and significant revision of it contrary to Article 11.03. [10] Even if Article 10:04 did not apply to referral to arbitration (Step III), there was still Article 10:05 to be considered. In reaching the conclusion that the time limit for referral to arbitration was not mandatory, the majority did not even mention Article 10:05 which provides for the extension of the time limits specified in Article 10. The fact that the parties addressed and set out how time limits could be extended is certainly a relevant factor to consider in determining whether or not the time limit in Article10:02 was mandatory or only directory. Absent statutory authority, an arbitrator has no discretion to extend time limits where the collective agreement contains an express provision allowing extension of time limits by mutual agreement and no such agreement has been made by the parties. In Re Canadian Airline Employees Association et al and Eastern Provincial Airways (1963) Ltd., supra at pp. 434-435 a clause similar to Article 10:05 was considered and found to be determinative of the issue of whether or not a time

Page: 8 limit in the collective agreement under consideration was mandatory. Another case which illustrates the significance of an article such as 10:05 to a determination of whether prescribed time limits in a collective agreement are mandatory is Montmagney (Ville de) v. Casgrain D.T.E. 2000T -786 (Que. S.C.). In this latter case Pelletier J. of the Quebec Superior Court held an arbitrator s decision patently unreasonable because he had effectively modified the collective agreement by concluding that the time limit for referring the grievance to arbitration was not mandatory in the face of provisions almost identical to Articles 10:02, 10:04, 10:05. [11] In support of its position that referral to arbitration is not a step in the grievance procedure the majority refers to the decision of the Ontario Divisional Court in S.E.I.U., Local 204 v. Leisureworld Nursing Homes Ltd. (1997), 99 O.A.C. 196. However, that decision is not applicable in a Prince Edward Island context. The decision in Leisureworld is based on the interpretation of s. 48(16) of the Ontario Labour Relations Act, 1995 (being Schedule A to the Labour Relations And Employment Statute Amendment Act, 1995, S.O. 1995, c.1) giving an arbitrator discretion to extend time limits for the taking of any step in a grievance procedure under a collective agreement. The Divisional Court s interpretation is founded on the legislative history of s. 48(16) which in an earlier incarnation had given an arbitrator discretion to extend the time for any step in the grievance procedure or arbitration procedure. The Divisional Court reasoned that its interpretation was necessary in order to give effect to the deletion of the words or arbitration in the present legislation. Prince Edward Island has no similar statutory provision and there is no comparable legislative history here. [12] The fact that s. 37 of the PEI Labour Act R.S.P.E.I. 1988 Cap. L-1 mandates arbitration but not a grievance procedure does not mean referral to arbitration cannot be a step in the grievance procedure established by a collective agreement. I agree with Drapeau J.A, now C.J.N.B., writing for the New Brunswick Court of Appeal in Pepsi Cola Canada Beverages v Dollar, 221 N.B.R. (2d) 124, [1999] N.B.J. No. 526 when he said at paragraph 6: A request for referral to arbitration is not necessarily, as a matter of law, a step in the arbitration procedure. It may, depending on the terms of the collective agreement... be a step in the grievance procedure... The case Drapeau C.J. was considering also involved a situation where a request for arbitration was made outside the time limit provided for in a collective agreement. He held that based on the wording of the collective agreement in question, referral to arbitration was a step in the grievance procedure. I would reach the same conclusion in this case. It is plain from Article 10.02 that referral to arbitration is Step III of the grievance procedure. By providing for such a referral as a step in the grievance procedure under a collective agreement, the parties were complying with the requirements of s-s. 37(1) of the PEI Labour Act which provides: 37. (1) Every collective agreement shall contain a provision for the final and binding settlement by arbitration, without stoppage of work, of all differences between the parties arising from the interpretation, application, administration, operation or alleged violation of the

