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Language Protection in the Human Rights Sphere
PDF version: Language Protection in the Human Rights Sphere
Cases Considered: Caron v Alberta (Chief Commissioner, Human Rights Commission), 2013 ABQB 13, and Chieriro v Michetti, 2013 AHRC 3.
The Caron language rights saga discussed in previous posts on ABlawg (see here) continues, as the next development in his continuing litigation was recently released by the Court of Queen’s Bench of Alberta. This post will discuss that decision, as well as a recent decision of the Alberta Human Rights Tribunal, Chieriro v Michetti, 2013 AHRC 3, which also raises issues about the protection of language-related rights.
Mr. Caron was a seasonal worker for Edmonton’s Department of Transportation and Streets and in a complaint to the Alberta Human Rights Commission, he alleged that his co-workers subjected him to discriminatory treatment and that his employer, the City of Edmonton, terminated his employment for discriminatory reasons. After the former Chief Commissioner of the Alberta Human Rights Commission upheld the Director’s dismissal of Mr. Caron’s complaint as too trivial to justify a public tribunal hearing, Mr. Caron filed a judicial review application seeking to quash the Commissioner’s decision. Mr. Caron’s complaint is based on section 7(1) of the Alberta Human Rights Act, RSA 2000, c A-25.5 (“AHRA”), which does not allow an employer to refuse to employ or continue to employ (section 7(1)(a)) or discriminate against any person in regards to employment (section 7(1)(b)) based on numerous protected grounds. The two grounds that Mr. Caron based his claim on are that of place of origin and ancestry because of his background as a Québecois. Mr. Caron alleged that he was called numerous offensive names throughout his employment with the City of Edmonton. The insulting names included “Frenchie,” “Chretien,” and “Gil”. These are the comments that ultimately led Mr. Caron to his claim that he suffered from harassment at his workplace, which created an oppressive environment to work in.
In her decision, Justice M.T. Moreau could not determine what had led the Commissioner to decide that these terms were not offensive or significant enough to warrant a hearing. As a result, this lack of explanation in the Commissioner’s reasoning led Justice Moreau to hold that the Commissioner’s decision failed to meet the reasonableness standard. The Commissioner’s decision was quashed and the matter has now been returned to the current Commissioner to reconsider the allegations, but only in regards to section 7(1)(b) of the AHRA. We will now have to await a further decision by the Commission in regards to the narrowed issue surrounding section 7(1)(b) of the AHRA and whether it should proceed to a tribunal hearing.
In previous litigation, Mr. Caron made challenges regarding the lack of French language protection in Alberta, particularly regarding the language in which laws are enacted (see here and here) and the lack of availability of French language proceedings under the AHRA (see Caron v Alberta (Human Rights and Citizenship Commission), 2007 ABQB 525). In the latter decision, it was held that Mr. Caron was able to address the court in French during the judicial review proceedings because of section 4(1)(b) of Alberta’s Languages Act, RSA 2000, c L-6. Mr. Caron was also granted an interpreter based on section 14 of the Canadian Charter of Rights and Freedoms, Part I of the Constitution Act, 1982, Schedule B to the Canada Act 1982 (UK), 1982, c 11 (Charter), which states that a person has a right to an interpreter in proceedings in which they do not understand or speak the language being used. Although it seems that there is some level of language protection via other legislation, what is the extent of the protection of language in human rights legislation?
Historically, in Canadian jurisdictions like Alberta where language is not a protected ground in human rights legislation, tribunals and courts have protected language vicariously through other grounds such as ancestry or place of origin. The Ontario Human Rights Commission has gone a step further and developed a policy that describes the approach that their courts and tribunals are to use in regards to language-based human rights claims (see here). Although the Alberta Human Rights Commission does not have a similar policy in place, based on the jurisprudence relating to language and human rights discrimination in Alberta, they seem to follow a similar method. The Ontario Human Rights Commission explains that there is an inevitable link between a particular language that is spoken or an accent that a language is spoken in and grounds like ancestry, ethnic origin or place of origin.
There are numerous types of cases that have come forward regarding language in a variety of areas including services, although the majority of them are in the employment context. An example of a case in the services area is one of Mr. Caron’s previous litigation matters. As previously mentioned, Mr. Caron was granted an interpreter for his human rights judicial review hearing, but was denied an order to get the records and related files translated into French (see Caron v Alberta (Human Rights and Citizenship Commission), 2007 ABQB 200). If language was included as a protected ground then the court may have been forced to grant an order requiring all of the records and related files to be translated for his use. This would be quite an extensive and demanding task to be placed on tribunals and courts as well as a potentially dangerous precedent to set for future litigants.
An example of a human rights claim related to language in the employment area is the case of Dhamrait v JVI Canada, 2010 HRTO 1085, 70 CHRR D/373, (Dhamrait) where two employees were told by their supervisor that they should be speaking English, not Punjabi during their lunch break. In this case it was found that even though language was not a protected ground in Ontario’s human rights legislation, it can be a proxy indicator of discrimination based on race, ethnicity or place of origin (at para 64). The Tribunal was able to make this connection by stating that the employees speaking Punjabi were not able to express themselves in their native language which placed a burden on them based on their race and ethnic background. In the case of Saadi v Audmax, 2009 HRTO 1627, (Saadi), a ban on speaking French within the office was put in place. A Muslim woman, Ms. Saadi, brought a complaint of discrimination based on race, colour, ancestry, place of origin and creed. The Ontario Human Rights Tribunal found that because the Muslim woman’s first language was not French nor was it a language she spoke at a high level, that the ban on the use of French did not constitute a proxy for racial discrimination (at para 39). The distinguishing factor between these two cases seems to be that in Dhamrait the claimants were able to show an inability to express themselves because they were being suppressed from speaking their first language, instead of a language that was neither their first language nor one they even spoke at a high level like in Saadi.
Interestingly, these sorts of language-based claims do not only arise in situations where people can or cannot speak a certain language, but also where individuals speak a language with a particular accent. The claimants tend to be less successful at claiming discriminatory treatment when their employment positions include a significant amount of communication with other individuals (Gajecki v Surrey School District (No. 36) (1989), 11 CHRR D/326 (BCCHR)) and more successful in circumstances where speaking a particular language plays a minor role (Dhaliwal v BC Timber Ltd (1983), 4 CHRR D/1520 (BC Bd of Inq)). Much of the claimants’ success or lack of success in their claim depends on the ability of the employer to justify their actions.
Although these cases were heard in other jurisdictions, the approach in Alberta is very similar. In the recent case of Chieriro v Michetti, 2013 AHRC 3, there is discussion by the Tribunal about discrimination on the basis of race, ancestry, place of origin and religion. During Mr. Chieriro’s employment, he was told that “…you need to use proper Canadian English. You need to speak like someone who is in Canada, not like someone who is in Africa” (at para 25). Although this is just one example of how Mr. Chieriro was subjected to discriminatory behaviour, these are some clear and direct references to the way in which Mr. Chieriro spoke. As it turns out in this case, the language-based claim was not necessary as there were other circumstances in which Mr. Chieriro had been directly discriminated against based on place of origin or ancestry. Whether or not a claim like this would be successful solely based on the language-related argument is an interesting question. If speaking to clients or customers was a regular part of his job, and if there had been any complaints regarding the accent in which Mr. Chieriro spoke English, these would likely be significant factors in answering this question. While it is an interesting question to debate, it was not discussed in detail in the case at hand as there was plenty of other evidence based on enumerated grounds that the Tribunal used in coming to its decision in favour of finding discrimination against Mr. Chieriro.
Although in the two recent Alberta decisions neither Mr. Caron nor Mr. Chieriro ultimately tested language protection in the human rights context, there will undoubtedly be cases around the corner that will continue to determine when and how claimants can be successful in language-related claims under the AHRA.
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Update in the Area of Family Status Discrimination
PDF version: Update in the Area of Family Status Discrimination
Cases Considered: Canadian National Railway v Denise Seeley and Canadian Human Rights Commission, 2013 FC 117.
In 2010, the Canadian Human Rights Tribunal released three cases involving Alberta women who alleged they were being discriminated against on the basis of family status. In a previous post I wrote on the outcome (see “Accommodation for Family Status Required by Federal Human Rights Tribunal for Three Alberta Women” December 22, 2010 here) in which CNR was required to accommodate parental responsibilities of all three women. Canadian National Railway (CNR) applied for judicial review on the case of Denise Seeley. The decision of Justice Mandamin of the Federal Court presents an attempt to reconcile two lines of decisions that addressed what “family status” discrimination entails. On a larger scale, this case is one of several in which gender and family status discrimination are argued to be result of social construct or personal choice rather than the operation of law or the result of discrimination in an activity that is covered by human rights legislation (e.g., employment, tenancy, services, accommodation and publications).
For example, in the Canadian Charter of Rights and Freedoms,Part I of the Constitution Act, 1982, being Schedule B to the Canada Act 1982 (UK), 1982, c 11 (Charter) case of Symes v Canada, [1993] 4 SCR 695, the majority of the Supreme Court of Canada held that a female lawyer could not deduct the wages she paid to her nanny as a business expense in her personal income tax returns. They also noted that while women disproportionately incur the social costs of child care, this is not the result of the operation of law (e.g., the Income Tax Act, RSC 1985, c 1), and thus, Charter section 15(1) is not violated.
Likewise, in the Canadian National Railway v Denise Seeley and Canadian Human Rights Commission, 2013 FC 117 (Seeley) case, CNR argued that this case really dealt with the question of whether balancing family life and employment duties will be transferred from the home to the workplace. It argued that the CHRT had been mistaken when it equated family status with a parent’s choice as to how to define and meet his or her childcare obligations (Seeley at para 55).
The Canadian Human Rights Tribunal and the Federal Court both noted that two lines of cases had developed regarding what the ground of “family status” entails. The British Columbia Court of Appeal in Health Sciences Association of British Columbia v Campbell River and North Island Transition Society, 2004 BCCA 260 at para 39, 240 DLR (4th) 479 (Campbell River) said that “a prima facie case of discrimination is made out when a change in a term or condition of employment imposed by an employer results in a serious interference with a substantial parental or family duty or obligation of the employee” (emphasis added). Thus, there needs to be more than a conflict between work requirements and regular parental obligations in order to establish a prima facie case of family status discrimination. In the Campbell River case, a legitimate change in hours of work was going to affect the complainant’s ability to care for her disabled son. While the court found that the employer had prima facie discriminated against the complainant on the basis of family status, the matter was remitted to the arbitrator to determine whether the employer had met its duty to accommodate her to the point of undue hardship.
A less restrictive standard was set out by the CHRT in Hoyt v Canadian National Railway, 2006 CHRT 33, [2006] CHRD No 33, and endorsed by the Federal Court of Canada in Johnstone v Canada (Attorney General), 2007 FC 36, [2007] FCJ No 43 (Johnstone); affirmed in 2008 FCA 101, [2008] FCT No 427 (Fed CA). In Johnstone, the Federal Court of Canada held that the test in Campbell River was too stringent, and instead held that family status discrimination claims should be analyzed in the same way as other discrimination claims. The Court said that the Campbell River test effectively established a hierarchy of grounds of discrimination, thus making family status less important than the others. In particular, the requirement that the complainant must establish a “serious interference” with family status had the impact of relegating family status to an inferior type of discrimination.
In the Seeley case, although CHRT member Michel Doucet declined to apply the Campbell River test, he nevertheless concluded that the complainants faced a “serious interference with [their] parental duties and obligations” if they were forced to work in Vancouver (Seeley at para 109). This suggests that he would have found that there was a prima facie case of family status discrimination whether he followed the Campbell River or the Johnstone approach. Thus, childcare issues constitute a parental responsibility that falls within the ground of “family status” based on either test.
The CNR appealed the Seeley case. The CNR argued that CHRT had erred in finding that a case of family status discrimination had been made out, in finding that the CNR had not met its duty to accommodate, and in awarding extra damages based on CNR’s reckless conduct. The Federal Court dismissed CNR’s appeal.
Justice Mandamin of the Federal Court noted that the Canadian Human Rights Act, RSC 1985, c H-6 does not define “family status” (Seeley at para 59) and also suggested that the legal cases to date illustrated two distinct lines (Seeley at para 61). Some had taken a more broad approach and some had taken a more narrow approach. The Federal Court seems to have tried to reconcile these two approaches and noted that in order to have proper regard to “family” one must consider children and the relationship between parents and children (Seeley at para 68). Parents are obligated to care for their children and if Parliament had intended to exclude childcare obligations from “family status” it would have done so clearly (Seeley at para 68). This interpretation of “family status” as including childcare obligations is within the scope of the ordinary meaning of the words (Seeley at para 70). Thus, the CHRT’s interpretation of the meaning of “family status” was reasonable.
In determining whether there was a prima facie case of discrimination based on family status, and in attempting to reconcile the two lines of cases, Justice Mandamin said that the following questions needed to be answered (Seeley at para 78):
a. does the employee have a substantial obligation to provide childcare for the child or children; in this regard, is the parent the sole or primary care giver, is the obligation substantial and one that goes beyond personal choice;
b. are there realistic alternatives available for the employee to provide for childcare: has the employee had the opportunity to explore and has explored available options; and is there a workplace arrangement, process, or collective agreement available to the employee that may accommodate an employee’s childcare obligations and workplace obligations;
c. does the employer conduct, practice or rule put the employee in the difficult position of choosing between her (or his) childcare duties or the workplace obligations?
Clearly, the contextual factors of the individual case were significant (as with most discrimination cases). The following factors were considered by Justice Mandamin to be relevant to a finding that there was discrimination on the basis of family status:
- Ms. Seeley is the primary caregiver for two children of tender age;
- her husband works full time and is the breadwinner;
- she had considered whether childcare was available in nearby Hinton, AB;
- CNR never provided necessary information for exploring whether childcare options were available or feasible in Vancouver; and
- a realistic assessment of her circumstances discloses she would have significant difficulty in fulfilling her childcare obligations in responding to an indefinite recall assignment for the Vancouver shortage (Seeley at para 90).
Thus, Ms. Seeley’s specific parental childcare obligations and CNR’s response to her request for an extension to address possible options all resulted in prima facie discrimination on the basis of family status (Seeley at para 95).
In addition, CNR never considered the question of accommodation under the collective agreement before firing Ms. Seeley (Seeley at para 100). Further, the CHRT’s finding that CNR had not adequately responded to Seeley’s request for accommodation was reasonable (Seeley at para 107). Finally, the CHRT’s award of damages was also reasonable.
It appears, then, that childcare responsibilities are clearly part of “family status” and that this ground of discrimination should be given equal footing with the other grounds. The tribunal will consider the steps that the employee took to minimize the obligations that were imposed on his or her family responsibilities. The tribunal will also consider the individual circumstances of the complainant, the nature of the conflicting responsibilities and the barriers that are in place. The employer’s duty to accommodate will be tempered by the three factors (listed above) that the tribunal will consider, which in turn seeks to balance the responsibility for childcare issues between the employer and the employee.
As for the larger issue of the role of social construct in this case, it would appear that the court is willing to at least consider that in many cases childcare obligations can be substantial and can go “beyond personal choice.”
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Intersection Between Different Legal Areas
PDF version: Intersection Between Different Legal Areas
Case commented on: Basha v Lofca, 2013 ABQB 159.
Introduction
It is quite common for certain legal areas to intersect with others in cases that come before the courts. In the recent Alberta Court of Queen’s Bench case of Basha v Lofca, this intersection arose within the areas of immigration and family law.
In Basha, the Court had to decide whether a provision in a family court order requiring that three children not be removed from Alberta or Canada could block a removal order issued under the Immigration and Refugee Protection Act, SC 2001 c 27 (IRPA).
Facts
In March of 2007, an Albanian mother arrived in Canada on a work permit, and later on became ill. Her husband and younger child arrived in the country on a temporary visitor’s visa later in the year, and the couple’s two older children were granted permission to enter the country in 2009, also on a temporary basis. Sadly, later on in the year the mother died, and the father and three children applied to extend their temporary visas and remain in Canada. However, Citizenship and Immigration Canada refused their applications, and the family was asked to leave the country on January 27, 2010.
Following this, the children’s aunt and uncle filed a claim for guardianship of the children under Alberta’s Family Law Act, SA 2003, c F-4.5. Although the father of the children was the respondent in the guardianship proceeding, the factual content of the filed material and the order granted by the chambers judge made it clear that the proceeding was friendly and unopposed in nature, and designed to give the children a better chance to stay in Canada (Basha, at para 10). The family court order was granted in January of 2010, and provided that “the children shall not be removed from the province of Alberta or country of Canada, without further order of this court.”
Later on in January, the Federal government requested that the entire family leave Canada voluntarily. The father did so, but the children remained in the country with their newly appointed guardians. Therefore, there were two legal process taking place. One was the Alberta Court of Queen’s Bench family law guardianship action, and the second was the Federal Court and tribunal immigration proceedings. The children made several applications through the Federal immigration process and in Federal Court in order to remain in Canada on a humanitarian and compassionate basis. These efforts failed, although some, particularly the review applications to the Federal Court, may have failed due to procedural non-compliance rather than a hearing on the merits of the case (Basha, at para 14).
In late 2012, the Attorney General of Canada applied to be added as an intervenor in the family law litigation, and requested that provision under the guardianship order preventing the removal of the children be struck out.
Positions of the Parties
The Federal Crown argued that the presence of the children in Canada was an immigration matter, and not a family law question of guardianship and custody. The Crown argued that there was no true family law dispute, and that the legal authority of the children to remain in Canada had expired. Therefore, the Crown wanted a variation order removing the order that prohibited the children from leaving Canada (Basha, at para 18).
The father, aunt, uncle and children took a common position and argued that the custody dispute was a proper family law matter, and that it was in the children’s best interest to remain in Canada (Basha, at para 18). They also argued that provincial courts of competent jurisdiction have, in certain cases, made decisions and orders that relate to family law and protection of children that allow the children to remain in the jurisdiction. A net, but indirect effect of these court activities is to preclude the ability of the Federal Crown to remove the children via immigration processes (Basha, at para 19). Finally, the respondents also argued that article 3 of the United Nations Convention on the Rights of the Child, 20 November 1989, United Nations, Treaty Series, vol 1577, p 3 (Convention) had a role to play in the matter (Basha, at para 20).
Analysis of the Court
The Court accepted the idea that a provincial superior court of inherent jurisdiction could make an order effectively blocking (at least temporarily) the removal of an individual from Canada by immigration authorities where a live and real family law litigation proceeding is underway. The Court provided an example where two parents, legally in Canada, bring their child into the country on a properly granted visitor’s permit. When the permit ends, one of the parents could wish to return home with the child, and the other may wish to apply for sole guardianship and oppose the removal of the child from the country by the other parent. The Court noted that in a context like this, where a real and substantive conflict exists, a superior court of inherent jurisdiction should have the jurisdiction to deal with collateral matters that flow from valid family law orders (Basha, at para 25).
However, the Court stated that in this case, no real litigation was underway, as the family law custody “dispute” was really a tactic, and not a real disagreement before the Court. Further, the Court noted that caselaw provides that a superior inherent jurisdiction court judge must exercise caution to avoid extending the scope of inherent jurisdiction so as to not intentionally interfere with other lawful processes (Basha, at para 26). The Court noted the decision of JH v FA, 2009 ONCA 17, 306 DLR (4th) 496, where the Ontario Court of Appeal stated that the purpose of non-removal orders in family law legislation is not to prevent the deportation of persons ordered to be removed from Canada, but to prevent parents from removing children from the jurisdiction in contested family law proceedings. Where no real dispute exists, such orders should not be used to frustrate the IRPA (Basha, at paras 29-30). The Court also noted a memorandum from the Alberta Court of Appeal, which stated that “the interests of the children are protected [in the immigration review system] on the basis of the compassionate and humanitarian considerations that are part of that immigration review process”. Thus, the Court concluded that in typical immigration scenarios there is no ‘gap’ into which a court should intrude, apply its inherent jurisdiction, and provide a remedy that would otherwise be unavailable (Basha, at paras 32-33).
The Court also found that the United Nations Convention on the Rights of the Child gave the courts no additional power that they would not have already had to take jurisdiction and block the normal operation of the immigration apparatus (Basha, at para 38). Article 3 of the Convention essentially states that in all court actions concerning children, the best interests of the child shall be a “primary consideration” in the ultimate decision (Basha, at para 35). However, the Court noted that “primary consideration” does not equate to “the” or “the only” primary consideration, or that the interests of the children trump everything else (Basha, at paras 36- 37). Citing Chief Justice McLachlin in Canadian Foundation for Children, Youth and the Law v Canada (Attorney General), 2004 SCC 4 at para 10, [2004] 1 SCR 76, the Court noted that “the best interests of the child may be subordinated to other concerns in appropriate contexts…” (Basha, at para 37). Finally, the Court pointed out that within the immigration system, the best interest of the child is always a consideration, and that the immigration system is required to implement state policy that flows from international treaty obligations (Basha, at para 38). Based on all these reasons, the Court granted the Federal Crown’s request and ended the prohibition against the removal of the children from the province and Canada (Basha, at para 41).
Conclusion
For the most part, the Court’s decision seems reasonable. There was no real family dispute in this case and the Court was simply following what the caselaw dictated. However, the Court did note that some of the immigration applications launched by the children failed due to procedural non-compliance issues, instead of the merits of the case. Those courts that denied those applications would then seemingly not have considered the “best interests of the children” at all. Thus, it is somewhat surprising that the Court in this case did not look at the best interests of the children more closely, especially since the Court admitted that the children had lived “model and productive lives in Canada” (Basha, at para 40).
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Do Covenants to Compensate for Designation as an Historical Resource Run with the Land?
PDF version: Do Covenants to Compensate for Designation as an Historical Resource Run with the Land?
Cases Considered: Equitable Trust Company v Lougheed Block Inc, 2013 ABQB 209.
The foreclosure proceedings taken with respect to the historic Lougheed Building at 604 – 1 Street S.W. in Calgary have generated a number of legal controversies. I have previously blogged on interest issues in the “Perennial Problem of Section 8 of the Interest Act” and on security deposits matters in “Who Bears the Loss for Converted Security Deposits?” This latest judgment — a decision of Mr. Justice Paul R. Jeffrey — concerns compensation paid by the City of Calgary for the decrease in the value of the building when it was designated an “historical resource” under the Historical Resources Act, RSA 2000, c H-9. A Lougheed Building Rehabilitation Incentive Agreement dated September 2006 provided that total compensation would be $3,400,000 and it would be paid in fourteen annual installments of $227,000 each and a final fifteenth payment of $222,000. The question was who was to receive the balance of the annual installments. Would it be The Lougheed Block Inc (LBI), the owner of the building who entered into the Incentives Agreement with the City and did the required rehabilitation work? Or would it be 604 – 1st Street S.W. Inc (604), the purchaser on the judicial sale after LBI defaulted on their mortgage with Equitable Trust Company and Equitable Trust foreclosed. The outcome depended on the answers to one property issue and one (far less interesting) contract issue.
Facts
The Historical Resources Act provides for compensation to owners of buildings designated by City Bylaw as Municipal Historical Resources. Designation means that the owners cannot remove, destroy, disturb, alter, rehabilitate, repair or other permanently affect the designated building except in accordance with the Standards and Guidelines for the Conservation of Historic Places in Canada. If the designation decreases the economic value of the building, the City is required to compensate the owner for that decrease. The City and LBI entered into the Incentive Agreement in order to specify the rehabilitation work to be done of the Lougheed Building and the conditions under which the City would compensate LBI for that work and for any decrease in the building’s economic value. Once the repairs were made to the satisfaction of the City’s Heritage Planner, the City would pay the owners $3,400,000 in fourteen annual installments. A caveat was registered against the title to the Lougheed Building property that referred to the Incentives Agreement and attached a copy of it.
As part of Equitable Trust’s foreclosure proceedings, the owner of 604 presented an offer to the court to buy the Lougheed Block (the Lougheed Building and the land on which it sits). That offer was approved by Master Prowse in July 2010. The lawyer for 604 requested, among other things requested for the closing, an assignment in favour of 604 of the Incentive Agreement with the City. LBI resisted that request, taking the position that LBI’s right to the City’s payments was not included in the purchase, and applied to a Master in Chambers for a declaration to that effect. The matter was argued before Master Laycock at the end of 2010. The Master ordered that LBI was entitled to the remainder of the annual installments: 2011 ABQB 269.
The purchaser, 604, appealed on two different grounds. First, 604 argued that it was entitled to the Incentive Agreement payments because the covenant to pay ran with the land — the property law issue. Second, and in the alternative, 604 argued that the right to receive the payments was included in the assets it bought in the judicial sale — the contracts issue.
Did the covenant to pay the Incentive Agreement payments run with the land?
Like Master Laycock, Justice Jeffrey found that the entitlement to receive the annual Incentive Agreement payments from the City was not a covenant that ran with the land. Because the covenant did not run with the land, 604 did not get the right to receive the annual payments when it became the owner of the Lougheed Block.
In order for a covenant to run with the land at common law:
(a) The covenant must be negative in substance and constitute a burden on the covenantor’s land analogous to an easement. …
(b) The covenant must be one that touches and concerns the land … [and] the land must be capable of being benefited by the covenant at the time it is imposed. …
(c) The benefited as well as the burdened land must be defined with precision in the instrument creating the restrictive covenant. …
(d) The conveyance or agreement should state the covenant is imposed on the covenantor’s land for the protection of specified land of the covenantee.
(e) Unless the contrary is authorized by statute, the titles to both the benefited land and the burdened land are required to be registered. …
(f) Apart from statute the covenantee must be a person other than the covenantor. (at para 38, citing Westbank Holdings Ltd v Westgate Shopping Centre Ltd, 2001 BCCA 268 at para 16).
The relevant covenant is that of the City, the covenantor, and it is for the City to make the annual Incentive Agreement payments. Such a covenant is positive in substance and thus fails part (a) of the test set out above, which requires a negative covenant. A negative covenant, to use Justice Jefferey’s definition (at para 37), is one where “the covenantor promises to not do something.” I prefer to think of a negative covenant as one that can be fulfilled by the covenantor doing nothing. A positive covenant, on the other hand, requires the covenantor to do something. In this case, the covenant requires the City to spend money and it is therefore a positive covenant. The rule that positive covenants do not run with the land has been a settled principle of the common law for more than 100 years and has, without question, been adopted in Canada: Parkinson v Reid, [1966] SCR 162.
604 argued that section 29 of the Historical Resources Act changed the common law and allowed positive covenants, including the City’s covenant to pay, to run with the land. However, section 29 does not apply to that covenant or that covenantor. The relevant portions of section 29 provide:
29(1) A condition or covenant, relating to the preservation or restoration of any land or building, entered into by the owner of land and
(a) the Minister,
(b) the council of the municipality in which the land is located,
(c) the Foundation, or
(d) an historical organization that is approved by the Minister,
may be registered with the Registrar of Land Titles.
(2) When a condition or covenant under subsection (1) is presented for registration, the Registrar of Land Titles shall endorse a memorandum of the condition or covenant on any certificate of title relating to that land.
(3) A condition or covenant registered under subsection (2) runs with the land and the person or organization under subsection (1) that entered into the condition or covenant with the owner may enforce it whether it is positive or negative in nature and notwithstanding that the person or organization does not have an interest in any land that would be accommodated or benefited by the condition or covenant.
(4) A condition or covenant registered under subsection (2) may be assigned by the person or organization that entered into it with the owner to any other person or organization mentioned in subsection (1), and the assignee may enforce the condition or covenant as if it were the person or organization that entered into the condition or covenant with the owner. (Emphasis added)
It is true that section 29(3) states that a covenant that has been registered against the designated land runs with the land. However, section 29(1) states that the covenants that can be registered are covenants that relate to the preservation or restoration of designated land or building — not covenants to pay compensation for the historical designation. Section 29 applies to LBI’s promises, not the City’s.
The purpose of making a covenant run with the land is to make it enforceable against the owner of that land, whoever they might be in the coming years. Thus section 29(3) also states that it is the entities listed in section 29(1) who may enforce the covenant, whether it is positive or negative in nature, and whether or not they have an interest in the land. Section 29(3) cannot be applied to the City’s covenant to pay. That would require reading section 29(3) to say that the City may enforce their own covenant to pay against the Lougheed Building even if their covenant is positive in nature and even if they have no interest in the Lougheed Building. That argument makes no sense. The City would not be the entity to enforce their own covenant to pay. And they would not enforce it against the Lougheed Building. Instead, it makes sense that the City could enforce LBI’s covenants to restore the Lougheed Building against that building and that is what section 29 is for — a covenant with a different subject matter and a different covenantor.
Justice Jeffrey recognized the same problems with 604’s arguments, although he refutes them in a different way (at paras 36-43). He focuses more on the fact the covenant is not a burden on the covenantor’s land and is not imposed on the covenantor’s land in order to point out the flaws in 604’s argument.
604 made one final point in its argument that the City’s covenant to pay ran with the land. That was that, insofar as 604 and the Lougheed Building were burdened by the obligations to preserve and restore the building, 604 should be entitled to the associated benefit, the annual payments. (Justice Jeffrey does not consider the substance of this argument, an argument that has received some acceptance in the UK as the doctrine of benefit and burden in Halsall v Brizell, [1957] Ch 169 and gained some ground in Ontario in Durham Condominium Corporation No 123 v Amberwood Investments Limited, 2002 CanLII 44913 (ON CA).) Master Laycock had considered 604’s argument and concluded that it is only the entity that owned the property at the time it was designated a historic resource that suffers an economic loss. A subsequent owner, such as 604, buys the already-designated building knowing about the designation and its impact on the property’s value and factoring that into a reduced purchase price. Justice Jeffrey agreed (at para 46) that the conclusion that the City’s covenant to pay does not run with the land was consistent with the purpose of the compensation provisions in the overall statutory scheme.
Was the right to receive the Incentive Agreement payments included in the assets bought in the judicial sale and assigned to 604?
What property did 604 offer to purchase in the judicial sale and what property was included in the Court’s acceptance of the 604 Offer? The 604 Offer was to purchase the “Property,” defined as being the Lougheed Block only. This was expanded to include some personal property in paragraph 10: “All fixtures, equipment and chattels located on the Property and which are owned by the Vendor shall be included in the Purchase Price.” Neither definition of the “Property” that 604 was purchasing included the City’s annual payments. However, 604 argued that its Offer also contained wording in two places that could be interpreted to expand the “Property” being purchased to include the right to receive the City’s annual payments.
The first place was paragraph 3 of the Offer, which required the Court to direct the Receiver “to deliver … a registrable transfer of title, free and clear of all encumbrances save and except only the matters referred to in Schedule 1 hereto … together with … a general conveyance re assets …”. Schedule 1 included the caveat with the attached Incentive Agreement. However, Justice Jeffrey held (at para 59) that the effect of this reference was only to identify what the title did not have to be free and clear of, i.e., what could be on title. The reference to “a general conveyance re assets” was just not specific enough, in the face of the definition of “Property,” to include the annual payments under the Incentive Agreement.
The better argument relied on the last sentence in paragraph 6 of the Offer, which stated: “All leases and contracts that are assignable shall be assigned to the Purchaser as of the Closing Date and the Purchaser shall assume all obligations thereunder.” The Incentive Agreement is assignable. Nevertheless, Justice Jeffrey held (at para 62) that just because the Incentive Agreement the type of contract that could be assigned did not mean that it had to be assigned to 604. The earlier definitions of the “Property” being purchased and the property ancillary to it established the substance of the transaction. The last sentence in paragraph 6 only set out a process for the transaction. This conclusion is supported by the fact that paragraph 6 otherwise dealt with 604 agreeing to accept the Property “as is” and acknowledging that the 604 Offer constitutes the entire agreement between the parties — boilerplate provisions.
Conclusion
A covenant by a government or historical organizations to pay compensation to the owners of property for the decrease in value of that property on its designation as an historical resource will never run with the land at common law because it is a positive covenant. Neither will it run under the Historical Resources Act because the Act only relaxes the common law test for promises to preserve and restore made to the government or historical organization. However, it would be possible to draft an Offer to Purchase an historical resource that did include any remaining annual compensatory payments as part of the property being purchased.
This case thus illustrates one of the principle differences between property law and contract law. Whether compensatory payments run with the land is a question of law. As such, the parties and their wishes are irrelevant. Whether the payments were included in the Offer is a question of interpretation, and therefore all about what the parties want and what they have the bargaining power to negotiate.
The Role of the “Noble Savage” in Environmental Social Activism
PDF version: The Role of the “Noble Savage” in Environmental Social Activism
Context of discussion: Enbridge Northern Gateway Pipelines Project
This blog is to discuss what I call the “The Role of the Noble Savage” in the pursuit of environmental justice through social activism. I will use the Enbridge Northern Gateway Pipelines Project to provide context.
Enbridge is a thirty-one billion dollar corporation based out of Calgary, Alberta. Enbridge owns and operates the world’s longest crude oil and liquids pipeline system. This system transports more than 2 million barrels per day of crude oil and liquids, and provides natural gas to 1.9 million customers in Canada and the United States.
Northern Gateway is the marketing term for a proposed oil and gas pipeline to construct twin 1200 km pipelines running from Bruderheim, Alberta, to Kitimat, British Columbia. The eastbound pipeline would import natural gas condensate, and the westbound pipeline would export crude oil and bitumen from the Athabasca oil sands to the new marine terminal in Kitimat. From there, loaded oil tankers will be dispatched to markets along the Pacific Rim. The project will create 3000 construction jobs and 104 permanent jobs in British Columbia and Alberta.
But there is opposition from many quarters, especially environmental NGO’s, biologists, aboriginal communities, British Columbia towns and villages and large American environmental philanthropists. Among the numerous parties who are against the proposal, my focus today is on indigenous groups. Indeed, the bulk of the media focus in Canada has been on the indigenous opposition to the project, though the rationale for why this is so, is unclear. I will argue that while seemingly benign, the focus on the indigenous opposition demonstrates an underlying racial bias that can be harmful to First Nations and other indigenous peoples at the same time it is a strategically effective device to put the environmental issues before the public.
The pipeline has been criticized by indigenous groups because it crosses much of their traditional lands and threatens the habitat of wild salmon and other wild life upon which they rely for sustenance. Groups like the Yinka Dene Alliance have organized to campaign against the project. In December 2010, 61 First Nations bands, including many along the proposed pipeline route, signed the Save the Fraser Declaration in opposition to the project.
