Western Canada Business Litigation Blog

Anti-Spam Private Right of Action Suspended

Posted in Privacy

The Government of Canada has suspended the implementation of the private right of action in Canada’s anti-spam legislation (CASL).

The provisions in connection with CASL’s private right of action were scheduled to come into force on July 1, 2017.  They would have given people the ability to seek damages against those who contravene certain sections of CASL, including the provisions with respect to sending commercial electronic messages, as well as certain sections of the federal Personal Information Protection and Electronic Documents Act.

The coming into force of these provisions was repealed by an Order in Council on June 2, 2017.  The short preçis associated with this Order remarks that the coming into force was suspended “in order to promote legal certainty for numerous stakeholders claiming to experience difficulties in interpreting several provisions of the Act while being exposed to litigation risk”.  The Government made the announcement on June 7, 2017, in a press release which stated that the suspension was done “in response to broad-based concerns raised by businesses, charities and the not-for-profit sector”.

The suspension of the coming into force of these provisions is indefinite.

To view an earlier blog post on this issue by Marko Vesely, click here.

The Seven Year Itch: The SCC Returns to Address an Unresolved Question regarding the Crown’s Duty to Consult Aboriginal People and the Legislative Process

Posted in Aboriginal, Constitutional, Environmental

On May 18, 2017, the Supreme Court of Canada agreed to hear an appeal in an important case that could further define the nature and extent of the Crown’s duty to consult Aboriginal people, including the previously unresolved question as to whether the Crown’s duty to consult Aboriginal people can be triggered by legislative action.

Background – When Does the Crown Duty to Consult Arise?

In 2010, the Supreme Court of Canada, in Rio Tinto Alcan Inc. v. Carrier Sekani Tribal Council, 2010 SCC 43, addressed the question “When Does the Duty to Consult Arise?”  The Court found that the test for triggering the Crown’s duty to consul can be broken down into three elements:

(1) the Crown’s knowledge, actual or constructive, of a potential Aboriginal claim or right;

(2) contemplated Crown conduct; and

(3) the potential that the contemplated conduct may adversely affect an Aboriginal claim or right. (para. 31)

In discussing the second element (contemplated Crown conduct), the Court went out of its way to clarify that it was not addressing the question of whether consultation obligations could arise from the government’s action in preparing or passing legislation.

We leave for another day the question of whether government conduct includes legislative action.”  (para. 44)

That day may arrive soon.

To read more, click here.

Dismissal for Chronic Delay – New Six Question Framework

Posted in Civil Procedure, Fraud

On April 19, 2017, in Humphreys v Trebilcock, 2017 ABCA 116 (“Humphreys“),  the Alberta Court of Appeal set out six “essential” questions that an adjudicator must ask in order to apply Rule 4.31, the “chronic delay” rule. Under the Alberta Rules of Court (the “Rules”), a party may apply to dismiss an action for undue delay pursuant to Rule 4.31 at any time in an action or Rule 4.33, the “drop dead” rule, if three years have passed without a significant advance in the litigation. While the Court has no discretion under Rule 4.33, Rule 4.31 provides the Court with broad discretion, but little direction.

Humphreys provides direction as to when and how to apply the Court’s discretion under Rule 4.31. The six “essential” questions are as follows:

  1. Has the nonmoving party failed to advance the action to the point on the litigation spectrum that a litigant acting reasonably would have attained within the time frame under review?
  2. Is the shortfall or differential of such a magnitude to qualify as inordinate?
  3. If the delay is inordinate has the nonmoving party provided an explanation for the delay? If so, does it justify inordinate delay?
  4. If the delay is inordinate and inexcusable, has this delay impaired a sufficiently important interest of the moving party so as to justify overriding the nonmoving party’s interest in having its action adjudged by the court? Has the moving party demonstrated significant prejudice?
  5. If the moving party relies on the presumption of significant prejudice created by r. 4.31(2), has the nonmoving party rebutted the presumption of significant prejudice?
  6. If the moving party has met the criteria for granting relief under r. 4.31(1), is there a compelling reason not to dismiss the nonmoving party’s action?

In dismissing the action in Humphreys, the Court considered both litigation and nonlitigation prejudice, including: the exacerbated stress associated with alleged fraud; the business and reputational toll on alleged wrongdoers when claims are not prosecuted in a reasonable time; the balance of the plaintiffs’ interest in securing a judicial determination with the defendants’ interest in carrying on business without fear that unsubstantiated claims in an extant lawsuit will cause others to refrain from doing business with them; and, degraded memories.

Rule 4.31 (at issue in Humphreys) provides an alternative for defendants where the requirements of Rule 4.33’s mandatory dismissal are not met, but the suit is languishing.

