Case commented on: Sahaluk v Alberta (Transportation Safety Board), 2013 ABQB 683
Several applicants are challenging the constitutionality of Alberta’s Alcohol-Related Administrative Licence Suspension Regime, which requires those charged with impaired driving-related offences to surrender their drivers’ licences to police and suspends them from driving until the charges are disposed of (when a conviction may result in further driving prohibitions under the Criminal Code, RSC 1985, c C-46, with no credit given for the provincial suspension). This regime is found in section 88.1 of the Traffic Safety Act, RSA 2000, c T-6, which is being challenged on the basis that it violates the applicants’ rights under sections 7, 8 and 11(d) of the Canadian Charter of Rights and Freedoms, and is in pith and substance criminal law and therefore ultra vires the Province of Alberta. In this preliminary application, the Registrar of Motor Vehicle Services sought an order striking out parts of three affidavits filed on behalf of the applicants on the basis that they contained “frivolous, irrelevant or improper information” contrary to rule 3.68(4) of the Alberta Rules of Court, Alta. Reg. 124/2010.
The Decision on the Affidavits
The affidavits were sworn by three lawyers – Shannon K.C. Prithipaul, Mark Ian Savage, and Thomas Allan Pearse. The passages of their affidavits objected to by the Registrar included: statements that some clients decided to plead guilty to the criminal charges against them even though they may have had good defences, and that clients were adversely affected when they could not work because of licence suspensions (Prithipaul and Savage); statements about the implications of a medical condition and that “the Government of Alberta has elected to punish people beginning at the time of their charge, rather than their sentence” (Pearse); and statements suggesting that the suspension regime would adversely impact persons living outside urban areas (Pearse and Savage) (at paras 3-7).
Mr. Justice Thomas W. Wakeling began his reasons by noting that the ordinary rules of evidence pertaining to civil litigation apply in the context of constitutional litigation. As Justice Wakeling indicated, “A judicial determination that legislation is unconstitutional must be based on reliable factual determinations that provide a comprehensive account of relevant social, political and cultural considerations” (at para 15). Justice Wakeling also noted the distinction between adjudicative facts (those that relate to the parties in the case) and legislative facts (those that relate to the purpose, background and context of legislation, which are “more general nature and are subject to less stringent admissibility requirements” (at para 16, quoting Danson v Ontario,  2 SCR 1086 at 1089)).
Justice Wakeling characterized the impugned portions of the affidavits as adjudicative facts, as the statements in question relate to information about identifiable persons. He also characterized the statements as hearsay, as they were out-of-court statements tendered in evidence as proof of the truth of their contents. Hearsay evidence may be admissible if it is not actually put forward for the truth of its contents, if it falls into one of the categorical exceptions to the hearsay rule, or if it accords with the principled approach the Supreme Court of Canada developed in The Queen v Khan,  2 SCR 531 and The Queen v Khelawon,  2 SCR 787. Under that approach, hearsay evidence may be admitted where it meets the criteria of necessity and reliability, and where its prejudicial effects do not outweigh its probative value (at paras 21-24). Justice Wakeling expanded upon these criteria as follows: “The necessity dimension recognizes the fundamental importance of accurate fact-finding. Is it necessary to admit the proffered hearsay evidence because there is no other reasonable means of presenting the evidence? The reliability marker acknowledges that a significant component of the value of proffered evidence in the fact-finding process is its reliability. Are there good reasons present that would justify the court in not subjecting the evidence to the best device known to test the reliability of evidence – cross-examination?” (at para 24).
Applying this approach to the Prithipaul and Savage affidavits, Justice Wakeling disagreed with the argument that the statements had been tendered for a purpose other than proof of the truth of their contents. Counsel for the applicants had argued that the impugned evidence was led to prove that “accused persons who have good defences may plead guilty”, but this was still seen as amounting to hearsay (at para 27). If these statements were not tendered to prove the truth of their contents, they would have no value to the proceedings. Justice Wakeling also found that the statements did not meet the criteria of necessity and reliability, as there was nothing to indicate that the out-of-court declarants were unavailable to give evidence, and there may be other reasons why accused persons plead guilty that could not be tested by cross-examination based on the challenged affidavits (at paras 28-30). He noted that an expert witness could be used to bring forward this evidence, subject to cross examination. In some cases, judicial notice may also be available, but Justice Wakeling determined that the question “why do persons accused of some driving offences plead guilty … is not so notorious or generally accepted as not to be subject of debate among reasonable persons” (at para 33). He struck the relevant portions of the Prithipaul and Savage affidavits.
As for the Pearse and Savage affidavits, the question was whether they infringed the rule that affidavits should not include argumentation or the opinion evidence of lay persons (at para 35, citing e.g. Alberta Human Rights Commission v. Alberta Blue Cross Plan, (1983) 48 AR 192 (CA)). Justice Wakeling found that the impugned portions of the affidavits gave an opinion on a medical condition of a client (Pearse), and opinions and argument as to the adverse impact of section 88.1 on persons living outside rural areas (Pearse and Savage). Those portions of the affidavits were also struck.
Justice Wakeling is a new appointee to the Court of Queen’s Bench as of February 2013 (see here), and I must say his decision was a pleasure to read. It was easy to follow and supported by plenty of references to case law and secondary sources. I will be recommending this case to my constitutional clinical students next term, as it provides a very good summary of the rules of evidence in constitutional litigation and a well-reasoned application of those rules.
Justice Wakeling concluded by noting that his ruling “will not prejudice the ability of Mr. Sahaluk to present the factual foundation he needs to establish his case. The evidentiary process provides other means through which relevant and important facts may be adduced” (at para 37). This is an important acknowledgement, as the case raises significant constitutional issues and it should not be decided without providing the applicants the opportunity to present a proper evidentiary foundation.
To subscribe to ABlawg by email or RSS feed, please go to http://ablawg.ca
Follow us on Twitter @ABlawg
Decision commented on: Alberta Utilities Commission, Utility Asset Disposition, Decision 2013-417, November 26, 2013
In ATCO Gas & Pipelines Ltd. v Alberta (Energy and Utilities Board), 2006 SCC 4 (Stores Block), a majority decision of the Supreme Court of Canada (per Justice Bastarache), the Court concluded that the customers of a regulated utility had no property interest in the assets of a utility company that were included in the rate base. Accordingly, when a utility sought the approval of the Energy and Utilities Board (EUB) (now the Alberta Utilities Commission (AUC or Commission)) for the disposition of a rate base asset outside the ordinary course of business, the EUB/AUC had no jurisdiction to require the utility, as a condition of the approval of the disposition, to allocate to the customers of the utility any share of the net proceeds of disposition beyond the depreciated book value of the asset in the utility’s accounts. In so ruling the Supreme Court of Canada reversed the long-standing practice of the EUB and its predecessors in sharing such gains between shareholders and customers. That long-standing practice is recounted in this decision at paras 19 – 32.
Since Stores Block, the AUC and the Alberta Court of Appeal have continued to struggle with the implications of that decision for other dispositions of rate base assets by regulated utilities. Part of the Commission’s response was to initiate the generic proceeding which is the subject of this post. The Commission initiated the proceeding by notice in April 2008 with three principal objectives:
The proceedings were suspended later that year pending the resolution of certain related matters before the Court of Appeal (ATCO Gas and Pipelines Ltd. v Alberta (Energy and Utilities Board), 2009 ABCA 171 (Harvest Hills); ATCO Gas and Pipelines Ltd. v Alberta (Utilities Commission), 2009 ABCA 246 (Salt Caverns)). The proceedings recommenced in October 2012 and the Commission released its decision on November 26, 2013.
The decision provides a useful distillation (at para 102, p 32 – 34) of no less than 19 principles which the Commission contends can be derived from the Stores Block decision as well as subsequent decisions of the Alberta Court of Appeal and of the Commission itself. The decision also addresses a number of specific issues: (1) does Stores Block apply to dispositions in the ordinary course of business? (2) rate base issues, (3) depreciation practices, (4) stranded assets, (5) special facilities tariffs, (6) production abandonment costs, (7) ordinary course of business, and (8) rate base verification.
(1) Does Stores Block apply to dispositions in the ordinary course of business?
As noted above, Stores Block involved an application for the approval of a disposition that was not in the ordinary course of business. So too did the subsequent Alberta Court of Appeal decisions in Harvest Hills, Salt Caverns and ATCO Gas and Pipelines Ltd. v Alberta (Energy and Utilities Board) 2008 ABCA 200, leave to appeal to Supreme Court of Canada refused, 32761 (December 4, 2008) (Carbon)). In this decision, the Commission, recognizing the property basis of the Supreme Court’s decision, concluded that the logic of Stores Block must equally apply to assets disposed of in the ordinary course of business. The Commission reasoned as follows:
…. the Commission considers that the utility asset ownership principles established by Stores Block and discussed above must apply to all utility property, regardless of whether the property is disposed of inside or outside of the ordinary course of business. To hold otherwise and find that it is customers that receive the benefit of any gain or bear the risk of loss for utility property other than in the case where it is disposed of outside of the ordinary course of business would mean that customers must have acquired some sort of property interest in those assets, contrary to the findings of the court in Stores Block. Indeed, paragraph 44 of the Stores Block decision recognizes that there is no authority in the Gas Utilities Act (or by implication the Public Utilities Act) to allocate gains or losses from the disposition of assets inside the ordinary course of business. It is inconsistent with the principles in Stores Block to suggest that customers do, or do not, gain a property interest in utility property, and receive the gains or bear the losses accordingly, depending on the nature of the circumstances of the disposition of the asset.
(2) Rate Base Issues
The post-Stores Block decisions confirmed that an asset could only remain in a utility’s rate base if it was used or required to be used to provide service. The Commission could not order that an asset be continued in the rate base for the sole purpose of capturing revenues from that asset for the benefit of consumers: Carbon. Furthermore, a utility does not require the Commission’s approval to remove an asset from the rate base (although the utility’s decision may be subject to a prudency review). Once an asset is no longer being used (or required for use) it must be removed from the rate base. The subsequent disposition of the asset is for the utility to decide (with the Commission’s approval where the disposition is not in the ordinary course of business) with any losses or gains for the account of the shareholders and not the customers (this decision at paras 273 – 279).
In this proceeding, the utility companies took the view (at para 280) that not all of the above principles applied to electrical utilities (Stores Block and the post-Stores Block Court of Appeal decisions all dealt with gas utilities). In making this argument the utilities noted that unlike the Gas Utilities Act, RSA 2000, c. G-5, s 37 (GUA), and the Public Utilities Act, RSA 2000, c. P-45, s 90 (PUA), the Electric Utilities Act, SA 2003, c. E-5.1 (EUA) does not in fact use the terms “rate base” and “used or required to be used”. The Commission however was having none of this argument:
 … this position is in conflict with the property ownership principles enunciated in Stores Block.…
 The Commission also observes that while the terms “rate base” and “used or required to be used to provide utility service” are not employed in the Electric Utilities Act, the same concepts apply. Section 122 of the Electric Utilities Act requires the Commission in setting a tariff to provide an “electric utility” with a reasonable opportunity to recover its prudent costs. An “electric utility” is defined, in part, as a “transmission facility” or an “electric distribution system” that is “used” to provide utility services. An “electric distribution system” is defined as the assets and services “necessary to distribute electricity.” A “transmission facility” is a facility that “transmits electricity” and includes “all property of any kind used for the purpose of, or in connection with, the operation of the transmission facility.” Therefore, Commission-approved tariffs for electric utilities must provide the electric utility a reasonable opportunity to recover the prudently incurred costs of utility assets that are used in (necessary to) the provision of electric utility service in the same way that Commission-approved tariffs for gas utilities must provide the gas utility with a reasonable opportunity to recover the prudently incurred costs of utility assets included in rate base. The Commission has no authority to include in rates the cost of assets that are not presently used, reasonably used or are likely to be used in the future to provide services to customers regardless of whether the statutory requirement is described as being “used or required to be used” to provide gas utility service or “used” or “necessary to” the provision of electric utility services. Therefore, the Commission finds that the principles related to assets used or required to be used to provide utility service established in the Alberta Court of Appeal cases dealing with gas utility assets apply equally to electric utility assets and, accordingly, the costs of all utility assets of both gas and electric utilities that are no longer used or required to be used for utility service must be removed from customer rates. All revenues generated by, and all costs associated with, such assets that are no longer used or required to be used for utility service are for the account of the utility shareholder.
The Electric Utilities Act is not the only utility statute that fails to use technical terms such as rate base and “used and useful” or “used and required to be used”. The National Energy Board Act, RSC 1985, c N-7 also fails to use these terms. And yet, as with the Commission in this decision, the Federal Court of Appeal (see for example, British Columbia Hydro and Power Authority v West Coast Transmission Company Ltd et al,  2 FC 646 (CA)) has always supported the NEB in its use of rate base concepts in its decisions, thereby confirming the idea that there is, in some sense, a common law of utility regulation.
(3) Depreciation Practices
The Commission examined its depreciation practices to see if they were consistent with Stores Block. The Commission concluded that its practices, including the use of mass property accounts (grouping homogenous assets for depreciation purposes) and the use of reserve true-ups (periodic reassessments based on depreciation studies which may require customers to pay additional amounts where inadequate depreciation had been collected) were consistent with Stores Block. The Commission noted that its
… mandate is to fix just and reasonable rates and in doing so it is permitted to exercise its discretion to allow for the amortization of reserve differences in rates in the same way that it is permitted to exercise its discretion to establish deferral accounts to deal with forecasting uncertainties for other kinds of costs.
(4) Stranded Assets
A stranded asset is an asset that ceases to be used or required to be used before it comes to the end of its economic life (i.e. before the utility has fully depreciated the asset). The Commission affirmed that such assets should be removed from the rate base (at para 303). The Commission further affirmed that such extraordinary retirements should be for the account of the utility (and not its customers).
(5) Special facilities charges
Under some circumstances a utility may provide a customer with services (and facilities) that are additional to the regulated service. In this decision the Commission confirmed that the risks associated with providing such additional services should be for the account of the utility (at para 311).
(6) Production abandonment costs
Some gas utilities own their production assets. These assets are properly included in the rat base for so long as they are producing. Once they cease to produce they cease to be used and useful and therefore no longer belong in the rate base. However, there may still be costs associated with these wells until the wells can be properly abandoned and the well sites and surface rights properly remediated. To what extent should the utility be able to recover costs associated with assets no longer in the rate base?
Perhaps surprisingly, the AUC in Decision 2011-450 disallowed recovery for production abandonment costs for ATCO Gas. That decision was then subject to a review and variance application as a result of which the Commission in Decision 2012-156 referred the treatment of such costs to this proceeding. The Commission gave the same direction in relation to a similar application from AltaGas (Decision 2012-311). In the current proceeding the Commission allowed recovery of these costs and offered significantly more guidance to utilities on this issue:
 The Commission panel has reviewed the decisions related to production abandonment costs from the perspective of its findings in this proceeding regarding depreciation methods, including the treatment of salvage, post-retirement costs and ordinary retirements. Based on those findings, the Commission finds, consistent with its findings above, that it may include the production abandonment costs in customer rates if those production abandonment costs result from causes reasonably assumed to have been contemplated in prior depreciation provisions, and normally expected to occur when the plant reaches the end of its expected service life. The evidence filed in the proceeding leading to Decision 2011-450 showed that production abandonment costs had been included consistently in depreciation studies related to the production facilities when they were in rate base. The inclusion of production abandonment costs in rates for these assets is an accepted component of the net salvage calculation. Indeed, production abandonment costs for assets no longer in rate base were included in settlement agreements between customer groups and the utility demonstrating that recovery of these production abandonment costs is an accepted component of the net salvage calculation. Therefore, the Commission varies Decision 2011-450 to the extent necessary to include the disallowed production abandonment costs in revenue requirement for the years in question. Similarly, the Commission approves the inclusion of production abandonment costs for AltaGas in revenue requirement for the years for which revenue requirement was determined in Decision 2012-311.
(7) Ordinary course of business
There is a distinction to be made between the removal of an asset from the rate base and the disposition of that asset. The Carbon decision determined that a utility does not require the prior approval of the Commission before it removes an item from the rate base. The Commission may second-guess the prudence of the utility in making this decision but no prior approval is required. The disposition of an asset requires the approval of the Commission but only if the disposition is outside the ordinary course of business: See GUA, s 26, PUA, s 101 (and s 101 of the PUA does potentially apply to electric utilities, see PUA s 116(1)). The penalty in each case is severe – the disposition is void. Understandably therefore the utilities in this proceeding sought some additional guidance from the Commission in the interpretation of this requirement. The Commission proved reluctant to provide that further guidance but it did reaffirm the criteria endorsed in a previous decision and the Commission also invited each utility to apply for prior approval of a dollar value below which transactions would be presumed to be disposition in the ordinary course.
As to the former, the Commission affirmed that the criteria articulated in an earlier decision continued, in the Commission’s view, to provide adequate guidance to utilities. That previous discussion provided as follows:
 With respect to the disposition of assets the Board notes that the GU Act provides little specific direction. The Board confirms that it must first determine whether the disposition of an asset is outside the ordinary course of business for a utility. The proceeds of disposition, NBV [net book value], frequency and type of sale would be among the factors considered by the Board in that determination. The quantum, and materiality (in relation to the total rate base) of the proceeds of disposition and the NBV would all be considered. … The Board would be willing to consider setting a threshold level for asset sales below which the Board would treat sales as being in the ordinary course of business for the duration of the Settlement. …The final determination whether a disposition is outside the ordinary course continues to rest with the Board.
As to the second, the AUC reminded the other utilities that it had approved a $1.5 million threshold for ATCO Gas and stated (at para 322) that “Each other utility may apply for a monetary threshold guideline applicable to their company in determining if a transaction is within or outside of the ordinary course of business.”
(8) Rate base verification
The real kicker in this decision is the Commission’s direction to utilities to reaffirm on a continuing basis that everything that they claim belongs in the rate base, really does belong there. This particular injunction flows from the Alberta Court of Appeal’s decision in Carbon wherein it stated that:
 The words “used or required to be used” are intended to identify assets that are presently used, are reasonably used, and are likely be used in the future to provide services. Specifically, the past or historical use of assets will not permit their inclusion in the rate base unless they continue to be used in the system. The fact that the Carbon storage facility was previously used to provide service may provide some context, but it is largely irrelevant to whether that asset should remain in the rate base.…
 [T]he only reasonable reading of s 37 is that the assets that are ‘used or required to be used’ to provide service are only those used in an operational sense.…
 The Act does not contain any provision or presumption that once an asset is part of the rate base, it is forever a part of the rate base regardless of its function. The concept of assets becoming “dedicated to service” and so remaining in the rate base forever is inconsistent with the decision in Stores Block (at para 69). Such an approach would fetter the discretion of the Board in dealing with changing circumstances. Previous inclusion in the rate base is not determinative or necessarily important; as the Court observed in Alberta Power Ltd. v Alberta (Public Utilities Board) (1990), 72 Alta. L.R. (2d) 129, 102 A.R. 353 (C.A.) at pg. 151: “That was then, this is now.”