More compelling is the fact that opposition remains despite the offer by Enbridge to grant all First Nation communities within 50 miles of the line a 10% equity stake in the project. The offer has not resolved the impasse even though some bands have indicated they will take up the offer, especially those whose lands are farthest away from the proposed pipeline and will likely not be affected if there is a spill someday.
Given the history of leaks and spills with other Enbridge projects, the concerns of the aboriginal bands whose lands border on the pipeline route are well-founded. For example, in 2010 an Enbridge pipeline in Michigan ruptured, resulting in 3 million litres of oil leaking into the wetlands, Talmadge creek and the Kalamazoo River. Three years after the spill cleanup is still ongoing and costs are now being projected to be one billion dollars, 350 million dollars more than Enbridge’s insurance policy coverage (see Globe and Mail article, March 20, 2013). Also in 2010, 2000 gallons of oil seeped from a pipeline in the middle of a Chicago suburb. One fireman told the Huffington Post that “it looked like the Beverly Hillbillies in the opening scene when the crude is bubbling up from the ground” (see Huffington Post, September 9, 2010). The Wisconsin spill in 2012 resulted in 190,000 litres of spillage. In a 2008 pipeline installation in Wisconsin, over 500 regulatory violations were incurred in just a year of construction. The Kamloops Daily News pointed out in 2011 that since 1998 Enbridge has registered over 800 leaks and ruptures.According to a study by Sean Kheraj, an environmental history professor at York University, pipelines carrying oil or other liquids have experienced more than 1,600 failures between 2006 and 2010, spilling 174,213 barrels of oil in mostly rural locations in Alberta (see here).
Despite these glaring environmental disasters, media attention has focussed less on the obvious technical and engineering shortcomings of the company’s operations, and more on re-framing the debate to create a narrow narrative that says the First Nations oppose the pipeline because they do not want their “primitive naturalist lifestyle” to be interrupted by industrial progress and prosperity. While this is not an accurate portrayal of the ambition of First Nations and other indigenous groups in Canada, their stance on sustainable development and environmental protection allows both sides to use narrow stereotypes to advance their side of the debate and create leverage to win public support.
Although the history of colonialism and aboriginal oppression is beyond the scope of this discussion, the image that grounds my perspective today is rooted in it. In the 1960s, a group called Keep America Beautiful (or KAB) partnered a non-profit public interest organization to launch an anti-pollution campaign. Its objective was to dramatize the injurious effects of litter and other forms of pollution on the environment, and encourage individuals to take responsibility to protect it.
On Earth Day in 1971, KAB released its most notorious Public Service Announcement ever (see here for a critique of ‘corporate greening’). In it, a Native American (depicted by an Italian-American actor) is seen paddling his canoe down a beautiful river at dawn. The idyllic scene begins to transform as we see a newspaper floating by. Then a wide angle shot reveals the background – an industrial port with huge cranes and cargo ships dominating the skyline. As the music and the drumbeats build, the canoe paddling Indian fades into a backdrop of smoking factories.
As he gets out of his canoe on the riverbank, the Indian sees bottles, cans, and other rubbish strewn everywhere. The narration then starts talking about the beauty of the natural environment. The Indian looks up where he sees cars on a freeway. A passenger tosses out a bag of fast-food trash that explodes at his feet. A close-up of his face shows him sadly looking down at the garbage and then up to the camera. The camera zooms in just as a tear rolls down his cheek. The narrator then intones in a deep voice, “Some people have a deep, abiding respect for the natural beauty that was once this country, and some people don’t.” Then comes the memorable slogan: “People Start Pollution. People Can Stop It.” To see the video, go to here.
This caricature was nothing new for the times, but what it did was transplant an otherwise racist image of the primitive Indian onto a social imperative for keeping streets clean. That is, the polluting habits of the motorists were so shocking to the Indian that it drove him to tears. Don’t make this simple, grown man cry, the commercial implied, do not pollute! In the decades since, this image has never really disappeared from our public discourse. The genius of the “Crying Indian” ad is the feelings of guilt that it generates. It reminds the viewer that we are destroying the land and the Indians know it, because we did it to them, too. The underlying stereotype is that Indians are markers of loss. Their inevitable disappearance is the price we pay for progress. The ‘Crying Indian’ or the ‘Ecological Indian’ symbol is an updated version of a much older symbol, that of the ‘Noble Savage,’ which was also used to express nostalgic feelings for a ‘Golden Age’ of innocence and pre-industrial simplicity. As a literary and artistic device, colonizers have used the ‘Noble Savage’ for over 400 years to justify domination of a dying, exotic civilization.The Gradual Civilization Act of 1857 and the residential schools policy designed to “kill the Indian in the Child” of the early 1900’s fed off these perceptions, justifying their extremely damaging projects of assimilation and cultural genocide.
Mark Twain (the Galaxy, September, 1870) described the noble red man as follows, and which is depicted almost to a tee in the Crying Indian commercial:
He is tall and tawny, muscular, straight and of kingly presence; he has a beaked nose and an eagle eye. His hair is glossy, and as black as the raven’s wing; out of its massed richness springs a sheaf of brilliant feathers; on his arms and wrists and ankles are broad silver bands and bracelets; his buckskin hunting suit is gallantly fringed, and the belt and the moccasins wonderfully flowered with colored beads; he is a being to fall down and worship.
The word ‘Savage’ generates a powerful effect. Savagery is just another form of barbarism; of primitivism; of ignorance and even violence. Savages need to be civilised. ‘Nobility,’ on the other hand, is gracefulness. It is serenity, sophistication, even enlightenment. The ‘Noble Savage’ is innocent of his own shortcomings. And so, absent any malice, he deserves the chance to be welcomed into the Christian brotherhood and obtain salvation.
The ‘Noble Savage’ stereotype of the North American indigenous is a different type of creature than, say, stereotypical portrayals of Arabs or Africans, who are supposedly savage savages. The ‘Noble Savage’ in North America has a profound connection to nature. His primeval relationship with the land, water, and wildlife illustrates his innocence and reveals an authenticity of sorts. His desire for a clean environment is pure. His existence is not infiltrated by commerce, industry, learning, or any other complex machination of modern life. When he speaks of the environment, or, rather, when he sheds a tear for the environment, we should listen intently.
In the Canadian context, these stereotypes are being used advantageously by some First Nation activists against both the Gateway Pipeline and the Alberta oil sands, even though they have a much broader agenda. Their strategy is to seek the support of other nations to exert pressure on Canada so that their otherwise ignored concerns, are heard. By exploiting the ‘Ecological Indian’ or ‘Noble Savage’ stereotype, they tap into the special fascination many European and other countries have for North American indigenous populations, seeing them as objects of reverence and fascination.
In pursuit of this objective is the tireless Dene Elder Francois Paulette, whose battles with Ottawa a generation ago, launched the era of modern land claims. Paulette, who easily fits Twain’s physical description of the “noble red man,” has travelled around the world taking full advantage of orientalist attitudes in gaining access to leaders who, to put it colloquially, are far above his pay grade. This photo of Elder Paulette paddling British Royalty in his canoe on Blatchford Lake in the N.W.T. speaks eloquently to the stereotype.
When the G20 was held in Toronto for example, Paulette showed up to make his case for the cancer affected aboriginal residents downstream from various oil sands projects. Resplendent in braids, beads and a fringed buckskin vest, he was followed by television cameras wherever he went. Before the end of the proceedings, he miraculously gained access to several European heads of state when he was invited to dine with them. This was especially interesting, as our own Prime Minister did not have the time of day for Mr. Paulette and no other NGO or scientists received such attention. The meeting may have been shrugged off by the Canadian politicians as a publicity stunt, but, a year later, as the European Union contemplated introducing trade restrictions on the import of Canadian Oil Sands oil, suddenly Prime Minister Harper was on full alert, attempting to counter the claims made by Paulette and his aboriginal and non-aboriginal supporters.
Paulette’s speech to the UN climate change conference in Durban is another example, where he evoked the stereotypical images of the ‘Ecological Indian’ very effectively (see YouTube video clip from 5:29 to 9:07).
Although these interventions gain exposure to the environmental issues, they are also potentially problematic. If aboriginal peoples are reduced to caricatures, two kinds of effects are generated. On one hand, when First Nations groups protest on environmental issues their concerns are taken seriously, as Mr. Paulette’s reception internationally attests. After all, being at one with nature is the most important aspect of a native person’s existence, is it not? The stereotype gives positive credibility to the speaker, but while his words get the attention the issue requires, the one dimensional characterisation can carry a potentially large price tag. If Aboriginal advocacy on the environment gets attention only because of the racist view that indigenous people are inherently limited this narrow area of expertise, then virtually any other issue is relegated to secondary status, for example, their advocacy for other critical issues such as improved health care, resource revenue sharing, economic development, education or self government.
Even within the environmental sphere, an infantilized conception of environmental protection can be generated by the ‘Noble Savage’ or ‘Ecological Indian’ stereotype, one that denies that indigenous people are sufficiently able to contemplate the social, political, and economic complexities that engage any real discussion of environment. After all, the implication is, what do these naturalists know about industry? The pipeline will generate hundreds of millions of dollars and creates thousands of jobs. Their protest is ignorant of such weighty concerns, or so it is said. Surely, no rational person could value a few caribou, swamps and trees over the massive economic wealth these projects would create for our country.
It is these childlike simplifications promoted by the media and the oil companies that make serious advocacy difficult for indigenous groups in Canada. Their demands are taken seriously in one specific sphere, but are rendered insignificant in others that are vitally connected to it.
This narrow reframing also ignores or trivializes a deeper issue. The regulatory process surrounding the Gateway Pipeline has followed an impoverished understanding of the duty to consult, a requirement declared by the Supreme Court of Canada as a necessary step in development projects on aboriginal lands. Under the common law, if any project approved by the federal government infringes the property or constitutional rights of Canadian indigenous peoples, a consultation process must be conducted that seeks to understand and assuage the concerns of those affected.
The problem in Canada is that this duty is without any serious legal requirements, nor is the ultimate consent of the affected parties required so long as the federal government approves the project. Many First Nations opposed to the Gateway Pipeline construction have publically stated their dissatisfaction with the consultation process.
It is important to mention that the duty to consult is not merely the invention of Canada’s indigenous peoples. It is, in fact, rooted in a powerful collective statement of international law, the United Nations Declaration on the Rights of Indigenous Peoples, which our country initially opposed. Canada was a part of a group of four of the richest countries on earth, namely Australia, New Zealand, and the United States, who decided that indigenous populations did not merit the protections in the Declaration. In 2010, Canada officially endorsed the Declaration, though we continue to struggle with how Article 19 will fit into our constitutional framework.
Specifically, Article 19 requires that states shall consult and cooperate in good faith with the indigenous peoples concerned through their own representative institutions in order to obtain their free, prior and informed consent before adopting and implementing legislative or administrative measures that may affect them. The Northern Gateway project will affect over 50 First Nation communities in the most profound of ways, yet the major complaint is a lack of meaningful consultation.
Recently, Dene National Chief Bill Erasmus wrote the Premier of Alberta to express the Dene Nation’s concerns about recent pipeline failures and oil spills in the province. He states in the press release, “We are concerned that Dene communities have not been notified of some spills, nor have Dene communities been consulted or updated on spill remediation. Dene communities are impacted by these spills, and there must be communication between the Dene Nation, Dene communities, and Alberta’s government when spills occur,” Erasmus said (see Media Release, June 15, 2012).
So, what does all of this imply for the pursuit of environmental justice in the future?
There are no easy answers, though some lessons can be drawn. The ‘othering’ of aboriginal peoples in Canadian discourse are presently being met with two avenues of response, both of which are very limited.
First, in seeking to preserve the integrity and preservation of their land and ecology, aboriginal groups engage in political advocacy. It is not complicated but it requires money and influence over the right people. Just as other special interest groups have done, a well-funded lobby can do wonders for virtually any political cause. This assumes, however, that there is money available to pay for the high cost of lobbying and that those being lobbied will listen and be persuaded. The problems of stereotyping and racial bias discussed above, can compromise lobbying efforts even when funds are available.
The second approach is a legal one. Both the beauty and tragedy of our positivist legal structures in the West rests in their internal consistency and responsiveness to rules and procedure. The legal rules that do exist can be utilized by affected groups to some effect. Indigenous groups after all, have the lasting power in this dispute. As the thinking goes, corporate executives under pressure from shareholders with short time horizons are much more likely to buckle than the indigenous inhabitants of land who have put up with such encroachment for 500 years.
A few well-placed injunctions and well thought-out statements of claim could stall the proposed pipeline for years while the courts deliberate but the ultimate result is still a gamble and the result may be counterproductive to the original goals of the litigation.
The challenge of achieving environmental justice goes beyond lobbying and litigation, it goes to the root of our legal concepts. The fundamental rationale for disregarding indigenous protests about land use rests in the Locke’s concept of private property. Over the centuries, discrete parcels of the natural environment have come to be viewed by non-indigenous peoples and the legal system as commodities upon which its owner may exert whatever form of rational wealth-maximization he sees fit to the extent that he sees fit.
Comparatively, indigenous theories of property revolve around the concept of custodianship, or trusteeship, which find support in Rousseau’s philosophy. That is, those who possess the land in effect hold it in trust for its true owner. While the true owner is often understood in transcendental terms, a secular analysis would replace divine justifications with intergenerational loyalty.
My proposal asks whether the pursuit of environmental justice would have better outcomes if a theory of property ownership that took indigenous values into account, were used. Property law based on trusteeship or custodianship rather than the temporally impoverished idea of the fee simple estate, would require an entirely different analysis when environmental issues arise. Such an approach would at least partially remove racial and ethnic bias from the law by including the values and cultural reality of the first occupiers. The present analysis starts from the assumption that unused space, if not utilized towards some economic end, is inherently valueless. It becomes a dichotomy of the value of ‘doing something’ versus the value of ‘doing nothing.’
A reframing of the debate to take indigenous values into account would ask, why must an open space be understood as having no value? Do oil company executives not have backyards? Do they not own cottages by untouched lakes to which they rush on summer weekends? Why have grass at all? Why not pave it all over?
When the argument is put this way, even the staunchest capitalist would agree there is no question that open space left open, can have value. Indigenous priorities, however, take it one step farther. They calculate value not from within a specific time frame but rather on the notion that open space that provides sustainable sustenance and shelter can do so for all time. A large amount of wealth for a period of less than one generation is of little weight in this calculus. After all, how much longer will the oil sands last? While indigenous values do not preclude development, they do not endorse development at all costs. This is why the duty to consult is so very important so that all views can be heard and that consent to development on traditional lands is genuine.
In conclusion, my aim in developing this discussion has been to suggest that there are inherent biases, racial stereotypes and systemic discrimination against indigenous peoples that have informed the law and the thinking of people on both sides of the environment debate generally and the Gateway Pipeline debate in particular. Although stereotypes of the “Ecological Indian” or the “Noble Savage” can cut both ways and even assist in accomplishing some environmental goals of the indigenous population and other environmental activists in Canada, they can have a net negative effect on the perpetuation of inequality in the long run. For the indigenous population to take their rightful and equal place in Canada, they must be able to fully participate in the broad range of decisions that affect them and be able to see all their values and needs – not just those pertaining to the environment - reflected in the law from a philosophical place as well as jurisprudentially. Before this can happen, the fundamental concept of property law must be re-thought by developers, judges and politicians, at least to the extent that it affects indigenous lands. Furthermore, there must be an expansion of understanding of the centrality of the land to all other aspects of indigenous life, including resource revenue sharing through planned and sustainable development projects. In the meantime, as systemic racism continues to exist in our society against indigenous peoples, its victims should take advantage of any positive opportunities that may arise that could create leverage for change. If these opportunities can be exploited by the indigenous peoples to derive some benefit while educating the public as to their multifaceted realities, then the “noble savage” may eventually fade into obscurity where he belongs.
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Consequences of being an OPCA Litigant?
PDF version: Consequences of being an OPCA Litigant?
Case commented on: ANB v Hancock, 2013 ABQB 97.
ANB v Hancock is Associate Chief Justice John D. Rooke’s second written judgment about an Organized Pseudolegal Commercial Argument (OPCA) litigant. As summarized by Justice Rooke in ANB (at para 15), “OPCA concepts are legally incorrect schemes marketed and promoted by a collection of conmen [“OPCA gurus”] that claim to allow a person to avoid or impose legal obligation outside of recognized legal processes.” These concepts and schemes are all associated with OPCA indicia, which are “unusual motifs that are unique to or strongly associated with OPCA concepts and schemes” (at para 16). ANB builds upon Justice Rooke’s ground-breaking decision in Meads v Meads, 2012 ABQB 571. Like Meads, ANB arose in the family law context, although Meads arose out of a divorce and matrimonial property action commenced by Mrs. Meads, and ANB arose from the seizure of A.N.B.’s two children by Alberta Family Services and a subsequent order granting permanent guardianship of the children to the province. ANB both applies and extends Meads. It applies it by following through on some principles set out in Meads, including the provision of an explanation of court costs, characterized in Meads (at paras 637-638) as “a crucial aspect in the ‘limited duty’ a judge owes to these self?represented litigants.” It extends Meads by allowing Crown counsel to hide their identities in the face of conduct by A.N.B. which is the subject of criminal charges.
In this comment we do not address all of the issues dealt with in Justice Rooke’s judgment. A.N.B’s central claim was that he had absolute authority over his children and his consent was required before he was subject to the jurisdiction of Alberta’s child welfare system, the police, or the courts. Most of Justice Rooke’s decision (at paras 36-99) is taken up with explaining to A.N.B. why the OPCA arguments supporting this claim cannot succeed in a court of law. Instead, after setting the stage with a bit of background, we focus on only four issues:
- the use to which the identification of A.N.B. as an OPCA litigant is put;
- the shielding of the identity of Crown counsel as a security precaution;
- the allegation Justice Rooke was biased because he was the author of Meads; and
- the costs awarded against A.N.B.
Background
The seizure of A.N.B.’s two children by Alberta Family Services led to three separate actions. First is the appeal by A.N.B. of an order by Provincial Court Judge Ho granting the province permanent guardianship of the children. Justice Rooke is the case management judge and A.N.B. is represented by an experienced family lawyer on that appeal.
The second matter involves criminal charges. A.N.B. pled guilty in Provincial Court in September 2011 to two counts of intimidating justice system participants (Alberta Children and Youth Services employees) and one count of criminal harassment. He was sentenced to time served (four months) and put on probation for one year. A.N.B. is now facing further criminal charges of a similar nature. The Crown is proceeding with these new charges by way of indictment, with A.N.B. already committed to stand trial in the Court of Queen’s Bench following a preliminary inquiry. A.N.B. is represented by an experienced criminal law lawyer in those proceedings.
The third action is this civil action, and A.N.B. was self-represented in these proceedings. He commenced this lawsuit a year ago against a number of government agents, peace officers, Crown counsel, court clerks, judges, and A.R., the mother of A.N.B.’s two children. His lawsuit alleged a variety of illegal conduct by those defendants and demanded $20 million in gold and silver bullion and the return of his two children.
In January 2013, Justice Rooke orally granted an application by a number of the defendants to strike A.N.B.’s civil claim and thus put an end to this lawsuit. Justice Rooke’s written reasons were subsequently published for the express purpose of assisting A.N.B. to understand why his lawsuit failed and, because A.N.B. had walked out of the courtroom before Justice Rooke’s costs order, to explain to A.N.B. the basis of the costs awards against him (at para 3). The decision was also published because it discusses some novel points. At 27 pages and 109 paragraphs, ANB is a fairly lengthy judgment, but considerably shorter than the 736 paragraph, 156 page Meads decision.
Identification of an OPCA Litigant
As a preliminary matter, Justice Rooke easily concludes (at para 19) that A.N.B. is an Organized Pseudolegal Commercial Argument (OPCA) litigant. His documents and oral arguments were filled with OPCA indicia and invoked numerous OPCA strategies. For example, in the style of cause for the civil action, A.N.B. identified himself by two different names: [A.-N.] of the [B.] Family and “Trust #983170-321522-19305 otherwise known as the [A.N.B.]TM dba, or the [A.N.B.] HOLDINGS”. The “double/split” character of the claim is discussed in ANB (at paras 66-71) and Meads (at paras 417?446). The Statement of Claim is also irregular in form and includes unconventional language. As examples of irregularities in form, the Statement of Claim includes a red thumb print surrounded by the text “SACRED OFFICE TRUSTEE 983170-321522-193058 SEAL” and is notarized. As examples of the unconventional language, the Statement of Claim claims violations of the U.C.C. (the Uniform Commercial Code of the United States) and “International Property and Copy Rights Law.” The unusual motifs are reviewed and quoted at length in ANB (at paras 8-14). The OPCA arguments in A.N.B.’s Statement of Claim and other documents are reviewed and addressed at even greater length (at paras 53-94).
To what purpose is A.N.B. identified as an OPCA litigant? To what purpose are his arguments characterized as OPCA strategies? As we have previously discussed (in “What has Meads v Meads wrought?”), courts have used Meads for a variety of purposes to date. It is therefore instructive to see what use Justice Rooke makes of his earlier decision in a new matter involving an OPCA litigant.
First, at the same time as he identifies A.N.B. as an OPCA litigant, Justice Rooke is careful to note (at para 19) that A.N.B.’s affiliations have no direct relevance to the validity of his claim. It is the legal substance of what he argues that matters. Of course, to the extent that A.N.B. only makes OPCA arguments already dismissed in numerous court actions across Canada, there is no legal substance to his arguments. Justice Rooke nonetheless explains why the specific claims brought by A.N.B. in this particular action do not have legal validity. Thus, for example, Justice Rooke notes that a claim in the tort of conspiracy that the defendants are denying A.N.B. access to his children cannot be brought in a family law proceeding given governing Supreme Court of Canada jurisprudence (para 53).
While identification of A.N.B. as an OPCA litigant may have no direct relevance to the validity of his claim, it does make certain types of procedural orders against him more readily available. In ANB, this point is illustrated by the next three issues we discuss.
Protective Anonymity for Crown Counsel
The first of these issues is another preliminary matter and concerns some unusual security precautions that Justice Rooke had ordered — precautions not specifically mentioned in Meads. The lawyer for fifteen of the defendants was allowed to identify herself by a pseudonym and communicate with A.N.B. is a way that shielded her identity. The lawyer for the four RCMP defendants was allowed to be identified only by his or her title, “Justice Canada Counsel.” The identity of these two lawyers was shielded not only from A.N.B. but also from his lawyers in the other two actions. The only lawyer identified by name was one appointed to represent A.N.B.’s children in the guardianship matter and apparently mistakenly named by A.N.B. as a defendant — mistakenly because A.N.B. made no allegations or claims against her in his Statement of Claim.
The identities of Crown counsel were shielded because A.N.B. had been convicted in September 2011, after pleading guilty, on two counts of intimidating justice system participants and one count of criminal harassment. However, Justice Rooke suggests (at para 26) that A.N.B.’s status as an OPCA litigant means that security precautions such as the orders shielding the lawyers’ identities should be easily available. Such security precautions should be available if a party is able to establish that there is an “air of reality to an actual or potential threat or danger.” This “air of reality” test offers a fairly low threshold, as Justice Rooke acknowledges (at para 26). However, he adds a caveat, namely, that the security precautions that can be ordered when this test is met cannot affect the OPCA litigant’s ability to make and respond to arguments in court.
In this case, A.N.B’s prior admitted guilt to intimidating justice system participants was, by itself, enough to meet the “air of reality” test with its low threshold. Justice Rooke left it open for a future case to determine whether mere affiliation or self-identification by a litigant with an OPCA movement with known violent propensities might be enough, by itself, to warrant security precautions. The groups identified by Justice Rooke in Meads as being OPCA movements with known violent propensities are the Freemen-on-the-Land, the Sovereign Man / Sovereign Citizen movement and the Church of the Ecumenical Redemption International [CERI] (Meads at paras 172-188, 257-263).
In ANB, Justice Rooke notes (at para 14) the basis for the violence in OPCA strategies:
One unfortunate and highly troubling aspect of persons associated with OPCA litigation and movements is that members of these groups are known to direct both harassing and violent activities to the persons they identify as their enemies … These enemies are typically peace officers, government and court employees, lawyers, and members of the judiciary. This potential aggression flows from the false historical and theoretical constructs within which OPCA concepts are advanced. An OPCA litigant is typically advised (incorrectly) by a guru with whom he is associated, that the state has no hold over the litigant. That is meant to indicate (again incorrectly) that any state action must be unlawful, and, in the result, the OPCA litigant is therefore (improperly) counselled to be free (and often encouraged) to strike back at his ‘oppressors’.
A significant challenge for courts will be to distinguish between those OPCA litigants who merely associate with ideas that could be used in an attempt to justify violence but do not themselves have violent tendencies or intentions, and those OPCA litigants who do. As discussed in our previous blog on judicial treatment of OPCA litigants post-Meads, some courts have used the fact of a litigant’s status as an OPCA litigant to assume that the litigant’s legal position is unmeritorious and that the litigant poses a danger. If applied unthinkingly, the air of reality test may reinforce this tendency and require OPCA litigants to proceed under distrust and suspicion, and without the normal ability to discuss a matter with opposing counsel. Those constraints can be justified where they are necessary, but we would suggest that merely espousing OPCA concepts, even the more extreme ideas of the “freemen of the land,” is not sufficient justification and should not provide the air of reality to concerns that the individual is a danger to other participants in the system.
We would further note that the approach adopted by Justice Rooke will present some practical challenges. How does one effectively shield the identity of lawyers and at the same time not interfere with the OPCA litigant’s ability to make arguments and respond in court? Will lawyers make submissions in court under pseudonyms? Will they make their submissions behind a screen? In the world of the Internet it may prove challenging to achieve both these goals simultaneously. This suggests another source of caution for the courts. Where the restrictions are being imposed for less tangible reasons than existed in this case, the courts ought to adopt restrictions at the moderate end of the spectrum.
Allegation of Bias against Justice Rooke as the author of Meads v. Meads
The final preliminary matter Justice Rooke dealt with was A.N.B.’s motion that Justice Rooke recuse himself for bias. A.N.B. argued that Justice Rooke ought to recuse himself because he is the judge who wrote the Meads decision, and “… since you made the decision you have a sort of personal stake in upholding that decision, correct, and that I feel you might not be totally objective …” (at para 32).
A judge must recuse him- or herself if “an informed person, viewing the matter realistically and practically, and having thought through the matter, would conclude that it is more likely than not that a judge, whether consciously or unconsciously, would not decide it fairly”: Wewaykum Indian Band v Canada, 2003 SCC 45 at para 60.
Justice Rooke declined to recuse himself for two reasons. First, he noted (at para 34) that because Meads has not been appealed, whether he or a different judge of the Court of Queen’s Bench of Alberta heard A.N.B.’s matter, “the principles of stare decisis means we would each apply the same law.” This is a bit of an over-statement. Stare decisis literally means “to stand by decided matters.” As Gerald Gall puts it in The Canadian Legal System, 4th edition, (Scarborough, Ont: Carswell, 1995) at page 343, “the decision of a higher court within the same jurisdiction acts as binding authority on a lower court within that same jurisdiction” [emphasis added]. Meads may not have been appealed but it is still a decision of the Court of Queen’s Bench, and not that of a higher court. The question is whether a judge is bound by a previous decision of a different judge of co-ordinate jurisdiction in the same province, i.e., by another Court of Queen’s Bench of Alberta justice in this case. Gall characterizes the issue as one of “comity” among judges in the same jurisdiction (at 356). Such a judge would be expected to come to a decision in accord with other decisions made by other judges of the Court of Queen’s Bench of Alberta on the same issue. But another judge would not be bound to follow Meads, which s/he would be if Meads had been a decision of the Court of Appeal of Alberta or the Supreme Court of Canada. A more serious problem for the binding nature of the decision in Meads is the fact that much of Meads is simply not binding because it is obiter dicta, i.e., not necessary to the decision about whether to appoint a case management judge, which was the issue in that case.
Second, Justice Rooke analogized his position to that of Justice Myers in R v Lawson, 2012 BCSC 356, where Justice Myers rejected an allegation of bias for his role in the conviction and sentencing of the OPCA guru Russell Porisky, noting (at para 7) that . . . “no reasonably informed member of the public would conclude that a judge was biased because he had decided a prior case involving similar issues. That is something that occurs on a regular basis.” But, again, that analogy does not fully apply given that Justice Rooke did more than simply issue a decision in Meads addressing the particular circumstances of that OPCA litigant. Rather, he wrote an extensive analysis of the OPCA litigant phenomenon and drew various conclusions about the nature, quality and significance of that phenomenon. That analysis may give an OPCA litigant appearing before him a better reason to perceive Justice Rooke as pre-committed to a particular point of view on how OPCA litigation ought to be dealt with.
We do not agree that Justice Rooke ought to recuse himself from cases such as this one merely because he decided Meads, given that his decisions shows a sensitivity and fairness in dealing with OPCA litigants and a willingness to engage with their arguments that not all post-Meads decisions have shown. He has been clear that in each case a judge is obligated to consider the merits of the OPCA litigant’s actual claims and arguments, and to decide each case consistently on its own merits. That seems to ensure that any OPCA litigant may reasonably expect that, on the actual issues to be adjudicated, he will have a fair and impartial hearing.
It is the case, however, that an unusual judgment like Meads, which is closer to an academic article on the OPCA phenomenon than to a traditional judicial decision, poses certain conceptual problems. It involves a judge taking a position on general concepts with application across a variety of cases without that position being necessary to the case that was decided. That gives a litigant some reason to perceive Justice Rooke as committed to that position in a way that a judge might not be if only having issued a more usual and restricted judgment. On the other hand, it is also the case that academics who become judges do not generally have to refrain from deciding cases which raise issues on which they have previously taken an academic position. That is, presumably, because general positions are not seen as necessarily pre-determining the consideration of specific matters of fact or law arising in an individual case (see, e.g., Re Great Atlantic & Pacific Co of Canada Ltd and Ontario Human Rights Commission et Al, (1993) 13 OR (3d) 824). Justice Rooke’s judgment in Meads, while a judgment, may be analogous to that sort of academic analysis.
Ultimately the key point is this: the OPCA positions advanced by a litigant are not, in fact, the issue before the court. The issue is whatever the issue in the specific case is — e.g., that the government has interfered in the parent-child relationship — and the OPCA positions are generally a means for a litigant to talk about those substantive issues or the process through which they are to be adjudicated. Therefore, where a judge has been clear that those substantive positions are to be adjudicated on their merits through a fair process, we suggest that judge does not create a reasonable apprehension of bias even if he has taken a position on the merits of OPCA and the litigants who use them.
Costs awarded against A.N.B.
The final issue in ANB that we want to discuss was not a preliminary matter, but a consequential one. A.N.B. left the courtroom after Justice Rooke had struck his action and therefore did not make any submissions about costs or hear Justice Rooke’s order about the costs A.N.B. would be required to pay as a result of his lack of success. The defendants argued that they should receive solicitor-and-own-client indemnity costs for being dragged into an entirely frivolous and vexatious action that flowed from OPCA strategies. Justice Rooke agreed (at para 101) that, because A.N.B.’s action was fatally flawed and without any basis in law, it would be unjust for the defendants to be out-of-pocket.
Justice Moen, in Brown v Silvera, 2010 ABQB 224 at paras 29?35, surveyed numerous cases in which indemnity costs had been found to be appropriate, cases in which the conduct of a party has been “reprehensible, scandalous or outrageous” and where indemnity costs would satisfy the objectives of deterrence and punishment. And in connection with OPCA litigation in general, in Meads (at para 631) Justice Rooke had formulated the following general principle:
[I]nnocent parties [should] be indemnified for the legal costs associated with OPCA litigation. No, or little, cost should flow to a litigant who is abused by OPCA strategies.
In applying this principle in ANB, Justice Rooke awarded the defendants the costs that they asked for, costs that covered the expense of responding to A.N.B.’s Statement of Claim. In the case of the self-represented lawyer who had been appointed to represent A.N.B.’s children — the lawyer apparently named by mistake as no claim was made against her — the indemnity costs were what she calculated she would have earned had she not spent her time responding to A.N.B.’s lawsuit. Costs against A.N.B. totalled $20,000.
The indemnification nature of the cost award in ANB illustrates another point that Justice Rooke made in Meads (at para 638):
It has been this Court’s experience that OPCA gurus do not educate their customers on the purpose and operation of court cost awards. An OPCA litigant may perceive explanation of this mechanism as a threat, but this explanation is a crucial aspect in the “limited duty” a judge owes to these self?represented litigants. OPCA litigants seem to often believe there are no potential negative consequences to their adopting OPCA techniques and strategies. Evidence to the contrary is a challenge to that indoctrination.
Cost awards against OPCA litigants therefore appear to serve at least one purpose that is specific to the OPCA litigation context and that is that they are intended to shake litigants’ confidence in their gurus. Justice Rooke’s quoted comment from Meads also explains why he goes to great lengths in ANB to explain the costs award to A.N.B. even though he had walked out of the hearing. In ANB we see an illustration of an explanation of a costs award as “a crucial aspect in the ‘limited duty’ a judge owes to these self?represented litigants.” Cost awards — and especially large ones — also serve a purpose specific to the vexatious litigant context. “[P]ersistently failing to pay the costs of unsuccessful proceedings on the part of the person who commenced those proceedings” is listed in section 23(2)(e) of the Judicature Act, RSA 2000, c J-2 as one of the types of conduct that make proceedings vexatious. Unpaid costs awards allow defendants to apply to the courts to have OPCA litigants declared to be vexatious litigants. And, if they are declared to be vexatious litigants, then they cannot commence or continue legal proceedings without the permission of the court.
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Independence of the Bar and the Prevention of Money-Laundering
PDF version: Independence of the Bar and the Prevention of Money-Laundering
Cases Considered: Federation of Law Societies of Canada v Canada (Attorney General) 2013 BCCA 147.
Introduction
On April 4, 2013 the British Columbia Court of Appeal issued its decision in Federation of Law Societies of Canada v Canada (Attorney General), 2013 BCCA 147 which upheld the earlier decision of a chambers judge that aspects of Canada’s money-laundering legislation violate section 7 of the Charter of Rights and Freedoms and cannot be saved under section 1.
In her initial judgment (2011 BCSC 1270) the chambers judge held that aspects of the money-laundering regime undermined the lawyer-client relationship and, in particular, eroded the solicitor-client privilege, which created an unjustified violation of section 7 (para 144). Because the alternative regime implemented by the provincial law societies was an effective alternative that had a more minimal effect on the liberty interests of clients, the money-laundering regime could not be saved under section 1. The law societies’ regulation ensured “that proportionate and dissuasive criminal, civil or administrative sanctions be available for non-compliance with anti-money laundering requirements” (para 154).