Canada’s Anti-Spam Law Adds Teeth, Leaves Potential Opening for Class Actions

Posted in Class Actions, Privacy

Canada already has one of the world’s strictest regimes regulating commercial electronic messages, and, just in time for the country’s 150th birthday, the consequences for breach are about to get much more severe. On July 1, 2017, this regime will add additional teeth in the form of a private right of action, which could drastically increase the threat of legal proceedings and financial consequences for those who violate it.

Until July 1, 2017 the primary concern is that violations of Canada’s Anti-Spam Law (“CASL”) would be prosecuted by the bodies responsible for its enforcement (Canadian Radio-television and Telecommunications Commission (the “CRTC”), the Competition Bureau, and the Office of the Privacy Commissioner).  After July 1, 2017 those who send commercial electronic messages also face the risk of class proceedings specifically permitted by CASL.

What is CASL?

CASL creates a broad and comprehensive set of offences, enforcement mechanisms and penalties applicable to a number of activities, including the unauthorized installation of computer programs on computers and electronic devices, the alteration of transmission data and various other forms of online fraud. However, for the vast majority of organizations, CASL’s requirements with respect to commercial electronic messages (“CEMs”) are the primary concern. Subject to limited exemptions, CEMs may only be sent if the recipient has given his or her informed consent and the CEM contains certain prescribed information, including a functioning “unsubscribe” mechanism.  Further, deemed or implied consent is only permitted in specific circumstances and there are rules and limitations on how express consent can be obtained.

What is the private right of action?

Once the relevant provisions are in force on July 1, 2017, CASL will allow individuals and organizations to bring a private action in civil courts against those who violate certain CASL provisions.

Starting July 1 individuals will be able to commence an action in court where they are affected by an act or omission:

  1.               that constitutes a contravention under sections 6 through 9 of CASL (those sections set out the fundamental rules for the sending of CEMs, the alteration of transmission data and the installation of computer programs);
  2.              that relates to a violation of the email harvesting and use provisions in sections 7.1(2) and (3) of the Personal Information Protection and Electronic Documents Act (“PIPEDA”); or
  3.               that results from false or misleading electronic messages within the meaning of the Competition Act.

Importantly, only one of these conditions needs to be satisfied for the private right of action to be available.

Currently, CASL is enforced jointly by the CRTC, the Competition Bureau, and the Office of the Privacy Commissioner. These public bodies have a range of enforcement mechanisms at their disposal, including imposing administrative monetary penalties on those who contravene CASL. Thus far, enforcement has been generally limited to more flagrant offences and also limited by each public regulator’s own internal resources.

Why should companies be concerned with the private right of action?

There are three primary reasons to be concerned with the private right of action that will come into force July 1:

  1. CASL is already a broadly drafted statute which creates an enhanced risk of a violation even inadvertently;
  2. CASL also allows a court to award damages regardless of whether actual loss has occurred to the plaintiff (up to a capped amount) which may encourage more claims to be advanced; and
  3. The private right of action may be particularly amenable to a class proceeding.

These three reasons are explored in greater detail below.

Broad scope of CASL: CASL has been criticized for its broad drafting and that criticism applies well to the private right of action provisions (sections 47-51).  Those sections provide that any person who alleges that he or she has been “affected” by a contravention of sections 6 through 9 may bring an action in court. This, coupled with CASL’s definition of CEM – which includes any electronic message that seeks to “encourage participation in a commercial activity” and effectively captures millions of messages sent each year – creates the potential for a large number of plaintiffs to commence lawsuits over a massive number of potential contraventions.

Different liability standard: Further and as noted above, in addition to compensatory awards for amounts equalling the actual loss suffered by the claimant, a court may also award non-compensatory damages up to $200 for each CASL breach and up to $1 million for each day during which a breach occurs.  These “statutory damages” favour the claimant, because they do not require the same level of proof as other types of damages. A claimant need only prove that he or she was “affected” by the CASL contravention.

Class action concerns: As the actual losses suffered by an individual as a result of a breach of CASL are likely to be modest in most cases, the viability of bringing individual civil suits is low. However, given that CASL’s broad language captures a vast range of messages, combined with the fact that enormous numbers of individuals could be “affected” by contraventions, the conditions may be ripe for class actions arising from breaches of CASL.

The availability of statutory damage awards only increases the amenability of class actions to this private right of action. Under CASL’s provisions, courts may award the $200 per violation, $1 million per day non-compensatory awards without evidence being provided of actual loss or injury. These potential non-compensatory award amounts could be multiplied by hundreds, if not thousands, depending on the scope of the violation.