While the utility in that decision contested the Commission’s ability to force an asset to remain in the rate base if it were not physically being put to use or potential use, the Commission in subsequent proceedings and in this proceeding has interpreted these comments to impose an active duty on the utility to identify assets that do not belong in the rate base. Thus, instead of waiting for an intervenor to identify unused assets and make the argument that the asset should be deleted from the rate base (surely a difficult task in many cases) the Commission has now turned the onus over to the utilities. Thus in this decision the Commission has ruled as follows:
 In order to give effect to the court’s guidance that the “rate-regulation process allows and compels the Commission to decide what is in the rate base, i.e. what assets (still) are relevant utility investment on which the rates should give the company a return,” the Commission directs each of the utilities to review its rate base and confirm in its next revenue requirement filing that all assets in rate base continue to be used or required to be used (presently used, reasonably used or likely to be used in the future) to provide utility services. Accordingly, the utilities are required to confirm that there is no surplus land in rate base and that there are no depreciable assets in rate base which should be treated as extraordinary retirements and removed because they are obsolete property, property to be abandoned, overdeveloped property and more facilities than necessary for future needs, property used for non-utility purposes, property that should be removed because of circumstances including unusual casualties (fire, storm, flood, etc.), sudden and complete obsolescence, or un-expected and permanent shutdown of an entire operating assembly or plant. As stated above, these types of assets must be retired (removed from rate base) and moved to a non-utility account because they have become no longer used or required to be used as the result of causes that were not reasonably assumed to have been anticipated or contemplated in prior depreciation or amortization provisions. Each utility will also describe those assets that have been removed from rate base as a result of this exercise. At this time, the Commission will not require the utilities to make additional filings to verify the continued operational purpose of utility assets. (footnotes omitted)
To subscribe to ABlawg by email or RSS feed, please go to http://ablawg.ca
Follow us on Twitter @ABlawg
Case commented on: Alberta Information and Privacy Commissioner v United Food and Commercial Workers, Local 401, 2013 SCC 62 (“AIPC v UFCW”)
This case out of Alberta has been the subject of other ABlawg posts (see here and here), and now the Supreme Court of Canada has made its views known on the constitutionality of Alberta’s privacy legislation. Clearly, the issues that were addressed were of interest across Canada as there were several interveners in the case, including the Attorneys General of Canada and Ontario, the Privacy Commissioners of Canada, Ontario and British Columbia, the Canadian Civil Liberties Association, the British Columbia Civil Liberties Association and labour and business groups.
The case involved a lawful strike by employees of the Palace Casino in Edmonton that lasted 305 days. Both the United Food and Commercial Workers (“UFCW”) and the employer videotaped and photographed individuals who were crossing the picket line. The UFCW posted signs near the picketing indicating that the images of people who crossed the picket line might be placed on a website [www.casinoscabs.ca]. Several individuals who were photographed or taped crossing the picket line complained to the Alberta Information and Privacy Commissioner. An Adjudicator appointed by the Privacy Commissioner concluded that the UFCW had contravened Alberta’s Personal Information and Protection of Privacy Act, SA 2003, c P-6.5 (“PIPA”). The UFCW applied to the Alberta Court of Queen’s Bench for judicial review, where the PIPA was found to violate the UFCW’s rights under the Canadian Charter of Rights and Freedoms, section 2(b) (freedom of expression). The Alberta Court of Appeal agreed and granted the Union a constitutional exemption from the application of the PIPA. The Supreme Court of Canada concurred with the Court of Appeal about the Charter violation, but changed the remedy. It quashed the Adjudicator’s decision, and, at the request of the Alberta Government and the Information and Privacy Commissioner, declared the PIPA to be invalid, but suspended the declaration of invalidity for 12 months to give Alberta’s Legislature the opportunity to revise the PIPA to make it constitutional.
The Supreme Court (all nine judges) easily concluded that the UFCW’s freedom of expression was restricted by the PIPA (AIPC v UFCW at para 18). Next, the Court performed a detailed Charter section 1 analysis. The Court noted that it must first determine whether the PIPA serves a pressing and substantial objective, and, if so, whether its provisions are rationally connected to the objective, whether it minimally impairs the right to freedom of expression, and whether its effects are proportionate to the government’s objective (AIPC v UFCW para 18). Applying the test, the Court found that the PIPA has a pressing and substantial objective: “providing an individual with some measure of control over his or her personal information… [which] is intimately connected to their individual autonomy, dignity and privacy” (AIPC v UFCW at para 19). The Court further noted that these are fundamental values and that privacy plays a fundamental role “in the preservation of a free and democratic society” (AIPC v UFCW at para 19). The PIPA addresses this objective by imposing broad restrictions on the collection, use and disclosure of personal information. The Court determined that the broad restrictions were not justified because they are disproportionate to the benefits the legislation strives to promote (AIPC v UFCW at para 20). The objective of providing an individual with some control over his or her personal information is “intimately connected to individual autonomy, dignity and privacy”, which are significant social values (AIPC v UFCW, at para 24). However, in limiting collection, use and disclosure of personal information, the PIPA does not regard the situational context for that information (AIPC v UFCW at para 25). The PIPA does not provide any way to accommodate the expression of unions engaged in lawful strikes. It does not balance the union’s constitutional right to freedom of expression with the interests the PIPA protects (AIPC v UFCW at para 25). The personal information collected by the Union was readily and publicly observable. Those who crossed the picket line could reasonably expect that their image would be caught and disseminated by others. Further, the information was limited to the images of the individuals and did not include any intimate personal details (e.g., lifestyle or personal choices) (AIPC v UFCW at para 26).
The Court held that the deleterious effects of the PIPA outweigh its beneficial effects. PIPA prohibits the collection, use or disclosure of personal information for legitimate expressive purposes related to labour relations, such as: ensuring safety of union members; persuading the public not to do business with the employer and bringing the labour conditions to the attention of the public. These activities are considered to be at the core of freedom of expression under Charter section 2(b) (AIPC v UFCW at para 28). Since the PIPA restricts a union’s ability to communicate and persuade the public of its cause, this infringement of the right to freedom of expression is “disproportionate to the government’s objective of providing individuals with control over personal information that they expose by crossing a picketline” (AIPC v UFCW at para 38). Thus, the Court concluded that the infringement of Charter section 2(b) rights was not saved by Charter section 1.
Unlike the Alberta Court of Appeal, the Court decided to strike the PIPA down entirely, rather than “pick and choose among the various amendments that would make the PIPA constitutionally compliant” (AIPC v UFCW at para 40). This declaration was suspended for 12 months to allow the legislature time to decide how best to amend the PIPA. This remedy alleviates the concerns I expressed after the Alberta Court of Appeal granted the union a constitutional exemption (see here). Now, privacy and freedom of expression advocates have the opportunity to provide “guidance” to the Alberta Legislature about suggested changes to the entire PIPA.
To subscribe to ABlawg by email or RSS feed, please go to http://ablawg.ca
Follow us on Twitter @ABlawg
Agreement commented on: Agreement Between the California Air Resources Board and the Gouvernement Du Québec Concerning the Harmonization and Integration of Cap-and-Trade Programs for Reducing Greenhouse Gas Emissions
In late September 2013, California and Québec signed an agreement to link their carbon emissions trading schemes effective January 1, 2014. This is the first linkage under the Western Climate Initiative (WCI) – a regional collaboration between British Columbia, Manitoba, Ontario, Québec, and California to establish a carbon reduction and trading scheme that is intended to produce an overall 15% reduction from 2005 level carbon emissions by 2020 amongst the participating jurisdictions. (For more detail on the WCI see here). Alberta is notably absent from the WCI.
It is both remarkable and unfortunate that Alberta – a jurisdiction which promotes market-based tools to address environmental problems – has chosen not to participate in the WCI. Regulated carbon emitters in Alberta will not have the benefit of participating in the Québec and California markets – and other WCI markets as time goes on – to acquire or sell emissions allowances or offsets. Of course in order to participate in the WCI, Alberta will have to replace its intensity-based carbon emission reduction obligation with a real and absolute cap on carbon emissions that is lowered over time. As well Alberta will have to place limits on how many emission offsets can be used by regulated emitters for compliance purposes and eliminate the ability to comply by paying into the provincial Climate Change Emissions Management Fund. For more detail on offsets and how Alberta’s intensity-based emissions reduction system differs from the cap-and-trade system in California or Québec see here.
The linking agreement will allow regulated emitters in Québec and California to buy and sell carbon emissions allowances and offsets in either jurisdiction and integrate the two schemes. This is a significant step forward towards the development of a North American carbon market, and comes at a moment when momentum for carbon market development is building around the world. Many other regions, including Europe, Australia, Japan, New Zealand, and South Korea, have already established or are currently developing their carbon markets. Most recently, in August 2012, Australia and the EU also announced their intention to link their emission trading schemes.
In order to implement this linkage, both Québec and California had to amend their respective cap-and-trade regulations to provide for recognition of allowances and offsets produced in a foreign jurisdiction. California was required to give public notice concerning the proposal and provide an opportunity for public comment in accordance with the Administrative Procedure Act (Government Code sections 11340 et seq) before amending its rules. Accordingly, on May 9, 2012, the California Air Resources Board (CARB) – the agency with responsibility for administering the California cap-and-trade scheme – published notice on the proposed linkage (see amendments). Subsequent to the notice, the Governor of California was required to make 4 key findings before the CARB could implement the linkage: 1) find that Québec’s program is similar to or identical to California’s in all material aspects; 2) determine that linkage does not change California’s ability to enforce its program against entities located inside or outside California; 3) confirm that Québec’s laws and regulations provide for equivalent enforcement of its cap-and-trade program; 4) find that linking is unlikely to place any significant liability on California. On April 8, 2013, the Governor informed the CARB that these requirements were satisfied (see letter here). And accordingly the CARB proceeded to prepare for linkage effective January 1, 2014, including a review of procedures and systems of California’s and Québec’s cap-and-trade ETSs to ensure their compatibility (see resolution here).
In December 2012 Québec amended its Regulation respecting a cap-and-trade system for greenhouse gas emission allowances, RRQ, c Q-2, r 46.1 issued under the Environment Quality Act, RSQ, c Q-2 to provide for linkage with California and other WCI partners going forward. To this end, the Regulation now recognizes emissions allowances and offsets for compliance purposes generated by partner jurisdictions with whom Québec has signed an agreement in accordance with section 46.14 of the Environment Quality Act. The amendments also strengthened administrative penalties and other sanctions to produce equivalency with California.
The Québec-California Linking Agreement provides the overall framework for collaboration between the jurisdictions on carbon emissions reduction and trading. Notable provisions in the Agreement include the following:
Consultation Committee: The Agreement provides for the creation of a consultation committee to monitor the coordination of the cap and trade programs and report at least annually. The Committee will be comprised of the CARB Executive Officer and the Assistant Deputy Minister for Climate Change, Air and Water at the Ministère du Développement Durable, de l’Environnement, de la Faune et des Parcs.
Regulatory Harmonization: The Agreement commits each jurisdiction to consult each other regularly and constructively to ensure ongoing harmonization of the regulations for the mandatory reporting of carbon emissions and for cap-and-trade programs. The jurisdictions have agreed to inform each other and work together on potential changes to their respective regulatory framework.
Specified Cap-and-Trade Requirements: The jurisdictions agree to mutually recognize compliance instruments such as emissions allowances and offsets from the other’s system. They also agree to ensure that all carbon emissions offsets produced by their own system are real, additional, quantifiable, permanent, verifiable and enforceable. Each jurisdiction agrees to allow trading of emission allowances and offsets across both systems. The jurisdictions agree to hold joint auctions of new emissions allowances with harmonized procedures. (Note however that joint auctions are not expected to take place until later). The jurisdictions agree to work cooperatively to monitor for fraud, abuse and market manipulation in the carbon market as well as share information to facilitate enforcement proceedings. The jurisdictions agree to form a common registry for emissions allowances and offsets and use a common auction platform, and to continue to work under the overall umbrella framework administered by the WCI.
Carbon markets have been slow to develop in Canada and the United States. This linking agreement is a significant step towards a functional carbon market in North America. It gives a real presence to the WCI, which until now was more of a policy network than a carbon market oversight body.
Professor Fluker’s research on carbon markets is supported by a grant from Carbon Management Canada (http://www.cmc-nce.ca/)
Rolandas Vaiciulis currently holds a post-graduate research fellowship at the Canadian Institute of Resources Law to investigate the linking of carbon emissions trading schemes.
To subscribe to ABlawg by email or RSS feed, please go to http://ablawg.ca
Follow us on Twitter @ABlawg
PDF Version: Limitations Issues in Oil and Gas Royalty Litigation
Case commented on: Canadian Natural Resources Limited v Jensen Resources Ltd., 2013 ABCA 399
This case involves a geologist’s gross overriding royalty (GORR). The principal issue at trial (see earlier post here) was the question of whether or not the royalty continued as against the property in question when the Crown issued oil sands leases for the oil sands rights in place of the earlier petroleum natural gas leases which were in force when the royalties crystallized. The trial judge held that the royalty did continue against these new leases and the Court of Appeal has confirmed that part of the award.
The Court of Appeal has varied the judgment at trial in relation to the limitations issue. While Justice Strekaf at trial held that the two year limitation period did not begin to run until the plaintiff had clear information to the effect that the defendant was not paying royalty on the encumbered lands, the Court of Appeal in an unanimous memorandum of judgment concluded that that was not the relevant test and that Jensen (through its principal, Gowertz, the geologist) ought to have known long before that that the royalty was payable. Accordingly, Jensen could only recover the unpaid royalty back to two years before its Originating Notice was issued.
In reaching the conclusion that she did Justice Strekaf at trial had relied heavily on the judgment of the Court of Appeal in Meek (Trustee of) v San Juan Resources Inc., 2005 ABCA 448 where the Court held that:
. . . A royalty interest holder is entitled to expect the royalty payor to honour its obligations. Absent clear information to show improper payment, royalty interest holders are not obliged to take positive steps aimed at ensuring that they are being correctly paid. . . .
In this case the Court of Appeal emphasized the importance of returning to the language of the statute and the facts. Since discoverability relates to issues of fact and not questions of law the crucial question was when Gowertz ought to have known that there was production on the sections 1 and 4 lands as well as the section 32 lands (on which Jensen was receiving royalties). Noting that Gowertz became aware that there was oil sands production on the section 32 lands sometime between 1997 and 1999, and given Gowertz’s experience and knowledge that heavy oil production was increasing in the Cold Lake area, a reasonable person in his position would have made inquiries as to whether there was also production from the other two sections especially since these lands were reasonably proximate to the section 32 lands. By his own admission Gowertz failed to make those inquiries. The Court concluded as follows:
 On this record, Gowertz had sufficient information to put him on inquiry sometime after 1999. If he had made reasonable inquiries at that time, he would have discovered that there was already oil production on section 4, and it would have alerted him to the possibility of future production on section 1. The respondent ought to have known, in this time frame, that it had a claim for royalties against the holder of the oil sands leases. The precise date need not be ascertained, because this is well before the limitation cutoff date, two years before the issuing of the Originating Notice. In the result, the respondent is entitled to an accounting for royalties on oil production on sections 1 and 4, but only from and after September 18, 2007.
To subscribe to ABlawg by email or RSS feed, please go to http://ablawg.ca
Follow us on Twitter @ABlawg
Case commented on: Stewart Estate v TAQA North Ltd, 2013 ABQB 691
This lengthy (121 page plus appendices) and well-reasoned decision will be essential reading for members of the oil and gas bar in Alberta. Justice Barbara Romaine offers guidance on a number of issues including the importance of having all relevant parties before the Court when seeking a declaration as to lease validity, limitations, the interpretation of the term “lack of or intermittent market” and the term “any cause whatsoever beyond the Lessee’s reasonable control”, and the measure of damages where a lessee produces on a dead lease. Given the length of the decision (much of which is taken up with a careful review of the testimony of expert witnesses) I will limit this post to the above legal questions. There are, however, a number of other issues discussed in the decision that this post does not deal with (e.g. estoppel, leave and licence, champerty and maintenance, etc).
All the parties interested
One of the preliminary issues that Justice Romaine had to deal with was whether some of the plaintiffs were proper parties to the litigation. This issue arose because there was at least some evidence that some of the parties who purported to hold interests in the leases as lessors had actually assigned their interests. The assignees were not before the Court. Justice Romaine did not resolve the issue of standing definitively but instead held that in this situation the validity of these leases could not be authoritatively determined because not all of the potentially interested parties were before the Court. While there might be an argument that such a rule is designed for the benefit of the applicant (to ensure that any declaration that issues will have practical effect) the rule is also supported by efficiency and justice reasons (at paras 171 – 175).
An application for a declaration that a petroleum and natural lease has terminated is not subject to any limitation period (see Limitations Act, RSA 2000, c. L-12, section 1(i) (definition of remedial order) and at para 186) but any application for a consequential remedial order (e.g. a claim for damages based on a cause of action in conversion, trespass or unjust enrichment for wrongful production on a dead lease) is subject to both the two year rule (s 3(1)(a)) and the 10 year drop dead rule (s 3(1)(b)). Section 3(1)(a) provides that the plaintiff must commence its action within 2 years after the date on which the claimant first knew, or in the circumstances ought to have known, that the injury for which the claimant seeks a remedial order had occurred.
In this case the pooled property (the section 25 lands) began producing during the primary term from the 7-25 well and continued until July 1995 at which time the lessee/operator shut the well in. As a result, the lessees no longer paid the lessors actual royalties; the only payments that were made thereafter until production from another formation re-commenced in 2001 were shut in royalty payments. On those facts Justice Romaine held that the limitations period began to run shortly after the cessation of production:
 In this case, the remaining freeholder Plaintiffs knew or ought to have known that production had ceased under the leases shortly after July 1995. By the end of November 1995, they ought reasonably to have known that production had ceased for more than 90 consecutive days. In the result, they knew or ought to have known by that time all the facts necessary for their claim that the leases had terminated in accordance with their terms. They thus should have known of the “injury” that is the subject of the claims of unjust enrichment, trespass and conversion.
It was immaterial (at para 198) that the lessors would not know at that point that the cessation in production was not for a reason provided for by the third proviso since (at para 200): “Even if the Plaintiffs did not know a fact material to the injury in not knowing the reason for the cessation of production, they were not entitled to ignore the issue until they were notified of the reasons by the Defendants, but they were obliged to exercise due diligence in determining the reasons for the cessation of production …:.”.