Page: 9 agreement, including any question as to whether a matter is arbitrable. There is nothing repugnant to s.37(1) in making a referral for binding arbitration part of the grievance procedure continuum provided for in a collective agreement. If the parties in this case did not intend referral to arbitration to be a part of the grievance procedure, they could easily have avoided making any reference to it at all or put it under Article 11 which is headed Arbitration. That is not what they did. They put it under Article 10 headed Grievance Procedure and specifically identified it as Step III of that procedure. [13] It is obvious from the collective agreement that the parties placed a high value on orderly process, certainty, timeliness, and finality in the resolution of disputes. Article 10:04 of the collective agreement indicates in very strong language the importance the parties attached to the time lines for the grievance process specified in this agreement. The appellant and the respondent agreed that failure to abide by the limits provided would constitute an irreversible abandonment of the grievance. In effect, the agreement provides that where there has been no referral within the time limit specified under Step III, there is no longer any difference between the parties arising from the interpretation, application, administration, operation or alleged violation of the collective agreement to refer to an arbitrator. The grievance has been abandoned and cannot be reopened. The board majority finding that Article 10.04 applies to Step II of the grievance procedure but not Step III is contradictory to the agreement and fails to recognize the great lengths the parties went to in order to emphasize and make clear the dire consequences of failure to abide by the specified time limits for accessing all steps of the grievance procedure including referral to arbitration. The board majority refers to Ontario legislation which permits an arbitrator to extend the time for taking any step in the grievance procedure. However, as I stated earlier, there is no similar legislation in this province. There is also nothing in the Prince Edward Island Labour Act that prevents the parties from imposing mandatory time limits for referring a dispute to arbitration. Furthermore in the case at bar the collective agreement addresses the issue of extending time limits for referral to arbitration. Article 10:05 provides that it may be done by mutual consent. There was no such consent in this case. The fact that the parties specified how the time limits could be extended is another strong indication the limits were intended to be more than just directory. See: Re: Canadian Airline Employees, and Montmagny supra. [14] The unreasonableness of the board s decision is manifest. As a result, I would dismiss the appeal and award costs to the respondent. The Honourable Chief Justice G.E. Mitchell I AGREE:

Page: 10 The Honourable Madam Justice L.K. Webber

Page: 11 McQUAID J.A. (dissenting): [15] The decision of the board of arbitration was reviewed by a judge of the Trial Division on the standard of correctness. I agree with the Chief Justice that he erred in doing so. [16] As a preliminary issue, the board was deciding whether the grievance of the worker could proceed and this involved the interpretation of certain provisions of the collective agreement. The Board s decision on such an issue was not one as to the Board s jurisdiction but was a decision within its jurisdiction. A board of arbitration established to resolve a grievance arising from the interpretation or application of a collective agreement may frequently have to decide preliminary issues such as the one before it in this case. The decision of the board will either exhaust the board s jurisdiction or allow it to continue and decide the grievance on the merits. [17] The appellate power of this court on an appeal from a decision of a subordinate court which has reviewed the decision of an administrative body has now been settled by the decision of the Supreme Court of Canada in Dr. Q v. College of Physicians and Surgeons of British Columbia 2003 SCC 19 (SCC); (2003), 223 D.L.R. (4 th ) 599. At para.43 McLachlin C.J.C. held that the role of the court of appeal is to determine if the reviewing judge applied the correct standard of review. This is a question of law which must be answered correctly by the reviewing judge. If the reviewing judge applied the correct standard, that is the end of the inquiry for the court of appeal. On the other hand if the reviewing judge applied the wrong standard, the court of appeal must assess the administrative tribunal s decision on the correct standard. Also see: Halupa v. Prince Edward Island (Director of Welfare Assistance) 2003 PESCAD 16 at paras. 10 and 11. [18] It has also been settled that there are three standards upon which a decision of an administrative tribunal may be reviewed. They are: (1) correctness; (2) reasonableness; and (3) patent unreasonableness. See: Dr. Q v. College of Physicians and Surgeons of British Columbia supra, and Law Society of New Brunswick v. Ryan 2003 SCC 20; (2003), 223 D.L.R. (4 th ) 577. [19] The least deferential of these standards is that of correctness. This standard of review directs that the reviewing court may substitute its reasoning for that of the tribunal if the court is of the opinion the tribunal reached an incorrect result. The second and more deferential standard of reasonableness directs that the reviewing court not ask itself whether the decision of the tribunal is correct; however, the court must look to determine if the reasons given by the tribunal adequately support the decision. The most deferential standard of review is that of patent unreasonableness and again, the court must not inquire as to whether the decision is correct nor is it simply a matter for the court to determine that the reasons do not support the conclusion. For a decision to be patently unreasonable the defect in the tribunal s reasoning process must be clearly obvious. See:

Page: 12 Law Society of New Brunswick v. Ryan, supra, and Dr. Q v. College of Physicians and Surgeons of British Columbia, supra. [20] The applicable standard of review is determined by applying the functional and pragmatic approach which, in turn, involves the consideration of four contextual factors. See: Dr. Q v. College of Physicians and Surgeons of British Columbia supra. I have considered these contextual factors as they relate to this case: (1) the decision of the arbitration board is final, binding and enforceable on the parties (Article 11.03); (2) the expertise of a board of arbitration lies in the interpretation of the collective agreement and the resolution of factual disputes related to the agreement; (3) the purpose of the grievance arbitration process is to provide for the prompt, informal and inexpensive resolution of disputes in the workplace by a tribunal of lay persons with substantial expertise in the resolution of such disputes; and (4) the nature of the issue before the board of arbitration was the interpretation of the collective agreement and the issue did not involve the interpretation of laws of general application. In the result, bearing in mind the constitutional role of the court to maintain the rule of law, considering the legislative intent reflected in the provisions of the Labour Act R.S.P.E.I. 1988 Cap. L-1 and the intent of the parties as reflected in the collective agreement, the decision of the board of arbitration in this case must be accorded the highest degree of deference. Accordingly, the board s decision should be reviewed on the standard of whether it is patently unreasonable. [21] Exactly what constitutes a patently unreasonable decision continues to be a perplexing issue. The determination may be more difficult with the introduction of the standard of reasonableness. When does an unreasonable decision become a patently unreasonable decision? In Canada (Director of Investigation and Research) v. Southam Inc., [1997] 1 S.C.R. 748, Iacobucci J. said the distinction was in the obviousness of the defect in the tribunal s reasoning. At paras. 56 & 57 he stated. 57. The difference between "unreasonable" and "patently unreasonable" lies in the immediacy or obviousness of the defect. If the defect is apparent on the face of the tribunal's reasons, then the tribunal's decision is patently unreasonable. But if it takes some significant searching or testing to find the defect, then the decision is unreasonable but not patently unreasonable. As Cory J. observed in Canada (Attorney General) v. Public Service Alliance of Canada, [1993] 1 S.C.R. 941, at p. 963, "[i]n the Shorter Oxford English Dictionary 'patently', an adverb, is defined as 'openly, evidently, clearly'. This is not to say, of course, that judges reviewing a decision on the standard of patent unreasonableness may not examine the record. If the decision under review is sufficiently difficult, then perhaps a great deal of reading and thinking will be required before the judge will be able to grasp the dimensions of the problem. See: National Corn Growers Assn. v. Canada (Import Tribunal), [1990] 2 S.C.R. 1324, at p. 1370, per Gonthier J.; see also Toronto (City) Board of Education v. O.S.S.T.F.,

Page: 13 District 15, [1997] 1 S.C.R. 487, at para. 47, per Cory J. But once the lines of the problem have come into focus, if the decision is patently unreasonable, then the unreasonableness will be evident. [22] Prior to the introduction of the standard of reasonableness, the Supreme Court of Canada attempted to delineate the difference between a review which proceeded on the standard of correctness and a review which proceeded on the standard of patent unreasonableness. These decisions do assist in identifying specific situations where the decision of the tribunal may or may not be found to be patently unreasonable. For example, in Canadian Union of Public Employees, Local 963 v. New Brunswick Liquor Corp., [1979] 2 S.C.R. 227 at p. 237 Dickson C.J.C. concluded that if the tribunal s interpretation of the statute from which it derived its authority can be rationally supported the court should not intervene. [23] In C.A.I.M.A.W. v. Paccar of Can. Ltd., [1997] 2 S.C.R. 983 at para. 32 La Forest J. cautioned that the court should not focus on the result reached by the tribunal but rather the focus should be on the reasoning process employed by the tribunal in arriving at the result. If there was a rational basis for the decision, the court is not in a position to conclude the tribunal s decision is patently unreasonable. [24] In Canada (Attorney General) v. Public Service Alliance of Canada, [1993] 1 S.C.R. 941 at pp. 963-964, para. 44 Cory J. stated: 44. It is said that it is difficult to know what "patently unreasonable" means. What is patently unreasonable to one judge may be eminently reasonable to another. Yet any test can only be defined by words, the building blocks of all reasons. Obviously, the patently unreasonable test sets a high standard of review. In the Shorter Oxford English Dictionary "patently, an adverb, is defined as "openly, evidently, clearly. "Unreasonable" is defined as "[n]ot having the faculty of reason; irrational.... Not acting in accordance with reason or good sense. Thus, based on the dictionary definition of the words "patently unreasonable, it is apparent that if the decision the Board reached, acting within its jurisdiction, is not clearly irrational, that is to say evidently not in accordance with reason, then it cannot be said that there was a loss of jurisdiction. This is clearly a very strict test. [25] In United Brotherhood of Carpenters and Joiners of America, Local 579 v. Bradco Construction Ltd., [1993] 2 S.C.R. 316 (S.C.C.) Sopinka J. held that the curial deference to be shown under the patently unreasonable test means that the tribunal has the right to be wrong regardless of how many reviewing judges disagree with the resulting decision. He goes on to say at para. 40: 40. Once it has been determined that curial deference to a particular decision of a tribunal is appropriate, the tribunal has the right to be