In its judgment the British Columbia Court of Appeal took a somewhat different approach. It held that the problems with the regime were not that they violated solicitor-client privilege, but rather that they jeopardized the liberty interests of lawyers and clients and were inconsistent with independence of the bar, a principle of fundamental justice.
After summarizing the decision, this blog will consider the Court’s use and definition of independence of the bar. I will suggest that while the Court’s general explanation of what independence of the bar means is vague and overbroad, its actual application of independence to the facts is both defensible and important. Where a statute interferes with a lawyer’s fulfillment of her legal duties in circumstances where the lawyer or client’s life, liberty or security of the person is at issue, then that interference is properly found to violate the Charter.
The Decision
The federal government’s attempt to regulate money laundering and terrorist financing began in 1989, but the provisions primarily at issue in the Court of Appeal decision were introduced in the form of regulations in 2007 and through legislative amendments in 2008 (paras 3 and 21). The Court of Appeal drew several conclusions about how this regime would apply to lawyers. First, it found that the regime did not apply only to lawyers “acting as financial intermediaries” (para 66) but also to lawyers receiving or paying funds in the course of providing legal advice (para 68). Any lawyer providing legal advice must comply with the record keeping and financial transaction monitoring provisions of the legislation, and also collect and retain client information (para 69). Second, while the legislation and regulations grant some protections and exclusions to information protected by solicitor-client privilege, they also require lawyers to “record client information which is prima facie the subject of solicitor-client confidentiality” (para 71). Solicitor-client confidentiality “is a broad descriptive term which includes, but is not limited to, information which is protected by solicitor-client privilege” (para 71). Third, while solicitor-client privilege is protected in some aspects of the regime, it is not wholly protected with respect to others, in particular the legislation’s search and seizure provisions (para 74). To assert a claim of privilege in the event of a search or seizure the lawyer is required “to disclose the client’s last known address” (para 76). Fourth, the use of information obtained through the search and seizure provisions is not restricted to determining whether lawyers are in compliance with their obligations. Once information has been disclosed to a law enforcement agency “there is no restriction on what use may be made of that information” (para 78).
In contrast to this regime, the Federation of Law Societies and its provincial members have adopted an alternative system to prevent the use of lawyer’s accounts for the purposes of money laundering. The Federation’s system has been in fact governing these matters since injunctions were obtained preventing the application of the federal money laundering regime to lawyers, both the provisions at issue in this case (para 24) and also earlier enacted provisions (para 17). The law societies’ regime has two key features. First, it prohibits lawyers from receiving or accepting more than $7,500 in cash in relation to a single matter except for the purposes of paying legal fees. If a lawyer receives cash payment for legal fees then any refund on those fees in excess of $1000 must also be paid in cash (para 19). Second, lawyers are required to perform client identification and verification “by recording basic information, such as the client’s name, address, telephone number and occupation (for an individual) or business activities (for a corporation or other entity) (para 22). The law societies ensure compliance with these rules through annual reports and audits (para 23). The Court noted that the governance by the law societies significantly differed from the government’s money laundering regime because information disclosed to the law societies was subject to the “same obligation to the client respecting the disclosure of that information as the lawyer from whom the information was obtained” and is not disclosed to others.
In brief, then, the federal money laundering regime requires lawyers to collect and disclose information that is protected by solicitor-client confidentiality and to provide that information to the state, where law enforcement agencies may use it without any particular restrictions. The law societies’ regime requires lawyers to collect information, and imposes restrictions on their use of cash transactions, but it controls and restricts the use made of that information in the event it is disclosed.
The Court of Appeal held that these aspects of the money-laundering regime rendered it unconstitutional. The legislation places the liberty interests of lawyers at risk because a lawyer who does not comply with her record-keeping and client identification obligations may be liable for a fine or term of imprisonment (para 82). It places the liberty interests of non-corporate clients at risk because it requires the disclosure of confidential information from those clients to law enforcement agencies who may use that information for any purpose, “including pursuing a criminal charge against the client” (para 90). The Court noted here that the regime does protect privileged information, but that “confidential information which is not found to be privileged has no such protection” (para 88).
The risk to lawyer and client liberty is not in accordance with fundamental justice. The Court of Appeal held that both solicitor-client privilege and independence of the bar are principles of fundamental justice. That the privilege is such a principle is well-settled as a matter of law (para 103). Independence of the bar can be recognized as a principle of fundamental justice in accordance with the requirements of R v Malmo-Levine, 2003 SCC 74, which requires that a principle of fundamental justice be a principle which a consensus recognizes as “fundamental to the way in which the legal system ought fairly to operate” and is “capable of being identified with sufficient precisions so as to yield a manageable standard against which to measure deprivations of life, liberty or security of the person” (para 101).
Independence of the bar satisfies this test because it is a legal principle which “has long been recognized as a fundamental feature of a free and democratic society” (para 107) and is “an integral part of Canadian society as a whole” (para 109). It is “an element of the rule of law which is essential to the constitution of a modern democracy” (para 111). It can also be defined: “independence of the bar consists of lawyers who are free from incursions from any source, including from public authorities” (para 114).
Contrary to the chambers judge, the Court of Appeal decided that the regime did not violate solicitor-client privilege. Generally speaking the provisions of the legislation granted “sufficient protection for solicitor-client privilege” (para 118). The Court held, however, that the legislation did not respect independence of the bar. In particular, the legislation requires that a lawyer choose between satisfying her duty of loyalty to her client or complying with the terms of the legislation (para 122). It “imposes conflicting interests and corresponding obligations on the lawyer, regarding clients’ interests, state interests, and Lawyer’s liberty interests” (para 123). Ultimately, “it attempts to make lawyers the agents of the state against the interests of their clients” (para 154).
The legislation was not saved by section 1. Its objectives are pressing and substantial, and there is a rational connection between the regime and those objectives given that lawyers have been involved in money laundering in the past (para 134). When compared to the rules and requirements imposed by the law societies, however, the regime cannot be considered to create a minimal impairment on the section 7 rights. Further, the approach of the law societies is sufficient to achieve the regime’s objectives, particularly since the law societies’ approach does not prevent the state from prosecuting lawyers who engage in unlawful money laundering: the money-laundering regime “may make the gathering of evidence of such activities easier, but if they are severed or struck down, such conduct on the part of lawyers would not be excused” (para 151). Finally, the Court held that the effect of the legislation was disproportionate to the accomplishment of its objectives.
There was a concurring judgment from Justice Frankel, concurred in by Justice Gerson. Justice Frankel agreed with the result but disagreed with the position of the majority that the regime infringed on the liberty interests of clients. He acknowledged that a client could end up facing legal consequences as a result of the lawyer’s compliance with the regime, but that would also be the case if a “stock broker or financial advisor” did so (para 165). Justice Frankel rejected the idea that simply creating a document that could potentially be used in an investigation or for evidence, engaged an individual’s liberty interests; the connection between the threat to liberty and compliance with the regime was too remote (para 168).
Analysis
In its reasons the Court expresses the idea of independence of the bar in two different ways. In the first articulation, where it sets out the “principle” included in fundamental justice, the court says that independence of the bar requires that lawyers be “free from incursions from any source, including from public authorities” (para 113). In the second articulation, where it applies that principle to the facts of this case, it says that independence of the bar is violated by the money-laundering regime because it requires lawyers to be “agents of the state against the interests of their client.”
The first articulation – that lawyers must be free from any state incursion – is quite typical of judicial invocations of independence of the bar. As I put it in a recent paper, “Rhetoric and Realities: What Independence of the Bar Requires of Lawyer Regulation” (2012) 45 UBC Law Rev 145, courts generally do not explain the relationship between independence of the bar and the ethical or legal duties of lawyers. Rather, “[i]ndependence of the bar is simply an abstract principle, like freedom, liberty, democracy, or, relatedly, the rule of law, invoked by the Court on its way to making a determination on some particular matter at issue” (at 152).
The claim that lawyers must be generally free from state interference is not accurate. All Canadian law societies exercise power granted by legislation, and are subject to judicial review in the event that they exceed that legislative authority. Further, lawyers are subject to obligations arising from other statutory schemes, as well as by virtue of judicial decisions. Under the rules of court, for example, lawyers can be required personally to pay costs where they file frivolous and vexatious motions or do not respect the process of the court. Yet we do not view the legislative empowerment of law societies, or the provisions of the rules of court, as requiring some sort of special justification because they involve a public authority determining what lawyers must do under threat of sanction; we would only require that justification if, like the money-laundering regime, the effect that they had was in some way contrary to the role that lawyers play in a free and democratic society. There is, in other words, no necessary problem with state interference with lawyers; there is only a problem where that state interference is of a particular kind.
This understanding of the actual point of independence of the bar is reflected well in the second articulation of independence of the bar, where the Court found that the money-laundering regime violated lawyer independence by making lawyers agents of the state against the interests of their clients. As I explain in the “Rhetoric” paper, the real point of independence of the bar is that state regulation of lawyer conduct ought not to discourage or inhibit lawyer advocacy for clients, and also ought not to discourage or inhibit lawyers from keeping their advocacy within the bounds of legality (at 162-163). The state can (and does) regulate what lawyers do, but that regulation must ensure that lawyers maintain their power and responsibility to facilitate the legal system’s function of achieving peaceful social cooperation in a diverse society.
That the money-laundering regime undermines lawyers’ accomplishment of their role as zealous advocates within the bounds of legality depends, though, on seeing that regime as contrary to the lawyer’s function as an advocate. Lawyers do not always act in accordance with their client’s wishes and, in some circumstances, have an obligation to take actions that may result in negative legal consequences for their client – to be in that sense agents of the state against the interests of their clients. If a client uses a lawyer’s services to accomplish a criminal scheme – to, for example, defraud a lender – the lawyer may be justified in reporting that client to authorities. The communications between the lawyer and client are not privileged because falling within the criminal communications exclusion, and are likely not confidential either (see Understanding Lawyers’ Ethics in Canada (Toronto: LexisNexis Canada, 2011) at 112-115). Similarly, a lawyer who receives inculpatory evidence of a crime from a client must disclose that information to the state, even though normally client property is treated as confidential. The lawyer must do so regardless of the negative effect for the client’s legal interests and, if she does not, she risks being found guilty of obstruction of justice (see R v Murray, [2000] OJ No 2182, 48 OR (3d) 544 (SCJ). So simply having a lawyer act in a way that furthers state interests at the client’s expense does not necessarily demonstrate that the money-laundering regime interferes with the lawyer-client relationship. Making that claim requires something more.
This is where the Court’s analysis of solicitor-client confidentiality comes in. The position of the Court appears to be that under the money-laundering regime information will be revealed by the lawyer that is confidential (although not privileged) and that revelation may result in negative legal consequences for the client. By revealing that information, the lawyer is compelled by statute to become an agent in the client’s downfall. But, as noted, that is not a unique phenomenon, and is also not one that is inherently problematic. It is only problematic if the lawyer is an agent in the client’s downfall and if doing so is inconsistent with the lawyer’s obligations to the client. Of course normally undermining your client is totally inconsistent with the lawyer’s obligations to that client, but as the examples in the previous paragraph show, it isn’t always.
So what distinguishes circumstances when a lawyer ought not to undermine her client, from those where doing so is unproblematic? I would guess that there are at least two circumstances that justify a lawyer undermining a client’s legal interests: first, where the client has no legal rights against the lawyer that would prevent the lawyer from doing so, or second, where the legal system imposes on the lawyer an overriding obligation to act contrary to the client’s interests in particular circumstances. The first instance is demonstrated by the criminal communications example. While a lawyer may or may not have a positive duty to report the financial fraud, the effect of the lawyer being the client’s dupe, and the operation of the criminal communications exclusion, means that the client has no legal right to prevent the lawyer from reporting his crime. The lawyer does not owe the client any duty that prevents reporting. Similarly, a lawyer may act for a new client in suing a former client in a matter unrelated to the earlier representation of the former client. Again, while the lawyer has some duties to former clients that outlast the representation, but those duties do not prevent an unrelated representation against that former client. Lawyers’ obligations to clients are extensive but they are also legally defined, and outside those obligations lawyers may lawfully act in ways contrary to the interests of those clients (or former clients).
The second instance is demonstrated by the physical evidence rule. While normally a client may ask a lawyer to keep her property confidential, the obligations of criminal law and the law governing lawyers override that obligation where the client’s property is evidence of a crime. Absent one of those circumstances – the absence of a legal duty to the client or an overriding legal obligation to act against the client’s interests in the particular circumstances – the lawyer must not act contrary to the client’s legal interests.
So what about the money-laundering regime? The problem must be not just that the regime involves state regulation of lawyers, and not just that the regime involves lawyers acting contrary to their client’s interests. It must be that the state is requiring lawyers to act against their client’s interests in a way that is inconsistent with the lawyer’s duties to their clients, and is not required by any overriding legal duty applicable in the circumstances.
Extrapolating from the Court’s analysis, the problem appears to be that information protected by lawyer-client confidentiality – which is not a criminal communication, e.g. – is required to be disclosed, and that disclosure occurs without any specific analysis of whether the disclosure of this particular information is legally justifiable, as is the case, for example, when a lawyer discloses evidence of a crime. The protected information is just disclosed as a matter of course, and may be passed on to law enforcement agencies.
This more detailed analysis suggests some weaknesses with the majority’s reasoning, if not with its result. The reason the money-laundering regime is unconstitutional is because of the particular effect it has on the lawyer-client relationship, not simply because it is a state incursion on a lawyer’s work. It requires the lawyer to disclose information he is legally obligated to protect, and it does so without demonstrating that, in the particular circumstances, that disclosure is justified.
The reasons of the minority challenge this analysis. In the minority judgment they characterize the information of the client as no different from information that the client would give to a financial advisor or any other person. If this were the case then the majority’s result would be difficult to justify, and it is hard to see why the minority concurs with it. The lawyer faces a fine or imprisonment for not complying with the regime, but unless the information that the lawyer holds is in some way special, then what principle of fundamental justice does that outcome offend? It is only because the lawyer has a duty to protect that information – a special duty arising from the lawyer-client relationship that would not apply to, say, a financial advisor – that the state’s threat to the lawyer offends fundamental justice.
This may suggest that my analysis is incorrect, and that by independence of the bar the majority does indeed mean to suggest that any state incursion on lawyers’ work requires justification as a potential interference with lawyer independence. If so then I would suggest that the judgment is unfortunate. Lawyers serve a crucial function in the legal system, ensuring that individuals can access the rights and privileges that the law provides. Regulation (state incursions) to ensure that they fulfill that function, that they provide competent advocacy for their clients, that they protect client interests and not their own, and that their representation complies with law, is essential, and should not require special justification, even if it potentially affects a lawyer or client’s liberty. Justification is necessary not when the state regulates, but when it regulates in a way that interferes with lawyers’ accomplishment of their function in a free and democratic society. In those circumstances, and particularly where life, liberty or security of the person is at issue, then the regulation does indeed violate independence of the bar, and ought not to be permitted. This appears to be the specific determination made by the Court of Appeal, and it is the one that the decision ought to be cited for.
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Summary Judgement to Recover Monies Owing Under a Unit Operating Agreement
PDF version: Summary Judgement to Recover Monies Owing Under a Unit Operating Agreement
Cases Considered: Canada Capital Energy Corporation v Barracuda Energy Ltd, 2013 SKQB 134.
This is a nice, straightforward case in which the court granted summary judgment for amounts owing under a unitization agreement.
Facts
CCEC was the operator under a unit agreement and operating agreement in which Barracuda had a 3.71% working interest. The operating agreement provided that expenditures of over $10,000 required approval by way of an authorization for expenditure (AFE) approved by three or more working interest owners having a combined voting interest of at least 80%. Owners must respond within 15 days and failure to respond is deemed to be a vote in favour of the expenditure. Between February and March 2012 CCEC sent out 20 AFEs seeking approval for capital expenditures of $5.6 million of which Barracuda’s share was $208, 422. Barracuda failed to respond but the requisite number and percentage of working interest owners did and the operator proceeded. Barracuda failed to settle the resulting invoices and CCEC commenced this action. Barracuda admitted it was a party to the agreement but defended on the basis that it had not received adequate financial disclosure of the basis of the charges or any production payments. CCEC sought summary judgment.
Judgment
Justice Whitmore granted the application for summary judgment. The affidavit evidence showed that Barracuda had received or obtained credit for all of the production payment to which it was entitled. It was no defence to say that the unit was once profitable and should still be profitable.
Commentary
There is nothing profound about this short decision but it does illustrate one important difference between a unit operating agreement and the ordinary CAPL operating agreements used for exploration and development activities in western Canada. Whereas under the CAPL agreements a joint operator cannot be made to contribute to an expenditure over a certain threshold amount without executing an AFE, (and failure to respond is deemed to be non-consent) the prevailing norm with respect to unit agreements is, as here, majority decision making. This increases the risk for small operators who may be exposed to significant expenditures with no effective way of avoiding the liability which comes their way.
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From Regulatory Chill to Regulatory Concussion: NAFTA’s Prohibition on Domestic Performance Requirements and an Absurdly Narrow Interpretation of Country Specific Reservations
Award commented on: Mobil Investments Canada Inc. and Murphy Oil Corporation v Canada, ICSID Case No ARB(AF)/07/4. Decision on Liability and Principles of Quantum, dispatched to the parties, May 22, 2012, redacted version released in the fall of 2012. Both the majority award (206pp) and a partial dissenting award (Professor Philippe Sands QC) are available here.
Case commented on: Hibernia Management and Development Company Ltd. v Canada-Newfoundland and Labrador Offshore Petroleum Board, 2008 NLCA 46 (CanLII)
In this Award a NAFTA Tribunal (by a Majority) found that Canada was in breach of the prohibition on domestic performance requirements of Article 1106 of NAFTA when the Canada Newfoundland Offshore Petroleum Board (CNOPB or Board) established and imposed a research investment target (the 2004 Guidelines) on operators working on the Newfoundland continental shelf. In doing so the Majority of the Tribunal ruled that Canada could not rely upon its country specific reservation. While Canada’s reservation protected the performance requirements that were in place at the time that NAFTA was entered into it did not protect the 2004 Guidelines. In reaching this conclusion the Majority severely constrains the ability of the host state to adopt new subordinate measures (e.g. regulations, guidelines and policies) to give effect to a reserved power. In effect, the Majority has adopted a one-way ratchet in which any subordinate measure adopted by a state that does not fully exploit the entire space offered by the text of a reservation may make it impossible for the host state to recover the lost ground. This, as the Dissent lucidly demonstrates, is an unreasonably narrow construction of the power of each NAFTA state to take a reservation to its general commitment not to impose domestic performance requirements on investors.
Less controversially, the Tribunal unanimously reached the conclusion that Canada was not in breach of Article 1105 of NAFTA. Here the Tribunal offers some useful guidance as to the limited scope of protection offered by the NAFTA version of the minimum standard of treatment. In particular, an investor cannot complain of regulatory change absent proof of promises, assurances or representations made by a government to the effect that the existing regime (here a benefits regime) would not change.
The background
Both Murphy and Mobil have interests in the Hibernia project (gross capital investment $5.8 billion, current production about 140,000 bbls per day) and the Terra Nova project (gross capital investment of about $3 billion, current production now less than 100,000 bbls per day) on the Newfoundland continental shelf. The projects are approved and regulated under the terms of federal and provincial mirror legislation implementing the Atlantic Accord. The federal legislation is the Canada-Newfoundland Atlantic Accord Implementation Act, SC 1987, c 3. The Act is principally administered by the Canada-Newfoundland Offshore Petroleum Board (the Board). Section 45 provides that the Board cannot approve a development plan for an offshore project without approving a Canada-Newfoundland benefits plan. Such a plan must include a proposal for research and development (R & D) and education and training (E & T). Section 15.1 (added in 1992, well before NAFTA entered into force on 1 January 1994) authorizes the Board to issue and publish guidelines on a number of matters including benefits plans. The Board first issued guidelines in 1986 and revised them successively in 1986, 1987, 1988 and 2004. The early versions of the guidelines focused on the exploration phase rather than the development phase of project activities. The 2004 Guidelines introduced the idea of an industry wide benchmark against which to measure R & D contributions. The Board introduced the Guidelines because of concerns that R & D investments were falling as the projects moved into the production phase.
Benefits Plans were established for each of the projects (Hibernia 1985 and Terra Nova 1997). Plans for both projects were heavy on principles rather than detailed commitments. The 2004 Guidelines require operators to make certain levels of expenditure on R & D matters for each of the exploration, development and production phases of the project. The Board calculated these expenditure targets based on Statistics Canada data for average R & D expenditures in the industry. In default thereof, operators were required to contribute any shortfall to a Board administered R & D Fund. The Guidelines were made enforceable by making them a condition of the operator’s Production Operations Authorization (POA).
It was these 2004 Guidelines that gave rise to the dispute. The applicants argued that these new requirements breached both the minimum standard of treatment (Article 1105) and the prohibition against domestic performance requirements provisions of NAFTA (Article 1106). The applicants further argued that the new requirements did not fall within the country specific reservation that Canada had taken upon ratification of NAFTA. Efforts by the operators to contest the validity of the Guidelines in the Newfoundland courts failed: see reference above and discussed at various points in the Award (e.g. at paras 86 and especially at paras 167 – 169 (in the context of the FET standard) and 354 – 355).
The performance requirement issue
Article 1106 of NAFTA, so far as relevant, provides as follows:
1. No Party may impose or enforce any of the following requirements, or enforce any commitment or undertaking, in connection with the establishment, acquisition, expansion, management, conduct or operation of an investment of an investor of a Party or of a non-Party in its territory:
…
(b) to achieve a given level or percentage of domestic content;
(c) to purchase, use or accord a preference to goods produced or services provided in its territory, or to purchase goods or services from persons in its territory;
…
3. No Party may condition the receipt or continued receipt of an advantage, in connection with an investment in its territory of an investor of a Party or of a non-Party, on compliance with any of the following requirements:
(a) to achieve a given level or percentage of domestic content;
(b) to purchase, use or accord a preference to goods produced in its territory, or to purchase goods from producers in its territory;
…
4. Nothing in paragraph 3 shall be construed to prevent a Party from conditioning the receipt or continued receipt of an advantage, in connection with an investment in its territory of an investor of a Party or of a non-Party, on compliance with a requirement to locate production, provide a service, train or employ workers, construct or expand particular facilities, or carry out research and development, in its territory.
5. Paragraphs 1 and 3 do not apply to any requirement other than the requirements set out in those paragraphs.
6. Provided that such measures are not applied in an arbitrary or unjustifiable manner, or do not constitute a disguised restriction on international trade or investment, nothing in paragraph 1(b) or (c) or 3(a) or (b) shall be construed to prevent any Party from adopting or maintaining measures, including environmental measures:
(a) necessary to secure compliance with laws and regulations that are not inconsistent with the provisions of this Agreement;
(b) necessary to protect human, animal or plant life or health; or
(c) necessary for the conservation of living or non-living exhaustible natural resources.
It is also necessary to set out the provisions relating to reservations. Thus, Article 1108 provides that Article 1106 does not apply to:
(a) any existing non-conforming measure that is maintained by
(i) a Party at the federal level, as set out in its Schedule to Annex I or III,
(b) the continuation or prompt renewal of any non-conforming measure referred to in subparagraph (a); or
(c) an amendment to any non-conforming measure referred to in subparagraph (a) to the extent that the amendment does not decrease the conformity of the measure, as it existed immediately before the amendment, with Articles 1102, 1103, 1106 and 1107.
A reservation extends to and encompasses both the non-conforming measure and “any subordinate measure” (at para 264, referring to the text of Annex I). A reservation must identify (Annex I, para 2), (a) sectors, (b) subsectors, (c) industry classification, (d) type of reservation, (e) level of government, (f) laws, regulations or other measures for which the reservation is taken (g) description, and (h) if to be phased out.
In this case, the law set out in the Annex is the federal Act and the description refers to the requirements for a benefits plan. The reservation did not identify any particular section. The parties agreed that section 45 of the federal Act was an existing non-conforming measure (at para 273). Section 15.1 (the section pursuant to which the guidelines were adopted (at para 274)) was more contentious. However, the tribunal appears to accept (at paras 279 – 281) that section 15.1 in principle is covered by the reservation while at the same time concluding that not every guideline adopted under the authority of the section will be covered (more on that momentarily).
In addition to “measures” (i.e. the federal Act), NAFTA also refers to “subordinate measures.” But, as the tribunal acknowledges, (at para 284):
Articles 1106 and 1108 of the NAFTA do not refer to the term “subordinate measure,” and it is not found in Chapter 11 of the NAFTA at all. However, it appears in paragraph 2(f) of Annex I. Provided it meets certain conditions, a subordinate measure forms a part of a reservation made by a NAFTA Party with respect to existing measures that do not conform with obligations imposed by Article 1106. (Emphasis supplied)
Did the Guidelines Constitute a Domestic Performance Measure?
The most important part of the Award deals with the interpretation of the reservations provisions of NAFTA as they apply to Article 1106, but before discussing those provisions the Tribunal first had to conclude that the Guidelines were domestic performance requirements within the meaning of Article 1106. On that issue there were two preliminary points, first, did the R & D and E & T requirements of the Guidelines fall within the scope of Article 1106(1) at all, and if so, second, did the Guidelines impose a duty to acquire goods or services locally?
Did the R & D and E & T requirements of the Guidelines fall within the scope of Article 1106(1)?
The Tribunal acknowledged (at para 215) that Article 1106 does not specifically refer to R & D and E & T issues but took the view that the term ‘services’ as used in Article 1106(1)(c) (at para 216) “covers a broad range of economic activities, and R & D and E & T may be seen as mainstream forms of service sector activity.” Such a reading was also consistent with how services are treated more broadly in the text of NAFTA (at paras 219 and 225) and in any event (at para 222) “the requirement to utilize domestic sources of R & D and E & T appears rather clearly to be a form of performance requirement imposed on an investor.”
Did the Guidelines impose a duty to acquire good or services locally?
The Tribunal was equally dismissive (and rightly so) of Canada’s efforts to suggest that there was no necessary domestic content to the Guideline and that it might be possible for an operator to meet the terms of the Guidelines without purchasing domestic goods and services. That was clearly unrealistic (at paras 237 and 238): “In practice, the Tribunal fails to see how the operators could, in reality, be required to spend millions of dollars on R & D and E & T in the Province without in practice being required to purchase, use, or accord a preference to domestic goods or services.” Furthermore, unlike earlier NAFTA cases R & D and E & T spending was not just an ancillary element of the regulatory regime “it was a central feature” of the 2004 Guidelines (at para 242).
The Article 1108 Exceptions
A preliminary point with respect to the Exceptions arguments was the question of whether the exceptions should be interpreted in any different manner than any other provisions of NAFTA. The Claimants in particular evidently wished to argue that they should be interpreted restrictively but at the end of the day all the parties seemed to accept that they should be interpreted (as with all of the other provisions of NAFTA) in accordance with the interpretation rules (Articles 31 – 33) of the Vienna Convention on the Law of Treaties (VCLT) (at paras 250 and 254; and see also Dissent at para 4):
Each NAFTA Party was free to identify and put forth its own reservations, which represented one Member’s binding commitment. That said, it is important to stress that the reservations are an integral part of the NAFTA. The task of ascertaining the meaning of a reservation, like the task of interpreting any other treaty text, involves understanding the intention of the NAFTA Parties, and it is to be achieved by following the customary rules of interpretation of public international law, as reflected in Articles 31 and 32 of the VCLT. There is no dispute on this point between the parties. The Tribunal proceeds on that basis.
In doing so the Tribunal understood that it should not presumptively accord a broad or narrow meaning to the reservations. The Tribunal was very much aware that its interpretation might have implications for the “system of reservations as a whole” embedded in NAFTA.
The System of Reservations
NAFTA contemplates that each of the contracting parties should be able to make reservations with respect to existing non-conforming measures pertaining to performance requirements. This is provided for by Article 1108 and the relevant Annexes, especially Annex I. In order to claim a reservation, Annex I requires each party to provide detailed information as to the elements of the reservation (at paras 260 – 263). By contrast (and as the Dissent emphasizes at several points (Dissent at paras 11 & 36)) there is no requirement in Article 1108 or anywhere else for a Party to set out any ‘subordinate measure’ that has been adopted or maintained. The reservation once made extends to the non-conforming measure itself including: (1) the continuation or prompt renewal of that measure or an amendment to the measure (provided that it does not decrease the conformity of the measure), and (2) any subordinate measure of the non-conforming measure.
The existing measure in this case was the federal Accord Act (at para 269) (hereafter the reserved measure). The description element refers to benefits plans but does not refer to any specific section of the Accord Act. That led to some discussion as to the scope of Canada’s reservation. Canada argued that the reservation covered the entire statute while the claimant suggested that it should be confined to section 45 (problematic from Canada’s perspective since it was agreed (at para 274) that the Guidelines were adopted under section 15.1). Faced with these two alternative positions the Majority (moving seamlessly from the statutory provisions themselves to the Guidelines) reasoned as follows (at para 279):
The Tribunal considers that the more plausible approach is to examine the reserved measure as qualified by the “Description element,” and then in accordance with the VCLT determine whether a particular provision of the Federal Accord Act is covered or not. In the present case, the qualification addresses the requirement that the Benefits Plan ensure that expenditures be made for research and development to be carried out in the province, and for education and training to be provided in the province. Section 151.1 of the Federal Accord Act is not specifically mentioned in the “Description element” but looking at the Federal Accord Act as a whole, the 2004 Guidelines issued pursuant to Section 151.1 provide a means, not necessarily the only means, by which guidance is offered on how to ensure that expenditures on research and development are carried out in the Province.
What the Tribunal seems to be saying here (and what the subsequent paragraphs of the Award clarify) is that section15.1 is included in the reserved Measure but that the Guidelines themselves constitute a subordinate measure the validity or conformity of which is still to be examined. The Tribunal also concluded that Board decisions approving particular Plans are not themselves reserved Measures but might qualify as subordinate measures.
In view of this approach it then became crucial for the Tribunal to determine under what circumstances something might qualify as a subordinate measure not least because (at para 284) “Provided it meets certain conditions, a subordinate measure forms a part of a reservation made by a NAFTA Party with respect to existing measures that do not conform with obligations imposed by Article 1106.”
There are three principal qualifying elements for a subordinate measure. First, such a measure must be “adopted or maintained,” second it must derive its “authority” from the reserved measure, and third it must be consistent with the measure. The controversial issue here related to the scope of the consistency analysis.
Adopted or maintained
The Tribunal held that the two terms were not synonymous and concluded that the term “maintained” refers to a subordinate measure that was in force when NAFTA came into effect whereas “adopted” refers to a measure that came into force after NAFTA came into effect (at para 297): i.e. a “new subordinate measure”. The implications in this case were as follows (at paras 298 – 299):
… the Hibernia Benefits Plan and Decision 86.01, having been adopted before January 1, 1994, are “subordinate measures” that are “maintained,” within the meaning of paragraph 2(f)(ii) of Annex I.
With respect to the Terra Nova Benefits Plan and Decision 97.02, as well as the 2004 Guidelines, (having been adopted after January 1, 1994) they are “subordinate measures” that have been “adopted,” within the meaning of paragraph 2(f)(ii) of Annex I, and are each to be considered “new subordinate measures.”
Under the Authority of the Measure
The Tribunal made surprisingly heavy weather of this issue. It soon concluded (at para 329) that “it is the reserved measure that provides the legal basis or origin of the subsequent measure” but that led to another “what is the applicable law” for determining authority? Is it national law, NAFTA or both? The Dissent was firmly of the view that the issue must be determined by national law (and that it had been – see the judgement of the Newfoundland Court of Appeal) and the United States and Mexico seemingly agreed with that as well – and perhaps even the majority at certain points (see here at para 350). But at other points the Majority (who by this time were carefully paving the way for their holistic take on the concept of consistency) were much more equivocal. Here is what the Majority had to say on the issue of authority (at para 330):
In the Majority’s reading, “authority” certainly requires that the subordinate measure must be determined in relation to the reserved measure. Whether other existing subordinate measures, in addition to the reserved measure, are also a critical part of that evaluation of “the measure” will depend on the facts of the case. On the facts we have before us, the Hibernia and Terra Nova Benefits Plans and related Board Decisions are “under the authority” of the Federal Accord Act. The 2004 Guidelines are also issued pursuant to the Federal Accord Act. It clearly makes no sense to suggest that the 2004 Guidelines, which are measures of general application, have to be “under the authority” of the Hibernia and Terra Nova Benefits Plans and Board Decisions, which are subordinate measures that apply to particular investment projects. Both sets of subordinate measures are authorized separately by the Federal Accord Act in a vertical relationship to that Act, but are not in a vertical relationship with each other. In this case, “the measure” that is the necessary reference for determining the “authority” of the 2004 Guidelines is the Federal Accord Act alone. It does not necessarily follow that this fact pattern will always be the case. The Majority can envision other factual circumstances, arguendo, where there are a number of subordinate measures that are in a vertical relationship to each other, such that a new rule or regulation is specifically introduced in order to implement a provision of an existing subordinate measure, both of which legally owe their existence to the reserved measure. In such circumstances, to understand whether the new subordinate measure is under the authority of the reserved measure, the treaty interpreter would be required to look at the reserved measure as well as other subordinate measures in the vertical chain in order to make sense of the legal framework.
And even if the matter was to be determined by domestic law, there was (at least from the claimants’ perspective and perhaps also from the perspective of the Majority) the problem of just what it was that the Court of Appeal had decided. After all, in the pluralistic world of domestic administrative law, it is not as if a Court sitting on a judicial review application is typically determining correctness. A Court sitting in review generally owes some degree of deference to the tribunal and accordingly the standard of review is more likely to be reasonableness than correctness. That was indeed the case here (see 2008 NLCA 46 especially at paras 32 – 58). While the Majority of the Tribunal ultimately deferred to the authority of the domestic law and the domestic court on the issue one gets the sense (see especially at para 355) that they did so with some reluctance.