The CRTC has handed out several substantial fines in the past pursuant to its regulatory authority under CASL, but these amounts would be paltry compared to the amounts that could conceivably be awarded by a court for a private right of action. For instance, in March of 2015, Vancouver-based online dating service PlentyofFish paid $48,000 as part of a voluntary settlement (known as an “undertaking” under CASL). This payment was for alleged violations involving CEMs that contained a deficient unsubscribe mechanism that were sent over a three-month period.  If such a contravention was pursued by way of a private right of action after July 1, and with a potential $1 million in statutory damages for each day the contravention occurred, PlentyofFish could theoretically have been liable for an amount in the vicinity of $90 million.

Consider also the $200,000 fine that Rogers Media Inc. paid to the CRTC in 2015 for allegedly sending contravening emails over a one-year period. Under a private right of action, Rogers’ liability could have exceeded $365 million.

What are the limitations?

Two aspects of CASL’s private right of action may limit statutory damage awards in practice. First, there are a number of factors that a court must consider when determining the amount of an award, including the offender’s ability to pay, any financial benefit obtained from the commission of the contravention, and any previous contraventions. Courts must also consider the purpose of an award, which is to promote compliance with CASL, PIPEDA, or the Competition Act, and not to punish offenders.

Second, under section 48(1) of CASL, where an offender has entered into an “undertaking” to comply with CASL, or has been served with a notice of violation (essentially, if regulatory proceedings have been commenced), then a court may not consider a private right of action against that person. This provision could potentially allow for parties who are faced with a multi-million dollar class action to enter into a settlement with the CRTC for a lesser amount so as to bar any further private right of recovery.


CASL has been in force for nearly three years now, and most organizations should be familiar with the legislation’s requirements. Come July 1, however, the availability of CASL’s private right of action will undoubtedly increase the consequences of violations, making compliance with the legislation essential for anyone engaged in sending CEMs.

With thanks to articling student Zander Grant for his assistance.

Court of Appeal upholds mortgage exit fee in face of Interest Act challenge

Posted in Banking, Civil Litigation

Section 8 of the Interest Act, R.S.C. 1985, c. I-15, prohibits any “fine, penalty or rate of interest . . . that has the effect of increasing the charge on the arrears beyond the rate of interest payable on principal money not in arrears.” Relying on this provision, borrowers often challenge fees and charges that borrowers levy when seeking to enforce a secured debt that has gone into arrears. For the defaulting borrower, it can slow down the lender’s effort to seek judgment and, if successful, can amount to relief from portions of the debt being claimed. However, what section 8 actually means and how it applies in any given case is a question that constantly bedevils courts.

Two recent decisions illustrate the practical difficulties in categorizing the nature of charges accruing to a secured debt and whether they contravene the Interest Act. Arguably, one decision, Krayzel Corp. v. Equitable Trust Co., 2016 SCC 18, does away with prior judicial distinctions that made commercial sense (though were difficult to apply) and makes relief under section 8 more likely. The other decision, Bankers Mortgage Corporation v. Plaza 500 Hotels Ltd., 2017 BCCA 66, illustrates a clear mechanism for lenders to avoid the perils of section 8 of the Interest Act.

In Krayzel, the Alberta courts applied a strict or narrow interpretation of s. 8 and categorized the interest rate in issue as “an incentive to pay” rather than a penalty for non-payment. In Krayzel, the borrower and lender renegotiated a secured loan after the borrower ran into difficulties. It was agreed that the loan interest rate would be 25% but that the borrower need only pay a monthly rate of 7.5% with the remaining interest accruing to the debt. If the borrower repaid the loan on time, the unpaid interest would be forgiven. If not, the unpaid interest would form part of the secured debt to be repaid. The Alberta trial and appellate courts held that this was not a “fine, penalty or rate of interest” on the arrears but rather an incentive to the borrower to repay on time. They upheld the interest rate. The Supreme Court of Canada (though with a dissent) disagreed, choosing instead to see this interest arrangement as contravening section 8. It reasoned that the focus of the inquiry was not on how to characterize the impugned charge (incentive v. penalty), but to look at its effect. If the effect is to impose a higher rate of interest on arrears of interest or principal than that payable on principal money not in arrears, the charge will offend the Interest Act because it makes it more difficult for borrowers who are already in default to redeem or protect their equity.

In the Plaza 500 Hotels case, the borrower sought to invoke the reasoning in Krayzel to argue that a mortgage exit fee it was obliged to pay to a mortgage broker offended the Interest Act and could not be enforced. As part of the original loan, the borrower agreed it would pay the mortgage broker an exit fee of $96,000 (0.67% of the principal amount of the loan) if the loan was either not renewed or not repaid on time.  After the mortgage went into default, the lender foreclosed and the mortgage broker sued to recover the exit fee. The broker then registered its judgment on title to the property that had been mortgaged to the lender.