Page: 14 wrong, regardless of how many reviewing judges disagree with its decision. A patently unreasonable error is more easily defined by what it is not than by what it is. This Court has said that a finding or decision of a tribunal is not patently unreasonable if there is any evidence capable of supporting the decision even though the reviewing court may not have reached the same conclusion (Lester (W.W.) (1978) Ltd. v. United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry, Local 740, [1990] 3 S.C.R. 644, at pp. 687-88), or, in the context of a collective agreement, so long as the words of that agreement have not been given an interpretation which those words cannot reasonably bear (Bradburn, supra, per Laskin C.J., at p. 849). What these statements mean, in my view, is that the court will defer even if the interpretation given by the tribunal to the collective agreement is not the "right" interpretation in the court's view nor even the "best" of two possible interpretations, so long as it is an interpretation reasonably attributable to the words of the agreement. Or, as stated by Dickson J. in CUPE, at p. 237:... was the Board's interpretation so patently unreasonable that its construction cannot be rationally supported by the relevant legislation and demands intervention by the court upon review? (My emphasis) [26] As Iacaboucci J. stated in Parry Sound (District) Social Services Administration Board v. Ontario Public Service Employees Union, Local 324 2003 SCC 42 at para. 18: The patent unreasonableness test is a very high standard that will not easily be met. [27] Accordingly, courts should not interfere or intervene in the decisions made by a labour arbitrator appointed under the terms of a collective agreement unless the error in the board s reasoning process is clearly obvious. There are many policy reasons which dictate that the efficient resolution of disputes in the workplace is better left to lay arbitrators agreed to by the parties in the collective agreement rather than to the courts. On the other hand, however, courts must be prepared to meaningfully exercise their supervisory jurisdiction of review on a standard contemplated by the parties and the applicable legislation. [28] Therefore, in the review of the board s decision on the standard of patent unreasonableness a reviewing judge must keep in mind that even though the board may not have provided the collective agreement with what he or she considers to be the correct or indeed the best interpretation, unless it is immediately obvious the board considered irrelevant factors, wrongly applied relevant factors or gave the words of the collective agreement a meaning they cannot reasonably bear, a reviewing judge has no jurisdiction to intervene. There must be, on the patently unreasonable standard of review, a compelling reason for a court to exercise its