The measure with which the subordinate measure must be consistent
The question here was whether the context for assessing consistency and authority was confined to the federal Act (i.e. the reserved Measure itself) or whether, as the claimant contended, the subordinate measure must also be consistent with other relevant subordinate measures and in particular (at para 310) the Hibernia and Terra Nova benefits plans and related Board decisions. The Majority found for the claimant on this point (at para 325) relying in large part (at para 324) on an interpretative note to a Party’s Schedule to an Annex which provides that the term “measure” refers to the reserved measure (in this case the Act) and “includes subordinate measures adopted or maintained under the authority of and consistent with the measure.” The Majority justified this conclusion and expanded upon the consequences of this interpretive approach as follows (at para 326):
The Majority agrees with the argument advanced by the Claimants that there is nothing in the interpretative note that provides an exception so as to exclude a subsequent subordinate measure that meets the test in paragraph 2(f). In our reading of this text, once a subordinate measure passes the crucial test laid out in paragraph 2(f)(ii), it is correctly “included” within the ambit of the non-conforming and expressly listed measure for the purposes of evaluating a subsequent subordinate measure. Thereafter, and depending on the facts of the case, the reserved measure and the subordinate measure should be interpreted together for the purposes of Annex I. It is in this way that the non-conforming measure includes the subordinate measure.
Such an approach demanded a complex analytical structure. The Majority provided the necessary elaboration through a series of questions designed to test the consistency of the 2004 Guidelines with the Federal Accord Act, the Hibernia and Terra Nova Benefits Plans and related Board decisions (at para 392):
(1) can there be a change in the methodology for requiring and calculating the expenditures to be made for research and development to be carried out in the province, and for education and training to be provided in the province, as compared with that which pertained on 1 January 1994, and what are the key characteristics of the methodology introduced by these 2004 Guidelines as compared with the existing measures;
(2) can there be an extension of the requirement to make such expenditures in relation to the development and production phase, as compared with it being limited to the exploration phase as pertained on 1 January 1994, and what are the consequences of this extension;
(3) can the amounts of such expenditures to be imposed in a Benefits Plan be specified, rather than determined through the self identified needs of the project operator, and also increased beyond those that would have pertained under the previous Benefits Plans as now required by the 2004 Guidelines; and
(4) can additional oversight and reporting requirements be introduced that reduce the discretion of the operators via the now mandatory pre-approval process, and against what standard should such adjustments … be evaluated?
The Majority was however careful to caution that these questions and the answers to them must be read contextually – there was no bright line. For example, the Majority suggested (at para 394) that a mere change in the methodology for determining the level of required expenditures was not itself problematic. Neither was the extension of the benefits requirements from the exploration phase of the projects to the development and production phases (at para 399), nor the mere fact that additional expenditures might be required (at para 400) What seems to have been fatal here was a combination of things: (1) the decision to base the level of contributions on industry norms thereby severing the connection between these particular projects and the requirements of the Guidelines (see in particular at paragraph 397, “requirements based on a methodology that is unrelated to the specific needs of the project”), (2) the substantially increased amounts of domestic expenditures over what the Plans would have required during the development and production phases of the project (at para 401), and (3) the enhanced monitoring and reporting requirements that were imposed (paras 402 – 404). The result of the analysis was unequivocal for the Majority (at para 398):
The particular approach contained in the 2004 Guidelines has introduced expenditure requirements, reporting requirements, and financial administrative adjustments that result in a set of additional obligations with respect to the Hibernia and Terra Nova projects that are different in nature and degree than those previously applied to these investment projects. Examining all of these attributes together, the Majority is of the view that the changes that have been introduced and applied to Hibernia and Terra Nova amount to more than mere changes in the methodology, but in fact reflect a fundamentally different approach to compliance, compared to the Federal Accord Act and the Hibernia and Terra Nova Benefits Plans.
Taken together this resulted in (at para 409) a “local content regime that [was] … more non-conforming with Article 1106 than was the case when the measures that applied to the Hibernia and Terra Nova investment projects were defined by the Federal Accord Act, the Hibernia and Terra Nova Benefits Plans, and related Board Decisions.”
Article 1105 and the Minimum Standard of Treatment
While there are several other NAFTA decisions that deal with Performance Requirements, none have provided such a detailed and sophisticated interpretation of the relevant texts as has this Award. Indeed as the Tribunal acknowledges some important part of its decision were matters of first impression (e.g. at para 249). But this was clearly not the case with respect to Article 1105 which has already been the subject of numerous arbitral awards as well as an agreed Interpretation Note (2001) issued by the contracting parties and designed to curb some of the more expansive interpretations of the fair and equitable treatment standard (FET) that were emerging in the jurisprudence. For the text of the Interpretation Note see here.
The claimants made two arguments under Article 1105 (at para 111): first that Canada had failed to provide a stable regulatory framework for the claimants’ offshore petroleum development operations, and second that Canada had frustrated the claimants’ legitimate expectations with respect to that regulatory framework.
In its Award the Tribunal (and the Tribunal was unanimous on the Article 1105 issues) carefully reviewed the existing arbitral jurisprudence before concluding as follows (at paras 152 and 153) as to the applicable standard:
152. On the basis of the NAFTA case-law and the parties’ arguments, the Tribunal summarizes the applicable standard in relation to Article 1105 as follows:
(1) the minimum standard of treatment guaranteed by Article 1105 is that which is reflected in customary international law on the treatment of aliens;
(2) the fair and equitable treatment standard in customary international law will be infringed by conduct attributable to a NAFTA Party and harmful to a claimant that is arbitrary, grossly unfair, unjust or idiosyncratic, or is discriminatory and exposes a claimant to sectional or racial prejudice, or involves a lack of due process leading to an outcome which offends judicial propriety.
(3) in determining whether that standard has been violated it will be a relevant factor if the treatment is made against the background of (i) clear and explicit representations made by or attributable to the NAFTA host State in order to induce the investment, and (ii) were, by reference to an objective standard, reasonably relied on by the investor, and (iii) were subsequently repudiated by the NAFTA host State.
153. This applicable standard does not require a State to maintain a stable legal and business environment for investments, if this is intended to suggest that the rules governing an investment are not permitted to change, whether to a significant or modest extent. Article 1105 may protect an investor from changes that give rise to an unstable legal and business environment, but only if those changes may be characterized as arbitrary or grossly unfair or discriminatory, or otherwise inconsistent with the customary international law standard. In a complex international and domestic environment, there is nothing in Article 1105 to prevent a public authority from changing the regulatory environment to take account of new policies and needs, even if some of those changes may have far-reaching consequences and effects, and even if they impose significant additional burdens on an investor. Article 1105 is not, and was never intended to amount to, a guarantee against regulatory change, or to reflect a requirement that an investor is entitled to expect no material changes to the regulatory framework within which an investment is made. Governments change, policies changes and rules change. These are facts of life with which investors and all legal and natural persons have to live with.
The Tribunal then proceeded to apply the standard to the facts concluding that the claimants had been unable to establish that the governments and\or the Board had made any promises or representations that there would be no changes to the regulatory regime (at para 156). There were no such representations in the relevant legislation (at paras 159 – 160) and this was equally true of the approved plans themselves (at para 161). The plans did not amount to a contract (at para 166) and there was no evidence (at para 169) that the claimants had sought assurances that the benefits requirements would not change as a result of the Board’s monitoring activities if those activities suggested that R & D expenditures were insufficient (so long as such changes could be made consistently with Canadian law, a matter already established by the Newfoundland Court of Appeal).
Damages for breach of the prohibition on domestic performance requirements
The claimants sought compensation for the incremental expenditures that they would incur as a result of the application of the Guidelines from the time that they came into force until 2036 (at para. 414) (the Hibernia property was projected to continue producing until 2036 (see para. 49)). Article 1116(1) provides that “An investor of a Party may submit to arbitration under this Section a claim that another Party has breached an obligation [of Chapter XI]…and that the investor has incurred loss or damage by reason of, or arising out of, that breach.” This language as well as the decisions of other arbitral awards led Canada to argue that the Tribunal could not award damages for prospective losses and could only make an award in relation to losses actually incurred (at paras 415 – 419). The majority of the Tribunal however took a broader view concluding (at para 427), at least as a matter of jurisdiction, that:
A breach giving rise to future and prospective damage may, in general terms, fall within Article 1116. There is nothing in the language of Article 1116 (1) that convinces us that the provision is directed only to damages that occurred in the past and does not extend, in principle, to damages that are the result of a breach which began in the past (the adoption of the 2004 Guidelines) and continues (the implementation of the 2004 Guidelines) resulting in the incurring of losses which crystallise (i.e. become quantifiable) and must be paid sometime in the future (hereafter “future damages”). We consider by extension that the same reasoning applies to damages in the past which are already identified or quantified, but must be paid in the future.
That was not conclusive of the Claimants’ claim to prospective damages since they still had to show (at para 431) “whether the amount of these damages can be established with sufficient certainty to be compensated.” As to the relevant principles for determining these issues the Majority concluded that (at para 437)
… the Claimants do not have to prove the quantum of damages with absolute certainty. The Majority further accepts that no strict proof of the amount of future damages is required and that “a sufficient degree” of certainty or probability is sufficient. However, the amount claimed “must be probable and not merely possible.”
The Majority also had to address the actual losses claimed by the claimants as of the date of the Award. The issue was significant here since the claimants’ own liability under the Guidelines was in the alternative. The claimants either had to make the actual R & D expenditures calculated under and required by the Guidelines (rather than on some notional business as usual (BAU) position under the relevant benefits plans) or they had to make a contribution to the fund, and to this point there had been a degree of forbearance by the Board in realizing any obligation pending the outcome of both the domestic proceedings and the arbitration. Given these circumstances when did the claimants actually incur a loss for which they could seek restoration (at para 440):
In the Majority’s view, actual damages occur when there is a firm obligation to make a payment and there is a call for payment or expenditure, or the occurrence of payment or expenditure has transpired. Indeed, expenditure of money is not always required for damages to be compensable. Expenditures which have not yet been paid may be included as compensation if a claimant can prove that they are under an obligation to pay such expenses (e.g. there has been some kind of call for payment).
Whatever view one takes of the Claimants’ claims it is clear that there are a number of variables that have to be taken into account in quantifying the scope of the Claimants’ obligations under the Guidelines and therefore any possible claim to damages. These variables included: production volumes, oil revenues (calibrated either in US dollars or perhaps Canadian dollars); the BAU R & D and E & T expenditures; the qualification of R & D expenses; the relevant Statistics Canada benchmark; and Board determinations as to level of deductibility of R & D and E & T expenses. At a later point in the Award (at para 474) the Majority helpfully categorizes these factors as two different types of variables: “One group of variables consists of objective, market-based factors, and the second consists of the results of the Board’s regulatory decisions.”
Having established the relevant tests the Majority divided the Claimants’ claims into three relevant periods: 2004 – 2008; 2009; and 2009 – 2036. The first of these periods was obviously the period for which the Claimants and the Tribunal had the most complete information, but even here the Majority concluded that the matter was not yet ripe for the Tribunal to award damages, principally it seemed because the Claimants’ obligations had yet to crystallize (at para 470):
With regard to the 2004 – 2008 period, the various actions of the Board to implement the 2004 Guidelines, such as the calculation of the required incremental expenditures, the crediting for actual expenses and the determination of the spending shortfall, the conditioning of the POA on compliance with the 2004 Guidelines, all confirm that the Board was seriously pursuing the Claimants’ spending obligation under the 2004 Guidelines for the 2004 – 2008 period. However, we are not aware that the Respondent has actually required the Claimants to make such payments by a certain date, nor whether it has indicated the prospect of sanctions for noncompliance. The Claimants have indicated that there may have been actions the Board has taken to date in pursuance of the spending obligation, namely a requirement for HMDC and Suncor to provide a promissory note secured by a letter of credit, but they have not provided evidence as to any steps being taken in furtherance of this requirement to show that it amounts to a firm obligation to pay or has entailed costs. Until the Claimants submit evidence of actual damage, the claim for the cost of compliance with the 2004 Guidelines for the 2004 – 2008 period is not ripe for compensation by this Tribunal.
The same conclusion followed with respect to the 2009 period as it must for the 2009 – 2036 period, although with respect to this final period the Majority of the Tribunal did offer some useful additional observations. One important observation was that arbitral awards dealing with assessment of prospective losses in cases of expropriation were really not pertinent in a case (as here) in which the “investment is not destroyed but encumbered” (at para 476). In the case of expropriation the tribunal “has no choice but to project future damages in the form of lost future profits.” But that is not this case. In this case the losses will at some time in the future become actual losses “thereby removing the necessity to forecast losses which has been present in other cases,” Even those cases in which tribunals had awarded compensation for future losses in other non-expropriation situations were not especially useful. In each of those cases the projections were relatively short term; here the situation was different (at paras 477 and 478):
While some variables in the current case may be more amenable to assessment than others (e.g. production level estimates for developed production sites in the near term may be more likely to be accurate than those that focus on longer term production forecasts), looking at the totality of relevant and necessary variables that would comprise the calculation of damages, we are simply unable to have confidence that the estimation of the entire picture is one that meets a test of “reasonable certainty.” The evaluation of future damages for such a long period is extremely hazardous and it does not, on balance, seem to us that the estimates are more probable than not.
…
In our view, there is no basis to grant at present compensation for uncertain future damages. Given that the implementation of the 2004 Guidelines is a continuing breach, the Claimants can claim compensation in new NAFTA arbitration proceedings for losses which have accrued but are not actual in the current proceedings.
While this all seems correct, it does suggest that if the parties are unable to agree we will be looking at installment litigation\arbitration for many years to come.
The Dissent
In my view the Dissenting opinion of Professor Phillippe Sands offers a devastating and persuasive critique of the majority opinion as it relates to the subordinate measures issues. Professor Sands is in agreement with the Majority on two important parts of the Award. Thus he agrees that there was no breach of Article 1105 and he also agrees that the Guidelines were caught by the Article 1106 rules relating to domestic performance requirements. But Sands fundamentally disagrees with the Majority on the interpretation and application of the subordinate measures provisions of Annex I. In his view the validity of a subordinate measure is to be examined solely by reference to the reserved measure itself and not by reference to other existing subordinate measures such as the earlier Benefits Plans adopted for the Hibernia and Terra Nova projects. Sands also dissented from the portions of the Majority award dealing with damages, principally on the basis that since Canada was not in breach there was no damages issue for the Tribunal to consider.
The Dissent offers a number of different critiques of the Majority’s opinion but three points in particular stand out. First, Sands, like the Majority, emphasises that the NAFTA text draws a clear distinction between the reserved measure and subordinate measures. One particular important distinction is that while the text establishes that amendments to reserved measures must not decrease conformity with the basic Article 1106 standards there is no similar test with respect to existing or new subordinate measures (Dissent at paras 21 and 24); such measures need only be established under the authority of the reserved measure and consistent with the reserved measure – a requirement that, as Mexico offered (Dissent at para 29), must be determined under domestic law (which it had been). Second, Sands emphasizes that the Majority has elevated the requirement of consistency from a formal jurisdictional requirement that a subordinate measure fall within the scope of the measure to an holistic and contextual demand for consistency with the “overall legal framework” that goes way beyond the text of the treaty and (Dissent at para 28) “seems to have been plucked out of the air.” Third, and as indicated in the introduction of this post, the effect of the Majority’s opinion is to introduce a one way ratchet in which the space available to the host state to protect its interests as contemplated by the reservation system is progressively reduced, and the ceiling (Dissent at para 37) on the range of acceptable measures gradually lowered. Not only does this afford different subordinate measures the same limiting effect as the higher norm of the measure itself (Dissent at para 37) but it will lead to increasing difficulties of application over time, especially since the state (as noted above) need not publish subordinate measures. But even if published the interpretive difficulties associated with establishing “authority” and “consistency” with an increasingly long list of previous measures will tax the ability of even the most highly paid arbitrators.
Commentary
The Majority’s interpretation of the subordinate measures provisions is startling. It carries the implication that every exercise of the power to make subordinate measures will necessarily limit any future exercise of the power. This applies equally to the situation where the state exercises the power to make subordinate measures after NAFTA enters into force (i.e. adopt) but also with respect to subordinate measures in force before NAFTA enters into force (i.e. maintains). In effect, what the Majority concludes is that when Canada listed the federal statute as a reserved measure, it was in reality only listing a gutted version of sections 45 and 15.1.
I can perhaps illustrate the point more graphically by asking the reader to imagine the power to make new subordinate measures (as described in the statute) as a full box (the statutory power describes the size of the box). The moment that the holder of the statutory authority exercises the power to adopt a subordinate measure we must empty the box of all of the unexercised powers contained within its corners. Subsequent subordinate measures must fall within the reduced content of the box. Or to put the matter another way, if the measure allows the statutory authority to adopt subordinate measures in relation to matters B to F; the exercise of the power in relation to matter B renders the statutory authority functus with respect to matters C to F. This is an extraordinary result and it is seemingly achieved by having the tail of the interpretive note wag the dog of the principal provisions of the text. While defending its conclusion in the name of a highly contextualized interpretive approach, the Majority ends up decontextualizing the simple claim made by the state reserving its authority to maintain domestic performance requirements. This one-way ratchet (which Professor Sands refers to as the progressive lowering of the acceptable regulatory ceiling (Dissent at para 37)) is fundamentally inconsistent with the discretion afforded to each NAFTA state to craft its own reservations and to decide upon the extent to which it was prepared to liberalize (and indeed eliminate) its domestic performance requirements. The treaty specifically contemplates that a party may establish the duration of the measure (i.e. a possible phase out commitment) and may make a liberalization commitment; and the clear inference is that a contracting party need not to do either. But the result of the Majority’s opinion is to commit each party to continuing liberalization. It seems incredible to think that any of the contracting parties thought that they were reserving less than the full box of power embraced by the relevant statutory provision.
One wonders about the implications of all of this for other domestic performance requirements (a.k.a. domestic benefit programs) in Canada whether developed under other federal oil and gas legislation (and in particular the Canada Oil and Gas Operations Act, RSC 1985 c. O-7 (COGOA), or under Yukon’s Oil and Gas Act), or under the terms of modern land claim agreements which routinely provide for the negotiation of impact and benefit agreements. Canada did file a reservation that referred to COGOA and to “Measures implementing Yukon Oil and Gas Accord” and the Northwest Territories Accord.” The reservation, so far as relevant, reads as follows:
1. Under the Canada Oil and Gas Operations Act, the approval of the Minister of Energy, Mines and Resources of a “benefits plan” is required to receive authorization to proceed with any oil and gas development project.
2. A “benefits plan” is a plan for the employment of Canadians and for providing Canadian manufacturers, consultants, contractors and service companies with a full and fair opportunity to participate on a competitive basis in the supply of goods and services used in any proposed work or activity referred to in the benefits plan. The Act permits the Minister to impose an additional requirement on the applicant, as part of the benefits plan, to ensure that disadvantaged individuals or groups have access to training and employment opportunities or can participate in the supply of goods and services used in any proposed work referred to in the benefits plan.
6. Provisions similar to those set out above will be included in laws or regulations to implement the Yukon Oil and Gas Accord and Northwest Territories Oil and Gas Accord which for purposes of this reservation shall be deemed, once concluded, to be existing measures. (Emphasis added)
A particular concern in this regard is that the federal government has long contented itself, at least during the exploration phase of northern oil and gas operations, with an especially vague and hortatory commitment to northern benefits requirements: see here. This is not the place for a detailed analysis but the Majority opinion, as flawed as it clearly is, creates regulatory risk for Canada in the event that it, or a successor territorial government, elects to take a more aggressive approach to capturing local and industrial benefits in the future than are contained in the current requirements. In such a case the federal government may have inadvertently set the ceiling so low that northern Canadians won’t even be able to stand up! Or perhaps given the analytically demanding and highly contextualized approach of the Majority it will just be exceptionally difficult to figure out where the ceiling is until you bang your head; another, and perhaps especially acute form of regulatory chill, if not regulatory concussion. But perhaps the underlined text may allow a subsequent Tribunal to distinguish this Award.
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The Harm of Hate Speech: Are Media Responses Knee Jerk, Impulsive and Thoughtless?
PDF version: The Harm of Hate Speech: Are Media Responses Knee Jerk, Impulsive and Thoughtless?
Case commented on: Saskatchewan Human Rights Commission v Whatcott, 2013 SCC 11 (CanLii)
It is difficult to find balanced or thoughtful responses from the media on the subject of hate speech harms or hate speech laws. Oxford Professor Jeremy Waldron, in his book, The Harm in Hate Speech writes, “The philosophical arguments about hate speech are knee-jerk, impulsive and thoughtless.” This article argues that media responses to hate speech are likewise.
The myriad of furious articles written by editorial writers and journalists after the recent Supreme Court of Canada decision in Saskatchewan Human Rights Commission v Whatcott (Whatcott), illustrate this. Without a doubt one of the most important decisions to come out of the court in many years, the media failed to see the significance of it beyond their own self- interest in absolute freedom of speech.
The importance of the Whatcott decision to the battle against hate groups, terrorist networks, the radicalization of children and youth, and use of the Internet for bullying, cannot be understated. The decision upheld the hate speech provisions of the Saskatchewan Human Rights Code on a constitutional challenge as well as finding liability in respect of some anti-homosexual pamphlets. The core legislation was found to be constitutional even though it limited speech rights, and two of the four pamphlets were held to have violated the hate speech prohibitions. The Court affirmed that the prohibition of hate speech is constitutional because of the core Canadian value of equality. It told us that equality is not optional in a free and democratic society.
The media’s response, however, from the Globe and Mail and the Toronto Star to the National Post and the Calgary Herald was silent on the harms of hate speech. Instead, the predictable, overheated rhetoric was all about freedom of speech and how it must never be limited by any law, heaven forbid a human rights law. The media’s knee-jerk response was to condemn the decision, suggesting the unanimous Court must have lost its collective mind. (For e.g. Andrew Coyne’s headline, Top Court’s Ruling in Whatcott case Beyond Belief, National Post, February 28; Karen Selick’s article, Unworthy of Canada’s Highest Court describing the Court’s “absurd thesis” National Post, February 28, 2013; or Robert Teskey in Erosion of Free Speech, Ottawa Citizen, March 1, 2013, describing the Court as “sinking to the level of maligned Human Rights Tribunals, while the Calgary Sun’s Alan Shanoff asks “Why does the court fear the truth?” Calgary Sun March 10, 2013.)
The problem with the media is that it tends to only look at expressive rights from the very narrow perspective of the speaker or the writer. This is evident in their arguments that proof that people actually hate homosexuals as a result of reading the pamphlets should be required before hate speech can be limited; the marketplace of ideas can take care of hate speech by providing space for competing ideas; that gay rights should not trump the rights of religious Christians to promote a Biblical view of homosexuality; there should be a legal distinction between hating the act of homosexuality and hating homosexuals as people; and the truth and honestly held beliefs should be a complete defense to hate speech.
These arguments allow them to deliberately misunderstand, or at least ignore the competing rights of victims that protect them as they go about their daily lives. It also hobbles their thinking beyond the case itself. One would think that a responsible media, even though they perceive their ox being gored by any limits on speech, would, at the very least, explain to the public what the competing arguments are and their current significance, especially in the light of hate crimes causing harms such as the Boston Marathon bombing, home grown terrorism in Canada, on-line bullying, and the murders or beatings of homosexuals, all engendered and contributed to by hate speech campaigns. In their 2011 hate crime overview, the FBI makes the link when it states, “Why? Not only because hate crime has a devastating impact on families and communities, but also because groups that preach hatred and intolerance plant the seeds of terrorism here in our country” (See here).
“A cross burning is not just an arson”
“A cross burning is not just an arson” are words taken from an article on police bias, (Susan Martin, Criminology, Vol 33 Issue 3 pp 303-326.) that underscores the importance of coming to grips with the context of hate speech to know what is really at stake in the hate speech/equality rights debate. If context is ignored, the real problem disappears. This is what happened in this case. The lack of context is palpable in the media’s free speech rhetoric condemning the Supreme Court’s reasoning. The majority of commentators refuse to acknowledge the systematic theoretical framework and careful calculus developed and successfully applied by the Supreme Court over the past 20 years since the decision in the leading Alberta case of Canada (Human Rights Commission) v John Ross Taylor and the Western Guard Party, [1990] 3 SCR 892. This framework is now successfully applied in most free and democratic jurisdictions around the world except in the USA, which is fast becoming a haven for hate speech dissemination because of the lack of laws to regulate it. (See Breckheimer, A Haven for Hate: the Foreign and Domestic Implications of Protecting Internet Hate Speech Under the First Amendment, 75 S Cal L Rev, 1493). By using a deeper and more contextual analysis, the Canadian Supreme Court recognizes that where the speech of one person threatens the rights or safety of another, the rights have to be reconciled.
The starting point for discussion of a fair understanding of the Whatcott decision must be the legal context within which the hate speech laws exist, the context of hate speech and the context of discrimination against homosexuals in Canada.
The legal context
As a whole, human rights legislation protects vulnerable groups from the harms of discriminatory or unequal treatment. They primarily apply to employment, accommodation and provision of services. Over the past several decades strides have been made towards equality in reproductive freedoms, sex equality, race equality, pay equity, employment, housing, immigration, family law, sexual violence, sexual orientation and disability accommodation for women and marginalized groups that would not have occurred except for the protections provided by human rights legislation and the litigation which ensured the protections were honored. Good examples of this in Alberta would be the Vriend case, [1998] 1 SCR 493, which required the Alberta government to include homosexuals in its human rights legislation; and employment cases that defined “employment” broadly to protect independent contractors, subcontractors, taxi drivers, army cadets and volunteers from discrimination. Hate speech laws protect vulnerable citizens from other types of discriminatory harm that can range from bullying to terrorism and genocide.
The provincial human rights laws in Canada exist in a much broader framework of national, international and regional human rights treaties under which Canada and all other western democracies, with the exception of the United States, have instituted regulations restricting hate speech. The Canadian Charter of Rights and Freedoms as well as all of the conventions, which address the right to freedom of speech, give equal weight to the right of equality. In addition to the jurisprudence of the Canadian Supreme Court and other equivalent Courts around the world, the jurisprudence of the European Court of Human Rights and the UN Committee on the Racial Discrimination Convention support hate speech laws and have not found them to violate free speech rights. The media ignores this context in its predictions that Canada is on the “road to ruin” as a free and democratic nation because of our hate speech laws. This is misleading and demonstrably false.
The context of hate speech
Traditionally, hate groups recruited members and spread extremist messages by word of mouth, or through the distribution of flyers and pamphlets, much like Mr. Whatcott’s anti-gay hate campaign in Saskatchewan. The medium of choice of most hate groups today, however, is the Internet. Because of its reach, the Internet allows members of hate groups from all over the world to engage in real-time conversations with each other, encouraging intolerance, violence discrimination and suppression against groups they despise. The Internet has been a windfall for the spread of their messages and their recruitment of new members. Today, according to the FBI, CSIS and other law enforcement agencies and human rights groups, some of the most active hate groups are those targeting younger audiences who in turn, form their own hate groups through social media (see here). See also, Schafer & Navarro, The seven-stage hate model: The psychopathology of hate groups. FBI Law Enforcement Bulletin, March 2003) Using Facebook for example, hate page/group creators choose their target, set up a site, and then recruit members. Anyone can create a Facebook group and invite followers to post comments, add pictures and participate in discussion boards that can amount to a form of on-line hate speech. A Facebook page is similar, except one must ‘like’ the page to become a member. This is exactly the reality teenagers Rehtaeh Parsons and Amanda Todd faced, culminating in their suicides from cyber bullying (see here).
The Simon Wiesenthal Center in its 2009 iReport, identified more than 10,000 problematic hate and terrorist websites and other Internet postings that participate in on-line bullying, recruitment and radicalization of youth into hate and terrorist organizations. The report includes hate websites, social networks, blogs, newsgroups, YouTube and other video sites.
A 2011 FBI Law Enforcement bulletin says a hate group, if unimpeded; will in time, commit violent hate crimes. Hate groups initially vocalize their beliefs and later, some inevitably act on them. The report points to a transition period that exists between verbal violence and acting that violence out, separating hardcore haters from rhetorical haters. Hate speech is thus, a prerequisite of hate crimes and a policy issue of public safety as well as equality. (See Hunter and Heinke, Perspective Radicalization of Islamist Terrorists in the Western World, here).
In Canada, a 2011 Senate Report on Security, Freedom and the Complex Terrorist Threat (here) found that young people are finding radicalizing material too easily online, including video and audio recordings that could generate emotional urges to react violently to perceived injustices. They recommended the government seek new ways of limiting access to radicalizing material on the Internet and work with committee leaders to respond to messages that glorify violence. The human rights laws respecting hate speech now validated by the Whatcott decision could be part of the solution to these serious problems our country is facing. When the media ignores such important findings of the very groups that are tasked with the responsibility of dealing with the consequences of hate speech and instead, characterizes its harms as minimal or non-existent, I would say that Prof. Waldron’s accusations of thoughtless, knee-jerk and impulsive responses to hate speech are more than aptly made out.
The context of discrimination
When the Court looked at the constitutional and liability issues in Whatcott, they considered the perspective of the victims and the audience, not just the speaker. This balanced approach had them consider that historically, discrimination against homosexuals in Canada has been systemic and prevalent. They have been treated as mentally ill and subjected to conversion therapies, including electroshock treatment; they have been targeted by discriminatory laws, including criminal prohibition of same-sex practices; until recently they have not been permitted to participate openly in the Armed Forces; they have faced discrimination in employment and housing; and been the frequent victims of hate-motivated crimes, anti-gay and anti-lesbian violence, and verbal harassment. It is against this backdrop that the question of harm was evaluated as well as the right of freedom of speech.
The damage the Court looked for in Whatcott, was damage to both our democratic imperative of equal citizenship and damage to the complainants. In determining whether the expression was hate speech, they asked whether a reasonable person, aware of the context and circumstances, would view the expression as exposing the protected group to hatred by others. “Hatred” or “hatred and contempt” is restricted to manifestations of the emotion described by the words “detestation” and “vilification.” This filters out expression, which does not incite the level of abhorrence that would cause discrimination or other harmful effects.
The Court indeed found that Whatcott’s pamphlets were hate speech. They contained a permanent denunciation of the equality rights of homosexual citizens in terms that a reasonable person would say provoked hatred towards them. The Court was clear in saying mere hurt feelings of individual victims are not sufficient to justify limits on speech. They looked beyond the individuals targeted, to their membership in the larger, traditionally vulnerable minority and assessed the harm done to the whole group. The Court described Whatcott’s hate speech as causing damage to the dignity of all homosexual citizens, meaning the social standing and respect that entitles gay citizens to the right to be treated equally as they go about their daily lives without facing violence, hostility, hatred, and discrimination by others.
In examining the harm to the expressive rights of Mr. Whatcott, on the other hand, there was little value found in his hate speech in terms of truth seeking, encouraging participation in political decision-making and cultivating self fulfillment and human flourishing. As such, his expressive rights were not violated to the extent that they would outweigh the equality rights at stake. The media unlike the Supreme Court, avoided consideration of this analysis, merely making the decontextualized argument that speech is always a good thing, and that the harm was only about “hurt feelings.” This is in direct contradiction to the express findings of the Court and is seriously misleading to their readers.
The emphasis the contextual analysis places on the victims explains why the motives of the speaker are irrelevant as are defenses of truth or honest belief. It is the effects of the speech that are examined in the balancing act the Court must perform. What the people who are spreading hate messages believe, religious or secular, may explain their behavior, but it is not the issue when it comes to assessing the harms that human rights legislation was designed to address. There is nothing in the Whatcott decision that says religious Christians cannot denounce homosexuality, but they must do it in a manner that does not generate hatred against homosexuals. One could be forgiven for thinking that this should not be such a difficult standard for religious leaders to meet.
In summary, as a result of the Whatcott decision, on one level, homosexual Canadians can now take comfort in the fact that the legal system is able to protect them when they are attacked. This is how equality rights are supposed to work. In the area of hate speech, everybody knows the libertarian notion of free expression comes into tension with the aspiration of equal dignity. The limits on both must be resolved within the framework of democracy and equal citizenship as they were in this case. On another level, the Court has cleared the air and silenced doubters by bringing the case law up-to-date in affirming that civil laws against hate speech are constitutionally supportable. In doing so, they have provided a very important tool with which law enforcement agencies, human rights commissions, targeted groups and individuals can combat the debilitating, dangerous and harmful effects of hate speech we are witnessing with alarming regularity. The media could immeasurably enrich the conversation by accurately reporting and commenting on the Whatcott decision; the rights engaged by hate speech on both sides of the debate, and the importance of reconciling those rights in a manner, which maximizes freedoms for all.
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Time to proclaim the compulsory unitization provisions of the Oil and Gas Conservation Act
PDF version: Time to proclaim the compulsory unitization provisions of the Oil and Gas Conservation Act
Decision commented on: Butte Energy Inc. Application for Special Oil Well Spacing, Chigwell Field, 2013 ABERCB 006.
Regular readers of this blog will know that this is not the first time that I have used this forum to call for the proclamation of the compulsory unitization provisions of the Oil and Gas Conservation Act (OGCA) RSA 2000, c O-6 (see here) but the facts surrounding this decision of the Energy Resources Conservation Board (ERCB, or Board) present a particularly compelling case for compulsory unitization to deal with holdouts which might convince even the sceptics..
The facts closely involve Glencoe Resources’ carbon dioxide (CO2) miscible flood enhanced oil recovery (EOR) project known as Chigwell Viking Units 1 and 2. Glencoe holds a scheme approval for this project under section 39 of the OGCA. As the term “units” suggests, the project involves lands included in unit agreements of which Glencoe is the operator. The subject of this application by Butte was three quarter sections of land in section 35. The subject lands are surrounded on three of four sides by Unit 1 or Unit 2 lands. The mineral interests in the section 35 lands are owned by Marsha Turney. They used to be leased to Glencoe but Glencoe was unable to negotiate a lease continuation with Turney and presumably its lease lapsed. Glencoe was also unable to convince Turney to include the lands within the unit agreements, apparently (at para 71) due to concerns related to surface access, confidentiality and the tract participation factor to be allocated to the lands. In the end, Glencoe decided to proceed with its EOR operation without the section 35 lands. The section 35 lands were subsequently leased to another party and Butte, the applicant in this matter, took an assignment of that lease and drilled the 4-35 well (south west quarter) on the lands (the Butte well).