In so ruling Justice Romaine distinguished the Court of Appeal’s decision in James H. Meek Trust v San Juan Resources Inc, 2005 ABCA 448 [Meek Trust]. In that case the Court held that time did not begin to run where a royalty payor stopped making certain gross overriding royalty payments. Time did not begin to run for the plaintiff since the reduced payment alone would not have put the plaintiff on notice that anything was amiss since the payor’s accounting did not connect the payments or reduced payments to any particular property. Meek Trust was distinguishable in this case since there was only one possible explanation for why the lessors here were no longer receiving actual production payments.
In sum, the plaintiff lessors ought to have known that they had possible claims by mid-1996 at the latest but the action was not brought until August 2005, roughly nine years later (at para 202). Although it is not entirely clear from her judgement I assume that the net effect of this is that if the plaintiffs did have a good cause of action (i.e. if the leases were dead) they could reach back no more than the two years prior to commencing the action (on the basis that each new act of unlawful production is a new tort – and for the most recent confirmation of that see Canadian Natural Resources Limited v Jensen Resources Ltd, 2013 ABCA 399 at para 11 – published after the decision in the instant case, which will be the subject of an ABlawg post next week).
“Lack of or intermittent market”
This litigation involved the secondary terms of a number of leases. The language of the leases was similar but not identical. In particular, the third proviso of each of the leases contained a sub-proviso which, if triggered, carried the implication that the time of any non-production “shall not be counted against the Lessee” (as to which see Kissinger Petroleums Ltd. v Keith McLean Oil Properties Ltd (1984), 33 Alta LR (2d) 1 (CA)). In one lease the sub proviso was triggered where the failure to produce was “as the result of a lack of or an intermittent market, or any cause whatsoever beyond the Lessee’s reasonable control.” A second formulation provided that the exception was triggered where non-production was “as the result of any cause whatsoever beyond the Lessee’s reasonable control including, in the case of production operations lack of or an intermittent market” (I put to one side third proviso language that deals with interruptions to drilling or working operations (since neither were at issue here)). The shut-in wells clause in each case tracked the language of the third proviso (at para 512).
The evidence showed that the 7-25 well was shut in because it could not be profitably produced in the deregulated environment and depressed prices of the mid-1990s. The well was not shut in for lack of a market (interpreting that term without the qualifying “economic”) (at para 515) since the lessee/operator had a gas sales contract throughout the relevant period. Various factors affected the economics of this particular well. It was a sour gas well; the lessee/operator had no working interest in the gas processing plant where the gas was being processed; there was limited capacity at the plant and the operator/lessee had to pay a custom operating fee; and the well was not as productive as some others. Sour gas from the Crossfield formation produced from the well was processed at Amoco’s plant which principally served the East Crossfield D1 unit which did not include the subject lands. Amoco had little incentive to take gas from the section 25 lands and indeed was in a position to drain those lands from its own wells. The 7-25 well was put back on production in 2001 when one of the working interest owners in the well put in an independent operations notice to re-complete the well in another formation. By this time prices had improved dramatically.
The principal legal question was whether the language of “lack of or an intermittent market” should be interpreted as requiring an economic or profitable market i.e. that the lessee should be entitled to invoke the sub-proviso if it could only produce at a loss. In the end, and following consideration of the relevant cases (549767 Alberta Ltd v Teg Holdings Ltd,  AJ 321 (QB); Omers Energy Inc v Alberta (Energy Resources Conservation Board), 2011 ABCA 251 (and see my ABlawg post here); Blair Estate Ltd v Altana Exploration Co,  AJ 554; Kensington Energy Ltd v B & G Energy Ltd 2008 ABCA 151 (and see here); Lady Freyberg v Fletcher Challenge Oil and Gas Inc, 2005 ABCA 46) Justice Romaine held that a commercially reasonable interpretation (at paras 529 and 538) required that (at para 542) “the phrase ‘lack of or an intermittent market’, read in context and with a view to the reasonable intention of parties to a lease to profit from the extraction of leased substances, should be interpreted to mean lack of or an intermittent economical or profitable market.”
“Any cause whatsoever beyond the Lessee’s reasonable control”
Justice Romaine was also prepared to accept that a drastic down-turn in the price of gas accompanied by high processing costs caused by “external forces” (at para 558) could fall within the phrases “any cause whatsoever beyond the Lessee’s reasonable control”. In reaching this conclusion Justice Romaine distinguished the Alberta Appellate Division’s decision in Canada-Cities Services Corporartion v Kininmonth (1963), 42 DLR (2d) 56 (aff’d on other grounds  SCR 439) on the grounds that the downturn in prices and other factors relied upon by the lessees (at para. 558) were not “as inevitable or foreseeable as seasonal road bans”. I confess to some difficulty with this particular conclusion. While price fluctuations may not occur annually or predictably on any other periodic basis, dramatic price fluctuations in the resource sector are foreseeable and in that sense inevitable.
But in the end Justice Romaine seems to have rolled up together these two potentially separate justifications (lack of or intermittent market, and cause beyond the lessee’s reasonable control) for failing to produce into a single ameliorative ground concluding:
 Thus I accept that the 7-25 Well was shut-in in July, 1995 for causes beyond the Lessees’ reasonable control, in that it was uneconomical to produce during the shut-in period given the low price of gas and the relatively high costs of production and processing, effectively a lack of an economic market. While the operator did not notify the other working interest owners of the decision to shut-in the well, as that decision was within its authority as operator, the other lessees did not object, implying that they were in agreement with the operator’s decision.
The Court also held that the operator/lessees turned the well back on at approximately the right time! While the operator made no formal determination as to a price at which it would have been economical to activate the well (at para 572) the evidence suggested that the operator was acting in accordance with the standard in the industry in continuing to evaluate whether it would be economical to produce this well (at para 578).
The Measure of Damages
In the event that she was found to be in error on the question of lease continuation, Justice Romaine went on to consider the measure of damages. The principal question here was whether the court should follow an emerging line of cases (Montreal Trust Co v Williston Wildcatters Corp, 2004 SKCA 116, leave to appeal to the SCC denied  SCCA 474 and the damages award in Lady Freyberg, 2007 ABQB 353) which adopts the idea that in the case of production on a dead lease damages should ordinarily be assessed on the basis of the royalty (and any signing bonus) that would typically be payable on that production rather than on a disgorgement or gains-based approach. In considering that question Justice Romaine offers a thorough and nuanced assessment of the relevant literature before suggesting (at para 664) two possible bases for assessing damages based on a restitutionary approach, one based on the idea of the royalty (and bonus) that would otherwise be payable, and the other grounding itself in the idea of disgorgement. In the end Justice Romaine favours the royalty + bonus payment approach (at para 665).
The geography of this case
The leased lands in this case involved section 25 of Township 27, Range 1, W5M which places the lands in the Crossfield area north of Calgary. The well in question produced at different times from the sweet Basal Quartz formation and the very sour Crossfield formation. It never produced from the Elkton formation which was thought to underlie at least some of the subject lands. This section of land is contiguous to the CrossAlta Storage Unit which has made efforts to shut down exploratory drilling in the area as explained in earlier posts dealing with Kallisto Energy here and here. Indeed, we learn in this case (at para 21) that the subject well, the 7-25 well was shut-in again in January 2011 at the instance of CrossAlta on the basis that the well was producing CrossAlta’s storage gas and later still (at paras 657 – 659) of some of the elements of the settlement agreement between at least some, if not all, of the parties involved in that litigation.
The leased lands are also close to the Number 2 Highway between Calgary and Edmonton and subject, throughout the period, to increasing urbanization. This had several implications for the way in which the operator/lessees managed the property and especially the sour gas of the Crossfield formation. For example, some production in the area was preferentially nominated to produce on long term gas contracts in order to deplete the reserves as quickly as possible to avoid premature shut-in and abandonment as a result of urban encroachment; new facility applications underwent a high degree of scrutiny; and operators had an incentive not to rock the boat by bringing forward new facility applications – better make do with a sub-optimal transportation and processing arrangement than bring forward a new application for fear of attracting scrutiny and review of existing operations.
To subscribe to ABlawg by email or RSS feed, please go to http://ablawg.ca
Follow us on Twitter @ABlawg
Decision commented on: Hanson and Lindberg v Director, Northern Region, Operations Division, Alberta Environment and Sustainable Resource Development, re: County of St. Paul (07 November 2013), Appeal Nos. 13-005 and 006-ID1 (AEAB).
This is a decision on preliminary matters by the Alberta Environmental Appeals Board (EAB) concerning an approval issued by Alberta Environment and Sustainable Resource Development (AESRD) under the Water Act, RSA 2000 c W-3 to fill a wetland in the County of St. Paul. The EAB hearing on the merits of the approval will be heard in January 2014. Before the EAB in this matter was a request by the Appellants for a stay of the approval pending the merit hearing. The EAB grants the stay, and I will comment on that here. I also note this decision for its discussion on how the federal Species at Risk Act, SC 2002, c 29 (SARA) applies to this case – keeping in mind SARA is federal legislation but does have some application within provinces and thus it is of ongoing interest to observe how SARA is considered and applied by provincial authorities.
In April 2013 AESRD issued an approval under section 38 of the Water Act to the County of St Paul for the partial filling of a wetland to allow for a new road. The Hansons and Lindbergs (the Appellants) reside on land adjacent to the wetland and in early May 2013 they filed a Notice of Appeal with the EAB to oppose the AESRD approval. The Appellants allege there is no justification for the new road since there is an existing road nearby or, alternatively, that the new road should be realigned so as to avoid the wetland. The Appellants also allege the area is frequented by species which are listed as endangered or threatened under SARA, and that the County failed to consider this in its environmental impact assessment conducted as part of its application to AESRD.
Efforts to mediate the dispute failed, and in late September the EAB decided to proceed to a hearing on the merits of the approval, and that hearing is scheduled for January 23, 2014. In the interim, the Appellants requested the EAB to stay the AESRD approval so that the road construction did not proceed before the hearing. Normally the filing of an appeal with the EAB does not stay the underlying decision, however section 97(2) of the Environmental Protection and Enhancement Act, RSA 2000, c E-12 (EPEA) provides the EAB with the power to grant a stay.
EPEA does not provide any criteria for the EAB to consider in a stay application, but there is significant case law governing the issuance of a stay or an injunction as interim relief in proceedings. The EAB applies the criteria provided by Supreme Court of Canada in RJR MacDonald v Canada (Attorney General),  1 SCR 311. In deciding whether to grant a stay of proceedings, a decision-maker such as the EAB in this case must ask itself 3 questions: (1) is there a serious issue to be tried in the proceedings; (2) will the applicant suffer irreparable harm if the stay is not granted; (3) which party will suffer greater harm if the stay is or is not granted (the so-called balance of convenience factor) (RJR MacDonald at paras 44-74).
The EAB makes short work of the criteria, ruling in favour of the Appellants that (1) the impacts on the wetland constitute a serious issue to be tried in the merit hearing (at para 46); (2) there will be irreparable harm to the wetland, and the Appellants’ use of the wetland, if the stay is not granted and the work proceeds before the hearing (at para 57); and (3) the EAB need not decide the balance of convenience since AESRD and the County did not provide any submissions on the granting of the stay. Accordingly, the EAB grants a stay of the AESRD approval prohibiting the County from proceeding with the road work until the EAB hearing is conducted and the Board’s recommendation is submitted to the Minister who then ultimately decides whether to confirm, vary, or reverse the AESRD approval under section 100 of EPEA (at para 59).
What is most noteworthy to me about this ruling is how the EAB applies the second factor of the RJR MacDonald criteria. Environmental advocates typically have a lot of difficulty obtaining a stay of proceedings because the alleged irreparable harm is not suffered by the advocate themselves (the Appellants in this case) but rather the environment (or the wetland in this case), and evidence about how the project in question will affect the advocates is qualitative and difficult to assess. The EAB decision does not elaborate on what uses will be impacted, other than noting the Appellants assert the intact wetland and surrounding area has scenic and other aesthetic values (at paras 16, 17 and 62). That is not to say this is the first decision to apply the irreparable harm factor directly to the benefit of the land, water or species in question, or to accept harm to aesthetic values as sufficient to meet the test, but I’d say this is a rare application and worth noting for future reference should you find yourself before the EAB in similar circumstances.
I also note that the EAB doesn’t consider the balance of convenience factor, which almost always works to the favour of the party with the economic interest at stake. In other words, if the stay is granted the project proponent can typically quantify its losses in dollars whereas the environmental advocate is left with qualitative assertions of loss if the stay is not granted in its favour. The fact here that AESRD and the County did not seem to vigorously oppose the stay seems to have influenced the EAB. And some courts have also considered factors 2 and 3 in the RJR MacDonald criteria as one consideration. Nonetheless it is noteworthy how easily the EAB moves past the balance of convenience in this case.
One of the issues to be raised by the Appellants at the merit hearing in January is that the AESRD approval failed to adequately consider the impact of this road project on species listed as endangered or threatened under SARA. They may also reference species listed as such under Alberta’s Wildlife Act, RSA 2000, c W-10 but they will soon realize there are no substantive legal implications of such listing relevant to their dispute here (for an overview of the inadequacies of Alberta’s endangered species laws see Shaun Fluker and Jocelyn Stacey, “The Basics of Species at Risk Legislation in Alberta” (2012) 50 Alta L Rev 95 or see my early comment on ABlawg here).
Both AESRD and the County have stated their view that a consideration of SARA is outside the jurisdiction of both AESRD and the EAB. The EAB summarizes the position of AESRD (referred to as the Director below) as follows:
 The Director stated he has no obligation to require studies under the Species At Risk Act and is not required to review these studies prior to issuing the Approval. The Director stated he has no jurisdiction over federal legislation and he does not have the ability to assess the adequacy of any study conducted pursuant to the federal legislation. The Director explained Species At Risk Act studies are only required where the land has been designated critical habitat for a recovery strategy for a listed species, and there is no evidence to suggest the lands where the proposed road is to be built are designated as critical habitat. The Director stated the studies proposed by the Appellants go beyond what is required in the Water Act and the Director’s authority. The Director stated it is the Approval Holder’s obligation to ensure compliance with the Species At Risk Act.
The EAB observes it has jurisdiction to consider whether the AESRD approval adequately addresses the impacts of the project on the aquatic environment, and moreover that this consideration includes impacts on species that rely on the wetland for survival (at paras 75-78). In relation to SARA specifically, the EAB rules it does not have jurisdiction to assess compliance with SARA but that SARA can be used as a reference to identify species at risk which should be considered in the approval and thus may contribute to the EAB’s decision on whether the AESRD approval adequately addresses the impacts of the project on the wetland (at para 85). I think the EAB is correct to assert as such.
From reading this decision we don’t know which SARA-listed species are potentially affected by this project. But given that the area in question is a wetland, we might speculate that such species would be either fish or migratory birds. And if this is the case here, then SARA potentially has more application then either the EAB or AESRD suggests and indeed the federal Migratory Birds Convention Act, SC 1994, c 22 may also apply (for some discussion see Fluker and Stacey, above). Together these two federal statutes provide some of the strongest legal protection available in relation to fish and migratory birds found in Canada.
To subscribe to ABlawg by email or RSS feed, please go to http://ablawg.ca
Follow us on Twitter @ABlawg
PDF Version: Douglas Inquiry Committee Resigns
Decision commented on: Inquiry Committee concerning the Hon. Lori Douglas, Reasons For Resignation of the Inquiry Committee (November 20, 2013)
In a stunning development, the Inquiry Committee charged with investigating the conduct of the Hon. Lori Douglas, chaired by Chief Justice Catherine Fraser of the Alberta Court of Appeal, has resigned en masse. Associate Chief Justice Douglas was investigated by the Canadian Judicial Council in relation both to her conduct prior to her judicial appointment and to her disclosures during the appointment process. The Inquiry Committee was additionally charged with considering her conduct during the Canadian Judicial Council’s investigation, and in particular allegations that she interfered with the investigation. (For a previous discussion of this case on ABlawg see here).
The Inquiry Committee’s hearing has been fraught with problems. ACJ Douglas alleged that the Committee was biased, and after the Committee rejected that allegation she sought judicial review to the Federal Court, and obtained a stay of the Committee’s proceedings. In addition, the Independent Counsel to the Committee resigned and has been replaced.
The resignation reasons of the Inquiry Committee provide a different perspective on the proceedings to date, and raise some serious questions about the position that the Committee was placed in by the Federal Court in its response to applications brought by ACJ Douglas.
First, the Inquiry Committee notes that, in the ordinary course, the Attorney General for Canada (AGC) is the party with standing to “take a position contrary to the Judge on the apprehension of bias issues and defend the process and challenged rulings on their merits” (at para 5). Here, however, the AGC was named as a respondent by ACJ Douglas, which meant that the AGC was placed in a fundamental conflict “between two public interest positions – on the one hand, defending the process and the Committee’s decision… and, on the other, abandoning that responsibility in deference to the direct role of the AGC as Minister of Justice in the disciplinary process for superior court judges” (at para 7). The Inquiry Committee observes that the Federal Court permitted this conflict by denying the “AGC’s request to be replaced as a respondent” and then exacerbated it by denying the Committee itself standing, and by restricting the standing of the Canadian Judicial Council and of the Independent Counsel to the Committee.
The result of this conflict was that on many matters ACJ Douglas’s applications to the Federal Court were simply unopposed; in particular, there was no opposition to her application for a stay of proceedings (at para 9(c)). Further, at no point were arguments made to the Federal Court with respect to the prematurity of ACJ Douglas’s application or with respect to her failure “to attempt, let alone exhaust, any remedies that might have been sought before the Committee or later in the process” (at para 9(d)).
Second, the Inquiry Committee raises some serious questions about the legitimacy of the Federal Court considering the applications brought by ACJ Douglas prior to the conclusion of the proceedings for removal of a judge, including the Inquiry Committee process. It notes the extensive “multi-staged process under the Judges Act” and that that process grants “several levels of protection for judges personally” (at para 14). The Inquiry Committee further notes the paramount importance of judicial independence, and that the Judges Act creates “an extraordinary process that supplements section 99(1) of the Constitution” which cannot be analogized to other administrative bodies created by Parliament and subject to judicial review (at para 32). The Inquiry Committee suggests that it is fundamentally inappropriate and an improper intrusion on judicial independence for its process to be subjected to interlocutory judicial review before the Federal Court:
 If this process is to work as Parliament intended, it is imperative that there be no ability to interrupt an inquiry with litigation in another court that spawns its own further litigation and takes the process ever further away from the object of the inquiry. This is not in the public interest. We emphasize that this does not deprive the judge of a remedy where procedural or fairness issues arise in an inquiry, just that the sui generis judicial conduct process under the Judges Act has built into it a mechanism (by way of appeal from the Committee to the Council at the end of the inquiry process) to address those issues through the Council which is itself a superior court.