Page: 15 supervisory jurisdiction. Throughout a review conducted on this standard, a reviewing judge must be careful not to allow his or her reasoning to be overtaken by an exercise which engages the judge in a comparison between the interpretation given by the board and the interpretation the reviewing judge might consider to be correct or, an interpretation he or she might consider to be better than the one provided by the board. The reviewing judge must exercise an extremely high degree of deferential self-discipline and be prepared to accept that a decision is reasonable even if the reviewing judge would not have reasoned or would not have come to the same conclusion as the tribunal. See: Law Society of New Brunswick v. Ryan supra at para. 46. [29] The relevant provisions of the collective agreement, except for Article 12 pursuant to which the grievance in issue was filed, are set forth in the reasons of the Chief Justice. I will not repeat them; however, Article 12 provides as follows: ARTICLE 12 - DISCHARGE, SUSPENSION AND DISCIPLINE 12:01 An employee who has completed his/her probationary period may be dismissed or disciplined but only for just cause, the burden of which shall rest with the Employer. When an employee is discharged or suspended, he/she will be given the reason in writing by the Employer with a copy to the Recording Secretary of the Local Union. 12:02 A probationary employee may be terminated by the Employer and there shall be no recourse to the grievance-arbitration procedure. 12:03 A permanent full-time or part-time employee who considers that he/she has been unjustly discharged or suspended shall be entitled to a hearing under Article 10, Grievance Procedure. Step 1 of the Grievance Procedure shall be omitted in such cases. Such grievances shall be filed within five (5) working days of the discharge or suspension. 12:04 An employee, upon giving twenty-four (24) hours (Monday - Friday) notice, may examine his/her employee file during regular office hours and shall have the right to respond in writing to any document contained therein. The employee shall have the right to make copies of any material contained in his/her file. References will not be shown or made available to the employee. 12:05 The Employer and the Union agree that dismissal is the appropriate penalty for blatant client abuse. Where a Board of Arbitration or a single Arbitrator is satisfied that blatant client abuse has been proven, the Union relinquishes its right to request that the penalty imposed by the Employer be changed and the Board of Arbitration or a single Arbitrator shall not have the authority to change the penalty. 12:06 The record of an employee will not be used against him/her providing the employee has twenty-four (24) months of work which is discipline

Page: 16 free. [30] In accordance with Article 10.01 a grievance is a dispute arising from the interpretation of the collective agreement or an alleged violation of the agreement. Pursuant to Article 10.02 - Step I - an aggrieved employee has a certain period of time from the date of the incident giving rise to the dispute within which to initiate the grievance procedure provided for in the agreement. Step II of the same article in turn provides that the employer has a certain period of time to respond with its position. Step III provides that in the event the employee is not satisfied, he or she has a certain period of time within which to submit the dispute to arbitration. [31] Article 11 sets forth the procedure to be followed throughout the arbitration process. It is silent as to the time limitation for the commencement of the arbitration process. [32] As the grievance in this case arose from a decision of the employer to discharge a permanent full-time employee for cause, Article 12.03 provides that such an employee shall be entitled to a hearing under the provisions of Article 10. It also provides that the employee s grievance shall be filed within five working days of the discharge. [33] This time limitation as well as the time limitations provided for in Article 10 of the agreement are on their face mandatory because of the use of the word shall. However, whether shall is mandatory or directory will turn on the interpretation of each collective agreement. Usually, where the agreement does not provide a penalty for non-compliance with a time limitation, the provision is interpreted as being directory only, despite the use of the word shall. On the other hand, it is generally accepted in Canadian arbitral jurisprudence that where the parties to a collective agreement specifically spell out the consequences of failing to adhere to time limits, and if those consequences are tantamount to abandonment or settlement of the grievance, such provisions are then viewed as mandatory. The failure to adhere to the time limit must, absent some statutory exceptions which are not present in this province, be viewed as rendering the grievance inarbitrable. In Brown and Beatty: Canadian Labour Arbitration, 3rd ed. (Canada Law Book Limited, 1988, Aurora), para. 2:3128 this principle is stated as follows: Generally, arbitrators have held that where the word may is used in the timelimit provision, failure to comply strictly will not render the grievance inarbitrable. However, where the word shall is used the matter is less certain. One line of authority has held that shall is imperative or mandatory and that non-compliance with such a provision is a bar to arbitration, particularly under statutory expedited arbitration provisions. The more prevalent view now, however, is that notwithstanding the imperative character of the word shall, whether it is mandatory or directory ultimately will turn on the construction of each agreement. For example, where the agreement does not contain an express provision providing for a penalty or dealing with the consequence of noncompliance, then the provision will more likely be construed as being directory