The borrower argued the mortgage exit fee was “related to the mortgage” as it was triggered by default under the mortgage and had the practical effect of making repayment more difficult. The B.C. Court of Appeal disagreed and upheld the mortgage exit fee. The distinguishing feature was that the mortgage exit fee was not part of the secured debt. It was, in the words of the Interest Act, not “stipulated for, taken, reserved or exacted on any arrears of principal or interest secured by mortgage on real property . . . that has the effect of increasing the charge on the arrears beyond the rate of interest payable on principal money not in arrears.” In other words, because the mortgage exit fee was not part of the secured debt, it did not fall within the scope of the Interest Act.

This decision is good news for lenders as it illustrates that there are sound commercial methods to set up incentives for borrowers to meet their obligations without worrying about running afoul of the Interest Act. While “incentives,” “bonuses” or “discounts” can still be used, they just cannot be tied to the secured debt. As an unsecured debt, this may make recovery more difficult but charges of this nature are nonetheless enforceable against a debtor and its guarantors. The Interest Act will not interfere to prevent recovery.

How do the courts allocate loss amongst innocent victims of a fraud?

Posted in Civil Litigation

Fraudsters are very clever. Many set up elaborate commercial transactions for the purpose of absconding with someone else’s money.  By the time the scheme is discovered, an innocent victim is usually out of pocket, often for large sums of money. In an effort to recover that loss, the victim often turns to other innocent parties who were unknowingly involved in the deal and seeks to impose the loss on them. The courts are left with the invidious task of deciding who, among these innocent litigants, should bear the loss. How do they make that decision?

The short answer is that it is usually entirely dependent on the facts of each case. It is those facts which define the legal principles that will provide the answer. A recent Alberta case provides a common example. The case involved paying out a mortgage debt with the payment being made to a company, Fuoco, that held itself out as agent for the lender. Once paid, the company and its principal disappeared with the cash. The lender, a Mr. Currie, was left to go after his borrowers, the Craigs, and their lawyer who made the payment to the fraudster at the fraudster’s direction. Mr. Craig also sought to assert his mortgage security still had priority over the mortgage the Craigs granted to TD Bank, some of the proceeds of which had been used to pay the fraudster (and purportedly discharge Currie’s mortgage).

The legal answer in this case turned on the law of agency and, in particular, the actual or implied authority of the fraudster, as agent, to act on Currie’s behalf. As a general rule, where an agent acts within their actual authority, the principal is bound by those acts, even if fraudulent. However, where an agent has gone rogue, most principals argue the agent was either not their agent at all or, more commonly, acted outside their authority. Mr. Currie did so in this case. As a result, the legal question then became whether Fuoco had “ostensible authority” to act for Currie. As a matter of law, the answer depends on whether the principal has, by words or deeds, held out their agent as having the authority to do the challenged act. In other words, did the agent have “ostensible authority.”

In making that decision, the Alberta court relied on the following propositions:

  1. Representations about the authority of an agent must come from the principal; an agent cannot clothe themselves with authority;
  2. The onus is on the party relying on the act of the agent to prove ostensible authority; and
  3. When an agent has actual authority, but that authority is subject to limitations, the onus is on the principal to prove that the limitations were conveyed to the third party who relied on the agent.

Relying on those propositions, the Alberta court found that the fraudster, Fuoco, had the ostensible authority to accept payment of the mortgage debt from the Craigs’ lawyer. As a result, Currie was the innocent party who bore the resulting loss, not the Craigs, their lawyer or TD Bank. This finding was based on specific facts, including that Currie:

  • allowed Fuoco to negotiate the original loan with the Craigs;
  • allowed Fuoco’s address to be used on the mortgage documents;
  • signed off on and allowed Fuoco to provide mortgage payout statements; and
  • did not voice any objection to or place any limit on Fuoco’s conduct with any third party, including the Craigs or their lawyer.

Based on this, the Alberta court found the Fuoco also had “ostensible authority” to receive payments on the mortgage debt and to do so in Fuoco’s name.

The underlying lesson here is that any principal should be cautious when clothing an agent with any authority to act on their behalf. Pay close attention to what your agent is doing and who they are dealing with on your behalf. Had Mr. Currie been paying closer attention to what Fuoco was doing, he would likely not have fallen victim to this fraud

Search and Ye May Find Something Else: Use of Competitors’ Names in Keyword Advertising and Domains

Posted in Civil Litigation, Torts


In Vancouver Community College v Vancouver Career College (Burnaby) 2017 BCCA 41, the British Columbia Court of Appeal found that Vancouver Community College (“VCC”) had established the tort of passing off against Vancouver Career College (“Career College”) for using “VCC” and “VCCollege” as part of Career College’s internet presence, overturning the trial judge on each component of passing off and awarding a permanent injunction to restrain Career College from using “VCC” or “VCCollege” to represent itself on the internet, including the domain name “VCCollege.ca” The court also considered for the first time whether or not the use of competitors’ marks in keyword advertising constituted passing off.