Butte applied to the Board under section 79(4) of the OGCA and section 5.190 of the Oil and Gas Conservation Regulations (Alta Reg 151/1971) to have the Board suspend the default drilling spacing units and target areas and establish a holding for these three quarter sections. Butte proposed that within the holding two wells per quarter section be permitted with any such well to be located at least 100 metres from the boundary of the holding. The Board, on the recommendation of its examiners who held the hearing on the matter and provided the written reasons, rejected the application. In the course of doing so, the examiners clearly bemoaned the fact that the Board lacked powers of compulsory unitization (at para 92):
…. the ERCB does encourage operators to cooperate with one another in the development of a pool. However, the ERCB does not have jurisdiction to force parties to enter into unit agreements even where it may be an appropriate tool to ensure orderly development of a pool.
Two of the features of the case provide compelling reasons for thinking that this was an outstanding case for compulsory unitization. The first is that oil production from Butte’s well was venting carbon dioxide. This was Glencoe’s CO2 that it had purchased from a capture entity. In the usual course, an operator that engages in a CO2 miscible flood EOR will have an incentive to capture any CO2 that is produced in association with the oil. This is because CO2 is expensive and the CO2 that would otherwise be vented may be captured and re-used. In addition, where the project qualifies for offset credits under AESRD’s Quantification Protocol, compliance with the Protocol requires capture. For the Protocol see here. The EOR Protocol is currently under review which means that proponents cannot use the QP unless they obtain special permission. Offset credits may be used by covered entities for compliance purposes under the terms of Alberta’s Specified Gas Emitter Regulations: Alta Reg 139/2007.
The second compelling feature is simply the gall of Butte in making this application. Butte is a self-proclaimed free-rider and apparently proud of it. Butte is quite candid in confessing in its application (at para 42) that “there was no reservoir drive energy remaining at the conclusion of primary production, so there was no potential left to recover oil from Section 35 under primary production” but by riding on Glencoe’s coattails “Section 35 has significant development potential under enhanced recovery, with remaining recoverable oil estimated to be 177 thousand (103) m3.” It is hard to imagine a clearer case of free rider behavior! Note that there was also at least some evidence (at paras 51 – 52) that Butte’s actions went beyond free riding and were actually causing “irreparable damage” to the recovery of Glencoe’s resources on the immediately offsetting lands due to reduced pressure causing channeling of the injected gas and loss of miscibility.
The relevant provisions
Section 79(4) reads as follows:
(4) When a pool or part of a pool is
(a) subject to a unit agreement and unit operating agreement filed with the Board,
(b) within a block, or
(c) within a holding,
the Board, on application, may order that any provision of this Act or the regulations regarding the development and production of the oil or gas resources be varied or suspended in the pool or the part of the pool for the duration of the unit operation, block or holding.
It is evident that the principal reason for applying for a holding is to obtain a variation of the default rules of the regulations – most commonly the default spacing rules, the default rules in relation to the number of wells per spacing unit, and the target areas within the spacing unit. For the default rules see Unit 7 of ERCB Directive 065, Resources Applications (available here):
5.190(1) The Board, on application and by order, may establish holdings.
(2) An application to establish holdings must be made in accordance with Directive 065 and must include any other information that the Board requires.
(3) The Board shall not grant an application for an order pursuant to subsection (1) unless, in the opinion of the Board, the applicant shows that
(a) improved recovery will be obtained,
(b) additional wells are necessary to provide capacity to drain the pool at a reasonable rate that will not adversely affect the recovery of the pool, or
(c) the proposed holding would be in a pool, in a substantial part of which there are existing drilling spacing units or holdings with similar provisions.
5.200 A holding shall contain only
(a) a single drilling spacing unit of common ownership, or
(b) whole, contiguous drilling spacing units of common ownership.
The decision
The Board (I will generally refer to the Board although the reasons as noted above are the reasons of the Examiners that the Board adopted) began its analysis of the application by considering whether or not Butte could meet one of the three conditions of subsection 3. The Board concluded, rightly enough, that the conditions were not cumulative and that therefore Butte need only establish that it met one condition; and in this case Butte could meet condition 3 since most of the rest of the pool fell within Glencoe’s units which operated on the same well density as Butte was proposing for the section 35 lands. In reaching this conclusion, the Board rejected Glencoe’s submission to the effect that the two situations were not comparable since the Board granted Glencoe’s application for increased well density in the context of an EOR scheme whereas Butte’s well was still on primary production. This was an interesting argument that surely had some merit. I speculate that the Board may not have pursued it further to avoid setting itself up for an appeal on a nice clean point of law. More surprising is the manner in which the Board seems to characterize its decision on this point as a true jurisdictional decision: i.e. the Board seems to be saying that it could only proceed further with the application if it could satisfy itself that Butte fell within one of the three conditions. I am not sure that that is the case given the substantive content of at least the first two conditions.
It is important to note that the three alternative conditions of subsection (3) are the only explicit guidance that the regulations give to the Board. But the section does not say that the Board shall grant the order in the event that the applicant establishes one of the conditions. Indeed, returning to subsection (1), it is clear that the Board retains a discretion (“may establish holdings”). What additional factors then should inform the exercise of the Board’s discretion? In this case the Board examined the application in light of three other considerations, each of which is grounded in one of the stated purpose of the Act.
The first consideration was whether the proposal to establish the holding would result in a conservation loss or reduction of oil ultimately recoverable from the pool. This consideration was based on the first purpose stipulated in section 4 of the OGCA (paragraph (a)) and the definitions of waste and wasteful operations:
4 (a) to effect the conservation of, and to prevent the waste of, the oil and gas resources of Alberta; … .
1(1) In this Act, …
(ccc) “waste”, in addition to its ordinary meaning, means wasteful operations;
(ddd) “wasteful operations” means
(i) the locating, spacing, drilling, equipping, completing, operating or producing of a well in a manner that results or tends to result in reducing the quantity of oil or gas ultimately recoverable from a pool under sound engineering and economic principles; … .
The second consideration was whether each owner in the pool has an opportunity to obtain its share of production. In effect, what that meant in the present case was whether or not it was necessary to grant the application in order to afford Butte that opportunity. This consideration was based on paragraph (d) of section 4.
(d) to afford each owner the opportunity of obtaining the owner’s share of the production of oil or gas from any pool; … .
The third consideration was whether the holding would result in orderly and efficient development. While the Board does not in this case make explicit the connection back to the statutory purposes it is evident that this consideration is based on section 4 of the OGCA.
(c) to provide for the economic, orderly and efficient development in the public interest of the oil and gas resources of Alberta; … .
Conservation loss or reduced ultimate recovery
Under this heading the Board concluded that Butte had simply not established its case. The Board recognized that there were two competing theories with respect to recoverability (at para 62). Butte’s theory was essentially that Glencoe’s investments and injection of CO2 created an opportunity for enhanced recovery on the section 35 lands which Butte wanted to seize and this could be done most effectively with additional wells! Without additional producing wells some of this opportunity would be passed up. Glencoe’s theory was that Butte’s current well was already interfering adversely with its EOR operation by reducing pressure which was affecting miscibility of the injected CO2 and reducing recovery at one of its wells. This reduced recovery would be compounded by the pressure reductions that would result (without offsetting injection on the same pattern developed by Glencoe) if Butte were allowed to drill on a denser pattern. The Board did not rule definitively on either theory but since the onus was on Butte, the Board’s failure to endorse Butte’s theory was a ground for rejecting the application.
The Board also ruled on one other matter in this part of its decision. The Butte well was on restricted production because its gas oil ratio (GOR) was high. It was high because of the amount of CO2 that was being produced with the oil. Butte (again, the gall of it!) argued (at para 55) that the gas part of the GOR should be based solely on native hydrocarbons and not on the CO2. The Board sided with Glencoe (at para 67):
As stated in Directive 007-1: Allowables Handbook, Guidelines for the Calculation of Monthly Production Allowables in Alberta, GOR penalties are imposed to limit production primarily to optimize oil and gas conservation. Since the injected CO2 is providing the mechanism for oil recovery from the E Pool, the examiners believe that producing and venting CO2 does not optimize oil conservation, and hence the CO2 should be included in the calculation of the GOR penalty.
Equity
The word “equity’ of course is being used here in its technical oil and gas law sense of affording each owner the opportunity not to be the victim of the rule of capture. In both its legal and common usage it is hard to imagine an application that is more inequitable and unfair; a case of reaping where one has not sown. Interestingly, this usage does have more than an echo in Glencoe’s argument (at para 74) and in the Board’s decision (at para 78):
Glencoe also argued that it is the owner of the CO2 injected into the reservoir through its EOR scheme, including any injected CO2 on Section 35, and that it remains the owner of the CO2. Glencoe pointed out that Butte does not have Glencoe’s approval to use the CO2 and Butte has not compensated Glencoe for the use of the CO2.
The examiners conclude that Butte is receiving the benefit of EOR without implementing its own EOR scheme for Section 35 or participating with Glencoe in its EOR scheme.
The Board also noted that there was a fundamental inconsistency in Butte’s “opportunity to produce” argument since Butte conceded that on primary production there was no loss of opportunity to produce: primary production had ended and any future opportunity to produce depended upon enhanced recovery. And here Butte wanted the best of all possible worlds since it wanted to take advantage of Glencoe’s EOR operation while avoiding the responsibilities that go along with an EOR approval such as (at para 79) “replacing voidage and maintaining reservoir pressure at or above the MMP [minimum miscible pressure]”. At this point, the Board seems to adopt a version of Glenco’s argument it had rejected earlier on the “jurisdictional” issue:
The examiners note that increased well density was not approved … for primary depletion; rather, the justification for increased well density and the opportunity afforded by it followed implementation of EOR. There is no evidence to suggest that the holding is required for primary depletion, under which Section 35 is currently being administered. The examiners note Butte’s statement that in the good-permeability part of the E Pool, under primary production there would be minimal difference in oil recovery between well densities of one and of two wells per quarter section. Further, … the E Pool was produced to depletion under primary production and, but for Glencoe’s EOR operations, no oil would currently be obtainable from Section 35 under primary depletion.
In the end, the Board concluded that while there was likely some drainage occurring, some drainage could be expected given the corner based target areas that prevailed when Glencoe’s wells were originally drilled (at para 82). Furthermore, Butte had the same opportunity for enhanced production as Glencoe; all it had to do was to pursue (at para 83) “the approval of an EOR scheme on its land, which would also result in Butte having to meet certain obligations, such as replacing voidage and maintaining reservoir pressure at or above the MMP.”
Orderly and efficient development
The Board concluded that Butte’s current practice as well as Butte’s future plans for producing from section 35 would not lead to orderly and efficient development. The Board noted that CO2 venting was currently occurring and with increased well density the problem would only be exacerbated. Furthermore, any plans by Butte to capture and re-inject any of the produced CO2 as part of its own CO2 scheme would need to deal with two further problems. The first was Glencoe’s claim to ownership of the CO2, and the second was the reality that the voidage replacement rules that the Board would impose as part of any EOR approval granted to Butte would require it to have an incremental source of CO2 beyond what Glencoe’s operations might serendipitously provide.
In its conclusion the Board found that approval of the application would not be in the public interest. The Examiners’ decision is well reasoned and I believe reaches the correct result. The only thing that puzzles me about the decision is that there is no reference to the province’s goals of reducing CO2 emissions and its investment in carbon capture and storage projects and (indeed CO2-EOR projects that may also sequester CO2). Surely that was a relevant public interest consideration given Butte’s cavalier and selfish approach which led to significant venting of CO2.
Bankes’ research on carbon related issues is supported by a grant from Carbon Management Canada.
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Under the Influence: The Alberta Court of Appeal and the Test for Discrimination
PDF version: Under the Influence: The Alberta Court of Appeal and the Test for Discrimination
Cases commented on: Wright v College and Association of Registered Nurses of Alberta (Appeals Committee), 2012 ABCA 267, leave to appeal denied, 2013 CanLII 15573 (SCC); Lethbridge Regional Police Service v Lethbridge Police Association, 2013 ABCA 47, leave to appeal application filed, April 15, 2013, SCC
On March 28, 2013 the Supreme Court of Canada denied leave to appeal in the case of Wright v College and Association of Registered Nurses of Alberta. Linda McKay-Panos blogged on that case here; it involves a claim of discrimination by two nurses with opioid addictions who were disciplined by their professional association after stealing narcotics from their employers. A majority of the Alberta Court of Appeal (per Slatter, JA, Ritter JA concurring) held that there was no discrimination and thus no duty to accommodate the nurses, using an approach that focused on stereotyping, prejudice and arbitrariness. Writing in dissent, Justice Berger undertook a traditional prima facie discrimination analysis and decided that the nurses had experienced discriminatory treatment. This split reflects a wider uncertainty about the appropriate test for discrimination under human rights law, and in particular the extent to which the approach to discrimination under section 15 of the Charter should have an influence. In the Supreme Court’s most recent human rights judgment, Moore v British Columbia (Education), 2012 SCC 61 (per Abella J), the Court declined to explicitly clarify the proper test, yet implicitly indicated that the traditional prima facie approach to discrimination is correct. Perhaps that is why the Court decided not to hear the appeal in Wright, which was decided before Moore. A more recent Court of Appeal decision, Lethbridge Regional Police Service v Lethbridge Police Association, was decided after Moore, yet Justices Martin, Watson and Slatter maintained a focus on stereotyping as the defining feature of discrimination. Worse, Lethbridge Police seems to impose additional burdens on complainants in human rights cases. This post will critically consider the Alberta Court of Appeal’s approach to discrimination and argue that the Supreme Court should grant leave to appeal in Lethbridge Police to clarify the proper test.
The Test(s) for Discrimination
In Ontario Human Rights Commission and O’Malley v Simpsons-Sears, [1985] 2 SCR 536, the Supreme Court established the prima facie approach to discrimination under human rights legislation. What a claimant must prove is that the conduct of the respondent has the effect of imposing “obligations, penalties or restrictive conditions not imposed on other members of the community” (at para 12). In Moore, this approach was described as a three step test (at para 33): “complainants are required to show [1] that they have a characteristic protected from discrimination under the Code; [2] that they experienced an adverse impact with respect to the service; and [3] that the protected characteristic was a factor in the adverse impact.”
O’Malley was cited in Andrews v Law Society of British Columbia, [1989] 1 SCR 143, where the Supreme Court first developed the test for discrimination under section 15 of the Charter. In Andrews, Justice McIntyre noted that while there were important differences between human rights legislation and the Charter, “In general, it may be said that the principles which have been applied under the Human Rights Acts are equally applicable in considering questions of discrimination under s. 15(1)” (at para 38). Those principles included the points that discrimination need not be intentional and could be based on the adverse impact or effects of a law or policy, and justifications of discriminatory actions were to be kept separate from the discrimination analysis. The Court rejected an approach to section 15 that that would have protected against only unreasonable discrimination, and instead defined discrimination in terms of disadvantage related to enumerated and analogous grounds, which was not much of a departure from the traditional prima facie approach under human rights legislation.
Andrews provided the governing approach to equality rights for some time, but differences began to develop within the Supreme Court on the proper test for discrimination under the Charter. Those differences were seemingly resolved in Law v Canada (Minister of Employment and Immigration), [1999] 1 SCR 497, which focused on “human dignity” as the measure of discrimination. Whether there was a violation of human dignity was assessed with regard to four contextual factors, some of which – contrary to Andrews – imported section 1 Charter considerations such as the connection between the purpose of the law and the claimant’s needs and circumstances (i.e. a consideration of arbitrariness) into the test for discrimination. The Law test prevailed from 1999 to 2008, and several Alberta human rights cases applied that test during this period, rather than the more traditional prima facie approach to discrimination (see e.g. Gwinner v Alberta (Human Resources and Employment), 2002 ABQB 685, aff’d 2004 ABCA 210; leave to appeal denied, [2004] SCCA No 342; Alberta (Minister of Human Resources and Employment) v Weller, 2006 ABCA 235; leave to appeal denied [2006] SCCA No 396). Cases in other jurisdictions did so as well (see e.g. British Columbia Government and Service Employees’ Union v British Columbia (Public Service Employee Relations Commission), 2002 BCCA 476 (Reaney)). In other human rights cases, courts declined to follow Law, particularly when the claim involved private rather than government action (see e.g. Vancouver Rape Relief Society v Nixon et al, 2005 BCCA 601; leave to appeal denied, [2006] SCCA No 365).
In 2008, the Supreme Court abandoned the discrimination as human dignity approach under section 15 of the Charter in R v Kapp, 2008 SCC 41, [2008] 2 SCR 483 (for ABlawg comments on Kapp see here and here). In doing so, the Court recognized commentators’ criticisms about the formalism of Law and the added burden on claimants to prove a violation of their human dignity (at para 22). In a decision penned by McLachlin CJ and Abella J, the Court purported to return to Andrews in Kapp by adopting a definition of discrimination that focused on the perpetuation of disadvantage by prejudice and stereotyping (at para 18). The Court also suggested that the contextual factors from Law were relevant to prejudice and stereotyping, thus maintaining a consideration of arbitrariness in the section 15 analysis. Jonnette Watson Hamilton and I have argued that Kapp is not actually a return to Andrews, and that a test of discrimination that focuses on prejudice, stereotyping and arbitrariness is a narrow one that may not capture the harms of unintentional, effects based discrimination and improperly considers section 1 matters under section 15 (see Jennifer Koshan and Jonnette Watson Hamilton, “The Continual Reinvention of Section 15 of the Charter”, forthcoming, University of New Brunswick Law Journal; available on SSRN). Others have been critical of the Kapp approach to discrimination as well (see e.g. Sophia Moreau, “R v Kapp: New Directions for Section 15” (2008-2009) 40 Ottawa L Rev 283; Margot Young, “Unequal to the Task: “Kapp”ing the Substantive Potential of Section 15” in Sanda Rodgers & Sheila McIntyre, eds, The Supreme Court of Canada and Social Justice: Commitment, Retrenchment or Retreat (Markham: LexisNexisCanada, 2010) 183).
Unfortunately, the concepts of prejudice, stereotyping and arbitrariness have also had an influence in the human rights sphere. The Supreme Court’s decision in McGill University Health Centre (Montreal General Hospital) v. Syndicat des employés de l’Hôpital général de Montréal, 2007 SCC 4, [2007] 1 SCR 161, is significant in this regard. In a concurring judgment in McGill, Justice Abella stated that “At the heart of these definitions [of discrimination] is the understanding that a … practice, standard, or requirement cannot disadvantage an individual by attributing stereotypical or arbitrary characteristics. … The essence of the discrimination is in the arbitrariness of its negative impact, that is, arbitrariness of the barriers imposed, whether intentionally or unwittingly” (at para 48, emphasis added).
Since McGill and Kapp, tribunals and courts have tried to make sense of the proper approach to discrimination in human rights cases. For example, in Ontario (Disability Support Program) v Tranchemontagne, 2010 ONCA 593, the Ontario Court of Appeal stated that “showing a prima facie case of discrimination involves demonstrating a distinction based on a prohibited ground that creates a disadvantage by perpetuating prejudice or stereotyping.” However, prejudice and stereotyping were not “freestanding requirement[s]” (at para 84), they were seen as being “incorporated into two stages of the prima facie case analysis: i) determining whether the treatment in issue truly creates a disadvantage; and ii) determining whether the protected ground or characteristic truly played a role in creating the disadvantage” (at para 90). See also Armstrong v British Columbia (Ministry of Health), 2010 BCCA 56; leave to appeal refused [2010] SCCA No 128.
The consequences of importing the Charter approach to equality into human rights analysis were discussed by Leslie Reaume in “Postcards from O’Malley: Reinvigorating Statutory Human Rights Jurisprudence in the Age of the Charter”, in Fay Faraday, Margaret Denike and Kate Stephenson, eds., Making Equality Rights Real: Securing Substantive Equality Under the Charter (Toronto: Irwin Law, 2006) 373. Writing at the time of Law, Reaume noted that it increased the burden on human rights complainants well beyond the burden imposed by O’Malley’s prima facie test; it also interfered with the proper relationship between the prima face discrimination and defence stages of analysis, and resulted in a “formal, mechanistic approach” to discrimination that was contrary to the “open, contextual” approach of O’Malley (at 374-376). More recently, Denise Réaume, in “Defending the Human Rights Codes from the Charter” (2012) 9 Journal of Law and Equality 67 at 68-69, argued that applying the Kapp approach to discrimination under human rights legislation “produce[s] a different conception of discrimination”, which obscures the legislature’s intent that “the important normative work of determining the scope of liability” should take place at the stage of defences. In other words, “section 15 places the burden on the claimant to prove that the legislation does indulge in stereotyping, whereas under the conventional approach to human rights adjudication …, the burden falls on respondents to prove that their generalizations are accurate” (at 82). The same point could be made about the problems with introducing an element of arbitrariness into the test for discrimination as something that the claimant must prove, rather than requiring the respondent to prove the rationality of its choices. Where the test for discrimination is too onerous, the analysis never gets to the stage of considering the respondent’s duty to accommodate the claimant, which should normally be the focus of human rights claims.
There are many arguments in favour of keeping the tests for discrimination under human rights codes and the Charter distinct. Human rights legislation is a statutory protection against discrimination, and although considered quasi-constitutional, it is easier to amend than the Charter if the legislature decides to shift the burden away from the traditional prima facie approach. Human rights legislation is also restricted to those grounds and those areas of conduct that a particular legislature sees fit to protect, and with respect to the defences and exemptions it makes available in different contexts. In contrast, section 15 of the Charter applies to laws and other government actions in all areas, and to both enumerated and analogous grounds, and Charter discrimination can only be saved by an ameliorative programs defence under section 15(2) or the reasonable limits justification under section 1. Another key difference is that human rights legislation binds private and public actors, while the Charter only applies to government actors and actions (thus involving policy considerations that may not apply under human rights legislation). Concerns that governments should not be subjected to different tests for discrimination depending on whether the claim against them comes under human rights codes or the Charter can be better resolved by what Réaume calls “local adjustments” to human rights legislation (at 100), rather than by letting private respondents such as employers and landlords off the hook via an overly stringent burden on claimants to prove discrimination.
Although there are good reasons for keeping distinct the human rights and Charter approaches to discrimination, at the time of Wright the proper test was still a matter of debate.
Wright v College and Association of Registered Nurses of Alberta
As noted, Wright involved a claim of discrimination by two nurses with opioid addictions who were disciplined for “unprofessional conduct” by their professional association after stealing drugs from their employers. The nurses argued that human rights principles precluded a finding of professional misconduct in the circumstances, as application of the regular disciplinary procedures would have a discriminatory adverse impact on them on the basis of their addiction-related disabilities. They also argued that the College and Association of Registered Nurses of Alberta had a duty to accommodate their disabilities by using alternatives to the disciplinary process. In particular, the College had access to an Alternative Complaints Resolution Process that allowed for treatment and rehabilitation rather than discipline for nurses who were addicted to alcohol or drugs.
The majority’s statement of the test for discrimination in Wright is unclear at best. Justice Slatter writes (at para 55) that “discrimination focuses on affronts to human dignity”, citing McGill (which does not actually refer to human dignity), and without acknowledging that Law’s focus on human dignity was abandoned in Kapp. Justice Slatter also suggests that the issue in the case is “whether the College’s conduct (in laying professional misconduct charges) is legally connected to the appellant’s [sic] disability, so as to raise the College’s conduct to the level of discrimination in law” (at para 57). This sounds more like the test for prima facie discrimination set out in Moore. However, in upholding the tribunal’s decision that the College’s conduct was not discriminatory, the majority relies on several factors that go beyond the prima facie approach, including dignity, the College’s motivation or intent, stereotyping, and arbitrariness (at para 58). Interestingly, the majority does not cite Kapp at all, but relies on McGill for the requirements of stereotyping and arbitrariness, and on Law-era section 15 and human rights cases for the notion that discrimination engages human dignity. The gist of the majority decision is that the nurses were disciplined for their criminal conduct rather than for their addictions, which is not an arbitrary or stereotypical application of the discipline process that engages their dignity. In other words, the nurses were treated the same as anyone else who stole drugs from their employer (at para 62). As for the argument that the failure to take their addictions into account amounted to adverse effects discrimination, Justice Slatter states that “the mere presence of a disproportionate effect on a protected group is not conclusive if it does not engage artificial and stereotypical assumptions” (at para 61). There is no recognition in the majority decision that it will be very difficult in adverse effect cases to establish stereotyping and arbitrariness, given that these concepts normally relate to direct, intentional discrimination. Nor is there recognition that dignity has fallen into disfavour in the equality rights context. The majority decision seems motivated by its concern over the “far-reaching” consequences of “excusing criminal behaviour because of addictions” (at para 66), and its sense (not supported by evidence) that “there are a great many addicts who do not commit criminal acts” and that those who do should be “[held] accountable for their actions” (at para 67). Relatedly, the majority fails to find a sufficient causal link between the addictions and the nurses’ thefts, contrary to the expert evidence that their addictions were at least a factor in their actions (para 61).
In contrast, Justice Berger’s dissenting opinion applies the prima facie test for discrimination, and considers whether the appellants had a disability, received adverse treatment, and if the disability was a factor in the adverse treatment (at para 118). He finds all of these elements to be present in the case at hand: the nurses had addiction related disabilities, they received adverse treatment in the form of discipline for professional misconduct, and the evidence established a causal connection between the disability, the thefts, and the adverse employment consequences (at paras 119-123). Justice Berger recognizes that the issue is whether “neutral performance standards have a disproportionately adverse impact on a nurse suffering from a disability, namely an addiction, which causes her to steal narcotics” (at para 116), and refutes the majority’s position, stating that “treating all nurses the same creates serious inequality” (at para 123). His finding of prima facie discrimination required the College to defend its actions under the bona fide justification test, which necessitated proof that it was impossible to accommodate the nurses without undue hardship to the College (at paras 128-9). Because this issue was not explored at the tribunal level, he would have remitted the matter for reconsideration.
Moore was pending when the Alberta Court of Appeal decided Wright, and was released just before the leave to appeal application in Wright was filed. In Moore, the Court was urged to clarify the test for discrimination by interveners such as West Coast LEAF. While it did not take the opportunity to provide that clarification explicitly, the Court does apply the traditional prima facie approach and does not import the concepts of stereotyping and prejudice. However, Justice Abella uses the language of arbitrariness at several points in her judgment in Moore. For example, at para 59, she states that “the focus is always on whether the complainant has suffered arbitrary adverse effects based on a prohibited ground” (emphasis added). This suggests that a consideration of arbitrariness is part of the test for discrimination, which is contrary to the traditional prima facie approach that the Court seems to support elsewhere in the judgment. At other points in Moore, Justice Abella’s references to arbitrariness suggest that she may consider it relevant to the justification stage of analysis, although this is not entirely clear. For example, at para 60, she writes that “The question in every case is the same: does the practice result in the claimant suffering arbitrary — or unjustified — barriers on the basis of his or her membership in a protected group. Where it does, discrimination will be established” (emphasis added; see also paras 26 and 61). It is therefore difficult to see Moore as having resolved the question of what test for discrimination should be applied in the human rights context.
Returning to Wright, I consulted with counsel for the applicants in the leave to appeal application. The application raised three issues. First, how should professional bodies such as the College apply human rights principles in the context of disciplinary proceedings? Although it is clear that human rights laws apply to such bodies (see section 9 of the Alberta Human Rights Act, RSA 2000, cA-25.5), the Court of Appeal suggests that there was a conflict between the traditional approach to discipline and a human rights approach, and this required clarification by the Supreme Court. The second issue was whether a different test for discrimination arises where the ground in question is an addiction-related disability. As argued in the leave application, Wright implies that there is a hierarchy of disabilities, with addiction-related disabilities subject to a higher level of scrutiny as “they sometimes involve an element of volition” (at para 51). The application cited other cases where this issue was raised as well, including British Columbia (Public Service Agency) v British Columbia Government and Service Employees’ Union, 2008 BCCA 357, leave refused [2008] SCCA no 460 (“Gooding”). Third, what is the proper test for discrimination, particularly in cases involving claims of adverse effects? The leave application argued that Moore did not resolve the debate about the appropriate test, particularly in the context of adverse effects discrimination, where the elements of stereotyping and arbitrariness are difficult to meet. The application connected these three issues to show the compounded difficulties faced by claimants alleging addiction-related disabilities in the context of professional regulation.
Subsequent to the filing of the leave application in Wright, but before a decision on leave was rendered, the Supreme Court released its most recent section 15 decision, Quebec (Attorney General) v A, 2013 SCC 5 on January 25, 2013. Writing for the majority on section 15 (at paras 325-8), Justice Abella indicates that Kapp was not intended to impose “additional requirements” on equality claimants, and that prejudice and stereotyping should simply be seen as two indicia of discrimination, along with disadvantage more broadly. The majority acknowledges that the concepts of prejudice and stereotyping reflect negative attitudes, whereas legal protections against discrimination are also meant to capture discriminatory conduct or effects, apart from intentional actions. This is a hopeful indication that at least some members of the Supreme Court are willing to look beyond prejudice and stereotyping as definitions of discrimination, even under section 15 of the Charter. However, the members of the Court who dissented on section 15 (Justices LeBel, Fish, Rothstein, and Moldaver) maintain a focus on stereotyping and prejudice as “crucial factors” for identifying discrimination (at paras 169, 185), and even Justice Abella reverts to the language of “arbitrary disadvantage” at one point in her judgment (at para 331). As Jonnette Watson Hamilton and I suggest in “Continual Reinvention” (at note 209), this reference may have been a slip of the pen rather than evidence of intent to retain a focus on arbitrariness. However, this and the close split in Quebec v A confirm that questions remain about the proper approach to discrimination under section 15 of the Charter. Even if the Charter should have some influence in human rights cases, it is unclear in substance what that influence should be.
It was therefore very disappointing when Justices McLachlin, Abella and Cromwell denied the leave to appeal application in Wright, especially since McLachlin CJ and Abella J were the major architects of the McGill / Kapp / Moore / Quebec v A decisions. While they may have believed the law on discrimination is clear enough that the appeal in Wright was not a matter of national importance, my human rights and constitutional law students, and perhaps readers of this post, might beg to differ.
It is in this context of uncertainty that the Alberta Court of Appeal decided Lethbridge Regional Police Service v Lethbridge Police Association.
Lethbridge Regional Police Service v Lethbridge Police Association
Justices Martin, Watson and Slatter, writing as “The Court”, released their decision in Lethbridge Police on February 12, 2013 – after both Moore and Quebec v A. The case involved a probationary police officer, Lester, who suffered workplace injuries, was given modified duties, and then experienced depression during his period of probation, leading to further problems which both he and the Police mishandled in different respects. His employment with the Lethbridge Police was terminated at the end of the probationary period, and his union filed a grievance and a human rights complaint. The parties agreed to have a labour arbitrator resolve both sets of issues. The arbitrator recognized that probationary employees have no right to permanent employment status, and that a refusal to continue probationary employment “can only be challenged if it is arbitrary, discriminatory, or done in bad faith” (ABCA at para 16). Applying a prima facie approach, the arbitrator found that discrimination based on disability was a factor in the termination of Lester, based on inferences of stereotyping drawn from the evidence. He remitted the matter to the parties to try to resolve. The arbitrator’s decision was overturned on judicial review, and the Lethbridge Police Association appealed to the Court of Appeal.
The Court of Appeal finds that the arbitrator was correct in holding that a decision not to continue a probationary employee can be reviewed if it is “driven by discriminatory considerations” (at para 30). Reminiscent of its decision in Wright, the Court contends that “discrimination focusses on affronts to human dignity”, citing McGill (at para 33), which (I note again) does not mention dignity. Kapp, Moore and Quebec v A are not cited in Lethbridge Police.
The Court then states that “Distinctions based on disability fall in a subtly different category, because some employees have actual limitations based on their disability. Drawing distinctions based on actual inability to do the work is not discrimination” (at para 34). The Court does not cite any authority for this point. Indeed, it is contrary to the well-established principle that an employee’s inability to meet an employer’s standards because of a protected ground is to be considered at the justification stage: British Columbia (Public Service Employee Relations Commission) v BCGSEU, [1999] 3 SCR 3 (Meiorin). The Court cites Meiorin (at para 66) for the point that “An individual assessment of the characteristics of a particular employee is what the law requires”, but fails to note that this is a matter relating to a bona fide occupational requirement justification, not to discrimination.
The Court dilutes the prima facie test for discrimination further when it states that instead of establishing that a protected ground was a factor in the adverse treatment (step 3 of Moore), the better approach is as follows (at para 37):
(a) first, determine if there was justification for the decision, absent the consideration of the prohibited ground, and
(b) if so, then examine whether the discrimination was so egregious, or of sufficient magnitude, to warrant nullifying the entire decision because of it.
This approach essentially means that if there is a factor to justify the adverse treatment, it will not amount to discrimination. Put another way, an employer only needs to come up with one good reason to dismiss a probationary employee, even if it had other reasons that were discriminatory, unless the discrimination had a “significant causative effect” (at para 37). According to the Court, “in cases like this it is legitimate to consider all the motivations and reasons behind any particular decision before deciding if discriminatory considerations so taint the decision that it should be set aside” (at para 38). Again, this approach is contrary to Meiorin and cases such as Lincoln v Bay Ferries Ltd, 2004 FCA 204, where it was held that employer motivations should not be considered until after the prima facie discrimination analysis. The Court of Appeal effectuates a major shift in the burden of proof here.
The Court also continues to focus on stereotyping as the definition of discrimination, notwithstanding the Supreme Court’s decision in Quebec v A. And it finds that the arbitrator’s inferences of stereotyping are not reasonable on the evidence, ultimately dismissing the appeal. As in Wright, the case never gets to the stage of considering what would be appropriate accommodation for the employee’s disabilities.
It is to be hoped that the Supreme Court will grant leave to appeal in Lethbridge Police. Moore did not sufficiently clarify the approach to discrimination in human rights cases, nor has Quebec v A sufficiently clarified the approach to discrimination under the Charter. The Alberta Court of Appeal continues to interpret this uncertainty in ways that present insurmountable difficulties for claimants. The Court of Appeal ‘s treatment of disability discrimination, raised as an issue in the Wright leave application, persists as a problem as well, and now it has been extended to create a possible hierarchy between all forms of disability and other protected grounds. The Court seems to have lost sight of the fundamental principle that human rights legislation is to be given a broad, purposive interpretation that protects the interests of disadvantaged members of society in crucial areas such as employment. The influence of Charter equality jurisprudence is certainly a factor in this morass, but the Court of Appeal has created new problems as well. There is no pun intended when I say that it is high time for the Supreme Court to resolve the issues surrounding the proper approach to discrimination in human rights cases.