Page: 17 only. Where, however, the collective agreement provides that no matter may be submitted to arbitration which has not been properly carried through all previous steps of the grievance procedure or if a grievance is not submitted or advanced from one step to another within the time limits the grievance shall be deemed to be abandoned and all rights of recourse to the grievance procedure shall be at an end, failure to comply with its terms will likely be held to be a bar to arbitration. [34] The collective agreement does not contain any provisions which would specifically permit the board to extend the times provided for in the grievance/arbitration procedure. Such provisions are similarly absent from the Labour Act. Therefore, whether the board has discretion to extend the time limitations in the collective agreement will turn on whether the time limitations set forth in the agreement are interpreted as being mandatory or directory. [35] In the case at bar the majority of the board interpreted the time limitation for referring a grievance to arbitration as being directory. They concluded that the grievance process and the arbitration process were distinct processes in the continuum of dispute resolution provided for in the collective agreement. They further reasoned that the referral to arbitration was the first step in the arbitration process, not a step in the grievance process, and that the provision of the agreement (Article 10.04) which provided a penalty for non-compliance with a time limitation related only steps in the grievance process. Therefore, the time period for referring a grievance to arbitration, being a step in the arbitration process was directory only, thereby allowing the board the discretion to extend the time if, in the circumstances, an extension was warranted. The issue in this appeal is whether the reasoning utilized in reaching this conclusion and applying such an interpretation of the provisions of the collective agreement is so obviously flawed this court should intervene to set it aside. [36] In making the distinction between grievance and arbitration the majority considered that in terms of the formality of the processes, the arbitration process is markedly different from the grievance process. They then went on to consider a number of cases which interpreted various provisions of the Ontario Labour Act which at one time or another had provided arbitrators with express discretion to extend time limits for taking steps in either the grievance or arbitration process provided for in all collective agreements. Similar provisions have never been included in the Prince Edward Island legislation, and it is important to note that the board did not interpret the Labour Act R.S.P.E.I. 1988 Cap. L-1 as conferring such authority on an arbitrator. To the contrary, the majority of the board relied upon the Ontario legislation and the decisions which interpreted it as support for their reasoning that the grievance and arbitration processes were distinct processes in this collective agreement. They did point out the one similarity between the legislation in both provinces is that both mandate only the inclusion of the arbitration process in a collective agreement while leaving it to the parties to incorporate a grievance process in the

Page: 18 agreement. This similarity and the resulting grievance/arbitration dichotomy prevalent in both jurisdictions was just another factor which also led the board to its conclusion there was... a practical and rational basis for making a clear distinction between grievance procedure and arbitration procedure. See paragraph 25 of the decision of the majority of the board. [37] In Pepsi-Cola Canada Beverages v. Dollar, [1999] N.B.J. No. 526 (N.B.C.A.), the arbitrator had concluded that on the basis of his interpretation of the relevant collective agreement, the referral to arbitration was a step in the grievance process and not a step in the arbitration process. The reviewing judge reversed that decision because he interpreted a decision of a court in Ontario as authority for the proposition that, as a matter of law, the provision in the collective agreement that provided for referral to arbitration is not to be considered a step in the grievance process but rather a step in the arbitration process. [38] An appeal from this decision was taken to the New Brunswick Court of Appeal. It concluded first of all, that the decision of the arbitrator should be reviewed on the standard of patent unreasonableness. Secondly, the court held that the decision of the arbitrator in interpreting the provision in the collective agreement before him, which provided that the referral to arbitration was a step in the grievance procedure, was not a patently unreasonable decision and it should be restored. [39] As Drapeau J.A. points out at para. 6 of his reasons, the referral of a grievance to arbitration is not, as a matter of law, a step in the arbitration procedure and it may, depending on the wording of the particular collective agreement, be a step in the grievance procedure. In the result Drapeau J.A. was not foreclosing the possibility that in another collective agreement the referral to arbitration may be interpreted as a step in the arbitration procedure and not a step in the grievance procedure. The significance of his comment is that such a determination is never a matter of law of general application but is instead a matter to be decided by each arbitrator on the interpretation of each collective agreement. [40] The majority of the board in the case at bar did not consider that, as a matter of law, the provision for referral to arbitration was to be considered a step in the arbitration process. They reached this conclusion on the basis of their interpretation of the collective agreement before them. [41] The board s task in deciding the preliminary issue before it was to ascertain from the words of the entire collective agreement as to whether it was the intention of the parties that the time limit in Article 10.02 for referring a grievance to arbitration was mandatory or directory. If the provision was mandatory, the board would not have discretion to extend the time limit,