The Committee states that it “does not consider itself entitled to concede any jurisdiction on the part of the Federal Court to interfere in the judicial conduct proceedings of an inquiry committee or the Council” (at para 35). The Committee notes that the Federal Court has now granted it standing to raise that jurisdictional issue, but that that process would be “measured in years” while the stay against the Committee persists (at para 36).
Third, the Committee notes the allegations of bias raised by ACJ Douglas at the Federal Court that were not raised before the Committee and judges those allegations to be groundless (at paras 15-22).
Given all of this, the Committee in its reasons states that it is in the public interest that the Committee resign. It notes that there are few advantages to it continuing given that the new Independent Counsel has indicated that she plans to revisit the evidence introduced by the former Independent Counsel. Further, the disadvantages arising from the “realities of the litigation process” have to be confronted. The Committee cannot continue while the interlocutory review continues and the stay persists, and the review may take some time to complete. The Committee also notes that the only way for it to raise the “critical flaw” arising from the lack of defence for the Committee at the Federal Court is through resignation:
 Moreover, for the reasons explained earlier, as of now, there is no voice in defence of the process and an inquiry committee’s role in it. Thus, this fundamental part of the process is silenced and paralyzed. The importance of some party being able to put, and in fact putting, the case for the Committee, in the interests of “fully informed adjudication” by the reviewing court, is reflected in decisions such as Children’s Lawyer for Ontario v Goodis (2005), 75 OR (3d) 309 (CA) at paras 34-45; and Leon’s Furniture Limited v Alberta (Information and Privacy Commissioner), 45 Alta. L.R. (5th) 1, 2011 ABCA 94 at paras 23-29; leave to SCC denied,  SCCA No. 260 (QL). It is ironic that the only way this Committee can meet the transparency requirements so essential for public confidence and inform the public of this critical flaw in the process is to resign but, regrettably, that appears to be the case.
Obviously the Inquiry Committee’s reasons do not represent a balanced assessment of the issues. On their face, however, they do raise three issues that seem prima facie of concern: 1) the legitimacy of having rulings by the Federal Court about its process without any submissions made on the Committee’s behalf; 2) the legitimacy of the Federal Court reviewing the Committee’s conduct on an interlocutory basis; and 3) the legitimacy of the Federal Court intervening in a process designed to respect judicial independence, and to provide a mechanism for implementing section 99 of the Constitution Act 1867.
Most of all, however, the reasons cement the status of the Inquiry into ACJ Douglas’s conduct as an unmitigated disaster for public confidence in the fair and efficient administration of justice.
This post originally appeared on Slaw.
To subscribe to ABlawg by email or RSS feed, please go to http://ablawg.ca
Follow us on Twitter @ABlawg
On November 21, 2013 the Supreme Court of Canada (McLachlin CJ, Cromwell J and Wagner J) dismissed a leave to appeal application by the defence for a sentence handed down by the Alberta Court of Appeal in R v QJK. The Supreme Court’s summary of the case frames the issue on which leave to appeal was sought as “Whether the Honourable Court of Appeal erred in not giving deference to the Learned Sentencing Judge as he did give proper weight to the gravity of the offense and properly considered the principles of denunciation and deterrence and imposed a fit sentence.” In a very brief Memorandum of Decision delivered from the bench, the Court of Appeal had increased the sentence imposed by the sentencing judge from 6 months to 20 months imprisonment. The Court of Appeal noted that the circumstances of the case – forced sexual intercourse by the accused on his spouse – amounted to a major sexual assault necessitating a 3 year starting point (2013 ABCA 244 at para 1). According to the Court of Appeal, the sentencing judge “overemphasized the mitigating circumstances and underappreciated the gravity of the offence as well as the need that the sentence reflect an appropriate degree of denunciation and deterrence” (at para 1).
The Court of Appeal decision did not cite any case law, but was no doubt mindful of cases such as R v Sandercock, 1985 ABCA 218, which established a 3 year starting point for cases of major sexual assault, and R v Arcand, 2010 ABCA 363, the Court’s most recent decision on sentencing starting points in sexual assault cases (for a comment on these cases see Joshua Sealy-Harrington’s post Blurred Lines: The Need for Clear Criteria in the Sentencing of Sexual Assaults). The Court could also have referred to past cases dealing with sentencing in the context of spousal sexual assault such as R v OFB, 2006 ABCA 207 at para 12, where Justice Sheila Greckol (sitting as an ad hoc member of the Court of Appeal) stated that “Sexual assault committed by a domestic partner or former domestic partner violates the victim’s emotional, psychological and physical autonomy in a way that may permanently harm her intimate and trust relationships; relationships that most view as integral to a fulfilled life.” Nor did the Court of Appeal reference section 718.2(a)(ii) of the Criminal Code, RSC 1985, c C-46, which provides that abuse of a spouse is an aggravating factor that shall be taken into consideration in sentencing an offender. The Court did note the presence of several mitigating factors, however, including the accused’s guilty plea, as well as the fact that this was “an isolated and out of character act by an individual without a record” (at para 2). It also indicated that at the time of sentencing, even defence counsel had submitted that a sentence of 1 to 2 years was appropriate in the circumstances.
As noted in an abstract for a forthcoming publication on marital rape, “Intimate Partner Sexual Violence (IPSV) is the most common type of sexual violence and a common component of domestic violence, yet most cases go unreported …” (Louise McOrmond-Plummer, Patricia L. Easteal, and Jennifer Y. Levy-Peck, Intimate Partner Sexual Violence: A Multidisciplinary Guide to Improving Services and Support for Survivors of Rape and Abuse (London: Jessica Kingsley Publishers, 2014 forthcoming). In a report I wrote for the equality effect in 2010, I analyzed the approximately 300 decisions in spousal sexual violence cases that had been reported across Canada since the immunity for marital rape was repealed in 1983. This small number of reported decisions confirms the low reporting rates for spousal sexual assault. The report also found also that sentencing in spousal sexual violence cases is widely divergent, with some courts recognizing the gravity of such offences and applying section 718.2(a)(ii) of the Criminal Code, while other courts emphasize the relationship between the parties and factors such as consensual sex following the sexual assault as mitigating factors (see p 47-53).
Given the small number of marital rape cases that end up before the courts and the wide diversity in sentencing in such cases, it is regrettable that the Supreme Court did not take this opportunity to provide some principled guidance in this area. Perhaps in future decisions the Alberta Court of Appeal itself will provide such guidance, as it did in Sandercock and Arcand with sexual offences more broadly.
To subscribe to ABlawg by email or RSS feed, please go to http://ablawg.ca
Follow us on Twitter @ABlawg
Case Commented On: 1007374 Alberta Ltd v Ruggieri, 2013 ABQB 420
The case of 1007374 Alberta Ltd v Ruggieri, 2013 ABQB 420, is not significant in and of itself, but rather because it highlights some (but not all) of the shortcomings of the current state of the law regarding fraudulent preferences and conveyances. This is an area of law that has been described as “notoriously antiquated and long overdue for reform” (see Tamara M. Buckwold’s article: “Reforming the Law of Fraudulent Conveyances and Fraudulent Preferences” (2012) 52 Canadian Business Law Journal 333, at 333).
In recognition of these shortcomings, the Uniform Law Conference of Canada (ULCC) has just completed a project to replace the existing legislation (in Alberta, the Fraudulent Preferences Act, RSA 2000, c F-24 (FPA) and Fraudulent Conveyances Act, 1571,13 Eliz 1, c 5, (FCA)) with a single statute – the Uniform Reviewable Transactions Act (URTA). The ULCC is a body that considers areas in which provincial and territorial laws would benefit from harmonization. The URTA is the result of over eight years of work and review by a working group of the ULCC. The Alberta Law Reform Institute is currently reviewing the possible implementation of the URTA in Alberta.
In brief, 1007374 Alberta Ltd. (1007 Alberta) entered into an agreement with A Ruggieri Engineering Ltd. (“Engineering”), where 1007 Alberta would refer and transition its clients to Engineering. In return, Engineering agreed to pay quarterly payments of up to $80,000 per annum. 1007 Alberta did not receive those payments in 2004 and commenced a lawsuit against Engineering (the “first action”). Following a trial in the first action, 1007 Alberta obtained a judgment against Engineering for just over $475,000 inclusive of costs and interest.
When 1007 Alberta tried to enforce its judgment, however, it learned that three days before the first action commenced, Engineering had changed its name to 857508 Alberta Ltd (“Alberta Engineering”). On May 16, 2011, Engineering granted general security agreements of $500,000 in favour of the defendants, Mr. Ruggieri and GMR Management Corporation. On June 1, 2011, Engineering also issued promissory notes in favour of the defendants. In March 2013, 1007 Alberta commenced a second action alleging, amongst other things, that there was a fraudulent conveyance of Engineering’s assets to Alberta Engineering and that the granting of general security agreements to Mr. Ruggieri and GMR Management Corporation was a fraudulent preference under subsections 2, 4 and 11 of the FPA.
In the interim, 1007 Alberta sought an interlocutory attachment order/Mareva injunction to secure the amount of the Judgment plus the anticipated costs of the action. As neither the FCA nor the FPA contemplate remedies other than a declaration that the impugned transaction is void, the attachment order was brought under section 17 of the Civil Enforcement Act, RSA 2000, c C-15 and the Mareva injunction derived from the Court’s equitable jurisdiction to grant injunctive relief. Hawco J. granted those forms of relief in 1007374 Alberta Ltd v Ruggieri, 2013 ABQB 278. 1007 Alberta subsequently requested an extension of Hawco J’s order until the conclusion of the second action. In the case under consideration Yamauchi J. granted 1007 Alberta’s request for extension.
While the case commented on concerns an application for an attachment order and injunctive relief, as part of that application 1007 Alberta had to demonstrate a prima facie case on the merits. Accordingly, for the purposes of this comment, the judgment contains considerable discussion about the current law of fraudulent preferences and conveyances.
In keeping with the current law, in order to challenge a transfer as a fraudulent conveyance, 1007 Alberta based its action under two separate statutes: the Fraudulent Conveyances Act, 1571 (FCA), an act that is dated to say the least, and section 1 of the more limited and less obviously named Fraudulent Preferences Act (FPA).
One of the biggest shortcomings of the FCA is that it dates from the 16th Century and requires the consideration of hundreds of years of case law, much of which is contradictory. In addition, one of the more difficult and questionable requirements under the FCA is that of intent. Under the FCA, the onus is on the party challenging the transfer to demonstrate that a party intended to perpetrate a fraud against its creditors. As Yamauchi J. considered in his judgment (at paras 29-33), this is typically accomplished through consideration of the so-called “badges of fraud” where an attempt is made to glean intent from the party’s actions. As Yamauchi J alludes to, under the current law, there is a debate as to whether a debtor’s insolvency results in an absolute presumption of insolvency (see for example Freeman v Pope (1870), LR 5 Ch 538) or a rebuttable presumption of intestacy (see for example Ex Parte Mercer In re Wise (1886), 17 QBD 290 (CA)).
Another issue raised in the case is what amounts to “property” under the FCA. The FCA applies only to transfers of an interest in real or personal property. In the case under consideration, the Defendants argued that client lists are not property. Yamauchi J concludes that, whether or not client lists are property, the business and income that arise from client lists are property.
Moving to the claim under section 1 of the FPA, as the case illustrates (at paras 38 -40), in order to succeed, 1007 Alberta had the onus to prove that Engineering was in “insolvent circumstances” or that it knew that it was “on the eve of insolvency.” The cases are clear that the legal burden of proof is on the creditor challenging the fraudulent conveyance. In the case under consideration, Engineering argued that it was not insolvent or on the eve of insolvency as there was no debt owing at the time of the impugned conveyances (the damage award occurred later). While the court did not decide this point, it did point to cases in the bankruptcy context where a settlor’s debts have included potential damage claims. Section 1 of the FPA also requires that intention be proved. Although the wording differs from that of the FCA, Alberta courts – including in the case under consideration – have relied on common law decisions on intent, including the badges of fraud (see C.R.B Dunlop & Tamara Buckwold’s book: Debt Recovery in Alberta, (Toronto: Carswell, 2012) at 1083). Like the FCA, the FPA is also limited to transfers of real or personal property.
Finally, the court considered the allegation that the general security agreements granted by Alberta Engineering in favour of Mr. Ruggieri and GMR were a fraudulent preference under subsections 2, 4 and 11 of the FPA. Yamauchi J concluded that a prima facie case of preferential treatment had been made. Accordingly, Yamouchi J. granted an extension of the attachment order/ Mareva injunction. In a separate part of the judgment he dealt with issue of security for costs.
Were the application in the case under consideration to be brought under the URTA, there would be a number of advantages, including:
In short, the URTA would provide a comprehensive and clear set of rules to reform the law of fraudulent preferences and conveyances. While the URTA does not depart radically from the pre-reform law, the work of the ULCC has produced a uniform act that would modernize and clarify the law, and should be fairly straightforward to implement in Alberta.
To subscribe to ABlawg by email or RSS feed, please go to http://ablawg.ca
Follow us on Twitter @ABlawg
Case commented on: R v Myette, 2013 ABCA 371
To what degree should courts accommodate the circumstances of persons with disabilities whose crimes attract jail sentences? The Alberta Court of Appeal recently divided on this issue in R v Myette, 2013 ABCA 371. At the original sentencing hearing, Judge Heather Lamoureux found that a jail sentence would be “unduly harsh” in light of Myette’s visual impairment, and ordered a suspended sentence of 18 months for sexual assault and common assault (2013 ABPC 89 at para 16). A majority of the Court of Appeal (Justices Constance Hunt and Jack Watson) found her approach to be erroneous, and substituted a sentence of 90 days in jail, to be served intermittently on weekends. Justice Peter Martin, writing in dissent, would have dismissed the Crown’s appeal. This post will review the various decisions in this case with a focus on whether sentencing decisions are the proper forum for accommodating the circumstances of offenders with disabilities.
Myette was convicted after trial for offences involving digital penetration of his sleeping roommate, followed by pushing her into a dresser when she woke up and attempted to resist him. The Crown sought a jail sentence of 18 to 24 months followed by a period of probation. Defence counsel argued that because Myette was legally blind, the normal sentencing range for his offences would be too harsh. He sought a suspended sentence with probation for 2 years, or alternatively, a 90 day intermittent jail sentence.
Judge Lamoureux heard evidence about the extent of Myette’s disability, including the fact that he used a guide dog, which had allowed him to live independently since he was 17. She also heard from federal and provincial authorities regarding their policies on accommodation for inmates with visual impairments. A representative from the Calgary Correctional Centre testified that the Centre had a policy for inmates with disabilities, but no specific policy for inmates who were blind. Staff (including caseworkers) had no training for dealing with blind inmates, and prison rules, regulations and computers were not accessible to blind inmates, although reading materials in Braille could be brought in. As a sex offender, Myette would likely be incarcerated in protective custody, which would entail living in a dormitory with 7 other offenders. The court heard that Myette would have to rely on other inmates to help him make his bed and obtain his food. His guide dog would not be permitted into the facility, but Myette would be allowed to use his cane. In terms of physical activity, Myette could use an exercise bike or treadmill along with others in protective custody, all of whom were given limited access to the outdoors. Myette would have access to some programs, but not work programs.
In its sentencing submissions, the defence relied on the United Nations Convention on the Rights of Persons with Disabilities, Article 14, which guarantees persons with disabilities the equal right to liberty and security of the person, and provides that persons with disabilities who are deprived of liberty must be treated in accordance with the objectives of the Convention, including the provision of reasonable accommodation. Judge Lamoureux considered this provision in her interpretation of section 718.2 of the Criminal Code, RSC 1985, c C-36, which sets out a number of principles that courts must take into account during sentencing. These include the principles that (d) “an offender shall not be deprived of liberty, if less restrictive sanctions may be appropriate in the circumstances” and (e) “all available sanctions other than imprisonment that are reasonable in the circumstances should be considered for all offenders, with particular attention to the circumstances of aboriginal offenders.” Judge Lamoureux concluded that “there is nothing even approaching reasonable accommodation in Alberta for Mr. Myette as a blind, accused convicted of sexual assault. If Mr. Myette were to be incarcerated he would be suffering a significant punishment beyond that suffered by other individuals incarcerated in the Corrections system in Alberta” (2013 ABPC 89, at para 15). She ordered “house arrest” and probation for 18 months, which she later clarified to mean a suspended sentence (2013 ABCA 371 at paras 20-22).
The majority decision of the Court of Appeal noted several errors made by the sentencing judge, including her failure to consider the “fundamental principle” of sentencing found in section 718.1, which provides that “a sentence must be proportionate to the gravity of the offence and degree of responsibility of the offender.” The majority indicated that consideration of this principle required attention to the Court of Appeal’s “many pronouncements on the gravity of a sexual assault involving digital vaginal penetration” (at para 26). The judge also neglected to assess the offender’s degree of responsibility, which the majority stated to be “extremely high” (at para 27). While she did review aggravating factors such as the breach of trust and the complainant’s unconsciousness during the sexual assault, the judge placed too much emphasis on the offender’s personal circumstances, “to the near exclusion of everything else” (at para 28). The sentence was also lacking in reasonable intelligibility given Judge Lamoureux’s initial order of “house arrest”, apparently an attempt to grant a conditional sentence, which is no longer an option for sexual offences.
Of most significance for this post, the majority of the Court of Appeal found that the sentencing judge made errors in her handling of the issue of accommodation. She did not hear from Myette in terms of his how his needs would be met (or not) in prison, nor the extent to which he relied on his guide dog. She also failed to give sufficient weight to the sections of the pre-sentence report which indicated that Myette “embraced his disability, adapted well to it, [was] never held back as a result; and always welcomed challenges and found ways to overcome obstacles” (at para 31). Moreover, the majority found that the sentencing judge misinterpreted the testimony of the witness from the Calgary Correctional Centre, who had indicated that Corrections policy required an individual assessment of the needs of inmates with disabilities and that accommodation could be provided by staff, volunteers, and family members. The majority disputed the sentencing judge’s finding that Myette “would essentially be in solitary confinement with severe restrictions on any kind of movement or access to counseling, services or exercise” (at para 32). They also found errors in her approach to international law, noting that the proportionality principle in section 718.1 of the Criminal Code could not be “bypass[ed] … by preferring the language of an international instrument” (at para 34).
Turning to the question of what would be a fit sentence in this case, the majority referenced previous case law establishing that the Crown must accommodate the needs of inmates with disabilities, but that these were issues for the prison authorities rather than the courts (at para 35, citing R v B(TL), 2007 ABCA 61). The disproportionate impact that a jail sentence will have on an offender with disabilities is a factor to be considered in the length of the sentence, but it cannot displace the imposition of a jail sentence where such a sentence is otherwise appropriate. In the circumstances of this case, the majority found that the offence was serious, the offender’s degree of responsibility was high, and there were some aggravating factors present, all of which warranted a jail sentence. They indicated that it was appropriate to start with a sentence of 18 months imprisonment for the sexual assault with 1 month concurrent for the common assault, which would be lowered in recognition of the “greater challenges” that Myette would have in prison because of his disabilities (at para 39). They also gave credit for the time that Myette had already spent under house arrest as a condition of his suspended sentence, which was 7 months. Taking all of these factors into account, the majority substituted a sentence of 90 days imprisonment, to be served intermittently over weekends, along with 12 months of probation with several conditions.