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Species at risk and an adjustment clause
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Case Considered: Matichuk v Quattro Holdings Ltd, 2013 ABQB 164.
The case of Matichuk v Quattro Holdings Ltd involves a contractual dispute over the sale of a parcel of agricultural land in St. Albert. The parties entered into a purchase and sale agreement in June 2012. The facts set out by Mr. Justice G.A. Verville suggest the Vendor was keen to sell and the Purchaser was keen to purchase in order to develop the land (I presume residential). Time was of the essence. The closing date was set for early October 2012. But the deal began to go sideways just a couple weeks before closing. The Purchaser sought an adjustment (reduction) on the purchase price to account for the facts that there are five wetlands on the property, some which may be Crown owned under section 3 of the Public Lands Act, RSA 2000, c P-30, and that a bird species listed as “special concern” under the Species at Risk Act, SC 2002, c 29 – was known to nest on the lands. The Vendor was not agreeable, and insisted on closing for the full purchase price. The parties filed counter claims and Mr. Justice G.A. Verville heard arguments in late February at the Court of Queen’s Bench. Justice Verville decided in favour of the Vendor, ruling the environment adjustments provision in the contract being relied upon by the Purchaser was so vague as to be meaningless and thus the Purchaser could not rely on it. Accordingly, Justice Verville found that the Purchaser had repudiated the contract by refusing to close the deal.
It has been many years since I thought much about contract law, and readers hoping for some insight into legal principles governing the construction of commercial contracts, meeting of the minds, or the severability of provisions will be disappointed. But there is a lesson to be learned here on drafting contracts. My primary interest here concerns investigating the role of listed species at risk in this dispute.
The contractual provision in question was the adjustments clause: “The parties acknowledge and agree that the amount set herein for the Purchase Price is based on the assumption that the Lands are 144.51 acres. Prior to and in conjunction with the Closing Date, the Vendor shall advise the Purchaser of the precise acreage. If the acreage, including deduction of environment, if any, varies from the 144.51 acres, the Purchase Price shall be adjusted on the basis of $90,000 per acre” [emphasis is mine].
The Purchaser sought an extension of the closing date to allow its environmental consultants to calculate appropriate reductions to the purchase price, in part, for undevelopable lands resulting from the application of the Species at Risk Act. We don’t get any more details from Justice Verville on this issue, and he makes no reference to the species at risk in his reasoning. Justice Verville rejects the position of the Purchaser on the basis that the adjustments clause is too vague to be of any meaning (at paras 60-61).
Nonetheless, it is interesting to consider how a listing under the Species at Risk Act might implicate private legal relations such as those in this case. The bird species in question (which isn’t named in the decision) is apparently listed as a species of special concern under the Species at Risk Act. Had this issue gained some traction in the courtroom, it would have become apparent that a “special concern” listing does not result in any prohibitions or restrictions under the Species at Risk Act. The no take and protection of critical habitat provisions, for example, generally only apply to species listed as endangered or threatened. Thus even if the adjustments clause had been drafted with more precision and specifically referenced species at risk issues as grounds for an environmental adjustment (so as to not be meaningless or vague), I question whether a species of special concern can trigger an adjustment in the purchase price since there are no Species at Risk Act impediments to developing lands frequented by these species.
An environmental adjustment is a real possibility in cases where species listed as endangered or threatened under the Species at Risk Act are present on lands subject to a commercial transaction. In light of this decision, the solicitor for a purchaser seeking to acquire such lands would be unwise to rely on the standard precedent language in drafting the adjustments clause.
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The interaction of the offset well and default clauses of an oil and gas lease
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Case commented on: 1301905 Alberta Ltd. v Sword Energy Inc. 2013 ABQB 113
In this case the Court granted summary judgement for breach of the offset well obligation in an oil and gas lease. Assessment of damages was referred to a referee.
The Facts
Sword was the assignee of a petroleum and natural gas lease of the south half of section 15. The lease was in the 1991 CAPL form (information provided by counsel) and 1301905 Alberta Ltd. was the assignee of the lessor’s interest. Sword drilled a producing well on the lands in 2007. In January 2010, 1301905 Alberta Ltd. served a default notice on Sword alleging that Sword was in breach of the Offset Wells clause of the lease and claiming compensatory royalties based on production from the offsetting well.
The offset well clause provided that if certain conditions were fulfilled, the lessee shall, within six months of commercial production being obtained from offsetting acreage, do one of four things: (a) commence or cause to be commenced operations for the drilling of a well, (b) pool or unitize the leased lands with the producing lands, (c) surrender the leased lands or the relevant zone, or (d) pay a compensatory royalty (the “compound obligation’).
The default clause provided that:
(a) If, before or after the expiry of the primary term, the Lessor considers that the Lessee has not complied with any provision or obligation of this Lease … the Lessor shall notify the Lessee in writing, describing in reasonable detail the alleged breach or breaches. The Lessee shall have 30 days after receipt of such notice to:
i) remedy or commence to remedy the breach or breaches alleged by the Lessor, and thereafter diligently continue to remedy the same; or
ii) commence and diligently pursue proceedings for a judicial determination as to whether the alleged acts or ommisions [sic] constitute a breach or breaches on the part of the Lessee.
Sword did not pay the requested compensatory royalties or commence the proceedings contemplated by the default clause although it did, by letter of February 24, 2010, take the position that there was no breach of the offset well clause since no drainage was occurring. Subsequently, on June 22, 2011 Sword, by written notice (at para 11), “terminated the Lease and surrendered the offset zones in the Well.”
On the basis of these facts 1301905 Alberta Ltd. sought summary judgement.
The decision
Justice Donald Lee granted the application for summary judgement. Drawing an analogy with limitations law he concluded that when Sword failed to commence an action within 30 days to ascertain whether the alleged acts or omissions constituted a breach of the lease, Sword lost its right to defend its position on that alleged breach. Accordingly, 1301905 Alberta Ltd.. was entitled to damages for breach of the lease (at para 43) “including Cl.15(c),” such damages to be assessed by a referee pursuant to Rule 7.3(3) (b) of the Alberta Rules of Court.
Commentary
At least, I think that the above is what Justice Lee decided, but it would be nice to know a lot more about the apparently simple facts before being more definitive. I say this because some things remain puzzles. For example, at paragraph 6 we learn that Sword spudded in a well (the Well) on the leased lands in 2007 and obtained commercial production. We never learn if this Well is still producing (and if so from what formation(s)), or, if not, when it ceased to produce. It would be nice to know this because if the Well is still producing it has some implications for the remedy available to the lessor under the default clause (no termination of the lease if there is a well capable of production on the lands) and it would help us make sense of just what Sword did on June 22, 2011 when it (at para 11) “terminated the Lease and surrendered the offset zones in the Well” (termination and surrender? the entire lease or just the relevant zones?)).
Two paragraphs later we learn that 1301905 Alberta Ltd.’s alleged breach of the offset clause “based on the commercial production from the spudded Well.” That’s right, that’s “breach” of a default clause and an upper case “Well.” What seems like a momentary lapse however is compounded later in the judgement with the following two paragraphs:
[32] First, on the basis of the record before me, the fact is clear and undisputed that Sword drilled Offset Wells (sic) on the Lessor’s Lands. And further, the Applicant in its Affidavit of Records provided production records from Alberta Energy Resources Conservation Board (ERCB) which confirmed commercial production from the Offset Wells on the Lessor’s Lands.
[33] Secondly, I do not agree that the determination of the legal issue as to whether the Offset Wells Clause has been breached based on the breach of the Default Clause in the Lease would require an extensive weighing of additional evidence in a full trial outside the facts that are already known in this application.
So where were the offsetting well(s) drilled? On the Lessor’s Lands? I thought that an offsetting well was a well drilled on offsetting acreage. And if they were offsetting well(s) how does production from an offsetting well establish production on the leased lands (and why was that relevant anyway)? Or perhaps Justice Lee is making a distinction between the leased lands and the lessor’s other lands (perhaps the lessor owns the offsetting acreage?) In any event, I hope I have said enough that you get the point, some of this seems about as clear as mud.
I have two more substantive points to make. The first relates to the numerous instances in which Justice Lee concludes that Sword is in breach of the default clause (see paras 21, 26, 27, 28, 33, 35, and 44). It seems odd to me to talk the “breach” of a default clause. It is true that the clause uses the mandatory “shall” but properly construed all that the clause does is to provide the lessee with two options in the event of a claimed breach: (1) take steps to remedy the breach, or (2) commence proceedings. The failure to elect either option is not a breach of an obligation, it simply exposes the lessee to termination of its lease:
… this lease … shall thereupon terminate and it shall be lawful for the Lessor to re-enter the said lands and to repossess them.
The breach of the lease at issue here is not the breach of the default clause it is the breach of the compound obligation represented by the offset well clause. That compound obligation stipulates that where an offsetting well obtains commercial production then the lessee within six months must do one of four things, all as stipulated in the lease and described above. One of these four things is the payment of a compensatory royalty. The lessor does not get to decide which of these actions the lessee is to take although the lessor is entitled to insist that the lessee do one of these four things. And the lessor is entitled to take the position that if the lessee fails to do any of the four things then the lessor can serve the default notice in proper form. The proper form requires that the lessor describe in reasonable detail the alleged breach or breaches.
The claim that it is incorrect to talk about the breach of a default clause may be just pedantry on my part but it may also have some bearing on Justice Lee’s characterization of the consequences of the “breach” of the default clause – or as I would put, the lessee’s failure to exercise one of its two options. The usual consequence would presumably be termination (either by the exercise of the right of re-entry or by way of a judicial declaration) but funnily enough nobody seems to be arguing about termination here, the argument is simply about damages. So what of the consequences of “breach” in this case? Well, apparently, the consequence of breach of the default clause is that Sword has somehow lost its opportunity to contest that it was in breach of the offset well clause and this means that 1301905 Alberta Ltd. is entitled to summary judgement (at paras 27 – 28) on liability leaving only the question of damages to be referred to a referee.
Now this seems quite draconian to me. It is one thing to say that the lessee has lost the right to object to termination. After all, one way to think about the “notice and options” provisions of the default clause is that these provisions are simply establishing the pre-conditions to lawful termination. The lessor has complied with them and accordingly can now terminate the lease (subject of course to the potential availability of relief from forfeiture, since apparently we are not talking about automatic termination for want of production) by way of judicial declaration or re-entry. But the lessor does not need the default clause to sue for breach of the offset well clause. Breach of the offset well clause may give grounds for termination; but termination and\or notice of default are not a precondition for bringing suit for breach of the offset well clause and a consequential claim for damages. And if this is correct is it still clear that this was an appropriate case for summary judgement?
Well, perhaps, but maybe not for the reasons given by Justice Lee. It may be the case that the lessor deserves summary judgement because the only defence that 1301905 Alberta Ltd. has (or the only defence we hear about) to a breach of the compound obligation of the offset well clause is not a good defence. That defence seems to be Sword’s claim that there is no drainage from under 1301905 Alberta Ltd.’s lands. But that is no defence to the breach of the compound obligation of the default clause. Actual drainage or proof of drainage is not a trigger to the lessor’s claim and proof of absence of drainage is not a good defence – and it may not even be relevant to the assessment of damages if those damages are claimed simply on the basis of compensatory royalty as provided for under clause 8(d).
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A Rather Quick Response to a Rather Typical Vexatious Litigant
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Case commented on: Onischuk v Alberta, 2013 ABQB 89
The prominent September 2012 decision of Court of Queen’s Bench Associate Chief Justice John D. Rooke in Meads v Meads, 2012 ABQB 571, established a continuum of litigants, ranging from commonly encountered self-represented litigants, to infrequently encountered and almost always self-represented vexatious litigants, through to the highly unusual organized pseudolegal commercial argument (OPCA) litigant who is usually self-represented. Justice Rooke’s decision in Onischuk v Alberta concerns a litigant who appears to fit in the middle of that continuum, a rather typical vexatious litigant, although perhaps found to be so more quickly than has been the usual case. It is those two matters — typicality and velocity — that I focus on in this post.
Facts
Onischuk’s initial claim arose from his allegation that he was exposed to toxic chemicals as a result of voluntarily participating in a cleanup of chemicals that spilled into Lake Wabamun as a result of the derailment of a Canadian National Railway (CNR) train in 2005. Justice Rooke says nothing more about this instigating event; he has no reason to do so in the context of the applications before him. However, some third party description of the event is necessary to support my claim that Onischuk is a “typical” vexatious litigant.
The spill is described by Ron Goodman in “Wabamun: A Major Inland Spill” as follows:
On August 3, 2005, forty-three cars of a westbound Canadian National Railways freight train derailed on the shore of Lake Wabamun, just west of Alberta’s capital city of Edmonton, spilling about 750 m3 of Bunker C and 75 m3 of a pole-treating agent on the lakeshore. The spilled materials quickly flowed into the lake, forming a slick that spread rapidly along the north shore of the lake, oiling more than 12 km of shoreline …. The local volunteer fire department responded in a few minutes and evacuated local residents. There was no fire and the spilled material quickly flowed into the lake. There was a large amount of a single product (750m3), which at the time was not identified as a dangerous good, so the fire department turned the response of the spill to the spiller. Canadian National Railways (CNR) called upon their response contractor to respond to the spill …. Bunker C is well known to have a serious environmental impact, mostly due to smothering. Its density being near that of freshwater, means it has a tendency to sink with only a limited amount of weathering or picking up of debris.
In 2009 CNR was fined a total of $1.4 million for the 2005 Lake Wabamun derailment. CNR pleaded guilty to three charges — one under Alberta’s Environmental and Enhancement Act for failing to take all reasonable measures to remedy and confine the spill, one under the federal Fisheries Act, and a third under the federal Migratory Birds Convention Act, 1994. CNR was also ordered to implement an emergency response plan to meet industry standards. See Environment Canada Enforcement Notification, “Canadian National Railway Convicted In Environmental Enforcement Cases in Alberta and British Columbia” (May 25, 2009). Also as a result of the spill, and due to public concern about the lack of government response, the Alberta Minister of the Environment established the Environmental Protection Commission to develop an improved infrastructure to respond to environmental emergencies in Alberta. See “Environmental Disasters and Lake Wabamun: A Review of the Government’s Response” by Jodie Hierlmeier, Staff Counsel, Environmental Law Centre (News Brief, Vol. 20 No. 5, 2005).
Onischuk initially sued CNR and a number of its employees, the Province of Alberta and several of its ministries, as well as ministries, boards and agencies of the federal government in August 2007. He discontinued his action against Alberta and Canada in 2009. His action against CNR and some of its employees was struck in 2009 by Justice Sulyma on the basis that Onischuk’s claim did not disclose a reasonable cause of action. Negligence, as a cause of action, requires that the defendant owe the plaintiff a duty of care, a breach of that duty of care by the defendant, a causal connection between the negligent conduct of the defendant and the resulting injury to the plaintiff, and resulting damage to the plaintiff. Justice Rooke does not indicate in what way Onischuk’s initial claim failed to disclose a reasonable cause of action, but I imagine it failed because the law does not recognize that a duty of care is owed by someone in CNR’s position to someone in Onischuk’s position.
That was the beginning. There was certainly a wrong by CNR: the spill of the Bunker C oil and pole-treating agent. And Onischuk may well have been exposed to toxic chemicals as a result of voluntarily participating in the cleanup of the spill. But because his claim was struck for failing to disclose a reasonable cause of action, we do not know if Onischuk suffered an injury that was caused by exposure to the Bunker C oil or pole-treating agent spilled by the derailment.
It was what happened after October 2009 — after Onischuk’s 2007 action was struck — that resulted in him being declared a vexatious litigant less than three-and-a-half years later. Justice Rooke accepted the summary of facts prepared by CNR’s lawyer and reproduced it as an eleven page Appendix to his Reasons for Decision. To very briefly summarize that summary:
- Onischuk filed a Notice of Appeal of Justice Sulyma’s decision to strike his claim against CNR but did not file the required documents on time and his appeal was struck.
- Onischuk filed applications to restore his appeal and to retroactively extend the time to appeal but those applications were dismissed by Justice Costigan in Onischuk v Canadian National Railway Co., 2010 ABCA 411 because the appeal lacked arguable merit, there was no reviewable error on the face of Justice Sulyma’s decision, and Onischuk had not proceeded with his appeal with the necessary diligence.
- Early in 2011 Onischuk filed a claim in the Federal Court that was nearly identical to the one struck by Justice Sulyma, an action which was struck by Prothonotary Lafrenière for lack of jurisdiction, failure to disclose a reasonable cause of action, futility and abuse of process.
- Onischuk appealed Prothonotary Lafrenière’s decision but that decision was upheld by the Federal Court Trial Division.
- Onischuk appealed the Trial Division decision and it was upheld by the Federal Court of Appeal: Onischuk v Alberta, 2011 Carswell Nat 6111.
- Onischuk applied for leave to appeal to the Supreme Court of Canada but that was denied: Onischuk v Alberta, 2012 Carswell Nat 359.
- Early in 2011 Onischuk filed a second Court of Queen’s Bench action that was nearly identical to the one struck by Justice Sulyma and the one struck by the Federal Courts. It differed in two ways from the first two:
- Judges and lawyers who were involved in the first Queen’s Bench action and in the Federal Court action were added as defendants, and Onischuk alleged negligence, bias, discrimination, misrepresentation, fraud and deceit, and more against them,
- Remedies not available in our judicial system were sought, including a request for lawyers and judges submit to “lie detection exams” and the administration of a “truth serum” drug.
- In March 2012 Onischuk filed an Amended Statement of Claim in the second Queen’s Bench action which named twenty-one additional defendants, including more lawyers and judges, the Governor General of Canada, the Premier of Alberta.
- In April 2012 Onischuk filed a 51 page Amended Amended Statement of Claim.
- In April 2012, Onischuk wrote to the Associate Chief Justice Rooke requesting the appointment of a Case Management Judge, a request to which all the Defendants subsequently agreed.
- Onischuk subsequently requested adjournments of case management meetings and document production deadlines.
- Onischuk subsequently alleged bias in Justice Rooke’s actions as Case Management Judge.
Law
The Alberta government passed new legislation in 2007 for the express purpose of giving the courts in the province more power to deal efficiently and effectively with “vexatious litigants.” Once a person is declared a “vexatious litigant,” they are barred from bringing or continuing court actions without permission from a court. The new provisions are found in the Judicature Act, RSA 2000, c J-. Section 23(2) provides a non-exhaustive list of the types of conduct that make proceedings vexatious:
(2) For the purposes of this Part, instituting vexatious proceedings or conducting a proceeding in a vexatious manner includes, without limitation, any one or more of the following:
(a) persistently bringing proceedings to determine an issue that has already been determined by a court of competent jurisdiction;
(b) persistently bringing proceedings that cannot succeed or that have no reasonable expectation of providing relief;
(c) persistently bringing proceedings for improper purposes;
(d) persistently using previously raised grounds and issues in subsequent proceedings inappropriately;
(e) persistently failing to pay the costs of unsuccessful proceedings on the part of the person who commenced those proceedings;
(f) persistently taking unsuccessful appeals from judicial decisions;
(g) persistently engaging in inappropriate courtroom behaviour.
As can easily be seen from this list, a prolonged or insistently continuous quality to behaviour is key. Justice Rooke relied upon Del Bianco v 935074 Alberta Ltd., 2007 ABQB 150, Jamison v Denman, 2004 ABQB 593, Prefontaine v Pairs, 2007 ABQB 77, and O’Neill v Deacons, 2007 ABQB 754 to synthesize a definition of a “vexatious litigant” as “one who repeatedly brings pleadings containing extreme, unsubstantiated, unfounded, and speculative allegations against a large number of individuals to exploit or abuse the court process for an improper purpose, or to gain an improper advantage” (at para 9).
Decision
Justice Rooke concluded (at para 12) that Onischuk had instituted vexatious proceedings and conducted proceedings in a vexatious manner. In fact, he found (at para 15) that Onischuk’s actions had “all the hallmarks of a vexatious litigant.” Those hallmarks were (at paras 13-14):
- Onischuk continued to bring actions based on the same facts arising out of the 2005 derailment of the CNR train. When one action was dismissed, Onischuk started essentially the same action again, but with the addition of defendants who were members of the judiciary or legal community who were involved in the prior action.
- Onischuk persistently brought proceedings on issues that have already been decided.
- He failed to follow court directives and failed to meet procedural deadlines.
- Onischuk failed to pay the costs awarded against him.
- His pleadings were excessively lengthy.
- His pleadings were filled with inflammatory accusations and theories about conspiracies among judges and lawyers.
- His pleadings contained irrelevant arguments, jurisprudence and legislation, and failed to advance legitimate claims.
The defendants then asked that Onischuk’s claims against them be struck pursuant to Rule 3.68 of the Alberta Rules of Court. Under Rule 3.68(2), a claim may be struck if a pleading discloses no reasonable claim; if a pleading is frivolous, irrelevant or improper; or if a pleading constitutes an abuse of process. Justice Rooke examined each ground for striking Onischuk’s claim and found that it could be struck on all three bases.
Justice Rooke also went on to consider whether summary judgment was warranted in the circumstances. He concluded that it would have been available in the alternative, had the claims not been struck (at para 50).
Comments
A Rather Typical Vexatious Litigant
In the introduction to this post, I characterized Onischuk as “a rather typical vexatious litigant.” In doing so I was referring to two recent law review articles which sort vexatious litigants into two categories: Didi Herman, “Hopeless cases: Race, racism and the ‘vexatious litigant’” (2012) 8(1) International Journal of Law in Context 27, and Christian Diesen, “The Justice Obsession Syndrome” (2007-2008) 30 Thomas Jefferson Law Review 487. Herman is a Professor at Kent Law School in the UK. Diesen is a Professor of Procedural Law at Stockholm University in Sweden (where a person who become a vexatious litigant as a result of a loss in court is called rättshaverist or a “wreck of justice” (Diesen at 488-89).
In her study of the individuals declared to be “vexatious litigants” in the UK and her review of the vexatious litigant literature, Herman noted (at 28) that people declared to be vexatious litigants can be broadly sorted into two groups: (1) those with histories of mental health problems who launch multiple legal actions against diverse targets, and (2) those whose initial legal action was resolved against them, and who then attempt to carry on with aspects of that complaint in various ways. From the facts summarized by Justice Rooke, Onischuk appears to be a classic example of the second type of vexatious litigant as the series of actions summarized in the Appendix to Onischuk can be traced back to one instigating dispute, the 2005 CNR derailment. In the case of this second type of vexatious litigant, Herman argues that we can understand their litigation as being about a passionate search for justice, as opposed to, or at least as well as, an “obsession.”
Herman focuses on two overlapping elements or themes of vexatious litigation: persistence or obsession, and hopelessness. Vexatious litigants refuse to accept the results of their initial trials and appeals and their continued persistence is taken as evidence of their unreasonableness. Their refusal to accept a matter is over is a failure to adopt the judges’ perspectives on the injury. Linked to judges’ disapproval of vexatious litigants’ persistence and obsession is their understanding that the vexatious litigants’ cases are hopeless. As Herman notes (at 39), “[i]t is the persistence in the face of this hopelessness that the courts find so hard to fathom, and that becomes evidence of unreasonableness.” Linked to the hopelessness of the litigation is judges’ view that the excessive litigation is all extremely wasteful. We can see an example of this in Justice Rooke’s judgment in Onischuk (at para 35):
To allow Onischuk to continuously bombard counsel, the judiciary, and this Court with lengthy pleadings, replete with inflammatory accusations, irrelevant legal argument, jurisprudence and legislation, that advance no reasonable cause of action, is manifestly unfair to all parties involved and other participants vying for scarce judicial resources. Consequentially, to allow this action to proceed would surely bring the administration of justice into disrepute (emphasis added).
Herman argues (at 40) that hope is about more than the rational assessment of legal prospects. Many of the vexatious litigants in her study appeared to recognize quite clearly that the legal system was unlikely to deliver justice in their case, but they were prepared to go on despite lack of this type of hope. They may have other kinds of hope they are pursuing.
Herman also found that many litigants refused to accept that a declaration that they were vexatious litigants terminated their pursuit of justice. They returned to court on their behalf or on behalf of others. They blog, post YouTube videos, and participate in online “victims of injustice” communities. Perhaps those online “victims of justice” communities lead them to “organized pseudolegal commercial argument” gurus.
Along very similar lines, Diesen (at 491) distinguishes between persons with querulous behaviour and persons with justice obsession syndrome. The core of justice obsession is the experience of justice denied and thus the starting point for the syndrome is “a legal decision or judgment against the complainant or the seeking of a legal decision to establish justice without the support of legal professionals” (at 492). With regard to this type of vexatious litigant, Diesen questions whether the legal system has a tendency to create these fixated losers. He also asks whether the syndrome might be a symptom of legal disorder, i.e., a way to identify the disadvantages of certain procedural rules.
A Rather Quick Response
I had also suggested in the introduction to this post that Onischuk was perhaps found to be a vexatious litigant more quickly than normal. The vexatious litigant provisions in Alberta’s Judicature Act require persistence, or a prolonged or insistently continuous quality. In the first five years following the 2007 amendments to those vexatious litigation provisions, it appeared that vexatious litigant orders were only being granted in extreme cases. As I noted in an earlier post — “How persistent does a vexatious litigant have to be?” (July 27, 2011) — it seemed to take a lot of improper behaviour against a large number of long-suffering defendants for a very long time (more than ten years in the case commented upon) before a person was denied unmediated access to a court.
In Onischuk’s case, the time from his initial loss to his being found a vexatious litigant was just over three years (October 2009 to November 2012). In Onischuk there were fewer years of litigation, fewer court actions, fewer interlocutory proceedings, and fewer unpaid cost awards than in many previous cases where people have been found to be vexatious litigants.
If I were to speculate, I might suggest that the relatively shorter time line may be because Justice Rooke, in his role of Associate Chief Justice of the Court of Queen’s Bench and as the author of Meads v Meads, 2012 ABQB 571, has much more familiarity with vexatious litigation than most judges and is therefore more willing to put an end to it when it is identified. It may also be that Onischuk picked the wrong defendants. Justice Rooke characterized part of the content of Onischuk’s pleadings as “inflammatory accusations and ever expanding conspiracy theories against Counsel who have argued, and the Judiciary who have heard his applications” (at para 14). Lawyers and judges have relatively easy access to all available judicial remedies for vexatious litigation.
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Supreme Court Renders Leave to Appeal Decisions in Several Alberta Cases
PDF version: Supreme Court Renders Leave to Appeal Decisions in Several Alberta Cases
Cases Considered: R v Mack, 2012 ABCA 42, leave to appeal granted, April 11, 2013 (SCC); Métis Nation of Alberta Region 1 v Joint Review Panel, 2012 ABCA 352, leave to appeal dismissed April 11, 2013 (SCC); Fitzpatrick v Alberta College of Physical Therapists, 2012 ABCA 207, leave to appeal dismissed April 11, 2013 (SCC)
On April 11, 2013 the Supreme Court of Canada handed down leave to appeal decisions in three cases from Alberta.
R v Mack, the sole Alberta case where leave to appeal was granted (by Justices LeBel, Karakatsanis and Wagner) is described by the SCC as follows:
Dax Richard Mack, Robert Levoir and Michael Argueta went hunting on land owned by Mack’s father on November 6, 2002. Only Mack and Argueta returned. Levoir had been shot and killed. Soon after Levoir had been reported missing, Jay Love went to police saying that Dax Mack had confessed to killing Levoir. An undercover investigation ensued with undercover operators, posing as members of a criminal organization, approaching Mack to recruit him into the fictitious organization. Although the recordings of the utterances made by Mack to the operators were not admitted into evidence, as the authorizations for the wiretaps had been obtained in a manner that violated Mack’s Charter rights, the prosecution was permitted to adduce viva voce evidence from the undercover operators. At trial, Mack and Argueta blamed the other for the murder. The trial judge’s charge to the jury addressed how to assess the evidence of the undercover officers and the testimony of Argueta. Mack was convicted of first degree murder. His appeal to the Court of Appeal of Alberta was dismissed.
The issues on appeal include whether Mack’s statements to undercover officers should be excluded under section 24(2) of the Charter, and the adequacy of the trial judge’s charge to the jury on (1) the danger of relying on those statements, and (2) the alternate suspect witness.
The Métis Nation of Alberta case is one that Nigel Bankes commented on in an ABlawg post from December 2012. As he notes in that post, the Alberta Court of Appeal
denied the application of the Metis Nation and of the Athabasca Chipewyan First Nation (ACFN) for leave to appeal the decision of the Joint Review Panel (JRP) constituted to deal with Shell’s Jackpine Mine Expansion Project application.
The Athabasca Chipewyan First Nation’s application for leave to appeal raised issues including whether the JRP had a duty to decide if the Crown had discharged its duty to consult First Nations before making its public interest determination, and whether it was premature for the JRP to assess the adequacy of consultation. Leave to appeal was denied by the SCC (Justices LeBel, Karakatsanis and Wagner) with costs to the respondents Shell Canada Limited, Minister of Justice and Attorney General of Alberta and Attorney General of Canada.
In the third decision, College of Physical Therapists of Alberta v Marilyn Fitzpatrick, SCC Justices Fish, Rothstein and Moldaver denied leave to appeal to the College, with costs. That case is described by the Supreme Court as follows:
[Fitzpatrick] is a physical therapist in Alberta and a member of the … College. The [College] received complaints that [Fitzpatrick] was diagnosing a disproportionate number of patients with “Whiplash Associated Disorder Level III”. At a disciplinary hearing, the [College]’s Discipline Committee found [Fitzpatrick] guilty of misconduct in the form of misdiagnoses or upgrades in respect of 56 patients, of making those misdiagnoses or upgrades without taking appropriate care, failing to maintain patient charts, and inappropriately seeking guidance from a lawyer regarding the treatment of patients and the conduct of practice. [Fitzpatrick] appealed to the [College]’s Council. The Council confirmed the Discipline Committee’s conclusions on liability and sanction but for two of thirteen particulars relating to the allegation of improper record keeping.
The issues raised in the leave to appeal application included whether criminal law rules and a burden of strict proof should apply to professional discipline hearings, whether a tribunal hearing professional discipline matters can rely on statistical evidence or patterns to prove allegations of professional misconduct, and issues relating to administrative law principles.
On March 28, 2013, the SCC also denied leave to appeal in another professional discipline case, Wright v College and Association of Registered Nurses of Alberta (Appeals Committee), 2012 ABCA 267. Linda McKay Panos blogged on the ABCA decision in Wright here, and I will be posting a comment soon on the Supreme Court’s decision not to hear the appeal in the Wright case, and the impact that decision has on human rights law in Alberta.
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When does the purchaser of an interest in a natural gas processing plant also purchase an interest in the sulphur block associated with the plant? Answer: only when the agreement (or perhaps ‘the elephant in the room’) says so!
Case commented on: Talisman Energy Inc v Esprit Exploration Ltd, 2013 ABQB 132
Talisman purchased Canadian 88’s interest in the East Crossfield Conditioning Plant in 2000. Did it also purchase the sulphur block and the liabilities associated with ownership of the block? In this case, and after undertaking an extensive and detailed contractual paper trail, Justice Sal LoVecchio concluded that the answer was no. The ‘elephant in the room’ was C88’s draft purchase and sale agreement (PSA) (which Talisman elected not to use) which, had it been executed, would have dictated the opposite result.
The Facts
In 2000 Canadian 88 ((C88) subsequently Esprit and Pennwest) disposed of its interest in the East Crossfield Conditioning Plant to Talisman. In 2007 Talisman commenced an action against Esprit and against Primewest (subsequently TAQA) as operator of the Plant seeking a declaration that it did not acquire an interest in the sulphur block associated with the plant when it acquired an interest in the Plant. In 2010 TAQA commenced a second action against Talisman and Pennwest seeking recovery against one or other.
In selling its properties (part of a larger agenda of seeking to dispose of non-core assets) C88 retained Waterous to assist it in marketing its properties and made use of an Initial Memorandum (IM) describing the properties and a confidential data room. The IM described C88’s interest in two unit agreements (East Crossfield (D-1) and Elkton) and in the agreement to construct own and operate (COO) the Plant (or more specifically the D-1 and Elkton units of the Plant). Talisman was ultimately novated into the COO. The COO distinguished between ownership of the Plant and ownership of Plant Products (which included sulphur). Plant Products were owned in accordance with the tract participation factor in the D-1 unit (as that varied from time to time). Ownership interests in the Plant did not correspond with ownership interest in the sulphur block (at paras 39 and 40). Some non-owners (in the Plant) had an ownership interest in the sulphur block. The original COO did not have a lot to say about the sulphur block but the parties interested (Plant owners and non-owners) ultimately developed a Solid Sulphur Storage Procedure (SSSP). Sulphur tracking records were provided from time to time but not consistently and there was evidence that no tracking records were found in the files Talisman received from C88 (at para 59).
Under the PSA (and as noted above Talisman elected to start with its own version of a PSA rather than the version proffered by C88 in the Data Book (at para 19)), Talisman agreed to purchase “Assets” defined as “the Petroleum and Natural Gas Rights, the Miscellaneous Interests and the Tangibles….”
The term “Tangibles” was defined to include the Facilities Interest which in turn referred to a list of Facilities in a Schedule which included the “4.81915% interest of Canadian 88 in the East Crossfield Gas Conditioning Plant.” The term also included “tangible depreciable property and assets” which are assets “situate in, on or about the Lands…and which are used in connection with production, gathering, processing, injection, removing, transmission or treatment of Petroleum Substances…but excluding equipment beyond the point of entry into a gathering system, plant or other facility.”
The PSA defined “Miscellaneous Interests” (at para 104) as “… the right, title, estate and interest of the Vendor in and to all property, assets and rights (other than Petroleum and Natural Gas Rights and the Tangibles) pertaining to, but only to the extent they pertain to, the Petroleum and Natural Gas [PNG] Rights, the Tangibles or any lands with which the Lands have been pooled or unitized, including without limitation, the interest of the Vendor in the following… .”
The judgement
Justice Sal LoVecchio concluded that Talisman did not acquire an interest in the sulphur block under the terms of the PSA and neither was Talisman liable to pay some or all of the costs associated with the sulphur block by virtue of either the general indemnity clause of the PSA or by virtue of being novated into the COO Agreement.