VCC was appealing its initially unsuccessful attempt to have Career College cease use of VCC’s recognizable initials.  VCC had claimed passing off as a result of the respondent Career College’s use of the domain name VCCollege.ca, and breach of the official marks of VCC, but also contended that Career College’s practice of bidding on the keywords “VCC” and “Vancouver Community College” was confusing enough to satisfy the second component of passing off, and further breached its official mark. The trial judge found against VCC on each component of the tort of passing off, and dismissed the claim for breach of VCC’s official marks.

The Tort of Passing Off

To establish the tort of passing off, a party must prove goodwill in the trade name at stake, and that a misrepresentation was made by the defendant that is likely to confuse the public by presenting or suggesting a connection between the plaintiff and defendant. Damage to the plaintiff is presumed due to the plaintiff’s loss of control over their reputation resulting from the misrepresentation.

In this case, goodwill was easily established by showing that a sufficient portion of the marketplace knew that “VCC” indicated Vancouver Community College. The second component is likely confusion of the public through a misrepresentation. The trial judge found that the first impression of the trade name was formed only after the consumer had clicked through to the defendant’s website, so any confusion in the domain name “VCCollege.ca” was irrelevant. The Court of Appeal overturned that to find that “VCCollege” was equally as descriptive of VCC as of Career College and contains the acronym “VCC”, so the domain name “VCCollege.ca” was a misrepresentation likely to cause confusion. Finally, damage was sufficiently established by proving interference with VCC’s goodwill.

The Court did not think it had the necessary evidence before it to determine whether a breach of the official mark had occurred. It referred that matter back to trial for consideration after laying out the framework upon which it should be decided.

Keyword Advertising

Keyword advertising involves predicting which words a target consumer will enter into a search engine, and engaging in competitive bidding on those words. The highest bidder for each word will have their title and description displayed at the top of the search results, which ensures higher traffic to their website. The keyword itself may or may not be displayed in the search result. In recent years, it has become more and more common to bid on a competitor’s trade name, to ensure that one’s website is not only included in an internet search for the competitor’s, but may actually rank ahead of it in the search results.

A previous case against Career College considered its use of the words “VCC” and “VCCollege” in keyword advertising in the context of misleading advertising under the Private Career Training Institutions Act, [SBC 2003] c. 79.  In Private Career Training Institutions Agency v Vancouver Career College (Burnaby) Inc, 2010 BCSC 765, the court determined that Career College’s use of keyword advertising was not misleading advertising under the legislation. The use of a competitor’s name or mark in keyword advertising alone was not intended to mislead, and that it provided choice to the consumer which was considered a benefit.

In this case, VCC attempted to claim that bidding on the words “VCC” and “Vancouver Community College” was sufficient to satisfy the second component of the tort of passing off. The Court did not agree, finding that, “merely bidding on words, by itself, is not delivery of a message. What is key is how the defendant has presented itself, and in this the fact of bidding on a keyword is not sufficient to amount to a component of passing off…”


The BC Court of Appeal has given a strong indication of how keyword advertising will now be treated in the context of passing off cases.  Whether or not bidding on the keywords “VCC” and “Vancouver Community College” can be considered a breach of an official mark was referred back to trial for determination, so that is yet undecided. What is known, however, is that the mere act of bidding on a competitor’s trade name as a keyword for one’s website will likely not result in a finding of passing off.

With thanks to articling student Caitlin MacDonell for her assistance.

BC Court of Appeal Reaffirms Finality of Arbitration Decisions

Posted in Civil Litigation, Civil Procedure

The recent decision of the British Columbia Court of Appeal in Chriscan Enterprises Ltd. v. St. Pierre, 2016 BCCA 442, reminds those who elect to resolve their business disputes through arbitration that decisions of the arbitrator, even those touching on the fairness of procedures, will generally be final and not subject to review by the courts. As the Court noted, the “scope to appeal arbitral awards is narrow because arbitration is intended to be an alternate dispute resolution mechanism, rather than one more layer of litigation.”

The Court of Appeal’s Decision

The appellants, the St. Pierres, contracted with the respondent, Chriscan Enterprises Ltd., in 2004 for the construction of a house. The project was completed in 2006, but some issues arose concerning Chriscan’s failure to obtain competitive bids for some of the work (the “Overcharge Issue”) and certain alleged deficiencies relating to the driveway (the “Deficiency Issue”). The contract contained an arbitration clause which required the parties to submit their disagreements to arbitration.