In a brief dissenting judgment, Justice Martin indicated that this was a “truly exceptional case, deserving of an individualized sentence outside of the established range” (at para 44). He agreed with the majority that the sentencing judge had made several errors, but in spite of that, would have dismissed the Crown’s appeal. He disagreed with the majority that further evidence of the impact of jail on the offender was required, noting that:
 A totally blind man such as the respondent would be unable to make his way around his new surroundings, read signs, or see another prisoner approaching him. He would be completely defenseless and at the mercy of other prisoners and his keepers to help him perform even the most basic of daily functions. That is particularly so as the respondent would not have the assistance of his guide dog on whom he has come to depend for the past 10 years.
Justice Martin also distinguished R v B(TL), a case relied on by the majority, as it involved an inmate in a wheelchair, for whom incarceration would not have the same adverse impact as a blind person (at para 49).
This case reflects one of the challenges of sentencing, namely that once a sentence is pronounced the matter is generally out of the hands of the court and into the hands of corrections. In that context, I agree with the gist of the decision of the majority. In cases involving offenders with disabilities where imprisonment is an appropriate sentence, the primary duty to accommodate is held by corrections officials. To find otherwise would be to relieve the Solicitor General, who is responsible for corrections, from the duty to ensure that prison facilities adequately accommodate the needs of inmates with disabilities. Although sentencing judges cannot order corrections officials to accommodate particular offenders at the time of sentencing, this duty exists independently of such an order by virtue of the Alberta Human Rights Act, RSA 2000, c A-25.5 (AHRA), and in the case of federal prisons, the Canadian Human Rights Act, RSC 1985, c H-6 (CHRA). The AHRA and CHRA bind governments, and provide that services such as corrections facilities must not discriminate on the basis of disability. Section 15 of the Charter is another source of governments’ duty to accommodate inmates with disabilities.
This is not to say that judges should disregard disabilities at the stage of sentencing. If a sentencing judge believes that a custodial sentence will have a disproportionate impact on an offender with disabilities regardless of accommodation by corrections, that impact should be considered as a factor during sentencing. In this sense, the duty to accommodate offenders with disabilities may extend to sentencing judges as well. The majority and dissenting justices seem to agree with this approach generally, but differed on the degree of weight they accorded to the impact of incarceration on Myette and the evidence they required to establish that impact (as well as what the impact might actually be).
There may be other cases where the offender’s disability is not just an issue related to the disproportionate impact of incarceration, but was also a factor in the commission of the offence – for example, if the offence was influenced by an addiction-related disability. In those cases, it may be appropriate to consider the offender’s disability in crafting an appropriate sentence. This approach would be consistent with section 718.1 of the Criminal Code, which requires assessment of proportionality in terms of the gravity of the offence and degree of responsibility of the offender.
While sentencing judges cannot make binding orders with respect to how offenders will serve their custodial sentences, they can make recommendations relating to appropriate accommodations by corrections facilities. Corrections would be well advised to follow those sorts of recommendations to avoid complaints under human rights legislation or the Charter.
To subscribe to ABlawg by email or RSS feed, please go to http://ablawg.ca
Follow us on Twitter @ABlawg
PDF Version: Eighty Percent Of Success Is Showing Up: Or “How A Pro Se Farmer Won A Default Against The United States In His Suit To Invalidate The Permit For Half Of Keystone Xl (& Why It Probably Won’t Last)”
Case commented on: Bishop v Bostick, 9:13-cv-00082, (E.D. Tex, Nov. 6, 2013).
On April 25, Michael Bishop, a farmer acting pro se, filed a lawsuit in the U.S. District Court for the Eastern District of Texas to revoke TransCanada’s permit to construct the southern half of the Keystone XL project. This part of the project, known as the “Gulf Coast Project” or “Phase III”, travels from Cushing, Oklahoma to the Gulf Coast. Bishop sued the Army Corps of Engineers and its Commanding General, Thomas Bostick, because the Army Corps issued the permit to TransCanada. The complaint that Bishop filed asked the court to order the Army Corps to revoke Keystone’s permit. Bishop then served this complaint on the Army Corps of Engineers, its officers, and the Attorney General of the United States.
Now, you might not like the chances of a pro se farmer aligned against the U.S. Attorney General, the Army Corps of Engineers, and TransCanada. But as Sheriff Bell would say: “even in the contest between man and steer the issue is not certain.” And, as it turns out, no one showed up to contest the lawsuit. Even though the permit at issue belonged to TransCanada, it was not a defendant, so it was not served. It was up to the government, and the government did not show up. As a result, on Wednesday November 6, the clerk entered a default against the Army Corps and its officers.
Mr. Bishop had won, and national news stories trumpeted his victory–e.g. Bloomberg “Texas Farmer Wins Entry of Default in Keystone Lawsuit”. He told Bloomberg, “Tomorrow I’m going to ask the judge for everything I had in my original petition. I’m going to ask him to revoke the permit and effectively shut this pipeline down until they comply with the law.”
The victory will likely prove short-lived, however. On Thursday, the U.S. Attorney’s office for the Eastern District of Texas filed an emergency motion to vacate the clerk’s entry of default. Although acknowledging that the AG, Army Corps, and officers had been served, the government pointed out that the U.S. Attorney’s office had not been served, a requirement under Federal Rule of Civil Procedure 4(i). As a result, the government also suggested that the complaint itself should be dismissed “due to failure of service.”
In the end, it seems unlikely that a lawsuit of this importance will end in a default. But it’s an important reminder of three things: 1) the myriad legal venues and strategies available to environmental plaintiffs looking to slow the flow of oil, 2) the difficulty of keeping track of the variety of resulting lawsuits, and 3) the importance of showing up.
This post originally appeared on James Coleman’s blog Energy Law Prof.
To subscribe to ABlawg by email or RSS feed, please go to http://ablawg.ca
Follow us on Twitter @ABlawg
Matters commented on: Canada’s ratification of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the Washington or ICSID Convention) and Bill 40: Settlement of International Investment Disputes Act
On November 1, 2013 Canada deposited its instrument of ratification of the Washington Convention with the secretariat for the International Centre for the Settlement of Investment Disputes (ICSID). The Convention will enter into force for Canada on December 1, 2013. The ICSID Convention, as its name implies, is designed to provide for dispute settlement (binding arbitration or conciliation) of investment disputes between states and investors from other states. The Centre may take jurisdiction over any such dispute by the written consent of both parties. That consent may be given in a specific case or it may be given generally. General consent is frequently given by the terms of a bilateral investment treaty such as the recent agreement that Canada has concluded with China. Article 22 of that agreement (which has yet to enter into force) provides as follows:
1. A disputing investor who meets the conditions precedent provided for in Article 21 may submit the claim to arbitration under:
(a) the ICSID Convention, provided that both Contracting Parties are parties to that Convention;
(b) the Additional Facility Rules of ICSID, provided that one Contracting Party, but not both, is a party to the ICSID Convention; or
(c) the UNCITRAL Arbitration Rules, as supplemented or modified by the rules set out in this Agreement or adopted by the Contracting Parties.
Article 23 provides the evidence of consent:
Each Contracting Party consents to the submission of a claim to arbitration in accordance with the procedures set out in this Agreement. Failure to meet any of the conditions precedent provided for in Article 21 shall nullify that consent.
It will be observed that Article 22 permits the claimant to choose from amongst three arbitral fora and so it becomes important to understand the implications of that choice. The ICSID Additional Facility Rules are simply a set of rules that allows the Centre to serve as the secretariat for the arbitration. In such a case the arbitration is not governed by all the terms of the ICSID Convention.
The principal implication of choosing ICSID as the arbitral forum is that the resulting award under an ICSID Arbitration will be shielded from any judicial supervision by a Canadian court. This follows from Article 53 of the Convention which provides as follows:
(1) The award shall be binding on the parties and shall not be subject to any appeal or to any other remedy except those provided for in this Convention. Each party shall abide by and comply with the terms of the award except to the extent that enforcement shall have been stayed pursuant to the relevant provisions of this Convention.
That provision however is not self-implementing. Accordingly all jurisdictions in Canada will need to give legal effect to that clause. Most jurisdictions have done so including:
Bill 40: Settlement of International Investment Disputes Act was introduced in the Alberta Legislature on November 4 with debate on the Bill being adjourned the next day. In introducing this Bill, Mr. Sohail Quadri, the MLA for Edmonton-Mill Woods indicated that “[m]oving forward with the implementation of the ICSID convention is a positive step to create certainty for investments both in Alberta and abroad…” No doubt this statement speaks to the fact that implementation of the ICSID Convention will provide investors with direct access to a form of dispute settlement which empowers them to seek remedies outside of the courts of a host state. Still, there may be some remaining uncertainty about the finality of awards rendered pursuant to the ICSID Convention. While there can be no domestic judicial supervision of an ICSID arbitration, the ICSID Convention does offer its own corrective. This is the so-called annulment procedure under Article 52 of the Convention, which provides that:
(1) Either party may request annulment of the award by an application in writing addressed to the Secretary-General on one or more of the following grounds:
(a) that the Tribunal was not properly constituted;
(b) that the Tribunal has manifestly exceeded its powers;
(c) that there was corruption on the part of a member of the Tribunal;
(d) that there has been a serious departure from a fundamental rule of procedure; or
(e) that the award has failed to state the reasons on which it is based.
Awards rendered under the UNCITRAL Rules or the ICSID Additional Facility Rules are not immune from judicial supervision. Which judicial supervision rules apply will depend upon the “seat” of the arbitration. The seat is not typically determined by where the arbitration actually occurs but by the express choice of the parties to the arbitration, or, failing agreement, by the decision of the arbitrators. The choice of place was, for example, contentious in Murphy v Canada, ICSID Case No. ARB(AF)/07/4. The matter was dealt with in the Award as follows:
15. The parties were unable to reach an agreement on the place of arbitration at the first session (Articles 19 and 20 of the Arbitration (Additional Facility) Rules, Article 1130 of the NAFTA). The Claimants proposed Washington, D.C., USA, while the Respondent proposed St. John’s (Newfoundland and Labrador) or Ottawa (Ontario), Canada. If a place in Canada were to be selected, the Claimants proposed Toronto (Ontario). The parties made oral submissions on this issue at the first session and filed further written submissions following certain questions from the Tribunal….
18. On October 7, 2009, the Tribunal issued Procedural Order No. 1, designating Toronto as the place of arbitration. In reaching its decision, the Tribunal took into account a range of factors, including the neutrality of the courts, Article 22 of the UNCITRAL Notes, the proximity of evidence and the ability to obtain evidence, and various arbitration statutes. As the Claimants had requested that the Ontario Superior Court of Justice have exclusive jurisdiction if Toronto were selected, the Tribunal invited the parties to comment on the request. The parties subsequently agreed that the Ontario Superior Court of Justice would be the exclusive court of the place of arbitration in which any and all applications concerning the arbitration would be filed. On November 5, 2009, the Tribunal issued Procedural Order No. 2 confirming the parties’ agreement.
Where an arbitration occurs under the UNCITRAL or Additional Facility Rules neither party will have access to the Article 52 annulment procedure.
There is much room to discuss the relative merits of these two review systems (i.e. domestic judicial supervision vs. the expert annulment procedure) and the relative “intrusiveness” or deference (i.e. the grounds and standard of review). The matter is not straightforward. For example, while Article 52 seems to allow for annulment only on very exceptional grounds, paragraph (e) has in some cases provided an opportunity for very searching analysis at a high level of expertise of the quality of the reasoning of arbitral panel: see for example CMS Gas Transmission Company v Argentine Republic, ICSID Case No. ARB/01/08 (Annulment Proceeding); Enron Corporation Ponderosa Assets, L.P. v Argentine Republic, ICSID Case No. ARB/01/3 (Annulment Proceeding); Patrick Mitchell v Democratic Republic of Congo, ICSID Case No. ARB/99/7 (Decision on the Application for Annulment of the Award). By contrast, there is no equivalent ground of review in any Canadian statute providing for the judicial supervision of international commercial (or investor/state) arbitral awards. As a matter of practice therefore Canadian judicial review procedures of investor state arbitral awards may show a higher standard of deference than that exhibited by ICSID Annulment Panels.
Consider as an example the Award in Murphy v Canada rendered under the ICSID Additional Facility Rules. One of us has written at length and critically of that Award and has suggested, in effect, that the reasoning is not supportable: see post here. The seat of the arbitration for that Award was, as we have seen, Toronto. We think that Canada would have had a much better chance of obtaining annulment under Article 52 than it would in obtaining judicial review under the terms of Ontario’s International Commercial Arbitration Act, RSO 1990, c.I.9, which implements the UNCITRAL Model Law on International Commercial Arbitration.
The narrow grounds for setting aside arbitral awards under the Model Law are found in Article 34 which provides that an arbitral award may be set aside if:
(a) the party making the application furnishes proof that:
(i) a party to the arbitration agreement referred to in article 7 was under some incapacity; or the said agreement is not valid under the law to which the parties have subjected it or failing any indication thereon, under the law of this State; or
(ii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iii) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside; or
(iv) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Law from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Law; or
(b) the court finds that:
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law of this State; or
(ii) the award is in conflict with the public policy of this State.
To date, Ontario courts have heard 3 of the 5 applications for review of NAFTA Chapter 11 arbitral awards: Mexico v Karpa, 2005 CanLII 249 (ONCA); Bayview Irrigation District #11 v Mexico, 2008 CanLII 22120 (ONSC); Mexico v Cargill, 2010 ONSC 4656; 2011 ONCA 622.
Karpa (aka Feldman) involved an arbitration conducted under the ICSID additional facility rules. Ottawa (at para 1) was named as the place of arbitration although the hearing took place in Washington DC. In that case, applying factors developed by the Supreme Court of Canada (i.e. the existence of a privative clause, the expertise of the tribunal, the purpose of the jurisdiction-conferring act, and the nature of the problem submitted for review) as well as ideas of international comity, the court concluded (at para 43) that “the applicable standard of review in this case is at the high end of the spectrum of judicial deference.” The Court in Bayview took a similar view (see esp. paras 13 and 60 – 62).
Cargill was another ICSID additional facility case in which the seat of arbitration was designated as Toronto although the case was heard in Washington (at para 9). While the Court acknowledged (at para 35) the general approach of deference to consensual international arbitral awards it applied a correctness standard to the threshold issue of determining whether the matter was properly before the arbitral panel (at paras 36 – 42) while again acknowledging that a reviewing court should be loath to characterize an issue as jurisdictional (at paras 45 – 48) and emphasizing that it had no jurisdiction to review on the merits. In the end the Court concluded that the tribunal had not erred in assuming jurisdiction.
Aside from the first case in which a Canadian court was asked to review a case brought under the ICSID additional facility rules (Mexico v Metalclad Corp, 2001 BCSC 664; additional reasons 2001 BCSC 1529) the three cases discussed above are representative of the general trend in Canadian court practice to find that there is no basis of review under any of the heads included in the Model Law. Given this history, it seems that arbitral awards rendered outside of the ICSID Convention remain final and binding on the parties in any such dispute. The available corrective under the ICSID Convention provides a review of arbitral awards on grounds exhaustively listed in Article 52. However Article 52(e), which specifies that ICSID arbitral awards may be annulled in cases where a tribunal fail[s] to state the reasons on which the award is based, has been used as a means by which to question and at times overturn the decisions reached by expert ICSID arbitral panels. It is entirely possible therefore that awards obtained as a result of arbitrations under the ICSID Convention may be more subject to successful challenge than investor-state arbitral awards obtained outside of the ICSID Convention and reviewed by Canadian Courts.
To subscribe to ABlawg by email or RSS feed, please go to http://ablawg.ca
Follow us on Twitter @ABlawg
PDF Version: The State of Estate Administration in Alberta
Report commented on: Alberta Law Reform Institute, Final Report on Estate Administration
In October 2013, the Alberta Law Reform Institute (ALRI) released its Final Report on Estate Administration. It is anticipated that new estate administration legislation will be introduced in the Legislature this fall.
The current Administration of Estates Act, RSA 2000, c A-2 remains relatively unchanged since it was first introduced in 1969. A person trying to administer an estate, however, would find little guidance in the current Act. This is partly due to the fact that the statute, in essence, is a list of exceptions and accretions to the common law without working them into a coherent whole.
The objective of ALRI’s Report is to create clear, rational and accessible legislation that will provide guidance to estate representatives who are responsible for administering an estate. Key recommendations in ALRI’s Final Report include:
In recognition of the fact that many estates are administered today without seeking formal authority, the Report also makes clear that the difference between formal and informal authority doesn’t affect the fact that whoever handles a deceased’s property is a fiduciary, has a clear standard of care and has a list of duties and obligations.
If implemented, these recommendations would complement the new Wills and Succession Act, SA 2010, c W-12.2, that was introduced in 2010. And together, these two new pieces of legislation would bring estate administration in Alberta into the 21st Century.
To subscribe to ABlawg by email or RSS feed, please go to http://ablawg.ca
Follow us on Twitter @ABlawg
Case commented on: Shin Fan F & P Inc v Canada-Nova Scotia Offshore Petroleum Board, 2013 NSSC 341
In this straightforward decision Justice Gregory Warner of the Nova Scotia Supreme Court declined to grant judicial review of a decision of the Canada-Nova Scotia Offshore Petroleum Board to cancel Shin Han’s exploration license (EL) for failure to tender a work deposit.
Shin Han acquired its EL, effective January 1, 2009, on the basis of a successful work bid of $129 million. Under the terms of the bidding documents and its EL Shin Han was required to post a license deposit of $50,000 to have the license issued to it and then, by the third anniversary of the license, post a further deposit in the amount of 25% of the bid. The purpose of the delay “was to allow interest owners three years to assess geology, raise financing, or attract a farm-in partner before posting these potentially large financial requirements” (see the Work Deposit Deferral Policy at 1). Clause 5(a) of Shin Han’s EL provided that “Failure to post the Work Deposit as security for the performance of the work will result in the cancellation of this License and forfeiture of the License Deposit.”
In January 2011 the Board adopted a Work Deposit Deferral Policy. Under the terms of that policy the holder of an EL might apply for an extension of up to two years if it could meet the following criteria:
1. Demonstrate that the interest owner has been actively evaluating and exploring the prospectivity of their lands by providing specific qualitative and quantitative examples (eg. Seismic data interpretation of a significant amount of data).