C88’s interest in the sulphur block was not included within the Tangibles branch of the definition of Assets for a whole slew of reasons. Talisman purchased C88’s interest in the Plant and the sulphur facility under the heading of “Facilities” but the definition of Facilities did not extend to the sulphur block itself. Neither was the sulphur block tangible depreciable property. The block did not decrease in value as it was used (unlike machinery or equipment) and it was not situated “in, on or about the Lands” (at para 96) since the Lands that were referred to were the petroleum and natural gas properties. The sulphur block was also “beyond the point of entry into a gathering system” (at para 97). Nor could it be contended that the sulphur block was used as a consumable commodity within the operations of the plant (at para 99).
Neither was C88’s interest in the sulphur block included within the “Miscellaneous Interests” branch of the definition of Assets since the sulphur block did not pertain to the PNG rights since the production operations did not in any sense depend upon the sulphur block (at para 111):
Neither did Talisman assume responsibility for the sulphur block under the general indemnity and environmental indemnity provisions of the PSA. The indemnities relate to the Assets; since the sulphur block was not an Asset it was not subject to the indemnity (at para 120). Nor was the novation of Talisman into the COO in itself enough to require Talisman to assume responsibility for the costs associated with the storage of an asset retained by the vendor. Talisman’s novation into the COO merely recognized that it had already acquired an interest in the Plant and the Sulphur Facilities but not the sulphur block (at paras 120 – 150).
Neither did the overall conclusion change when the Court took account of the background to Talisman’s acquisition of the property and in particular the draft PSA included in the Data Book that was made available to interested parties (at paras 152 – 175). The draft PSA (had it been used – it was not, as noted above, Talisman offered its own form of the PSA) would have made it clear that sulphur stored on site would have been included in the definition of Miscellaneous Interests. However, other elements of the factual matrix pointed in the other direction and on the whole supported the conclusion already reached.
A limitations argument by Primewest (at paras 177 – 185) and a misrepresentation argument by Talisman (at paras 185 – 189) were both dismissed summarily as disingenuous.
Commentary
This is a long and complicated decision which carefully works through the necessarily complex contractual chain before coming to well reasoned conclusions. Are there broader lessons to be learned from the decision? This is not immediately clear but I am sure that the decision will lead counsel to scrutinize (once again) the crucial definition of Assets (and its main component elements) in any and all purchase and sale agreements and Justice LoVecchio’s observations on the language of these particular definitions will undoubtedly prove useful as will his general observations on contractual interpretation although (as Justice LoVecchio acknowledges) his judgement draws heavily on Justice Poelman’s judgement in Nexxtep Resources v Talisman Energy Inc, 2012 ABQB 62, aff’d 2013 ABCA 40 (and for my post on that decision see here).
But at the end of the day it is perhaps Justice LoVecchio’s response to what he calls the “elephant in the room” that might attract most discussion. The “elephant in the room” was the draft PSA that C88 had included in the Data Book that had been made available to interested parties. C88 encouraged the use of the draft PSA but it was not essential and evidently Talisman preferred to use its own version of the form. But the point is this, had Talisman used that form Justice LoVecchio was fairly clear in concluding that judgement would have gone the other way:
[157] In the draft Purchase and Sale Agreement contained in the Data Book, “Miscellaneous Interests” is a defined term. Just as in the PSA it enumerates a number of items and as one might expect they are to a large extent similar to those which appear in the PSA. There is one very significant difference.
[158] The Miscellaneous Interests definition in the draft is Article 1.01 – i). Sub (iv) of this definition reads “all Petroleum Substances produced beyond the wellhead but not sold and in storage or tanks at the Effective Date”. Petroleum Substances is also defined. The definition is found in Article 1.01 – m) and sulphur is a specifically enumerated Petroleum Substance.
[159] Had the words in Article 1.01 – i) (iv) of the draft PSA made their way into the PSA, there is little doubt in my mind that Talisman would now be the proud owner of the Disputed Interests.
Which of course leads to the obvious question: is a draft agreement proffered by one of the parties as the basis for negotiations admissible evidence as to the intentions of the parties as to the meaning to be attributed to the final written agreement between them, especially where, as here, Justice LoVecchio had found no ambiguity (at para 154) in the chain of documentation. I should have thought before reading this judgement that the answer should be an unequivocal “no” for the reasons nicely summarized in Justice Poelman’s judgement in Nexxtep and drawing upon earlier judgements of the Alberta Court of Appeal (Gainers Inc v Pocklington Holdings Inc 2000 ABCA 151 and the House of Lords (Prenn v Simmonds, [1981] 3 All ER 237 (HL) per Lord Wilberforce):
The authorities, hold, however, that evidence of the factual matrix should not include the parties’ negotiations. Lord Wilberforce explained that evidence of prior negotiations is not admitted because it is not helpful, rather than for technical reasons or efficiency. Where negotiations are difficult, positions change until the parties achieve consensus. Evidence of the use of different expressions or the same expressions does not usually help interpretation of the contract’s words, and may occur in a context of different surrounding circumstances.
But notwithstanding this weighty authority Justice LoVecchio does seem to have concluded that in this case evidence as to the content of the draft PSA was admissible (at paras. 174 – 175).
But even if admissible as evidence as to the intentions of the parties as to the meaning of the final document, the draft PSA alone could be far from conclusive since other admissible evidence tended to support the conclusion that C88 well knew how to include the sulphur assets in a transaction but failed to do so.
All of this allowed Justice LoVecchio to conclude that: (1) absent evidence of the draft PSA Talisman did not purchase the sulphur assets, and (2) even taking into account evidence of the draft PSA, that evidence, when considered with other admissible evidence as to the matrix of negotiations, did not change the result that had already been reached (at para 175). Perhaps all that Justice LoVecchio was trying to do here was to protect the parties from the cost and expense of a new trial in the event that he had ruled that the evidence was inadmissible and had the Court of Appeal chosen to disagree with that conclusion (on that possibility see here the recent judgement of the Court of Appeal in AG Clark Holdings Ltd v HOOPP Realty Inc., 2013 ABCA 101 at paragraphs 26 -27 taking into account the drafting and negotiation history of an agreement, but note that the premise as to admissibility in that decision does seem to be assumed ambiguity – not so here). While this is a laudable objective, Justice LoVecchio might have chosen a slightly different route to achieve the chosen result. As it stands his judgement seems to suggest that he thought that evidence as to the content of the draft PSA was admissible notwithstanding his conclusion that the final agreement was not ambiguous. The idea that one party’s version of an agreement which was never taken seriously by the other side should be admitted as evidence of the intentions of the parties as to the interpretation of the final written agreement between the parties is a long stretch, and one that if broadly adopted will increase the prospects of litigation and the length of trials.
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The Manitoba Métis Case and the Honour of the Crown
PDF version: The Manitoba Métis Case and the Honour of the Crown
Case commented on: Manitoba Métis Federation Inc v Canada (Attorney General), 2013 SCC 14
In its historic decision on the constitutional rights of the Manitoba Métis, the majority of the Supreme Court of Canada, in a decision rendered by the Chief Justice and Justice Karakatsanis (Rothstein and Moldaver JJ dissenting), concluded that section 31 of the Manitoba Act, 1870 (reprinted in RSC 1985, App. II, No. 11) expresses a constitutional obligation to the Métis people of Manitoba to provide Métis children with allotments of land. The majority held that the obligation did not impose a fiduciary or trust duty on the Crown but that it did engage “the honour of the Crown.” The majority held that the Crown failed to live up to the terms of that engagement and that the Métis were accordingly entitled to a declaration to that effect. The claim for declaratory relief in relation to the honour of the Crown was not barred by the law of limitations or the equitable doctrine of laches.
Section 31 of the Manitoba Act provides that:
31. And whereas, it is expedient, towards the extinguishment of the Indian Title to the lands in the Province, to appropriate a portion of such ungranted lands, to the extent of one million four hundred thousand acres thereof, for the benefit of the families of the half-breed residents, it is hereby enacted, that, under regulations to be from time to time made by the Governor General in Council, the Lieutenant-Governor shall select such lots or tracts in such parts of the Province as he may deem expedient, to the extent aforesaid, and divide the same among the children of the half-breed heads of families residing in the Province at the time of the said transfer to Canada, and the same shall be granted to the said children respectively, in such mode and on such conditions as to settlement and otherwise, as the Governor General in Council may from time to time determine.
According to the Supreme Court (at para 93) (endorsing the judgment at trial) section 31 “was a constitutional provision crafted for the purpose of resolving Aboriginal concerns and permitting the creation of the province of Manitoba.” But within the broader framework of the relationship between the Crown and the Aboriginal peoples of Canada generally and the broader jurisprudence of the Court, the section assumed additional responsibilities (at para 98):
… s. 31 of the Manitoba Act was to reconcile the Métis community with the sovereignty of the Crown and to permit the creation of the province of Manitoba. This reconciliation was to be accomplished by a more concrete measure — the prompt and equitable transfer of the allotted public lands to the Métis children.
The theme of reconciling the Aboriginal peoples to the Crown’s acquisition of sovereignty is fully consistent with earlier decisions of the Supreme Court starting with R v Van Der Peet, [1996] 2 SCR 507 (at para 31).
The Manitoba Act is part of the Constitution of Canada. It is listed in Schedule I to the Constitution Act, 1982 (item # 2). Given that, it was presumably open to the Court to consider and grant a declaration that Canada was in breach of its obligations under section 31 of the Act. Indeed that seems to have been part of what the plaintiffs asked for (at para 100):
The Métis allege Canada failed to fulfill its duties to the Métis people in relation to the children’s grant in four ways: (1) inexcusably delaying distribution of the s.31 lands; (2) distributing lands via random selection rather than ensuring family members received contiguous parcels; (3) failing to ensure s.31 grant recipients were not taken advantage of by land speculators; and (4) giving some eligible Métis children $240 worth of scrip redeemable at the Land Titles Office instead of a direct grant of land
True enough, the plaintiffs also wanted to go beyond that and seek a declaration that Canada was in breach of its fiduciary obligations. The advantage of such a plea if successful (it was not) is both rhetorical and practical. The rhetorical aspect is obvious, the more practical angle is that such a declaration moves the case from the realm of public law to the realm of private law and the language of damages and constructive trust: Blueberry River Indian Band v Canada, [1995] 4 SCR 344.
But in this case the majority of the Court went out of its way to frame the issue not simply in terms of a declaration that the Crown had failed to live up to the obligations of section 31, but rather that it had failed to live up to the obligations associated with the honour of the Crown. In doing so the Court must have given the plaintiffs much of what they were looking for in terms of rhetorical and political support even while rejecting the fiduciary duty argument.
What then is the difference between a declaration that the Crown is in breach of a legal or even a constitutional duty and a declaration that the Crown is in breach of its honour (even framing it that way sounds odd)?
The Court summarizes the state of the law in relation to the honour of the Crown as follows (at para 73):
(1) The honour of the Crown gives rise to a fiduciary duty when the Crown assumes discretionary control over a specific Aboriginal interest (Wewaykum, at paras. 79 and 81; Haida Nation, at para. 18);
(2) The honour of the Crown informs the purposive interpretation of s. 35 of the Constitution Act, 1982, and gives rise to a duty to consult when the Crown contemplates an action that will affect a claimed but as of yet unproven Aboriginal interest: Haida Nation, at para. 25;
(3) The honour of the Crown governs treaty-making and implementation: Province of Ontario v. Dominion of Canada, (1895), 25 S.C.R. 434, at p. 512, per Gwynne J., dissenting; Mikisew Cree First Nation v. Canada (Minister of Canadian Heritage), 2005 SCC 69, [2005] 3 S.C.R. 388, at para. 51, leading to requirements such as honourable negotiation and the avoidance of the appearance of sharp dealing (Badger, at para. 41); and
(4) The honour of the Crown requires the Crown to act in a way that accomplishes the intended purposes of treaty and statutory grants to Aboriginal peoples: R. v. Marshall, [1999] 3 S.C.R. 456, at para. 43, referring to The Case of The Churchwardens of St. Saviour in Southwark (1613), 10 Co. Rep. 66b, 77 E.R. 1025, and Roger Earl of Rutland’s Case (1608), 8 Co. Rep. 55a, 77 E.R. 555; Mikisew Cree First Nation, at para. 51; Badger, at para. 47.
But what did that mean in the present context?
The majority discusses this starting at paragraph 75 when they note that “when the issue is the implementation of a constitutional obligation to an Aboriginal people, the honour of the Crown requires that the Crown: (1) takes a broad purposive approach to the interpretation of the promise; and (2) acts diligently to fulfill it.”
The first requirement ensures that the interpretation of the relevant provision “cannot be a legalistic one that divorces the words from their purpose.” As for the second, in order to fulfill this duty (at para 80), “Crown servants must seek to perform the obligation in a way that pursues the purpose behind the promise.” The honour of the Crown does not demand perfection (at para 82):
Not every mistake or negligent act in implementing a constitutional obligation to an Aboriginal people brings dishonour to the Crown. Implementation, in the way of human affairs, may be imperfect. However, a persistent pattern of errors and indifference that substantially frustrates the purposes of a solemn promise may amount to a betrayal of the Crown’s duty to act honourably in fulfilling its promise. Nor does the honour of the Crown constitute a guarantee that the purposes of the promise will be achieved, as circumstances and events may prevent fulfillment, despite the Crown’s diligent efforts.
The Court measured Canada’s performance against four alleged failings: (1) inexcusable delay in the distribution of the s.31lands; (2) distributing lands via random selection rather than ensuring family members received contiguous parcels; (3) failing to ensure that section 31grant recipients were not taken advantage of by land speculators; and, (4) giving some eligible Métis children $240 worth of scrip redeemable at the Land Titles Office instead of a direct grant of land.
The Court found that Canada was in breach of its “honour of the Crown duty” by its delay because of a persistent pattern of inattention (at para 108) which meant that it failed to achieve the purpose of section 31 (at para 110) which was to give “the Metis children a real advantage relative to an impending influx of settlers from the east” or (at para 99) a “head start in the race for land and a place in the new province. This required that the grants be made while a head start was still possible.”
By contrast, the process of random selection that the Crown used to distribute land did not violate the honour of the Crown. There was no commitment to locate children’s land close to that of their parents and any effort to do so would likely have created unfairness and divisiveness (at para 130).
The issue of sales to speculators was more difficult because it caused the court to weigh the virtues of alienability vs inalienability of indigenous lands. This continues to be a challenging debate with important contributions coming from De Soto, The Mystery of Capital (2000) in an international context and from Tom Flanagan and colleagues in a Canadian context: Beyond the Indian Act: Restoring Aboriginal Property Rights (2010). Here the Court ruled (at para 117) that the honour of the Crown did not demand that the grant lands be made inalienable, but the difficulty here was that the delays in the granting process led many grantees to sell their entitlement before their land selection was known with the result that the price was discounted significantly. The result was inconsistent with the honour of the Crown since (at para 117) it perpetuated “a situation where children were receiving artificially diminished value for their land grants.”
The Crown’s decision to use scrip to make up for the fact that the 1.4 million acre allotment referred to in section 31 proved inadequate (insofar as there were more eligible children than expected) was reasonable and was neither a breach of section 31 nor a breach of the honour of the Crown (at para 120):
As long as the 1.4 million acres was set aside and distributed with reasonable equity, the scheme of the Manitoba Act was not offended. It was unavoidable that the land would be distributed based on an estimate of the number of eligible Métis that would be inaccurate to some degree. The issuance of scrip was a reasonable mechanism to provide the benefit to which the excluded children were entitled.
But the delay in distributing scrip was again problematic since by the time that scrip was made available it was inadequate to purchase the 240 acres that had been made available to other children:
The delay resulted in the excluded children receiving less land than the others. This was a departure from the s.31 promise that the land would be divided in a roughly equal fashion amongst the eligible children (at para 121).
[T]he delayed issuance of scrip redeemable for significantly less land than was provided to the other recipients further demonstrates the persistent pattern of inattention inconsistent with the honour of the Crown that typified the s.31 grants (at para 123).
The conclusion of the majority on the Honour of the Crown argument is as follows (at para 128):
The s.31 obligation made to the Métis is part of our Constitution and engages the honour of the Crown. The honour of the Crown required the Crown to interpret s.31 in a purposive manner and to diligently pursue fulfillment of the purposes of the obligation. This was not done. The Métis were promised implementation of the s.31 land grants in “the most effectual and equitable manner”. Instead, the implementation was ineffectual and inequitable. This was not a matter of occasional negligence, but of repeated mistakes and inaction that persisted for more than a decade. A government sincerely intent on fulfilling the duty that its honour demanded could and should have done better.
Commentary
I return by way of short commentary on this decision to a question I posed earlier in this post: what are the implications of concluding that a constitutional instrument is not just a constitutional instrument but that one that engages the honour of the Crown? Or to put it another way, what is the difference between a declaration that the Crown’s behaviour is unconstitutional and a declaration that the Crown’s behaviour is inconsistent with the honour of the Crown?
I am not sure I know the answer but here are some of the possibilities.
First, it may be that the Court applies a different and more demanding interpretive approach to an honour of the Crown provision in the Constitution than to a constitutional provision that does not engage the honour of the Crown. This would be a strange result since the Court routinely takes a purposive approach to the interpretation of constitutional provisions: see Van Der Peet above. Talk of a more or less purposive interpretive approaches seems to no more helpful than talk of “unreasonable” and “patently unreasonable” decisions of administrative decision-makers.
Second, it may be that there is more opprobrium attached to a declaration that the Crown is in breach of its honour than a declaration that the Crown’s behaviour is unconstitutional. I confess that this is hardly intuitive for me and that is because of the fuzziness associated with the term “honour” even if “of the Crown.” At least I think I know what the Constitution is and I know that a breach of the Constitution is fundamentally inconsistent with the rule of law. Is dishonourable behaviour worse than this? I confess that I don’t know.
Third, it may be that a declaration of dishonourable behaviour makes a moral claim to redress that is not so obviously demanded by a declaration that the historical behaviour of the Crown was unconstitutional. I say a “moral” claim to redress because a declaration simply establishes the legal relationship between the parties to the litigation; it is not itself a remedy. If it were a legal remedy there would have been a limitations problem in this case. But why might the moral claim to redress be stronger? I think that the claim to redress might be stronger because of the association in the jurisprudence between the honour of the Crown and reconciliation. Here are some examples:
[31] …. what s. 35(1) does is provide the constitutional framework through which the fact that aboriginals lived on the land in distinctive societies, with their own practices, traditions and cultures, is acknowledged and reconciled with the sovereignty of the Crown. The substantive rights which fall within the provision must be defined in light of this purpose; the aboriginal rights recognized and affirmed by s. 35(1) must be directed towards the reconciliation of the pre-existence of aboriginal societies with the sovereignty of the Crown. (emphasis added) R v Van der Peet (per Lamer CJC)
[16] “The government’s duty to consult with Aboriginal peoples and accommodate their interests is grounded in the honour of the Crown. The honour of the Crown is always at stake in its dealings with Aboriginal peoples … It is not a mere incantation, but rather a core precept that finds its application in concrete practices.” Haida Nation v British Columbia (Ministry of Forests), [2004] 3 SCR 511.
[20] The honour of the Crown is in turn grounded in the objective of achieving reconciliation: the reconciliation of “pre-existing Aboriginal sovereignty with assumed Crown sovereignty” Haida Nation.
[32] The jurisprudence of this Court supports the view that the duty to consult and accommodate is part of a process of fair dealing and reconciliation that begins with the assertion of sovereignty and continues beyond formal claims resolution. Reconciliation is not a final legal remedy in the usual sense. Rather, it is a process flowing from rights guaranteed by s. 35(1) of the Constitution Act, 1982. This process of reconciliation flows from the Crown’s duty of honourable dealing toward Aboriginal peoples, which arises in turn from the Crown’s assertion of sovereignty over an Aboriginal people and de facto control of land and resources that were formerly in the control of that people. As stated in Mitchell v. M.N.R., … at para. 9, “[w]ith this assertion [sovereignty] arose an obligation to treat aboriginal peoples fairly and honourably, and to protect them from exploitation” (emphasis added) Haida Nation.
[54] Treaty making is an important stage in the long process of reconciliation, but it is only a stage. What occurred at Fort Chipewyan in 1899 was not the complete discharge of the duty arising from the honour of the Crown, but a rededication of it. Mikisew Cree First Nation v Canada (Minister of Canadian Heritage), 2005 SCC 69.
Thus, when the Court declares that the Crown has failed to live up to the honourable expectations demanded of it then one of the possibilities is that this has interfered with the goal of achieving reconciliation; and whatever the legal effect of a declaration the Crown must have a continuing obligation to take the steps necessary to achieve reconciliation. And it would not be too much of an extension of the existing case law to suggest that this must mean a duty to engage in good faith consultations with a view to achieving the reconciliation that has been thwarted by the Crown’s dishonourable dealings.
Where will this case have an impact?
It will be interesting to see if this decision will have a broad impact or whether it will be confined in the case law that follows to its particular historical facts. There are perhaps three areas where we can expect the decision to have an impact. First, there are other big historical cases out there for which the decision may be directly applicable. The provisions that come to mind include Article 13 of British Columbia’s Terms of Union, 1871 (as to which see Jack v R, [1980] 1 SCR 294) and the “well-being of the tribes” provision in the Schedules to the Rupert’s Land and Northwest Territory Order, 1870 (as to which see Montana Band v Canada, 2006 FC 261). Second, the decision will likely have an impact on ongoing and any future litigation involving the timely implementation of modern land claim agreements (see NTI v Canada (Attorney General), 2012 NuCJ 11 and my ABlawg post “Disgorgement Damages” on this decision here. And finally, the decision may well help put teeth into the argument that the Crown owes a justiciable duty to engage in good faith negotiations to achieve the objective of reconciling the prior normative order of indigenous peoples with the Crown’s unilateral assertion of sovereignty.
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What has Meads v Meads wrought?
PDF version: What has Meads v Meads wrought?
Cases commented on: R v Duncan, 2013 ONCJ 160 (CanLII); R v Tyskerud, 2013 BCPC 27 (CanLII); Cassa v The Queen, 2013 TCC 43 (CanLII); R v Martin, 2012 NSPC 115 (CanLII); R v Lavin, 2013 ONCJ 6 (QL); Scotia Mortgage Corporation v Gutierrez, 2012 ABQB 683 (CanLII); Stancer (Re), 2012 BCSC 1533 (CanLII); Grattan (Re), 2012 NBQB 332, [2012] NBJ No 353 (QL)
I. Introduction
Associate Chief Justice John D. Rooke’s decision in Meads v Meads, 2012 ABQB 571 (CanLII) — one of CanLII’s Top Ten Cases of 2012 — established a category of vexatious litigants that he called “Organized Pseudolegal Commercial Argument” (OPCA) litigants. OPCA litigants “employ a collection of techniques and arguments promoted and sold by ‘gurus’ … to disrupt court operations and to attempt to frustrate the legal rights of governments, corporations, and individuals” (Meads at para 1). Although those techniques and arguments are varied, the essence of the OPCA litigants’ position is that they deny the authority of the state and the courts. Both of us have commented on the Meads case previously on ABlawg: see “The Organized Pseudolegal Commercial Argument (OPCA) Litigant Case” and “The Top Ten Canadian Legal Ethics Stories – 2012”. What we want to look at in this post is the use that has been made of Meads in the intervening six months. We will also consider the extent to which OPCA and similar litigants may influence judges to embrace styles of judgment that are disrespectful of the parties appearing before them. The post will touch on the ethical problems created when judges embrace “literary flourishes” and “dry wit” in their decisions (Katie Daubs, “Legal Decision with literary flourish and dry wit making the round…” Toronto Star, March 29, 2013).
Justice Rooke’s decision in Meads was not without some biting characterizations of Mr. Meads’ arguments and tactics. He refers, for example, to the “bluntly idiotic substance of Mead’s argument …” (at para 77), his “bizarre response” to a suggestion of cooperation (at para 253), and his use of “gibberese” (at para 435). A very small number of barbs are aimed more at the person than his arguments, including “some, like Mr. Meads, appear unable to resist the temptation of wealth without obligation …” (at para 543). But, in general, and considering the length of the proceedings and the decision, Justice Rooke limits his scorn to OPCA litigants and tactics in general, and especially those he called “gurus”, i.e., those who claim to know secret principles and law that is hidden from the public but binding on the state and courts and who promote and sell this supposedly secret knowledge as a commercial product in seminars, books, websites, and instructional DVDs.
Justice Rooke’s decision in Meads not only identifies almost every OPCA indicia and deconstructs almost every OPCA concept and argument, but also explains why each cannot succeed and what courts, lawyers and litigants can do if faced with OPCA litigants’ tactics and arguments. The decision was clearly intended to be a resource for other judges and it has been used as such. According to CanLII, Westlaw and QuickLaw, Meads has been judicially considered for its points about OPCA litigation in seven written judgments since its release on September 18, 2012, and also in the unreported written decision in R v Duncan. Three of those cases involve income tax prosecutions; two involved other types of criminal or quasi-criminal offences. Two cases were bankruptcy matters (one almost entirely for taxes owed) and the final case involved a foreclosure. These cases testify to the importance and significance of Meads. They also indicate the extent to which OPCA litigants test judges’ ability to discharge their judicial function.
II. The Post-Mead Cases
A. R v Duncan
R v Duncan was heard by Justice Fergus O’Donnell of the Ontario Court of Justice.
A minor alleged Highway Traffic Act offence — an unsignalled turn — led to an altercation with a police officer in the parking lot of Duncan’s apartment building. A request that Duncan produce his licence led to an alleged refusal to do so, an attempt to arrest him, a struggle, and the arrest of Duncan for allegedly assaulting a police officer. Justice O’Donnell acquitted Duncan of the charge because there was no lawful basis for the stop and thus no lawful basis for the demand for identification and thus no lawful basis for the arrest for failing to produce identification. As the arrest was unlawful, even if Duncan resisted, he was entitled to do so. The acquittal was entered as the result of something equivalent to a motion for non-suit that was made at the conclusion of the Crown’s case by the Court on Duncan’s behalf. It was a happy outcome for Duncan, but it came at a large cost to his dignity.
There is no doubt these Highway Traffic Act proceedings did include a number of the indicia of OPCA litigation that were listed by Justice Rooke in Meads. Duncan talked about being a split person, with both natural person and administrator aspects (footnote 1); he provided an “affidavit of truth” objecting to the court’s jurisdiction over him and denying he was a citizen of the country or province, a “person,” or someone with a contract with the court (at para 9); he produced a “fee schedule” just before his altercation with the police (at para 12); etc. In Meads Justice Rooke describes the uses of these concepts and tactics (and more) in other cases (at paras 199-253).
Duncan is addressed by Justice O’Donnell throughout the judgment as “Mr. Duncan.” He is described as “a rather pleasant young man” (at para 7), “a decent fellow who expressed himself well” (at footnote 5) and “a perfectly pleasant young man” (at para 9). Nevertheless, and apparently because of the acquittal and the publication of Meads between the first and second days of Duncan’s trial, Justice O’Donnell had his fun with Duncan in his written reasons for judgment released five months after his oral judgment. Consider the following examples from those reasons:
- “There was some mumbo-jumbo about the natural person and the administrator and that one of them might have been Mr. Duncan and one might have been Matthew and one, but not both, of them might have been the person speaking to me in court (while seated).” (at footnote 1).
- “It has been said that, given enough time, ten thousand monkeys with typewriters2 would probably eventually replicate the collected works of William Shakespeare.3 Sadly, when human beings are let loose with computers and internet4 access, their work product does not necessarily compare favourably to the aforementioned monkeys with typewriters.5”
2 For readers under the age of thirty or so, the ‘typewriter’ was a mechanical device used for creating documents that pre-dated the computer and lacked some of the computer’s more annoying characteristics, in particular the computer’s facilitation of ‘cutting and pasting’, which is undoubtedly one of the four horsemen of the modern apocalypse and which has cost many trees their lives and many lawyers and judges their eyesight.
3 “William Shakespeare” was a sixteenth century English poet and playwright of some skill. …
4 The “internet”, also known as the “world-wide web” is a bi-polar electronic Leviathan that has erupted on the world scene in the past two decades. … For the purposes of this case, the relevance of the internet is its un-policed “garbage in/garbage out” potential and its free-market-of-ideas potential to lure in otherwise pleasant and unsuspecting folk with all manner of absurdity and silliness.
5 Lest anyone misunderstand me, this is by no means intended to compare Mr. Duncan to a monkey. As I have noted, Mr. Duncan seemed a decent fellow who expressed himself well (other than when rambling a bit too long about jurisdiction, as noted herein) and whose principal shortcomings appeared to be too much free time with internet access and too little discernment in whose example he followed. The reference to monkeys with typewriters is intended solely to point out that technological “advances” are sometimes used to such ends that one wonders if perhaps the Luddites didn’t have a point.
- “Mr. Duncan provided me with an ‘affidavit of truth’, a rather substantial volume that appeared to me to be the result of somebody doing a Google search for terms like ‘jurisdiction’ and the like and then cobbling them together in such a way that it makes James Joyce’s Ulysses look like an easy read. This hodgepodge of irrelevancies relied upon by Mr. Duncan was one of the misbegotten fruits of the internet. Finding it was a waste of Mr. Duncan’s time; printing it was a waste of trees and my reading it was a waste of my time and public money.” (at para 9).
- “We did not finish Mr. Duncan’s trial on the first day. As I left court that day and contemplated returning in the autumn to finish the trial, it occurred to me that I would have to write rather a lot to address the various procedural issues raised by Mr. Duncan in his tome and his verbal arguments. Now, don’t get me wrong about this; I’d be happy to write until the cows came home about matters of substance relating to the guilt or innocence of the defendant and the liberty interests of a citizen vis a vis the constabulary, but the idea of having to disentangle all of the palaver, nonsense and gobbledygook in the document Mr. Duncan presented to me was not particularly appealing.” (at para 19)
- “There is an ancient proverb to the effect that “those whom the gods would destroy, they first make mad”. The prospect of disentangling Mr. Duncan’s adopted argument and his volume of internet-derived gibberish made me wonder if, for some reason, the gods had me in their cross-hairs.” (at para 20)
- “There is no merit to Mr. Duncan’s jurisdictional argument. Such arguments are a waste of the court’s time and resources, a selfish and/or unthinking act of disrespect to other litigants and deserving of no further attention, energy or comment.” (at para 22)
- “With his whole life ahead of him, one can only hope that Mr. Duncan will not only eschew formal adherence to that line of thinking, but will forsake all of the odds and ends and bits and pieces that accompany it and similar silliness.” (at footnote 6)
- “Near the beginning of his comments to me at the outset of this trial, Mr. Duncan proclaimed that he had no obligation to produce identification to the police officers. In that moment, before he continued down the Alice in Wonderland garden path of trusts and jurisdiction and dollar amounts and contracts and natural persons and administrators, Mr. Duncan momentarily hit upon the concept that would ultimately lead to his acquittal, albeit not by the rather circuitous and, with all due respect, silly path he wanted to go down.” (at para 30)
- “Mr. Duncan did not strike me as a fool and individual acts seldom define people, but the red binder he offered to the officers and the “affidavit of truth” he offered to me in court were regrettable descents into foolishness and Mr. Duncan would be well-advised to be more discriminating on what parts of the internet he models himself upon in the future.” (at para 31)
And on the publication of Meads between the first and second days of Duncan’s trial and how it might have led to the sort of “palaver” quoted above, consider the following excerpts:
- “If December 7, 1941 is a day that will live in infamy, for anyone faced with “freemen on the land” or similar litigants, 18 September, 2012 is a day that will shine in virtue. On that day, Mr. Justice J.D. Rooke, the Associate Chief Justice of the Alberta Court of Queen’s Bench, delivered a judgment in the matrimonial case of Meads v Meads 2012 ABQB 571.” (at para 21)
- “… Justice Rooke’s comprehensive judgment on what he labels “Organized Pseudolegal Commercial Argument Litigants” (of various iterations), wonderfully frees me from having to address any more effort to the jurisdictional arguments raised by Mr. Duncan.” (at para 21)
Justice O’Donnell did not address any effort to the jurisdictional arguments raised by Duncan. He did not describe those arguments. He did not refute them with law. He did not quote their refutation by Meads. Instead, he viewed Meads as a license to ignore them.
B. R v Tyskerud
In our opinion, the best use of Meads to date is that by Judge J.P. MacCarthy in the 460 paragraph judgment in R v Tyskerud, 2013 BCPC 27 (CanLII). The accused, a father and son, were charged with income tax evasion. Tyskerud is a case that appears to involve what Justice Rooke called a “guru.” In discussing a variety of typical OPCA techniques and arguments used by the father, Judge MacCarthy specifically notes that the accused attended some courses presented by the Paradigm Education Group to learn about the concept of a natural person (at para 42). The father testified that he drew on several sources, including Paradigm, to create documents such as his “Statutory Declaration Truth of Identification- Documentation Number MY-7748229.”
As Judge MacCarthy notes (at para 309), one of the gurus that Justice Rooke identified by name in Meads is Russell Porisky, founder of the Paradigm Education Group. As part of his review of court decisions arising from the prosecution of Porisky for tax evasion and counselling others to commit fraud, Justice Rooke stated (at paras 88, 89, 93-94, citations omitted):
Recently, a more complete window into the operations of an OPCA guru and his customer base has been provided by the trial and conviction … and sentencing of Russell Porisky and Elaine Gould for tax evasion and counselling others to commit fraud. …
Porisky operated a business, named “The Paradigm Education Group”, that advanced a concept that it was possible for a potential taxpayer to:
… structure their affairs so that they were a “natural person, working in his own capacity, under a private contract, for his own benefit”. Paradigm taught that money earned under this arrangement was exempt from income tax.
Porisky and Paradigm advanced this scheme on a commercial basis. … Paradigm operated as something of a pyramid scheme; Porisky also qualified “educators” to further proselytize his approach… At least one of these educators is now also the subject of criminal litigation … as are other participants in the Porisky tax evasion ring… Many other persons who used Porisky’s techniques have already been convicted of tax evasion …
Additionally, and in what can only be described as an exercise in pure arrogance, Porisky demanded 7% of the next two years income from his subscribers in exchange for his or his educator’s assistance … The tax liberator had become a tax collector.
The accused in Tyskerud characterized Paradigm in benign terms, viewing the group as legal and human rights educators (at para 312). The father denied that they were disseminators of tax protestor information. However, Judge MacCarthy was able to use Justice Rooke’s review of the tax evasion and related cases generated by the teachings of Russell Porisky to conclude (at para 312) that “the central focus of these self-styled education programs was to evade income tax.” However, Judge MacCarthy is careful to admonish himself (at para 314) that it would be an error “to find any accused guilty by association. … The presumption of innocence must be maintained.” Instead he uses the information from Meads — summaries of reported decisions for the most part — to provide a context for the accused’s’ arguments.