The St. Pierres attempted to have the Overcharge Issue heard by the courts, arguing breach of fiduciary duty, but were directed back to the arbitration process. The arbitrator rejected the St. Pierres’ breach of fiduciary claim, ruling that the issue was one of breach of contract. The St. Pierres did not seek to amend their Statement of Claim at that time, and the arbitrator continued to hear and decide the Deficiency Issue. The St. Pierres later made an application to amend their Statement of Claim to allege the Overcharge Issue through breach of contract. The arbitrator allowed the amendment, finding that the delay in bringing the application to amend was explained by other steps taken in the litigation and that Chriscan would suffer no substantial prejudice. By this time, the parties had made no fewer than four court applications in the dispute.

The Chambers Judge granted leave to appeal the amendment decision. He was of the view that the proposed appeal was on a point of law, and that the importance of the decision to the parties justified the court’s intervention. Citing reasonableness as the standard of review, the Chambers Judge allowed the appeal.

The Court of Appeal disagreed with this characterization. Writing for a unanimous Court, Savage J.A. held that the issue of whether to allow the amendment was a question of mixed fact and law and that leave to appeal should not have been granted. Rule 22 of the Domestic Commercial Arbitration Rules of Procedure provides a permissive power to arbitrators to allow amendments to pleadings. It sets out two situations where the arbitrator may not allow the amendment: (i) where the delay is prejudicial; or (ii) where the amendment is beyond the terms of the agreement. Any finding as to delay is therefore a finding of fact. The Chambers Judge improperly rejected this factual finding when he substituted his own finding that to allow the amendment would be a manipulation of the adversarial process.

The Court addressed Chriscan’s several other arguments including res judicata, estoppel, waiver, and abuse of process. On the res judicata issue, the Court held that it was clear that the Overcharge Issue was never dealt with on the merits and that the initial jurisdiction decision served only to eliminate the St. Pierres’ claim in breach of fiduciary duty. The breach of contract issue remained extant, although not pleaded. The Court commented that it was inappropriate to treat the parties’ arbitral process as being the same as an action in the courts, where a final entered order ends the jurisdiction of a trial judge. The parties chose to “litigate in slices” and discrete issues were dealt with at different times. As a result, no finding was made in respect of the breach of contract issue. With respect to waiver and estoppel, the Court accepted the arbitrator’s conclusion that the St. Pierres had not, either by their words or conduct, abandoned their contractual claim. As for abuse of process, the Court rejected this claim summarily, repeating that the amendment decision was a question of mixed fact and law.

The Bottom Line

The Court of Appeal reminds us that parties submitting to arbitration subscribe to “the whole package that comes with it.” The Arbitration Act limits the Courts’ role in reviewing arbitral decisions to true questions of law, and the courts will apply the deferential standard of reasonableness, even on important matters of procedure. Choosing arbitration means choosing to be bound by the Arbitration Act, the Domestic Commercial Arbitration Rules of Procedure, and the discretion of the arbitrator chosen.

Supreme Court Of Canada Dismisses Appeal Alleging Freedom of Expression Breach

Posted in Constitutional

In its first decision of 2017, the Supreme Court of Canada addressed the likelihood of successful damages claims against quasi-judicial boards pursuant to s. 24 of the Charter. In a 4-4-1 split decision, the Court ultimately dismissed the appeal and struck the appellant’s claim for damages. Given the nature of the split decision, and the fact-specific basis for the result, a closer look is warranted both to understand the decision in question and evaluate its potential reach.

Factual Background

The Energy Resources Conservation Board (the “Board”) is an independent quasi-judicial body responsible for regulating Alberta’s energy resource and utility sectors. It is responsible for overseeing energy related activities and enforces legislation intended to protect the groundwater supply. The Board was created by the Energy Resources Conservation Act (the “ERCA”), R.S.A. 2000, c. E-10. That statute includes an immunity clause at s. 43 which insulates the Board from actions or proceedings against it “in respect of any act or thing done purportedly in pursuance of this Act, or any Act that the Board administers, the regulations under any of those Acts or a decision, order or direction of the Board.”

Ms. Ernst owns land in Alberta. Throughout 2004 and 2005, she frequently voiced her concerns to the Board about the negative impacts caused by hydraulic fracturing and drilling near her home. She also voiced her concerns publicly.

In December 2007, Ms. Ernst brought claims against the project proponent, the Board, and the government of Alberta. Only one of those claims was still alive before the Supreme Court of Canada, i.e.: whether or not the Board had breached Ms. Ernst’s s. 2(b) right to freedom of expression by “arbitrarily, and without legal authority” restricting her communications with the Board for a period of 16 months. She asserted that the Board had punished her for her earlier public criticisms.