2. Demonstrate that the delay is beyond the control of the interest owner. For example, by providing a detailed explanation of the unforeseeable extraordinary adverse circumstances (eg. Major environmental or social issue that impedes the ability to proceed with exploration activities such as the 2010 Gulf of Mexico BP incident or a major global disruption in the economy) that necessitated the request to defer the posting of the Work Deposit. Also demonstrate why these circumstances could not have been anticipated or mitigated to allow the lands to be explored in the normal timeframe.
3. Demonstrate that the interest owner has sufficient resources available to carry out acceptable exploration on their lands or alternately provide details on the efforts made to acquire resources internally and/or externally to carry out acceptable exploration on their lands.
4. Demonstrate that the interest owner has been diligently conducting technical assessments by providing a detailed report of all technical assessments completed for the exploration licence during the current tenure.
5. Demonstrate that the interest owner will diligently pursue exploration of the lands during the extension period. This could be addressed by providing a detailed report and timeline, with key milestones identified, of the proposed work to be completed on the lands during the extended period.
An application for an extension had to be filed with the Board no later than 120 days before the third anniversary date.
Shin Han did not apply for an extension and on October 28, 2011 the Board wrote to Shin Han reminding it of the need to post the deposit. Two weeks before the due date Shin Han wrote to the Board requesting an extension of its license. The Board generously elected to treat this as an application to defer tendering the work deposit but still rejected the request on the grounds that the application was not in accordance with the Board’s published policy.
At the beginning of January the Board served notice under s 126 of the Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act, SC 1988, c. 28 (CNSOPRAIA) to the effect that Shin Han had 90 days to comply with the obligation to post the work deposit, failing which its license would be canceled and its $50,000 license deposit forfeited. Shin Han failed to do so but did submit an application for an extension of time to post its deposit (which the Board rejected in May.) Section 126(1) of the CNSOPRAIA provides as follows:
126 (1) Where the Board has reason to believe that an interest owner or holder is failing or has failed to meet any requirement of or under this Part or Part III or any regulation made under either Part, the Board may give notice to that interest owner or holder requiring compliance with the requirement within ninety days after the date of the notice or within such longer period as the Board considers appropriate.
The Board followed up its January notice with a “Notice of Proposed Decision” as to cancellation served under s 126(2) of the CNSOPRAIA. Section 126(2) provides that:
(2) Notwithstanding anything in this Part but subject to sections 32 to 37, where an interest owner or holder fails to comply with a notice under subsection (1) within the period specified in the notice and the Board considers that the failure to comply warrants cancellation of the interest of the interest owner or holder or any share in the interest held by the holder with respect to a portion only of the offshore area subject to the interest, the Board may, by order subject to section 127, cancel that interest or share, and where the interest or share is so cancelled, the portions of the offshore area thereunder become Crown reserve areas.
The reference to s 127 serves to allow the licensee to receive notice of a proposed decision and the opportunity to contest that decision before a body known as the Oil and Gas Committee which must consider the request and then make recommendations to the Board before the Board finalizes its decision. The section also provides for judicial review of any resulting decision on the following terms:
(11) Any order, decision or action in respect of which a hearing is held under this section is subject to review and to be set aside by the Supreme Court of Nova Scotia in accordance with the practice and procedure established by or pursuant to the Provincial Act.
Shin Fan referred the matter to the Committee which considered the request and issued written reasons in which the Committee agreed with the Board’s proposed decision that the license should be cancelled. The failure to do so would (as quoted at para 30):
• Lead to similar requests from other license holders, to which, on the basis of consistency, the Board would have to accede;
• Undermine the confidence in the land tenure system; and
• Impeded [sic] the exploration of petroleum in the Nova Scotia Offshore Area.
The Board considered the Committee’s recommendations and issued the order cancelling the licence whereupon Shin Han brought this application for judicial review.
The Court concluded that the standard of review of this decision was that of reasonableness. The Court noted that while section 127(11) expressly authorized judicial review, other sections of the legislation (e.g. s 149 which provides that findings of the Committee on questions of fact are binding and conclusive) constitute (at para 44) “at least a partial privative clause”. The Court also noted that the Board was interpreting its own statute and the decision engaged the Board’s expertise. Furthermore the decision involved questions of fact and policy and not general questions of law.
In applying that standard to the matter at hand, Justice Warner considered both the recommendations of the Committee and the decision of the Board, concluding in each case that the factual and policy determinations were understandable, transparent and justifiable and fell within the range of reasonable outcomes (at paras 72 – 77).
As I said in the introduction, this was a straightforward case and there is therefore little to comment on in the decision itself. Everyone except Shin Han seems to have done what was expected of them. But what a set of expectations! Sections 126 and 127 (which are replicated in both the Canada-Newfoundland Atlantic Accord Implementation Act, SC 1987, c 3, ss 123-124 and the Canada Petroleum Resources Act, RSC 1985, c 36 (2nd supp) (CPRA)) are an astonishing example of the nanny state bending over backwards to protect oil and gas companies. It is not clear to me why a licensee should be entitled to such an extensive suite of substantive and procedural protections which include: (1) a notice that gives the licensee the right to cure the default, (2) a notice of proposed decision that the licensee can contest before an expert Committee, and (3) a right of judicial review of any resulting decision which review is not confined to points of law or jurisdiction! In an industry that is fully familiar with drop-dead rules in relation to the failure to drill and the failure to make timely delay rental payments (see, for example, Freyberg v Fletcher Challenge Oil and Gas Inc, 2005 ABCA 46 and Polaris Resources et al v Canada-NL Offshore Petroleum Board et al, 2006 NLTD 143 (CanLII)), this collection of protections seems entirely unnecessary and incredibly wasteful and inefficient. The roots of this collection of privileges go back to the government’s decision to get rid of the National Energy Program. At the time it was thought to be necessary to include a number of provisions in the CPRA (which is the model for the Accord legislation on these points) designed to limit the government’s discretion (e.g. the use of a single bidding variable, expert assessment of declarations of significant and commercial discovery and these appeal provisions) and to assure industry that it would be well treated if it chose to invest in Canada. But that was then, and this is now and it’s time to review these cotton wool provisions. It should be easier than this for the Board to cancel a license for non-payment of a work deposit.
Last Thursday (October 31, 2013), the Canadian Environmental Assessment Agency (the Agency) released the highly anticipated federal panel report for Taseko’s proposed New Prosperity Mine project (New Prosperity Report). As many readers will know, this marks the second time that this particular proponent has been through the federal environmental assessment (EA) process. A first attempt with respect to what was then referred to simply as the Prosperity Mine project was approved by British Columbia’s Environmental Assessment Office in 2009 but was thwarted in 2010 by several findings of significant adverse environmental effect (SAEE) by an initial federal panel, including the total destruction of Fish Lake, also known as Teztan Biny by the Tsilhqot’in First Nation. (As an aside, the discrepancy between the federal and provincial outcomes was noted at the time and in the ensuing debate over the fate of the since-repealed Canadian Environmental Assessment Act, SC 1992, c-37). Undeterred (and seemingly prompted by the federal government), Taseko quickly revised its project with a view first and foremost towards avoiding the outright destruction of Fish Lake and in 2011 re-submitted it to the federal EA process. Alas for the company, two deficiency statements and one 24-day public hearing later, it appears to be no closer to realizing its project than it was three years ago, the second federal panel having now concluded that the New Prosperity Mine project is also likely to result in SAEE on several fronts.
According to the panel,
…the New Prosperity Project would result in several significant adverse environmental effects; the key ones being effects on water quality in Fish Lake (Teztan Biny), on fish and fish habitat in Fish Lake, on current use of lands and resources for traditional purposes by certain Aboriginal groups, and on their cultural heritage. The Panel also concludes there would be a significant adverse cumulative effect on the South Chilcotin grizzly bear population, unless necessary cumulative effects mitigation measures are effectively implemented.
New Prosperity Report at p ix (executive summary).
This marks the second finding of SAEE in as many federal panel reports since the release this past summer of the Shell Jackpine Report (which I wrote about here). Like the Shell Jackpine Report, the New Prosperity Report is notable for several reasons in addition to its conclusions with respect to SAEE, including the panel’s approach to the new standing rules under the Canadian Environmental Assessment Act, 2012, SC 2012, c 19 (CEAA 2012), the definition of “environmental effects” pursuant to subsections 5(1) and (2) of the same, and last – but certainly not least – its approach to adaptive management (AM).
A “Liberal and Generous Approach” to Standing
Amongst the many controversial changes to the federal EA regime brought about through last year’s omnibus budget bills was an attempt to restrict public participation in the EA process. Through the combined operation of subsections 2(2) and 43(1)(c) of CEAA 2012, only those persons deemed by a panel to be “interested parties,” which is to say persons who are either “directly affected by the carrying out of the designated project” or “have relevant information or expertise” are to be granted the full suite of participatory rights.
On July 16, 2012, Ecojustice (on behalf of MiningWatch Canada) requested that MiningWatch Canada be granted “interested party” status in the context of the New Prosperity panel review. The panel issued its ruling on all such applications on October 8, 2012, wherein it drew a distinction between private and public law and, relying on the Supreme Court of Canada’s then recent decision in Canada (Attorney General) v Downtown Eastside Sex Workers United Against Violence Society, 2012 SCC 45, adopted a “liberal and generous approach” to the standing requirements:
Generally, “directly affected” refers to a personal interest that is distinct from the general public interest in a matter. In the private law situation, a direct interest may arise from holding property or other legal right that may be affected by a decision. In the public law situation, an interest sufficient to support standing is interpreted more broadly but still must be “genuine interest”, a “real stake” or “substantial connection”. The Supreme Court of Canada has emphasized the need to screen participation to allow only those with a genuine interest and exclude the mere “busybody”. In public law cases, the Court calls for a “liberal and generous” or “flexible” approach, guided by the purposes that underlie the traditional limitations on standing designed to protect the efficient use of the court’s resources.
When assessing whether a person is “directly affected” by a designated project the Panel regards the situation to be closer to the public law situation because of the purposes of the Act. In addition, subsection 2(2) also contemplates granting interested party status if the Panel decides a person “has relevant information or expertise”. Therefore, the Panel has followed a liberal and generous approach to determine Interested Party status for this Review, weighing the requirements of 2(2) with the purposes listed in section 4.
New Prosperity Report, Appendix 3
Those familiar with Alberta’s regulatory framework will no doubt be struck by the profound contrast between the panel’s approach to the “directly affected” test here and that of our provincial regulators, the most extreme manifestation of which was recently put on display in Pembina Institute v. Alberta (Environment and Sustainable Resources Development), 2013 ABQB 567 (as blogged about by Professors Fluker and Bankes here and here). The New Prosperity panel’s approach also stands in contrast, albeit to a lesser extent, to the Shell Jackpine panel’s approach, which simply stated its understanding of these provisions as allowing “a review panel to conduct an appropriately focused project review” but nevertheless granted standing to the vast majority of applicants (see Joint Review Panel Letter to Osler, Hoskin and Harcourt LLP and to Individuals and Groups – Regarding Interested Parties Participation in the Hearing and Presentation of New Evidence).
While a detailed discussion about the implications of these diverging interpretations of the same test (i.e. directly affected) is beyond the scope of this post, the following two observations are offered. The first is that, as between federal and provincial agencies’ interpretations, much of the relevant provincial legislation, e.g. the Environmental Protection and Enhancement Act, RSA 2000, c E-12, has the same “public” nature and contains the same kinds of purpose clauses as those found in section 4 of CEAA 2012 (including the importance of public participation, as noted by Marceau J in Pembina, supra). The second observation is that, depending on the applicable standard of review, it is conceivable that the interpretation of CEAA 2012 – including the standing test – will vary from region to region, as does the membership in federal EA panels. The question will be whether such panels are entitled to the presumption of deference espoused in Alberta (Information and Privacy Commissioner) v Alberta Teachers’ Association, 2011 SCC 61 or whether the “rolling” membership of that institution and the consequential impact on CEAA 2012’s interpretation is an “exceptional” circumstance that rebuts that presumption.
In the meantime, on the basis of New Prosperity and Shell Jackpine at least, it is reasonable to suggest that the new standing rules in CEAA 2012 have not had a dramatic effect on the number of parties participating in panel hearings.
Environmental Effects are Characterized by Complex Linkages and Interactions
Another controversial change brought about by CEAA 2012 is an attempt to restrict the kinds of environmental effects that the federal government considers under its EA process. Following the Supreme Court of Canada’s decision in MiningWatch Canada v Canada (Fisheries and Oceans), 2010 SCC 2,  1 SCR 6, where Rothstein J overturned nearly a decade of his own prior jurisprudence at the Federal Court of Appeal (and Prairie Acid Rain Coalition v Canada (Minister of Fisheries and Oceans), 2006 FCA 31 in particular), the law appeared settled that there was no barrier, whether constitutional or administrative, that prevented the federal government from assessing resource projects in their entirety (see generally Marie-Ann Bowden and Martin Olszynski, “Old Puzzle, New Pieces: Red Chris and Vanadium and the Future of Federal Environmental Assessment” (2011) 89 Can Bar Rev 445).
Nevertheless, some such limitation has now been self-imposed through subsections 5(1) and (2) of the CEAA 2012, the relevant portions of which are as follows:
5. (1) … [The] environmental effects that are to be taken into account in relation to an act or thing, a physical activity, a designated project or a project are
(a) a change that may be caused to the following components of the environment that are within the legislative authority of Parliament: (i) fish and fish habitat as defined in the Fisheries Act; (ii) aquatic species as defined in Species at Risk Act; (iii) migratory birds as defined in the Migratory Birds Convention Act, 1994, and (iv) any other component of the environment set out in Schedule 2;
(b) a change that may be caused to the environment that would occur (i) on federal lands, (ii) [interprovincial effects], or (iii) outside Canada; and
(c) with respect to aboriginal peoples, an effect occurring in Canada of any change that may be caused to the environment on (i) health and socio-economic conditions, (ii) physical and cultural heritage, (iii) the current use of lands and resources for traditional purposes, or (iv) any structure, site or thing that is of historical, archaeological, paleontological or architectural significance.
(2) However, if the carrying out of the physical activity, the designated project or the project requires a federal authority to exercise a power or perform a duty or function conferred on it under any Act of Parliament other than this Act, the following environmental effects are also to be taken into account:
(a) a change, other than those referred to in paragraphs (1)(a) and (b), that may be caused to the environment and that is directly linked or necessarily incidental to a federal authority’s exercise of a power or performance of a duty or function that would permit the carrying out, in whole or in part, of the physical activity, the designated project or the project…
If one were to consider only the (voluminous) private bar commentary that followed the introduction and passage of CEAA 2012, one might reasonably conclude that subsections 5(1) and (2) are relatively straightforward – even an improvement on the previous, overly-broad approach under CEAA 1992 (see, for example, here, here and here). However, in what will not be news to EA practitioners (or anyone with a background in ecology), it turns out that there are actually “many linkages between and among environmental changes” that are “complex” and require “careful” consideration, as the New Prosperity panel has now stated in a passage worthy of quoting at length:
The Panel interprets the two branches of [the subsection 5(2)] definition of effects as follows: “directly linked” environmental effects to be effects that are the direct and proximate result of a federal decision; and “necessarily incidental” environmental effects are other effects that are substantially linked to a federal decision although they may be secondary or indirect effects.
All direct environmental effects resulting from the loss of Little Fish Lake (Y’anah Biny) and the upper reaches of Fish Creek (Teztan Yeqox) that are not captured under subsection 5(1) would be considered under subsection 5(2). Also, if the loss of the above-mentioned areas results in the loss of habitats used by the moose or grizzly bear, for example, those indirect and substantial effects on the grizzly bear and moose would be considered environmental effects that are necessarily incidental to a federal decision, and would therefore be captured under subsection 5(2) of CEAA 2012…
There are many linkages between and among environmental changes, including changes that are environmental effects defined under CEAA 2012 and those that are not. For example, the Panel determined that the Project would generate seepage of pore waters from the tailings storage facility. This would be considered a change in the environment – i.e. a change in the quantity and quality of groundwater influenced by seepage originating from the tailings storage facility. This seepage would also result in a change in surface water quality when it would seep into Fish Lake (Teztan Biny) which is located down slope from the tailings storage facility. That change in water quality in Fish Lake would be considered an environmental effect under the former Act but it would not, by itself, fall within one of the listed categories defining an environmental effect under subsection 5(1) of CEAA 2012. Fish Lake, however, consists of fish habitat which sustains a viable population of fish, namely rainbow trout. The change in the water quality in Fish Lake would have an adverse effect on both the fish habitat and the fish which are both within the listed environmental effect categories.
Moreover, Fish Lake (Teztan Biny) is used by the Tsilhqot’in for traditional purposes and as part of their cultural heritage. The changes caused to the Lake would affect the Aboriginal cultural heritage as well as the current use of land and resources by Aboriginal peoples for traditional purposes. These too would be environmental effects under subsection 5(1) of CEAA 2012. Since the effects and linkages are a complex and interactive web, the Panel was careful to consider those interactions when deciding how to categorize the environmental effects.
New Prosperity Report at p 21
In addition to suggesting considerable breadth to the scope of environmental effects to be considered where, as in the case of New Prosperity, federal decision-making is engaged (essentially a return to the outcome in MiningWatch, supra), this part of the report could be interpreted as confirming an old adage that often comes to my mind when considering the slough of changes to Canada’s environmental laws in the course of the past year: haste makes waste. In its rushed effort to streamline the EA process and reduce “red-tape,” the federal government may have made the EA process more complex and, consequently, more uncertain – including for proponents. Certainly, requiring panels to go back and slot environmental effects into one category or another seems to do little in terms of increasing efficiency and timeliness.
As in the case of Shell Jackpine and nearly all major resource projects in Canada over the last decade, the New Prosperity Mine project proposal relies heavily on adaptive management (AM) as a means of dealing with the uncertainties associated with various adverse environmental effects. In my post on the Shell Jackpine Report, I described AM as “as an experimental approach to resource management that acknowledges the inherent uncertainty characteristic of many human-ecosystem interactions.” In that post, I also stated that AM has in the past been misused – even abused – but that there are also signs that Canadian regulators are beginning to appreciate both the challenges and corresponding responses necessary to ensure its appropriate and effective use.
The panel’s approach to AM in the context of New Prosperity certainly fits with that trend. Like the panel for the Lower Churchill Hydro-electric project, the New Prosperity panel has stated that blanket reliance on AM cannot be used to bring a potentially significant adverse environmental effect below that threshold:
Taseko declined to provide some materials requested by the Panel and by other participants (e.g., description of water quality model for Fish Lake). To deal with the resulting uncertainties, the Panel considered various risk management strategies, including adaptive management in some circumstances. However, when the Panel concluded the potential adverse environmental effects were potentially “significant”, it did not agree that deferring decisions on the approach to manage the risk to subsequent regulatory processes is appropriate. It is necessary at the environmental assessment stage for the Panel to determine if a significant adverse effect is likely and to consider if and how the risk can be managed to acceptable levels.