Judge MacCarthy also took seriously (Tyskerud at para 317) Justice Rooke’s admonition (Meads at para 202) that the indicia typically found in OPCA litigation “do not prove a claim or action is invalid, or that a litigant is vexatious.” Many of the indicia of OPCA litigation were present in the Tyskerud case: see paras 318-324. Many of the arguments made by the accused were refuted in Meads and Judge MacCarthy quotes extensively from Meads (at paras 325 – 369) in order to reject the arguments advanced by the accused which failed in other cases identified in Meads. There is nothing in Judge MacCarthy’s decision or the language he uses that is disrespectful of the accused or that fails to take their arguments seriously.
C. Cassa v The Queen
Another case involving income tax evasion and OPCA gurus is Cassa v The Queen, 2013 TCC 43 (CanLII). This particular decision, by Justice Diane Campbell acting as a case management judge, granted a motion by the Respondent to strike the Appellant’s Further Amended Notice of Appeal filed in January 2013. But this decision was only part of a large group of appeals, half involving self-represented litigants and half involving litigants represented by legal counsel. There was a “thread of similarities” in the wording in hundreds of these appeals — “de-taxer” language — leading Justice Campbell to conclude these Appellants have received “counsel” from a “guru.”
Justice Campbell’s ruling on the motion to strike shows little patience with the appellant, Cassa — and she relies on the existence of “self-represented litigants who are making an honest attempt to advance their appeals through the Court system in a timely manner” (at para 14) to justify her lack of time for Cassa’s “‘song and dance’ routines.” She characterizes his oral submissions as amounting to “nothing more than an absurd blend of the ridiculous arguments he included in his appeal documents” (at para 9). His arguments are labelled “unintelligible, incomprehensible, meaningless, irrelevant and factually hopeless” (at para 14). She notes that Cassa referred to the Meads decision as “prejudicial and premature” in what she took as an attempt to persuade her to ignore Meads. She concluded (at para 12) “that suggestion is as absurd as many of his other assertions.” Cassa’s use of the double or split person concept is characterized (at para 13) as an “absurd argument” and “total and utter nonsense.” Justice Campbell states (at para 13): “My method of dealing with any attempt by the Appellant to employ this nonsense in my Court was to simply ignore it.”
D. R v Martin
R v Martin, 2012 NSPC 115 (CanLII) is a third income tax evasion case with the suggestion of involvement by a guru. Judge Del W. Atwood ruled on the accused’s application for disclosure, an application he did not grant but did consider on its merits even though it was neither diligent nor timely. In this case, it was not the judge who relied on Meads but the Crown prosecutor. Apparently the focus of the Crown was on pigeon-holing Martin as an OPCA litigant and the argument adopted by the Crown in its written brief was that Martin, as an OPCA litigant, had brought unmeritorious applications in the past and therefore his present application should be assessed as being unmeritorious, as well. Judge Atwood not only noted the formal fallacy in this argument, but jumped to the defence of Martin (at para 9):
In this case, Mr. Martin has raised a triable issue: at what point in time did the CRA audit of his business evolve into an offence-focussed investigation? The Crown’s submissions regarding the purported authorship of Mr. Martin’s present argument — allegedly a Mr. Kimery, an individual who has, himself, been involved in litigation with the CRA in another province — were similarly unhelpful, as they amounted merely to an ad hominem rebuttal. In my view, it matters naught who helped Mr. Martin put together his application; what matters here is the legal merit of the application. Mr. Martin’s application this time around had merit and was arguable. What it lacked was persuasive evidence.
While acknowledging that Meads is an “immense benefit to trial Courts in managing cases defended by improperly guided, self-represented or agent-represented parties,” Judge Atwood correctly adds that Meads underscores the critical importance of maintaining focus on the merits of the case (at para 9). Like Judge MacCarthy in Tyskerud, Judge Atwood took seriously Justice Rooke’s admonition that the indicia typically found in OPCA litigation “do not prove a claim or action is invalid, or that a litigant is vexatious.”
E. R v Lavin
The uncontested bail hearing conducted by P. Kowarsky, Justice of the Peace, and described in his 207 paragraph decision in R v Lavin, 2013 ONCJ 6 (QL) is one of the more problematic post-Meads treatments of an OPCA litigant. Lavin was charged with obstructing a peace officer, using a permit and licence plate not authorized for the vehicle he was driving, driving while under suspension, operating a motor vehicle without insurance, and driving a motor vehicle without a currently validated permit. The Crown was prepared to consent to the release of Lavin on his own recognizance. However, on what appear to be three separate occasions when Lavin appeared before the Justice of the Peace, he refused to recognize the jurisdiction of the court. After Lavin was removed from the courtroom on the first occasion, the Crown was still willing to consent to his release on his own recognizance, subject to Lavin acknowledging his name, informing the Court that he understood the conditions of his release, agreeing to comply with all the conditions, and signing the recognizance. From the portions of the transcript quoted by the Justice of the Peace, it does not appear that Lavin was prepared to comply with the Crown’s proposed conditions, although it is not clear that he explicitly declined to do so. The Justice of the Peace refused to order Lavin’s release and detained him. He also found Lavin to be an OPCA litigant.
According to the transcripts quoted in the decision, Lavin repeatedly refused to recognize the authority or jurisdiction of the court. He made many statements to the effect of: “Sorry, I don’t recognize you. I don’t recognize the Crown. I don’t recognize any of these people in this court.” The following exchange is also quoted:
68 THE COURT: Sit down. All right. This is a gentleman who has now indicated to me that his name is David Lavin, appeared before me yesterday in this court. He had disrupted the proceedings in the court.
69 DAVID LAVIN: I’m sorry, Your Honour [sic], for and on the record, I’m sorry.
70 THE COURT: If you continue to talk, I’ll have you removed from the court, do you understand that? One more word from you until I ask you to respond and you will be removed from the court. Do you understand that?
71 DAVID LAVIN: I’m under – I do so under duress, threat and intimation.
72 THE COURT: Take him down, please.
73 MR. POON: Can we come back tomorrow, Your Worship?
74 THE COURT: No, no, no. I’m going to deal with it in his absence and then I’ll call him up and I’ll ask, perhaps, if possible, to have the record indicate what I’ve said so you can take a seat for a moment. All right.
The day before the Justice of the Peace had indicated to Lavin in open court what the conditions of his release would be and Lavin said he needed 10 or 15 minutes to think about it. When the matter came before the court again, this is what happened (at para 78):
Once again, for the purposes of the record and to ensure that I was dealing with David Lavin, I asked him to provide the court with his first and last name. Again, he started talking in some form of gibberish that made no sense and has no legal standing in this court. For that reason, I had him removed from the court, and, in the interests of justice, I ordered the matter to return before me today in order for the bail, once again, to be considered.
It is at this point that the Justice of the Peace turns to Meads which he describes (at para 79) as the “seminal case on matters of this kind” and a case “dealing with a similar litigant.” He continues on (at paras 82 – 97) to quote from Meads, but picking and choosing isolated passages that are general statements and (with the exception of paras 95-96) not the detailed list of indicia or court cases or available remedies that comprised the main part of Justice Rooke’s decision. For example, see the following paragraphs that suggest that Lavin is violent because some OPCA litigants sometimes are:
86 From the accused’s behaviour in this court, it appears that in the words of Justice Rooke;
“These persons employ a collection of techniques and arguments …”
87 I’m quoting.
“… to disrupt court operations and to attempt to frustrate the legal rights of governments, corporations and individuals.”
88 At paragraph 3:
“One of the purposes of these reasons is through this litigant to uncover, expose, collate and publish the tactics employed by the OPCA community as part of a process to eradicate the growing abuse that these litigants direct towards the justice and the legal system we otherwise enjoy in Alberta and across Canada.”
89 And at paragraph 198:
“Moreover, members of the OPCA community have proven violent.”
90 And he adds that;
”Always an important fact.”
The last straw for the Justice of the Peace appeared to be when Lavin questioned whether signing the recognisance would create a binding contract. According to Meads, a common OPCA litigation concept is that every binding legal obligation emerges from a contract, and consent is required before an obligation can be enforced (Meads at para 379). In other words, there can be no binding unilateral obligations imposed by the state though its legislation or by its courts; bilateral contracts have an elevated importance (Meads at para 382).
172 DAVID LAVIN: If, if I give my signature, right, if I, if I put my signature down on a piece of paper, am I entering into a binding contract?
173 THE COURT: Absolutely.
174 DAVID LAVIN: Okay. So under duress and threat and intimation, I’m being coerced into signing a contract, am I not, sir?
175 THE COURT: There will be no order for judicial interim release. I will order that this gentleman be held in pre-trial custody until such time as he has been dealt with according to law. I am satisfied …
Matters did end better for Lavin, however. In an Addendum to the judgement, the Justice of the Peace notes that Duty Counsel requested the matter be adjourned to the Plea Court on the following day and the Justice of the Peace acceded to that request. On the following day Lavin entered a guilty plea to the obstruction of justice charge and received a Conditional Discharge with a Probation Order for 6 months, including 30 hours of community service. He also pleaded guilty to driving while his licence was under suspension and operating a motor vehicle without insurance and was fined.
F. Scotia Mortgage Corporation v Gutierrez
The decision by K.R. Laycock, Master in Chambers in Scotia Mortgage Corporation v Gutierrez, 2012 ABQB 683 (CanLII) involved a foreclosure action, so-called “Dollar Dealers,” and another OPCA guru. The land being foreclosed upon was transferred by the homeowners to 1158997 Alberta Inc for a nominal $1.00. The former homeowners paid rent to 1158997 and 1158997 pocketed that rent without making any mortgage payments. The slower the foreclosure practice, the more the Dollar Dealers profited.
The issue in this decision in the Gutierrez case was whether or not Derek Johnson, the principal shareholder and director of 1158997, would be permitted to address the court on behalf of the numbered company. 1158997 had been declared a vexatious litigant in at least two other cases because of arguments made by Johnson when he appears in court on behalf of the company: Exceed Mortgage Corporation and Exceed Funding Corp v 1158997 Ltd., Action No. 1001-08610 (December 3, 2010) per Justice Wilson, and in HSBC Finance Mortgages Inc. v Strand Action No. 1001-14143 (February 9, 2011) per Justice Strekaf.
Master Laycock characterized Johnson as a snake oil salesman (at para 26) and found that Justice Rooke’s description of OPCA litigants in Meads described Johnson. However, Master Laycock mentions none of the indicia of OPCA litigation, only characterizing Johnson’s arguments as “nonsense” and delaying tactics. The Master relies on (at para 30) passages from Meads that describe vexatious litigants — much more commonly encountered than OPCA litigants — and their impact in general:
OPCA strategies as brought before this Court have proven disruptive, inflict unnecessary expenses on other parties, and are ultimately harmful to the persons who appear in court and attempt to invoke these vexatious strategies. (Meads at para 71)
Without some indication of how Johnson’s documents or arguments match Justice Rooke’s description of OPCA litigants’ techniques and concepts, it is difficult to see that the use of Meads is justified. Meads is used to support denying Johnson the opportunity to represent 1158997, but the reasons for denying him the opportunity to speak seem to have more to do with 1158997 previously being found a vexatious litigant when represented by Johnson and what Master Laycock sees as his victimization of the former homeowners.
G. Re Stancer
A renewed application for absolute orders of discharge from bankruptcy was granted by Master R.W. McDiarmid in Stancer (Re), 2012 BCSC 1533 (CanLII). It appeared that the bankrupt had written a letter five years earlier that stated “The person names on all your documents is a legal fiction corporate name created by the Province of Ontario as evidenced by the Birth Certificate #83-408072-01, registered August 22, 1951, which is the legal property of the Province of Ontario” (at para 29). This and other statements in the letter led Master McDiarmid to characterize the bankrupt as an OPCA litigant (at para 30) and note that it was regrettable that the bankrupt used OPCA tactics because she therefore failed to address the issues she needed to address in order to obtain her discharge.
However, the bankrupt also made oral submissions to Master McDiarmid and he stated that it appeared “she had resiled from what I will call the OPCA jargon” and addressed the court on the merits (at para 31). It is not at all clear why Meads was mentioned in this decision. There is a hint that it was because of the bankrupt’s 2007 use of some language that Justice Rooke identified as indicia of OPCA litigants that her discharge was denied in the past.
H. Re Grattan
In Grattan (Re), 2012 NBQB 332, [2012] NBJ No 353 (QL), Registrar M.J. Bray dealt with an application for discharge that was opposed by the Canada Revenue Agency which had filed proofs of claim for $375,998 for unpaid income tax and $92,950 for unpaid HST. The case is similar to Re Stancer, with old written indicia of OPCA concepts and current contriteness, but a harsher outcome was reached.
The Registrar found the bankrupt to be an OPCA litigant (at para 6). The only indicia of that which was referred to in the decision was a 2004 letter to the CRA which was quoted (at para 10):
NOTICE:
I, Cory Grattan declare that I am the Son of the Almighty Creator, As such, I am one with my Father in his Kingdom.
That I Cory Grattan is not a CANADIAN CITIZEN!
That I am not a citizen of the CROWN in the right of CANADA! And as such, that I am not a Federal Citizen!
Do not assume, that I Cory Grattan is CORY GRATTAN.
Tax avoidance is noted (at para 7) to be one of the primary goals of OPCA litigants. This general statement is followed (at para 8) by a quote from Meads (at para 79)
… these are little more than scams that abuse legal processes. As this Court now recognizes that these schemes are intended for that purpose, a strict approach is appropriate when the Court responds to persons who purposefully say they stand outside the rules and law, or who intend to abuse, disrupt, and ultimately break the legal processes that govern conduct in Canada. The persons who advance these schemes, and particularly those who market and sell these concepts as commercial products, are parasites that must be stopped.
The Registrar then tells us (at para 9) that “[i]n incurring a substantial tax debt, the Bankrupt was not an honest and unfortunate debtor but one of a group who deliberately conspired to avoid their legitimate responsibilities by advancing bogus arguments unknown in law.” No reason is offered for this conclusion, save and except the quoted 2004 letter to the CRA.
The Registrar notes (at para 11) that “the Bankrupt argues that he now recognizes the error of his previous ways, is working as a school bus driver and attempting to provide for his family. I have no reason to doubt the sincerity of this statement but the previous actions cannot be ignored.” He doubts that the bankrupt will try to evade taxes in the future but states that general deterrence is an important consideration and “the element of intention in the original wrongdoing cannot be ignored” (at para 12). But because the bankrupt was the sole support of a young family and the CRA’s demand for $25,000 would see him remain in bankruptcy for ten years, the bankrupt was ordered discharged upon payment of $10,000. In the end, his characterization as a (former) OPCA litigant seems to be irrelevant except in so far as it was used to justify a finding about the intentional nature of the tax evasion.
III. The World for OPCA Litigants Post-Meads
The use of Meads in these eight cases reveals several problems of a doctrinal nature. One is the way a mere reference to Meads is used as an excuse to simply ignore a litigant’s arguments. Another is the way that Meads has been used to position a litigant’s arguments at the extreme of the OPCA litigant category, even if they do not belong there. A third is the blurring of the categories of self-represented litigants, vexatious litigants and OPCA litigants — the pseudolegal commercial element is not always present.
We see the first problem — the use of Meads as a license to simply ignore what a litigant said —most notably in R v Duncan, where Justice O’Donnell gleefully notes (at para 21) that “Justice Rooke’s comprehensive judgment on what he labels “Organized Pseudolegal Commercial Argument Litigants” (of various iterations), wonderfully frees me from having to address any more effort to the jurisdictional arguments raised by Mr. Duncan.” However, Justice O’Donnell did not address the jurisdictional arguments raised by Duncan at all. He did not describe those arguments, he did not refute them, and he did not quote from Meads to show why those arguments had failed in previous cases. A bare reference to Meads is put forward as a sufficient reason to ignore the arguments altogether. The same is true of Cassa, where Justice Campbell stated (at para 13): “My method of dealing with any attempt by the Appellant to employ this nonsense in my Court was to simply ignore it.”
The second problem, the demonization of the litigant, can be seen in two of the cases. In Lavin, an uncontested bail hearing, the Justice of the Peace quoted (at paras 89 and 90) isolated and general passages from Meads to suggest that Lavin was violent because some OPCA litigants have sometimes been violent. This suggestion of violence arguably made it easier to hold the accused in custody. In Duncan, Justice O’Donnell characterizes Duncan as part of the freemen-on-the-land movement (at paras 6 and 21), even while acknowledging that Duncan denied he was part of that group (at footnote 6). The freemen-on-the-land movement is presented in Meads (at para 172, 175, 181, 182) as the most extreme type of OPCA litigant, on a par with the American Sovereign Man community:
The Freemen-on-the-Land are a comparatively newer movement. From reported caselaw, individuals who self-identify with this movement appear active across Canada. The membership’s focus is strongly anti-government, and has libertarian and right wing overtones.
Alarmingly, certain members of the Freeman-on-the-Land movement believe they have an unrestricted right to possess and use firearms … In that, and many other ways, the Freemen-on-the-Land parallel the American Sovereign Man community. Both engage in a broad range of OPCA activities directed towards almost any government or social obligation. Both habitually use ‘fee schedules’, and advance claims and liens against state, police, and court actors. Many apply the ‘everything is a contract’ approach and so are extremely uncooperative, in and out of court.
In the United States, Sovereign Men are notorious for their violent conduct, intimidation of state and court personnel, and their misuse of legal processes to engage in “paper terrorism”: Robert Chamberlain & Donald P. Haider-Markel, “”Lien on Me”: State Policy Innovation in Response to Paper Terrorism” (2005) 58 Political Research Quarterly, pp. 449-460; Erick J. Haynie, “Populism, Free Speech, and the Rule of Law: The “Fully Informed” Jury Movement and Its Implications” (1997) 88 The Journal of Criminal Law and Criminology pp. 343-379; Susan P. Koniak “When Law Risks Madness” (1996) 8 Cardozo Studies in Law and Literature, pp. 65-138. The FBI classifies Sovereign Men as a domestic terrorist movement.
In Duncan, characterizing the “rather pleasant young man” that Duncan was said to be (at para 7) as part of the freemen-on-the-land group appears to be only a rhetorical flourish because Duncan was acquitted. However, it has that “guilty by association” whiff to it that has no place in a criminal proceeding, as Judge MacCarthy was careful to note in Tyskerud (at para 314). That same “guilty by association” tactic was used in Martin by the Crown — and squashed by the judge — when the prosecutor argued that Martin was an OPCA litigant who had brought unmeritorious applications in the past and therefore his application in the case at bar could be assessed as unmeritorious. Conflating all OPCA litigants with the most extreme elements of that diverse group is also problematic because of the third problem, the conflation of OPCA litigants with vexatious or even merely self-represented litigants.
The third of the doctrinal problems these seven cases reveal is the blurring of lines between self-represented litigants and OPCA litigants and, even more so, between vexatious litigants and OPCA litigants. Meads established a continuum of litigants, ranging from the commonly encountered ordinary self-represented litigant, through to the infrequently encountered almost always self-represented vexatious litigant, to the highly unusual organized pseudolegal commercial argument (OPCA) litigant who is almost always self-represented and who, by definition, engages in vexatious litigation. These categories are best kept separate because of the large number of possible responses to OPCA litigants that are put forward in Meads (including punitive damages, elevated cost orders, fines segregated proceedings, etc. (at paras 587-675)), because of the often derisive response of courts to OPCA litigants, and because there are so many self-represented litigants compared to so relatively few vexatious litigants and OPCA litigants. It is unfortunately not unusual for self-represented litigants to be treated with contempt; see Dr. Julie Macfarlane, “The Truth is Raw”. Conflating them with OPCA litigants risks increasing the likelihood of such treatment.
Meads was controversial, in part, because of a perceived overlap between OPCA litigants and self-represented litigants — see in this respect the comments of Dr. Julie Macfarlane on “Avoiding conflation: OPCA’s and self represented litigants” and “The “Scourge” of Self-Representation?”. For example, in noting that OPCA litigants have now been identified as a category of vexatious litigant, Justice Rooke noted that “What remains is to manage these problematic self-represented and vexatious litigants in an effective manner” (Meads at para 641, emphasis added). Justice Rooke did distinguish self-represented litigants from OPCA litigants by noting that “persons who engage in OPCA litigation tend to adopt certain stereotypic motifs in their written materials and in-court conduct [and the] vast majority of these indicia are almost never shared by other self-represented litigants, including those who may have difficulty communicating their positions and arguments, and by litigants who are affected by cognitive and psychological dysfunction” (Meads at para 199, emphasis added). But he also explicitly noted that “OPCA litigants are typically self-represented” (Meads at para 628) and that “[d]ealing with an OPCA litigant is difficult and frustrating. The fact that they are almost always self-represented adds to the challenge” (Meads at para 658).
While very few self-represented litigants are OPCA litigants and not all OPCA litigants are self-represented litigants, all OPCA litigants are vexatious litigants by definition: “OPCA schemes are inherently vexatious” (Meads at para 65; see also paras 256 and 629). According to Meads, what separates the vexatious litigant from the OPCA litigant is apparently the same thing that separates the self-represented litigant from the OPCA litigant, namely, the adoption of “certain stereotypic motifs in their written materials and in-court conduct” (Meads at para 199). Although not listed in Meads, the identifying characteristics of vexatious litigants are found in the Judicature Act, RSA 2000, c J-2, Part 2.1 and have been elaborated upon in many decisions including, most recently, one by Justice Rooke in Onischuk v Alberta, 2013 ABQB 89. In Gutierrez, Meads was used to support denying Johnson the opportunity to represent 1158997, but the reasons for denying him the opportunity to speak seem to have more to do with 1158997 previously being found a vexatious litigant when represented by Johnson. The approach in Gutierrez can be contrasted with that of Justice Atwood in Martin, who rejected the Crown’s argument that, because Martin had brought unmeritorious applications in the past, his present application should therefore be assessed as being unmeritorious. If a litigant does persist in bringing unmeritorious applications, the vexatious litigant provisions of legislation such as Alberta’s Judicature Act should be used.
IV. Judicial Restraint and the OPCA Litigant
In three of the post-Meads cases the use of OPCA tactics and concepts appears to have strongly affected the judge’s perception of that litigant and the manner in which the judge discharged his or her role. In Duncan Justice O’Donnell inserted himself squarely in the judgment and communicated clearly (if some think wittily) his irritation and resentment at the task the OPCA litigant imposed upon him, his disdain for the position presented and a total lack of empathy for Duncan’s attraction to the OPCA strategies. In Cassa Justice Campbell was similarly impatient with her OPCA litigant and in Lavin the Justice of the Peace appears to have viewed the making of OPCA arguments as tantamount to contempt of court. Other judges appear to have been less threatened by OPCA indicia, with Judge McCarthy in Tyskerud continuing to treat the litigant’s position seriously and Judge Atwood in Martin viewing the potential role of an OPCA guru as essentially irrelevant to the determination of the legal position.
Is there a problem with judges using the existence of OPCA indicia to justify the evisceration of the party or her positions? We have a great deal of sympathy for judges who become frustrated or disconcerted by litigants who do not recognize their authority or who do not engage with good faith in the judicial process. Such litigants require time, patience and an ability to employ the power of the court in a careful and judicious fashion. What does a Justice of the Peace do at a bail hearing with a litigant who in essence refuses to participate? This is not an easy problem to solve.
In our view, however, a judge’s response to OPCA litigants – or indeed to any person appearing in the courtroom – must remain rigorously civil, professional and respectful. It must remain within the constraints of legal adjudication, both factual and legal. Any other approach violates the dignity of participants and, most importantly, undermines the ability of our system of law to act as a form of social settlement. It reinforces the perception of OPCA and some other litigants of the legal system as “other,” as so removed from their own position and perspectives that it has no actual authority over them. For them the legal system remains the gunman writ large.
In one of his excellent books on legal ethics, Legal Ethics and Human Dignity (Cambridge: Cambridge University Press, 2007), Professor David Luban argues that the purpose of our criminal justice system is to protect the dignity of an accused, to ensure that even as a person is brought to justice that she is not humiliated. Whatever wrong a person has been accused of committing, she must not be “silenced and ignored” with her “story and viewpoint [treated] as insignificant” (p. 72). Rather, any declaration of guilt upon her must follow only from a process in which she had the right to challenge the truth and legitimacy of any story the state is telling about her, and to tell her own story in her defence. It is only after her own story has been accounted for, and the state’s case nonetheless proven, that the state may rightfully impose a legal sanction upon her.
The process of fair adjudication of legal disputes, in both criminal and civil trials, also permits the legal system to make the very sort of authority claims that OPCA litigants deny. The legal system’s authority claim is that even when a person denies the morality or desirability of a legal rule or result, the fact that that rule is enshrined in law gives one a reason to obey it; the mere fact that a rule is a law becomes a reason for acting in accordance with that law. On what basis can law make such a claim? It can do so because the law provides us with a means of peaceful co-existence, of a way of living together without need to resolve our disagreements – whether moral or prudential – through violence. Each person in a society may have a different view of the right way to live, but the fact that laws are enacted through a reasonably democratic process, and applied through a reasonably fair system of adjudication, gives that person a reason to subject his own conception of the good to that which the law contains.
Where the legal system does not treat those before it with dignity – as having a story and a point of view that are significant – it cannot make the same claim to authority. The result it is imposing in that instance does not follow from an accounting of the party’s story in light of the rules of law. Rather, it follows from the exertion of force and authority by the state; that could give someone a reason to obey, but it does not do so because it has made a legitimate claim to authority.
The three judgments noted above, and in particular Duncan, do not treat the OPCA litigants who appear before them with dignity. It is acceptable and right to tell an OPCA litigant that their argument against the court’s jurisdiction is not meritorious, even that it is frivolous or vexatious. But it is not acceptable to suggest that a judgment simply involves a “song and dance” routine (Cassa) or that the making of such arguments indicates that the person in question presents a risk of violence absent some reason to believe that he does so (Lavin). And it is certainly not a reason to liken an OPCA litigant to a monkey (“Sadly, when human beings are let loose with computers and internet4 access, their work product does not necessarily compare favourably to the aforementioned monkeys with typewriters”) and then to pretend that you are not doing so by adding a footnote saying that you aren’t (“Lest anyone misunderstand me, this is by no means intended to compare Mr. Duncan to a monkey”). That the same passage adds a footnote explaining who Shakespeare is simply reinforces its clear message of humiliation: Duncan is stupid (he needs to be told who Shakespeare is!) and his arguments unworthy of serious attention. That message is reinforced by the judge’s suggestion that Duncan’s argument imposes such an inconvenience upon the judge that it feels like the gods have him in their crosshairs and his repeated reference to the silliness and foolishness of Duncan’s position.
Does this judgment give any reason for Duncan, or someone in his position, to view the proclamations of the legal system as worthy of his attention, as worthy of respect regardless of his own view of the right way to live? In my view it does not; indeed, it cannot given the contempt with which his commitments are treated. A judgment like this communicates that the judge is wise and Duncan foolish, the judge’s time is valuable and Duncan has wasted it and – most of all – the judge has power and Duncan does not. And, disappointingly, the power expressed in this sort of judgment seems raw – because I can – rather than an articulation of the authority of law.
One of the problems of the legal system, and one of the reasons why it can alienate its participants, is the extent to which the legal system cares only about the legally salient features of a person’s story. The law does not, for example, really care whether your spouse cheated on you unless somehow the fact of cheating has legal relevance. Yet for the person consulting a divorce lawyer the fact of the cheating may, in that moment, be the only thing that really matters. That is a frustration that the legal system may never be able to fix while discharging its function. At the same time, however, participants in the system, whether they are judges or lawyers, need to recognize that when they frame people only in terms of what is legally salient about them they have the ability to miss much of what is, in a personal or moral sense, truly important. Further – and this is the real point to be made here – when you have only considered the legally salient features of a person you truly know very little about him or her. Like Judge O’Donnell, we know nothing about Duncan. We don’t know if he is a good friend, a kind son, a considerate lover, a dedicated employee or a great person to have drinks with at the bar. We know only this: he made an unsignalled turn; he resisted an unjustified arrest; he defended himself in court using OPCA tactics and concepts that were without merit. A judge faced with that limited information ought to be properly restrained in that which he says about the litigant. Certainly Duncan deserved to be told that his arguments were wrong, just as he deserved his acquittal. Telling him that might simply have included quoting the relevant passages from Meads with their explanation of the relevant law. But Duncan did not merit being treated as someone of whom the judge had personal knowledge, and who could be judged accordingly – “a decent fellow who expressed himself well (other than when rambling a bit too long about jurisdiction, as noted herein) and whose principal shortcomings appeared to be too much free time with internet access and too little discernment in whose example he followed.” That sort of assessment cannot follow from the law’s necessarily limited focus.
Near the beginning of my academic career I (Woolley) taught the first year contracts course for several years, and of course taught many of Lord Denning’s judgments. While the students enjoyed them, and Lord Denning’s legal analysis always merited careful study (if not perhaps treatment as binding precedent), I think his example was not salutary. Daydreams about bluebells and rickety chairs may be evocative, but humility and wisdom are better aspirations for judges than drawing pictures in the sky.
Summary judgement on an oil and gas lease termination case
PDF version: Summary judgement on an oil and gas lease termination case
Decision commented on: P. Burns Resources Limited v Locke, Stock and Barrel Company Limited, 2013 ABQB 129.
In this appeal from an unreported decision of Master Laycock, Justice Bensler granted partial summary judgement on an application for a declaration that a petroleum and natural gas lease had expired during its secondary term for want of production or working operations. The evidentiary basis for this conclusion consisted primarily of production records filed with the Energy Resources Conservation Board (or its predecessors). On the appeal before Justice Bensler in the Court of Queen’s Bench the lessee supplemented the record with evidence of one of its employees and one of its consultants.
The decision
Burns, as owner of the mines and minerals other than coal in section 13, granted an oil and gas lease for a one year primary term on December 19, 1984 to Locke, Stock and Barrel’s (LSB) predecessor in title. The third proviso to the habendum to the lease provided that:
If at any time after the expiration of the said term production of the Leased substances has ceased and the Lessee shall have commenced further drilling or working operations within ninety (90) days after the cessation of said production, then this Lease shall remain in force so long as any drilling or working operations are prosecuted with no cessation of more than ninety (90) consecutive days. (…) If drilling or working operations are interrupted or suspended as the result of any cause whatsoever beyond the Lessee’s reasonable control or if any well on the said lands or on any spacing unit of which the said lands or any portion thereof form a part, is shut-in, suspended or otherwise not produced for any cause whatsoever which is in accordance with good oil field practice, the time of such interruption or suspension or non-production shall not be counted against the Lessee.
Burns alleged that there were two periods after the end of the primary term during which the well on the lands did not produce for more than a period of 90 days and on that basis sought a declaration that the lease had terminated for want of production and for damages. Master Laycock awarded partial summary judgment in favour of Burns based on cessation of production during the second of the two periods. He was of the view that there was some evidence of production (albeit insignificant) during the first period. Master Laycock left the issue of damages to be determined at trial. LSB appealed. Rule 6.14(3) allows the parties to supplement the record before the master with “additional evidence that is, in the opinion of the judge hearing the appeal, relevant and material.” On the appeal LSB led new evidence from its “pumper” (Ferner) who was in charge of the well and from Anderson who advised LSB on the operation and management of the well.
The judgement
Justice Bensler held that the lease terminated for want of production or working operations at the end of the first period of non-production. The additional evidence adduced on the appeal made it clear that there was (as alleged by Burns) no production whatsoever during each of the two periods. While the production records did show an increase in inventory in one of the months in the first period (from 4.4m3 to 4.5m3) Ferner insisted that there was no production and that was the only firsthand knowledge of production at the well. Accordingly, whether the Court was applying a volumetric standard (i.e. some production however small) or an economic standard, as apparently endorsed by the Court of Appeal in Omers Energy Inc v Alberta, 2011 ABCA 251 (an appeal from an ERCB decision and involving a differently worded lease), the lease failed for lack of production.
Neither was the lease saved by further drilling and working operations. While Ferner occasionally turned the pump on and off, added diesel, and tapped the well, these efforts were minimal and not directed at the production of oil and accordingly were inadequate to fall within the meaning of “working operations.” It was significant that once the pump was repaired (at the end of the first period) it was able to produce again within five days (at para 41). LSB could have repaired the pump at any point during the period of non-production but chose not to. During the second period, it was not until the lessee took steps to install a ringgear starter that the lessee engaged in working operations but this occurred during the second of the two alleged periods of non-production and was too late to save lease.
The failure to produce was not beyond the lessee’s control. Neither the pump malfunction nor elevated concentrations of wax and acetate were outside the control of LSB (at para 42). Any problems attributable to these conditions were caused by LSB’s inattentiveness to the well conditions.
The failure to produce or engage in working operations was not consistent with good oilfield practice (at para 43). General evidence to the effect that LSB’s operations with respect to these types in order to maintain production was generalized and not directed to the particular operation carried out by LSB on this particular well.
Commentary
In a previous post (see the full list of posts referred to in “Back to square one: summary judgement on an oil and gas lease validity issue set aside” here I suggested that it would be an unusual case in which the Court would give summary judgement on the death of an oil and gas lease. That particular comment related to a case in which there was at least some basis for thinking that there might be an estoppel argument available to the lessee. But that is not the case here. The production record from the well was clear. And while there was some record of insignificant production during the first period of alleged non-production that was trumped on appeal with the new evidence of the lessee’s own employee who was on the site to the effect that there was no production. Given all of that, termination for lack of production seems like the only possible decision. Similarly, the case seems to be a reasonable application of the decision of the Saskatchewan courts in Montreal Trust v Williston Wildcatters Corp, 2001 SKQB 360, aff’d 2002 SKCA 91 to the effect that isolated acts in and around the well could not qualify as working operations. Such activities need to be directed at securing production. Equally reasonable is the conclusion that the failure to produce or carry out working operations was not for a cause that was beyond the control of the lessee. On this point Justice Bensler remarks that counsel had not referred her to relevant authority and that “the case law is sparse in this area” (at para 28). One relevant authority is the Court of Appeal’s decision in Canada Cities Services Petroleum v Kinninmonth (1963), 44 WWR 392, (aff’d by the SCC on other grounds [1964] SCR 439) (a road ban case) but nothing turns on this since the decision fully supports the conclusion that Justice Bensler reached.
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