The Board brought an application to strike Ms. Ernst’s claims. The onus was therefore on the Board to demonstrate that it was “plain and obvious” that Ms. Ernst’s claims could not succeed as pleaded. Both the Alberta Court of Queen’s Bench and the Court of Appeal found that the immunity clause on its face barred Ms. Ernst’s claim for Charter damages and concluded that her claim should be struck out, 2013 ABQB 537; 2014 ABCA 285.

The Issues

While there were three key issues on appeal, the three decisions written by the court addressed these issues in substantially different fashions. Three judges sided with Cromwell J.; one judge sided with Justice McLachlin C.J., Moldaver J. and Brown J.; and Abella J. wrote for herself.

(a)            Does s. 43 of the ERCA bar a claim for Charter damages?

Justice Cromwell, writing for himself, and Justices Karakatsanis, Wagner and Gascon, and Justice Abella (writing for herself) held that it is “plain and obvious” that the immunity clause bars a claim for Charter damages, but for slightly different reasons. Justice Cromwell concluded it would be unfair to the Board to rule otherwise, since the case has been argued in the lower courts on this basis. However, Abella J. was of the view that s. 43 is an absolute and unqualified immunity clause and that, absent a successful challenge to the constitutionality of the provision, it bars all claims against the Board.

The Chief Justice, Moldaver J. and Brown J. disagreed. Although this issue was not properly before the lower courts, the circumstances of this case, involving a novel legal problem of significant public importance, compelled the Court to consider the issue. In their view, it was not plain and obvious that Ms. Ernst’s claim was barred by the immunity clause. Focusing on the language of “any act or thing done purportedly in pursuant of the [ERCA],” it is arguable that punitive acts or non-adjudicative functions could fall outside the scope of the immunity that s. 43 confers.

(b)               Is s. 43 of the ERCA constitutional?

At both the Queen’s Bench and the Court of Appeal, Ms. Ernst maintained that she was not challenging the constitutionality of the immunity clause, but rather was challenging the applicability of the clause to her Charter damages claim. It was not until she reached the Supreme Court that this issue was raised. As a result, neither the Attorney General of Alberta nor the Attorney General of Canada received notice of a constitutional question and no evidence was lead as to the constitutionality of the provision.

Justice Abella was critical of this procedural failure, and emphatically declined to rule on the constitutionality of s. 43. Notice to the Attorneys General serves the vital purpose of ensuring courts have a full evidentiary record before invalidating legislation and affords governments the fullest opportunity to support duly enacted statutes. She stated that new constitutional questions ought not to be answered “unless the state of the record, the fairness to all parties, the importance of having the issue resolved by this Court, the question’s suitability for decision, and the broader interests of the administration of justice demand it.”

The Chief Justice, Moldaver J. and Brown J. also declined to rule on the constitutionality of the provision. In their view, the appeal should have been allowed on the basis of their answers to the other two questions. However, they expressed some support for Abella J.’s approach, commenting in obiter that the record did not provide an adequate basis on which to decide the issue.

Justice Cromwell ruled the provision was constitutional, for two reasons. First, the appellant had simply failed failed to discharge her burden of showing that the law is unconstitutional. Second, however, Cromwell J., found that as Charter damages would never be an appropriate and just remedy for Charter breaches by the Board, and s. 43 did not actually limit the availability of Charter remedies, it could not then be unconstitutional.

(c)              Are Charter damages an appropriate remedy as against the Board?

Charter damages may be an “appropriate and just” remedy for a breach of a claimant’s Charter rights if the claimant demonstrates that damages would fulfill one or more of the functions of compensation, vindication, or deterrence. However, Charter damages will not be available where countervailing factors, such as alternative remedies or good governance concerns, render s. 24(1) damages inappropriate or unjust, 2010 SCC 27.

Justice Cromwell concluded that it was plain and obvious that Charter damages would never be an appropriate remedy against the Board. Judicial review is available to vindicate any misconduct by the Board and good governance concerns support the Board’s immunity – immunity protects the Board’s independence and impartiality and ensures the Board is able fulfill its functions without the distraction of time-consuming litigation. His decision reminds litigants and lower courts that courts must be careful not to extend the availability of Charter damages too far.

Those siding with the Chief Justice again, disagreed. In their view, the limited evidentiary record did not support the high threshold mandated by an application to strike. It was not plain and obvious that Charter damages could not, in any circumstances, be an appropriate and just remedy against the Board. It was not obvious that judicial review would fulfill the same the same objectives as an award of Charter damages, namely, vindicating Ms. Ernst’s Charter right and deterring future breaches. It was also not plain and obvious, on the record at this junction, that good governance concerns, either alone or together, would be enough to oust a claim for Charter damages.