New Prosperity Report at p 22
In reaching this conclusion and apparently at the urging of both Environment Canada and the Tsilhqot’in, the panel noted the Agency’s own Operational Policy Statement – Adaptive Management Measures under the Canadian Environmental Assessment Act, wherein it is stated that “If, taking into account the implementation of mitigation measures, there is uncertainty about whether the Project is likely to cause significant adverse environmental effects, a commitment to monitor Project effects and to manage adaptively is not sufficient.” Thus, in addition to federal panels, it appears that federal regulators are also becoming more rigorous in their approach to AM (elsewhere in the report, Fisheries and Oceans Canada is quoted as stating “that successful adaptive management would be directly contingent upon monitoring efforts of sufficient duration, extent, and quality” (at p 248), inadequate monitoring being a widespread problem in the implementation of AM).
The above noted passage also suggests that Taseko’s approach to this second EA process, i.e. its failure to provide sufficient information, including with respect to its AM plans, may have been its own undoing. Indeed, the report is clear that Taseko understood relatively well the requirements of effective AM, as the discussion about its environmental management plan make plain:
With regards to water quality in Fish Lake (Teztan Biny) tributaries, Taseko stated that, should monitoring indicate levels of contaminants of potential concern were increasing, the adaptive management plan would include an alert. The alert could result in increased monitoring and an action level would be declared if the level were to approach X% of the guideline. The action level would initiate corrective actions…
Taseko stated that the overarching goal of the adaptive management program would be to provide a monitoring, early warning and action plan that would allow the operator to maintain a habitat capable of supporting a viable population of rainbow trout during the life of the mine.
Taseko submitted that the final adaptive management plan and its associated threshold levels would be determined at the time of permitting and adjusted through-out its implementation. Threshold levels would be based upon reaching a predetermined key indicator measurement as well as rate of change of the indicator.
New Prosperity Report, at p 247
Monitoring, action levels, thresholds and key indicators – these are all the language of effective and rigorous AM. The problem for the panel, however, was Taseko’s curious refusal to provide such information, as in the case of water quality in Fish Lake: “the Panel is of the opinion there are too many risks and uncertainties with respect to the proposed recirculation scheme, the adaptive management plan and the technical and economic feasibility of the various water treatment options to conclude that the ecological integrity of Fish Lake could be maintained in the long term” (at p 87).
Looking ahead and bearing in mind not just the New Prosperity Report but also the Shell Jackpine and Lower Churchill Reports, it will be interesting to see whether industry’s enthusiasm for AM – which to date has been significant – remains as such or wanes as panels increasingly insist on its more rigorous conception. In part, the answer to this question will depend on the government’s responses to panel reports, as there are often yawning gaps between what panels recommend and what the government actually commits to doing. The government’s response to the Shell Jackpine Report – expected any day now – should give observers some sense of how it will approach not only AM, but also the breadth of environmental effects that it must consider and findings of significant adverse environmental effects.
To subscribe to ABlawg by email or RSS feed, please go to http://ablawg.ca
Follow us on Twitter @ABlawg
Case commented on: John Barlot Architect Ltd. v 413481 Alberta Ltd., 2013 ABQB 388
The doctrine of fundamental breach has caused much confusion, in part because of its relationship to the doctrine of repudiatory breach. The two are entirely different doctrines, but as I tell my students, it doesn’t help that sometimes, the doctrines are merged and the terms used interchangeably.
In effect, the two doctrines are quite separate and the finding of one type of breach leads to a significantly different outcome than a finding of the other. The problem occurs when, as in this decision, the two doctrines are combined and there is no clear indication of the differences between the two. That does not necessarily render the judgment incorrect but it does make for inaccurate references and confusing terminology.
This post will focus on the doctrines of fundamental and repudiatory breach. A shortened version of the facts will be provided, as not all of them are necessary for the purpose of this post.
Mr. Luhur’s company owned a parcel of land in Edmonton. The parcel became the subject of a re-zoning application, which led to the owner and the City of Edmonton having to negotiate a By-Law to regulate its development. The By-Law was ultimately passed by the City and a multi-disciplinary team was hired for the project.
Issues arose between the team and the architectural office of Mr. Barlot. Additionally, Mr. Luhur believed Mr. Barlot was failing to address difficult questions that had severe financial consequences to the project. On October 16, 2005, Mr. Luhur, on behalf of the numbered company Defendant, terminated the contract with Mr. Barlot’s architectural company, alleging a fundamental breach of contract.
The case involved actions dealing with fundamental breach of contract, inducement to breach the contract or otherwise tortuously interfere with contractual relations, and the appropriate calculation of damages in the event there is no fundamental breach. I will only be dealing with the issue of fundamental breach in this post.
Fundamental Breach & Repudiatory Breach
In the decision, Macleod J. defines fundamental breach as “a breach [that] deprives the innocent party of the substantial benefit of the contract, or goes to the root of the contract” (para. 36). Technically, that is accurate. If a breach is so “fundamental”, that the innocent party is deprived of the benefit of the contract, then the innocent party is entitled to stop performing and sue for damages. As a matter of legal terminology and supporting case law, however, Macleod J. is actually referring to the doctrine of “repudiatory breach”; the “doctrine of fundamental breach” is quite different and used in different circumstances. Adding to the confusion in the decision, Macleod J. relies on some cases that lay out the requirements for, and support, the doctrine of fundamental breach, but use the definition of repudiatory breach.
Fundamental Breach: UK
The doctrine of fundamental breach, which has recently been struck down by the Supreme Court of Canada (see Tercon Contractors Ltd. v British Columbia (Transportation and Highways), 2010 SCC 4 [Tercon Conractors]) has a long and varied history in Canadian and UK jurisprudence. Prior to its elimination in Tercon Contractors, the doctrine of fundamental breach was used to determine whether a party can rely on an exclusion of liability clause (also referred to as a “limitation of liability clause”) in a contract. Essentially, if the limitation of liability clause allowed a party to fundamentally breach a contract, the court could strike down the clause under the doctrine of fundamental breach.
In the UK, there are a few important cases that have shaped the doctrine and its existence. One of the most important expressions of the doctrine is found in Karsales (Harrow) Ltd. v Wallis,  2 All ER 866 (CA) [Karsales], where Lord Denning maintained,
The law about exempting clauses, however, has been much developed in recent years, at any rate about printed exempting clauses, which so often pass unread. Notwithstanding earlier cases which might suggest the contrary, it is now settled that exempting clauses of this kind no matter how widely they are expressed, only avail the party when he is carrying out his contract in its essential respects… They do not avail him when he is guilty of a breach which goes to the root of the contract (at 868-69).
The doctrine was popular in England, and courts applied it for years. But in 1967, the House of Lords questioned it. In Suisse Atlantique Societe d’Armement Maritime S.A. v N.V. Rotterdamsche Kolen Centrale,  1 AC 361, a case relied on in this present case, the House of Lords rejected the approach taken in Karsales and determined that the proper approach to determining whether an exemption clause applied was to look at the construction of the agreement. Lords Reid and Upjohn, however, created some confusion with their judgment in Suisse Atlantique, as they appear to have mixed the doctrine of fundamental breach with that of repudiatory breach in their judgment, maintaining that,
If fundamental breach is established, the next question is what effect, if any, that has on the applicability of other terms of the contract…I do not think there is generally much difficulty where the innocent party has elected to treat the breach as a repudiation, bring the contract to an end and sue for damages. Then the whole contract has ceased to exist including the exclusion clause, and I do not see how that clause can then be used to exclude an action for loss which will be suffered by the innocent party after it has ceased to exist, such as loss of the profit which would have accrued if the contract had run its full term (at 397-98).
Lord Upjohn had a similar remark (at 428).
However, the doctrine of fundamental breach essentially met its demise a little over a decade later, and its end was ultimately spelled out in another House of Lords judgment. In 1977, the English Parliament enacted the Unfair Contracts Terms Act 1977 ((UK) 1977, c. 50), which put an end to the doctrine of fundamental breach as it applied to consumer contracts. For commercial settings, situations in which the legislation would not apply, the courts further reduced the application of the doctrine in Photo Production Ltd. v Securicor Transport Ltd.,  A.C. 827 (HL) [Photo Production] where they determined that the construction approach was the proper approach. The approach was explained by Lord Diplock:
Since the obligations implied by law in a commercial contract are those which, by judicial consensus over the years or by Parliament in passing a statute, have been regarded as obligations which a reasonable businessman would realise that he was accepting when he entered into a contract of a particular kind, the court’s view of the reasonableness of any departure from the implied obligations which would be involved in construing the express words of an exclusion clause in one sense that they are capable of bearing rather another, is a relevant consideration in deciding what meaning the words were intended by the parties to bear (at 850-1).
Lord Wilberforce, with Lords Keith and Scarman concurred (at 843).
Fundamental Breach: Canada
In Canada, this area has been unclear and fraught with inconsistency, as the application of the doctrine of fundamental breach has varied between courts. After Suisse Atlantique was decided in the UK, a number of Canadian courts applied its reasoning, the construction approach, including a majority of the Supreme Court of Canada in B.G. Linton Construction Ltd. v C.N.R. Co,  2 SCR 678 [B.G. Linton]. But the doctrine of fundamental breach was a powerful one, as it gave courts the ability to strike down exclusion clauses where it appeared fair to do so. Judges liked it, and regardless of the attempt to dispense with it, it continued to pop up in different places.
When the doctrine again reached the Supreme Court in Hunter Engineering Co. Inc. v Syncrude Canada Ltd.,  1 SCR 426 [Hunter Engineering], it was another opportunity for the Court to reaffirm its position on the doctrine, which it had earlier articulated in B.G. Linton. Unfortunately, even though the Court unanimously dismissed the plaintiff’s claims, two decisions were rendered, and neither had majority support. Wilson J. would not dispense with the doctrine of fundamental breach and maintained that the doctrine would apply in situations where it would be unfair or unreasonable to apply the exclusion clause in the event of a breach. Dickson C.J.C., on the other hand, maintained that the doctrine of fundamental breach should be “laid to rest” (at 462) and replaced with the doctrine of unconscionability.
As a result of the two judgments from Hunter Engineering, the doctrine of fundamental breach continued to be unresolved and its application was still unclear. Some courts would interpret the two judgments to effectively mean the same thing, in that the doctrine has been rejected and replaced by the doctrine of unconscionability, while others would apply both judgments to the facts before them. This continued to be the case until the Supreme Court released its Tercon Contractors decision, in which a unanimous court decided to “lay [the doctrine of fundamental breach] to rest” (Cromwell J., at 62) and to “again attempt to shut the coffin on the jargon associated with ‘fundamental breach’” (Binnie J., at para 82). There was a 5:4 split in the Tercon Contractors court but Cromwell J., for the majority, agreed with the analysis of Binnie J., for the minority. Binnie J. articulated a three-step test to determine the validity of exclusion clauses, to replace the doctrine of fundamental breach. The split in the court was as a result of the application of the test to the facts, not in the articulation of the test.
To conclude, the doctrine of fundamental breach no longer exists in Canada, as Tercon Contractors did away with it and replaced it with a three-pronged test to be applied to determine the enforceability of an exclusion clause. However, given the durability of the doctrine in Canada prior to Tercon Contractors, some question whether it is truly gone (see Angela Swan and Jakub Adamski, “Fundamental Breach is Dead; Or Is It – Tercon Contractors Ltd. v British Columbia (Transportation and Highways)” (2010) 49 Can Bus LJ 452).
In contracts, there are two types of provisions: conditions and warranties. Conditions are important provisions, breach of which deprives the innocent party of the substantial benefit of the contract and therefore entitles it to stop performing and sue for damages. Warranties are less important contractual provisions. If breached, the innocent party is not entitled to stop performing; it must continue performing but it can sue for damages.
The determination of whether a term was a condition or warranty used to be made by looking at the contract and attempting to determine what the parties must have intended at the time they entered into it. And if the parties had stipulated that one term was a condition, breach of it put the contract at an end, regardless of how inconsequential the effect of the breach. It was for that reason that the condition/warranty dichotomy was problematic – it was too rigid and could lead to absurd consequences.
The dichotomy was eventually expanded in Hong Kong Fir Shipping Co. Ltd. v Kawasaki Kisen Kaisha Ltd.,  2 QB 26 (CA) [Hong Kong Fir], where it was determined that another classification should be developed. The categories of condition and warranty remained the same but the timing at which terms should be categorized was expanded. Specifically, it was determined that for some terms, the classification as to whether they are conditions or warranties should come at the time of the breach, in order to see the consequences of the breach before making the determination. Diplock L.J. developed the category of “innominate” or “intermediate” terms, which he described as follows:
There are, however, many contractual undertakings of a more complex character which cannot be categorized as being “conditions” or “warranties”… Of such undertakings, all that can be predicated is that some breaches will, and others will not, give rise to an event which would deprive the party not in default of substantially the whole benefit which it was intended that he should obtain from the contract; and the legal consequences of the breach of such an undertaking, unless provided for expressly in that contract, depend on the nature of the event to which the breach gives rise and do not follow automatically from a prior classification of the undertaking as a “condition” or a “warranty”.
Later cases clarified that the need for certainty meant that the Hong Kong Fir analysis did not mean that any term not classified as a condition or warranty automatically became an innominate term; on a proper construction of the contract, a term might be found to be an “implied condition” (see Bunge Corp., New York v Tradax Export S.A., Panama,  1 WLR 711 (HL).
The breach of a term that is a “condition” or a term initially classified as an innominate term that deprives the party substantially of the benefit of the contract, is a repudiatory breach.
Fundamental Breach and Repudiatory Breach: The Current Case
These two concepts have sometimes been seen to be interchangeable, due to the similarity in language. It is important, however, to keep them separate, as the question of whether an exclusion clause can be relied upon in the event of a breach is quite different than whether a breach of a contract is so significant as to entitle the other party to stop performing.
The confusion, however, is not unexpected, as several cases have fused the two concepts. In Lord Diplock’s judgment in Photo Production, the two concepts are merged in his analysis of primary and secondary obligations under the agreement. In Hunter Engineering, Wilson J. relies on that part of Lord Diplock’s judgment when she says “A fundamental breach occurs ‘Where the event resulting from the failure by one party to perform the primary obligation has the effect of depriving the other party of substantially the whole benefit which it was the intention of the parties that he should obtain from the contract” (at 499) and it is that part of Hunter Engineering that Macleod J. relies on in this case.
In Hunter Engineering, Wilson J. is referring to the doctrine of fundamental breach as it applies to exclusion clauses, but is using the definition of repudiatory breach. In this current case, Macleod J. is referring to the doctrine of repudiatory breach but relying on a case about the doctrine of fundamental breach as it relates to exclusion clauses, but which used the definition of repudiatory breach. Doing so does not make Macleod J.’s analysis incorrect; indeed, the judgment is clearly about whether the breach at issue was repudiatory, and there are several references throughout that correctly state the definition of repudiatory breach. This case does not involve an exclusion of liability clause. The problem lies in the use of the term “fundamental breach”, the doctrine that applied only to exclusion clauses.
This confusion does not change the analysis or render it inaccurate. There is, by definition, a significance, a fundamentality, to the concept of repudiatory breach. The breach must be fundamental enough to deprive the innocent party of the benefit of the contract and entitle it to stop performing. But it is not accurate to refer to it as “fundamental breach”, given that there is an entire doctrine of fundamental breach, through which courts used to determine the enforceability of exclusion clauses. Keeping those two concepts separate would only enhance the clarity in these areas going forward. Hopefully, there will be fewer references to the doctrine of fundamental breach altogether, given its demise in Tercon Contractors, but I have my doubts, both about the actual demise of the doctrine (like Swan and Adamski) and about the referral to it in discussions about repudiatory breaches.
To subscribe to ABlawg by email or RSS feed, please go to http://ablawg.ca
Follow us on Twitter @ABlawg
Policies commented on: Policy on the Use of Electronic Devices in Courtrooms, Alberta Court of Appeal, October 28, 2013; Electronic and Wireless Devices Policy, Court of Queen’s Bench of Alberta, January 2012
Last week the Alberta Court of Appeal (ABCA) issued a Notice to the Profession attaching its Policy on the Use of Electronic Devices in Courtrooms. The Policy applies to all ABCA courtrooms, and prohibits use of electronic devices in those courtrooms by members of the public. For those persons, “Electronic devices … must be turned off and kept out of sight” (section 3). Only lawyers and “accredited media members” are permitted to use such devices in ABCA courtrooms (section 4), subject to certain restrictions. Anyone who uses an electronic device contrary to the Policy may face sanctions including being required to leave the courtroom or declared in civil contempt of court (section 12). The Alberta Court of Queen’s Bench (ABQB) has a similar Electronic and Wireless Devices Policy, requiring that all electronic devices be turned off in its courtrooms, but exempting counsel and some members of the media from that rule. The Provincial Court of Alberta (ABPC) has adopted the ABQB Policy. This post will describe the details of these policies, and will examine whether the policies are consistent with freedom of expression as protected by section 2(b) of the Canadian Charter of Rights and Freedoms.
The ABCA Policy applies to all electronic devices capable of “transmitting and/or recording data or audio, including smartphones, cellular phones, still and video cameras, voice recorders, computers, laptops, tablets, notebooks, personal digital assistants and other similar devices” (section 2(b)). As noted, there is a general rule against using electronic devices in ABCA courtrooms by members of the public (section 3). Lawyers may use electronic devices in these courtrooms, but are not permitted to audio record proceedings (section 6). “Accredited media members” are also permitted to use electronic devices, and are defined as those who are listed on the Court of Queen’s Bench of Alberta’s Media Undertakings List (section 2(a)). This list consists of “media representatives … who have submitted Undertakings that they will not broadcast audio recordings, and that they will not engage in unacceptable use of electronic networked devices in courtrooms.” A quick perusal of the list shows that it only includes those associated with established media organizations. Members of the media who are on the list may audio record ABCA proceedings, but only for the purpose of verifying their notes, and they are not allowed to transcribe, copy, share, sell, or transmit such recordings (section 5).
Those permitted to use electronic devices must ensure they are in silent mode and are used discreetly (section 7), that they are not used for voice communication, to video record or to take photographs (section 8), and that they comply with all publication bans and other restrictions on publication (section 11). Lawyers and accredited members of the media may be asked to produce identification to verify their entitlement to use these devices (section 9). The Policy also stipulates that electronic devices must not “interfere with courtroom decorum or the proper administration of justice” or “interfere with court recording equipment or other courtroom technology” (section 8), which gives us some sense of the purposes behind the ABCA Policy. The permissions noted above remain subject to “the authority of the Court to determine what use, if any, can be made of electronic devices in the courtroom” (section 10).