Page: 19 whereas if the provision was directory the board would have such discretion. The intention of the parties in this respect is not immediately obvious from the words of the collective agreement. [42] Neither the collective agreement nor the Labour Act supra contains a specific provision allowing for the extension of the time limit. Indeed, the time limit in Step III of Article 10.02 is only mandatory if the provisions of Article 10.04, which provides a penalty for non-compliance, relates to that step. The relevant part of 10.04 reads as follows: If advantage of the grievance procedure has not been taken within the time limits specified in this agreement, the alleged grievance shall be deemed to have been abandoned and cannot be reopened. [43] Despite the lack of clarity, the majority of the board concluded the time limit in Article 10.02 of the collective agreement was directory. In reaching this conclusion they did not employ reasoning which was clearly and obviously defective. For a number of reasons, they gave the words of the collective agreement an interpretation which can be rationally supported. [44] First, even if the penalty provision in Article 10.04 relates only to the grievance procedure, it is unclear as to whether the parties intended that it apply only to the initiation of the grievance procedure or to each step in the grievance procedure. Note the words:... if advantage of the grievance procedure has not been taken within the time limits specified in the agreement... the grievance will be deemed to be abandoned. This provision could be reasonably interpreted to mean that, only if the grievance procedure is not initiated within the various time limits in the agreement is the grievance deemed to be abandoned and that once initiated, the time limits for taking the various steps in the procedure do not bring the penalty provisions into play thereby making those time limits directory. Other than Article 10.02, there are a number of time limits set forth in the collective agreement for the initiation of a grievance. See: Articles 12.03, 15.06, 26.02(c). If the penalty provision was to apply to the steps in the grievance procedure, the parties could have been much clearer in expressing their intent in this respect. For example, Article 10.02 could have been more clearly worded as follows: If advantage of the grievance procedure has not been taken or if the grievance has not been advanced from one step to another, within the time limits provided for in this agreement, the grievance shall be deemed to be abandoned. [45] Second, the collective agreement does specifically contemplate a grievance procedure and an arbitration procedure in Articles 10 and 11.

Page: 20 [46] Third, the fact that the time limit for referring a grievance to arbitration appears in an article under the heading Grievance Procedure is not conclusive of the parties intention to make it a step in the grievance procedure as opposed to a step in the arbitration procedure. While the heading in a collective agreement may be considered in interpreting the meaning of the agreement, it cannot be used to control the meaning. See: Re Kenora Roman Catholic Separate School Board and Ontario English Catholic Teachers Association (1993), 37 L.A.C. (4 th ) 28. [47] Fourthly, by the provision of Article 12.03 the parties intended that permanent full-time employees who had been terminated would be entitled to a hearing under the provisions of Article 10. The majority of the board also considered this direction in reaching its conclusion. The only hearing contemplated in the various steps of the grievance procedure is an arbitration conducted in accordance with Article 11. Therefore, one is left to speculate as to whether or not it was the intention of the parties to give a suspended full-time permanent employee a hearing regardless of the non-compliance with certain time limits. [48] Finally, the fact that Article 10.05 of the collective agreement provided for the extension of time limits in Article 10 on the mutual consent of the parties, is not conclusive of the intention of the parties as to whether or not an arbitrator had the discretion to extend the time limits in a particular situation where the parties could not agree on their extension. The Article does not provide that the time limits may only be extended with mutual consent of the parties nor does it provide they shall be extended with the mutual consent of the parties. It goes without saying that the parties could mutually agree to amend any provision of the collective agreement, including those that set the time limits. Furthermore, because one arbitrator interpreting another collective agreement may have decided that a provision such as article 10.05 was determinative of the issue as to whether time limits were mandatory or directory, is irrelevant to a determination as to whether the majority s decision here is patently unreasonable. In Re Canadian Airline Employees et al. and Eastern Provincial Airways (1963) Ltd. (1981), 129 D.L.R. (3d) 426 (N.S.S.C.A.D.), where the court reviewed the decision on a standard of correctness, an arbitrator did conclude that a provision similar to Article 10.05 was indicative of an intention that the time limits be mandatory. However, arbitrators may reach different conclusions in their interpretation of similarly worded collective agreements and as difficult as this may be for reviewing judges to accept, the standard of patent unreasonableness directs that they must unless there are obvious defects in the reasoning of the decision maker. [49] In summary, based on the ambiguities in the collective agreement here, it cannot be said the majority s decision amended or modified the terms of the collective agreement between the parties. To the contrary, the decision provided an interpretation which the language of the