Justice Abella declined to decide this issue as well, finding that the question of whether Charter damages are appropriate requires a prior determination of the constitutionality of the immunity clause. Though her comments in obiter suggest that, absent the procedural error, she would have otherwise agreed with Cromwell J.

What does all of it mean?

Although the justices reached their conclusions in different ways, the collective result is that s. 43 remains in effect and bars claims against the Board. However, a constitutional challenge of s. 43 and other similar immunity clauses appears to remain open, as there was a limited evidentiary record before the Court to support its ruling. It is unclear whether an argument is still open to litigants to argue that s. 43 does not apply to a claim for Charter damages, as only Abella J. conclusively ruled on the matter.

It is also unclear whether Charter damages are available to litigants as against a quasi-judicial board other than Energy Resources Conservation Board. Although Abella J.’s comments suggest that such a claim would fail, the Court’s decisions do not offer a clear majority on this issue.

With thanks to articling student Rochelle Collette for her assistance.

The Perils of Trespass

Posted in Civil Litigation

Few property disputes engender more anger and unreasonable behaviour than trespass and nuisance claims between residential neighbours.  Municipal and other authorities, such as regional districts or stratas, are either loath to get involved or simply refuse to exercise their authority, though that would often resolve matters sooner.  As a result, such disputes between neighbours often lead to acrimonious, lengthy and costly litigation.

A recent case provides a example and a cautionary tale for property owners seeking to build or renovate their property.  The lesson to be learned is: if you are going to engage in construction activities on your land, do it properly, makes sure you know where your property line is, obtain all the requisite approvals and permits, and get professional help if at all in doubt.  Your failure to do so will not only peeve the neighbours but, in the long run, be a lot more expensive.

Mr. Jensen and Mr. Lojstrup learned this the hard way recently when the court found them liable for trespass, granted injunctive relief requiring them to tear down much of their construction as well as awarding both special and punitive damages against them.

They had purchased a lot in the Shuswap Lake Estates development with a plan to build a home.  The result was described by the neighbour as a “monstrosity” and an “abomination”.  The project started poorly when the two men built a retaining wall on their neighbour’s property without permission.  While this was quickly removed when the neighbour complained, that temporary trespass resulted in an award of both general and special damages to compensate the neighbour for both the cost of a survey and the neighbour’s actual legal costs in hiring a lawyer to protest the encroachment.

Despite this early trouble, the men went on to rebuild the retaining wall on their property but within the building scheme set back.  They also built their “dream home” partially within the set back and at a height that exceeded the building scheme requirements.  The reconstructed retaining wall was also quite different than the description given to the neighbour in a “gentlemen’s agreement.”  Despite the neighbour’s vociferous protests, the regional district refused to take any action, in spite of the clear violations of the local zoning bylaws and building code.  As a result, the neighbour sued in both nuisance and trespass.

The nuisance claim was dismissed on the grounds that the “mere proximity of an otherwise safe structure on a neighbouring property” is not enough to trigger liability in nuisance.  However, the trespass claim was allowed on the grounds that the neighbour was entitled to enforce, in a private dispute, the development’s governing building scheme.  The argument that the retaining wall was a “fence” for the purposes of the governing building scheme was quickly dismissed.  The court found that in building the second retaining wall and the house, the owners had breached the building scheme in several respects.  They had failed to prepare formal drawings and specifications.  They did not seek prior approval of their construction.  They failed to comply with setback and height restrictions.  They did not comply with the building code.  As a result, court concluded that “there has been a clear, ongoing breach of the statutory building scheme by the defendants.”

The question then became what remedy to grant.  In deciding what order to make, the court noted that the defendants had made no effort to determine the location of their property line.  They had not submitted plans to anyone for approval or comment.  They “deliberately and knowingly breached the gentlemen’s agreement . . . concerning the height of the retaining wall.”  The neighbour’s complaints were “treated with disdain and contempt”.  As result, the court granted an injunction requiring the defendants to remove the retaining wall and offending portions of the house so that they were in compliance with the building scheme.  Interestingly, the court suspended the injunction for a period of thirty days so that the defendants could calculate how much this would cost them and the neighbour could decide whether he wanted to be paid this sum instead or to have the defendants’ property fixed.

Because of the “highhanded” nature of the defendants’ conduct, the court went on to award punitive damages of $15,000 against each of them ($30,000 in total).

If you run into allegations of trespass, nuisance and contravention of zoning bylaws or building schemes, it would be prudent to address those concerns immediately and transparently.  If you are in the wrong, rectify the situation.  If you are in doubt, obtain professional assistance to confirm your position.  Do not do as Mr. Jensen and Mr. Lojstrup did and charge ahead without professional assistance and in the face of the complaints of others.  If you do, it may turn out to be a very expensive exercise.