The ABQB Policy is more explicit about its purposes, noting that the Policy “is intended to promote the fairness of the administration of justice.” The general rule is that all electronic and wireless devices are to be turned off in ABQB courtrooms, but counsel and members of the media who have signed an undertaking with the Court are exempted. Jurors are advised that the presiding justice will provide them “with specific directions which will supersede the directions contained in this policy.” Everyone must refrain from “unacceptable use” of such devices, i.e. those uses that “cause a disturbance, interfere with court operations, or are offensive.” More specific examples of unacceptable use include:
a. Causing interference with court sound systems or other technology, whether deliberate or inadvertent
b. Taking photographs or movies of anyone in a courtroom, or anywhere in the courthouse
c. Making an audio recording of proceedings in any courtroom, jury room, chambers or hearing room unless permitted by the presiding judge or by court policy (media)
d. In the courtroom or hearing room, any use inconsistent with court business
e. Any use that may lead to a breach of privacy or courtroom decorum, or interferes with the administration of justice.
Similar to the ABCA Policy, anyone who engages in unacceptable use under the ABQB Policy may be required to turn off or forfeit their device or to leave the courtroom, and may be cited in contempt.
Freedom of Expression
Section 2(b) of the Charter provides that everyone has the fundamental freedom “of thought, belief, opinion and expression, including freedom of the press and other media of communication.” Section 2(b) protects all activities that convey meaning (Irwin Toy Ltd. v Quebec (Attorney General),  1 SCR 927). While no content-based restrictions on expression are permitted without section 1 Charter justification, there are some internal limits on the methods and locations of expression that are protected under section 2(b).
In Montréal (City) v 2952-1366 Québec Inc., 2005 SCC 62,  3 SCR 141, the Supreme Court of Canada clarified the test for when expression in a public or government-owned location will be protected under the Charter. According to Chief Justice McLachlin and Justice Deschamps, writing for a majority of the Court, “The basic question … is whether the place is a public place where one would expect constitutional protection for free expression on the basis that expression in that place does not conflict with the purposes which s. 2(b) is intended to serve, namely (1) democratic discourse, (2) truth finding and (3) self-fulfillment.” Two factors are to be considered in answering this question: “(a) the historical or actual function of the place; and (b) whether other aspects of the place suggest that expression within it would undermine the values underlying free expression” (at para 74). The historical and actual functions of the place must be examined with a view to whether “the space [is] essentially private, despite being government-owned” or whether “the activity going on there [is] compatible with open public expression” (at paras 75-76). The Court noted that “Many government functions, from cabinet meetings to minor clerical functions, require privacy. To extend a right of free expression to such venues might well undermine democracy and efficient governance” (at para 76). However, “Changes in society and technology may affect the spaces where expression should be protected having regard to the values that underlie the guarantee” (at para 77).
In adopting this values + function approach, the Court rejected the argument that expression in all public locations should be protected, stating that:
… governments should not be required to justify every exclusion or regulation of expression under s. 1… Otherwise, uncertainty will prevail and governments will be continually forced to justify restrictions which, viewed from the perspective of history and common sense, are entirely appropriate. Restricted access to many government-owned venues is part of our history and our constitutional tradition. The Canadian Charter was not intended to turn this state of affairs on its head.
Applying the Supreme Court’s reasoning to the ABCA and ABQB electronic devices policies, we might all agree that section 2(b) should not protect someone who decided to use a courtroom for a soapbox type of speech, or those who entered a courtroom carrying placards expressing an opinion about the matter before the court. We would not expect constitutional protection for those forms of expression in courtrooms because they conflict with the court’s historical and actual functions. Courtrooms are places where trials and applications are conducted, i.e. witnesses give evidence, lawyers make arguments, and judgments and rulings are delivered. All of this occurs in a context we expect to be governed by the rule of law, procedural fairness, and the independence and impartiality of decision makers. Expression that clearly interrupted or interfered with court proceedings and the principles underlying them would probably not be protected under the Supreme Court’s approach.
But does the use of electronic devices by members of the public necessarily interfere with the historical or actual functions of courtrooms? We must acknowledge the Supreme Court’s point that changes in technology may influence our understanding of where particular forms of expression should be protected. Members of the public who are not accredited media members nevertheless may have a strong interest in using electronic devices to tweet or live-blog courtroom proceedings, and may do so in a way that is not disruptive of those proceedings or the administration of justice. They would be promoting the value of democratic discourse without interfering with the historical or actual functions of the place. We must be mindful of a number of Supreme Court decisions holding that courtrooms are places where justice must be seen to be done via hearings open to the public. For example, in its ruling in Canadian Broadcasting Corp. v Canada (Attorney General), 2011 SCC 2,  1 SCR 19 [Canadian Broadcasting Corp] the Court stated that:
 The open court principle is of crucial importance in a democratic society. It ensures that citizens have access to the courts and can, as a result, comment on how courts operate and on proceedings that take place in them. Public access to the courts also guarantees the integrity of judicial processes inasmuch as the transparency that flows from access ensures that justice is rendered in a manner that is not arbitrary, but is in accordance with the rule of law.
It should be recognized that certain uses of electronic devices in courtrooms could actually promote the open court principle and the accessibility of the public to courtroom proceedings. (And note that the Supreme Court does not itself appear to have a policy limiting electronic devices in its courtroom).
Consider also the example of a self-represented litigant waiting for their matter to be called, who might wish to use their cell phone to read work-related emails or to be in contact by text message with daycare staff in the case of a sick child. This person would be engaged in expression that at the very least promoted the value of self-fulfillment without disrupting the courtroom’s functions. Given the number of self-represented litigants in the courts these days, restricting their use of electronic devices in these sorts of circumstances may have widespread impact.
At the same time, other uses of electronic devices might still be disruptive to courts’ functions and fall within the internal limits of section 2(b) protection – for example, taking photos of witnesses or parties in the courtroom. On the other hand, in the Canadian Broadcasting Corp case, the Supreme Court found that the media’s taking of photos in the public areas of courthouses outside of actual courtrooms was protected expression (as was conducting interviews and broadcasting official audio recordings of court proceedings, although limits on all of these activities could be justified under section 1 of the Charter). Any analysis of whether freedom of expression should be protected must focus on the specific form and method of expression in the context of the specific public location that is at issue.
Perhaps the challenge in the minds of those who developed the policies in the Alberta courts was that if electronic devices were permitted to be used in courtrooms by anyone, it would be hard to control those uses. All of us have been in situations where someone’s cell phone carelessly goes off, and this would be bound to happen if electronic devices were allowed to be turned on and used. Yet not everyone has to turn electronic devices off under these policies. Lawyers and members of the media are exempted, seemingly because the courts have more control over them than they do over members of the public in light of professional obligations and undertakings. But are the risks of unacceptable uses of electronic devices or inadvertent disruptions to the functions of courts by members of the general public sufficient to say that expression using electronic devices should not be protected under section 2(b)? I would prefer an interpretation of freedom of expression that would require this blanket limit on members of the public to be justified under section 1 of the Charter. Absolute bans are always more difficult to justify under section 1 than bans that are carefully tailored to the concerns underlying them (see e.g. Montréal (City) v 2952-1366 Québec Inc. at para 90). The courts should be required to justify why members of the public cannot use electronic devices even in circumstances where those devices are not reasonably likely to be disruptive of the courts’ functions, yet promote important values underlying freedom of expression and the open court principle.
One final point. In a hallway chat about the ABCA Policy last week, my colleague Nigel Bankes remarked that he hoped the policy would be disseminated more broadly than through a Notice to the Profession, since the persons most likely to be affected were members of the general public. Even if readers disagree with my analysis, I hope that you will spread the word about this policy.
To subscribe to ABlawg by email or RSS feed, please go to http://ablawg.ca
Follow us on Twitter @ABlawg
PDF Version: Client Rights and Lawyers’ Files
Case commented on: Royal Bank of Canada v Kaddoura, 2013 ABQB 630
In a recent decision, Master Prowse held that a client who sues a lawyer may obtain production of documents from the files of other clients of the lawyer. The production of specific documents may be resisted on the basis of solicitor-client privilege. Master Prowse did not, however, impose any requirement that those clients be given notice of the production of documents from their files, did not consider whether the documents contain confidential (as opposed to privileged) information, whether the documents are properly considered to be in the “control” of the lawyer, or assessment of the risk of prejudice to the legal interests of those clients from disclosure. In short, the judgment appeared to give no weight or consideration to those clients. This result is unfortunate, and inconsistent with the usual respect afforded to the confidentiality of lawyer-client communications.
The context of Master Prowse’s decision was two lawsuits brought against their lawyers by “straw buyers”. As Master Prowse explains, straw buyers are individuals who are used by a “mastermind” to buy property for an inflated price. The mastermind already purchased the property for a lower price, but the straw buyer does not know that. The mastermind receives the straw buyer’s payment for the property and absconds with the profit; the straw buyer is left with a mortgage debt and ownership of a property that does not have a value sufficient to discharge the liability. In these circumstances, the straw buyer may look to the lawyer who did the transaction for redress, since the lawyer generally “represents the straw buyer, the vendor (i.e., the mastermind or the agent of the mastermind) and the lender” (at para 4). The straw buyer will allege that he or she received “little or no legal advice from the lawyer” while the lawyer will respond that he or she provided “fulsome advice to the straw buyers, and that the straw buyers deceived the lawyer by not telling him/her that they in fact have no intention of… owning the house” (at para 4).
In the particular litigation at issue here, the Royal Bank sued a straw buyer, Kaddoura, who brought third party proceedings against his lawyer, Harris Hanson. The Royal Bank also sued the straw buyer Eade, who commenced a separate legal action against his lawyer Linda Anderson.
During discoveries, questions were asked which raised the issue of whether “prior files handled by Mr. Hanson or Ms. Anderson” had involved “the same mastermind, agent or loan officer” (at para 28). The parties then sought direction from the court as to whether that information was “relevant and material” to the actions (at para 28). In considering that application Master Prowse determined that the real issue to be considered was “whether these files were producible under Rule 5.5” which sets out the requirements on parties to produce affidavits of records (at paras 8 and 29). Master Prowse took this position on the basis that “lawyers being sued should not be able to take the position that straw buyers are engaging in a ‘fishing expedition’ in asking about prior files when in fact it is the obligation of those lawyers to produce those prior files (subject to solicitor and client privilege)” (at para 30).
Master Prowse determined that the defendant lawyers should identify past transactions involving the “same mastermind, agent of the mastermind or loans officer of the lender was involved” (at para 11). Documents “regarding previous transactions, if they exist, are in my view relevant and producible under Part 5 of the Rules of Court” (at para 25). Claims that documents are privileged will be assessed in light of the particular documents, rather than in an abstract way.
One can understand the rationale for Master Prowse’s decision. It certainly seems likely that the existence of past transactions involving similar “masterminds” would be probative of whether the lawyer ought to be considered in some way responsible for the straw buyer’s plight. As demonstrated by the law on solicitor-client privilege, however, the mere fact that the disclosure of information may serve some beneficial purpose does not mean that that information ought to be disclosed. Absent exceptional circumstances, we allow clients to have private communication with their lawyers, and we do not disclose the nature of those communications even if some public interest would be served by doing so.
Master Prowse’s decision does not reflect that general stance, instead reflecting a troubling lack of attention to the interests of those third party clients. For starters, documents in the file that were provided by the client belong to that client; as noted in the Law Society of Upper Canada’s recent Guide to Retention and Destruction of Closed Client Files (here), such documents are to be returned to a client upon file closure. As indicated by Rule 2.05(1)(a) of the Law Society of Alberta Code of Professional Conduct (here), the lawyer has a duty to preserve the client’s property, including
original documents such as wills, title deeds, minute books, licences, certificates and the like, and all other papers such as client’s correspondence, files, reports, invoices and other such documents.
The production of such documents ought therefore be governed by the rules applying to production of information from third parties (i.e., Rule 5.13); the fact that they are in the lawyer’s file does not place them in the lawyer’s “control” given that the lawyer holds them as a professional fiduciary.
In addition, information contained in the file may be confidential to the client even if not privileged (because, e.g., it was not communicated directly for the purpose of obtaining legal advice, or because it is known to a third party). While confidential information may be producible, courts are normally still careful about disrupting the zone of privacy and confidentiality that surrounds the lawyer-client relationship. As the Supreme Court has consistently recognized in the context of solicitor-client privilege, the confidentiality of the lawyer-client relationship is essential to permitting access to counsel, and ought not be lightly interfered with. While confidentiality does not have the same status as privilege, courts have viewed it as something that warrants a degree of respect (see, e.g., the money-laundering cases, the most recent of which was discussed here: “Independence of the bar and the prevention of money-laundering”)
It may be that client confidentiality can be protected on the basis that very little information in the third party client’s file will be both relevant and material and not privileged. Master Prowse’s reasons do not, however, provide the third party client with any certainty on that point. The third party client must simply rely on the judgment of her former lawyer and that lawyer’s lawyer, who of course are making decisions in the context of the former lawyer’s litigation, which may conflict with the interests of the third party client.
The key point I am making here is that in any circumstances in which a court or party is producing information from a client’s legal file, and is doing so without representation of that client’s interests, there are reasons to be seriously concerned. When I teach ethics to my students I generally advise them that the default position is that information in a lawyer’s file is privileged. Master Prowse has turned that position on its head, presuming that the information is not privileged unless that claim is made and sustained. That outcome is unfortunate. At minimum, the client whose information may be producible as a consequence of a ruling such as this ought to be notified, and given the opportunity to object. More substantially, the default position should be that information in a lawyer-client file is not producible, absent some basis for production of specific information in that file.
In this case, the less problematic outcome would have been simply to have had the lawyers answer the question they were posed in discovery: have you acted in cases in the past involving this mastermind? If the lawyer had been, then they could be put to the rebuttal of the logical inference that they had reason to be suspicious about the transactions involving these straw buyers, and given them better advice than they did. A more general production of the files of third party clients would be unnecessary, and the interests of those clients respected.
To subscribe to ABlawg by email or RSS feed, please go to http://ablawg.ca
Follow us on Twitter @ABlawg
Case commented on: Fasken Martineau DuMoulin LLP v British Columbia (Human Rights Tribunal) 2012 BCCA 313; leave to appeal granted, Michael McCormick v Fasken Martineau Dumoulin LLP, 2013 CanLII 11313 (SCC).
I have written a number of posts (see for example here and here) about the narrowing interpretation given to “employment” in discrimination cases under the Alberta Human Rights Act, RSA 2000 c A-25.5. Since the Act protects individuals from discrimination in five areas (employment, notices, tenancy, services and accommodation, and trade unions), on several grounds (e.g., age, gender, race, colour, place of origin, ancestry, source of income, religious beliefs, family status, marital status, physical disability, mental disability, or sexual orientation), if the discrimination does not occur in an area defined as “employment” (or any of the other four areas) then the complainant cannot obtain a remedy under the Act. Consequently, one way that respondents seek to counter human rights complaints is by establishing that they do not fit within the current definition of “employment”, and hence the Commission does not have jurisdiction to deal with the complaint. As noted previously, the narrowing interpretation of “employment” seems to counter the overarching educational and remedial purpose of human rights law, and the “large and liberal interpretation” that is supposed to be given to provisions in the Act.
A human rights case out of British Columbia, which will be argued before the Supreme Court of Canada in December, may assist in limiting this narrowing trend.
Michael McCormick, a partner in the limited liability partnership of Fasken Martineau Dumoulin in Vancouver, complained to the British Columbia Human Rights Tribunal about his mandatory retirement at age 65. He was successful at the Tribunal and at the British Columbia Supreme Court, but the British Columbia Court of Appeal (BCCA) ruled in favour of the firm.
The BCCA held that although the British Columbia Human Rights Code, RSBC 1996, c 210 contained principles that mandated a “broad, liberal approach consistent with its legal purposes”, this did not change the underlying legal relationship between the parties. In particular, it not override the well-established principle of law that a partnership is not a separate entity from its partners, and thus cannot be an employer of a partner (BCCA at para 3). Thus, the Tribunal did not have jurisdiction to hear the complaint (BCCA at para 4).
McCormick was an equity partner in Fasken and had been working there since May 1970. He was a party to the partnership agreement that provided that absent an individual arrangement to the contrary, he was required to retire at the financial year-end of the year in which he turned 65 (BCCA at paras 6-9).
Both the Tribunal and the British Columbia Supreme Court applied indicia of an employment relationship as set out in the case of Crane v British Columbia (Ministry of Health Services), 2005 BCHRT 361, which was reversed on other grounds (2007 BCSC 460). These indicators include: utilization, control, financial burden and remedial purpose (e.g., is it for a remedial purpose that the Human Rights Tribunal would consider it an employment relationship) (BCCA at para 20).
The BCCA noted that there had been broad, liberal and purposive interpretations of human rights legislation that were extended to the determination of whether an employment relationship existed. In previous cases, the term “employ” and ”employment” had been given a broad meaning to apply to contractors for service and independent contractors (See Canadian Pacific Ltd. v Canada (Human Rights Commission),  1 FC 571 (CA), and Pannu, Kang and Gill v Prestige Cab Ltd. (1986), 73 AR 166 (CA)) (BCCA at para 27). The BCCA noted that in the cases where the Tribunal or Court found that there was an employment relationship, the decision-maker had applied the broad, liberal and purposive approach to interpreting the applicable human rights legislation, looking to the nature of the relationship between the parties rather than the traditional legal concepts of employment law or common law (BCCA at para 29).
The BCCA focused on the fact that, from a strictly legal perspective, a partnership is not a separate legal entity from its partners. Thus, a partner cannot be an employee of the partnership of which he or she is a member, because he or she cannot employ him or herself (BCCA at para 37). Based on the legal nature of a partnership, the BCCA concluded that the trial judge’s rationale for treating the firm as a separate legal entity from its partners was unsupportable (BCCA at para 45). Regarding the question of whether this well-established legal principle could be over-ridden by a broad, liberal and purposive interpretation of the Human Rights Code (BCCA at para 46), the BCCA held that the inevitable conclusion of its analysis is that there was no employment relationship between McCormick and the firm. Therefore, the Tribunal did not have jurisdiction to hear the complaint (BCCA at para 60).
Thus, it is now up to the SCC to determine whether remedial human rights legislation can apply to non-traditional employment relationships. This is significant because so many people are in these types of independent working relationships. If human rights law does not apply, then there is little protection from discrimination in these quasi-employment relationships. Perhaps this is why several human rights commissions sought to intervene in the appeal (including those from Alberta, BC, Ontario, and Canada, all of which were granted intervener status in September). A number of limited liability partnerships were also granted intervener status.
To subscribe to ABlawg by email or RSS feed, please go to http://ablawg.ca
Follow us on Twitter @ABlawg