Wednesday, December 12, 2018

Ontario Court of Appeal Declines to Clarify When Judges Can Impose Fines Below Statutory Minimum

In a decision released on December 7, 2018, the Ontario Court of Appeal missed an opportunity to provide lower courts with guidance  regarding the circumstances in which they could depart from imposing statutory minimum fines required by provincial regulatory statutes.  Section 59(2) of the Provincial Offences Act (“POA”)  gives the court discretion to impose something less than the minimum where “exceptional circumstances” make it “unduly oppressive” or “not in the interests of justice” to do so.   However, the Court of Appeal ruled that the provincial offence regime is better served by leaving the requirements for departure from minimum fines and sentences intentionally vague.  In fact, the Court may have even muddied the waters by appearing to say that “exceptional” means “unusual” and then failing to define the term unusual.
The case, Ontario (Environment, Conservation and Parks) v. Henry of Pelham Inc. 2018 ONCA 999, drew attention from a number of third parties who sought to intervene before the court of appeal to weigh in on the meaning of exceptional circumstances.  However, only the Criminal Lawyers Association was granted such leave.  Many expected the court to determine the standard to be applied in the exercise of judicial discretion to depart from mandatory minimum sentences found in over 600 Ontario provincial offences to which section 59(2) of the POA applied.  In addition, the case would have an influence on similar cases in other provinces where there was no jurisprudence at the appeal court level.  The judge who granted leave to appeal to the Court of Appeal, Justice Ian Nordheimer, in his endorsement noted both the importance of having guidance from the Court of Appeal on an unclear issue and stated that it was “essential for the due administration of justice that leave be granted”.  Justice Nordheimer held, “It is evident that there is no clear guidance as to when the requirements of section 59(2) are met.  Indeed, from the existing cases, it would appear that a very broad approach has been taken that may not reflect an apparent will of the Legislature that a departure from a minimum fine should only occur in exceptional circumstances.  Consequently, some guidance from this court respecting the minimum requirements that need to be established before section 59(2) can be invoked would be helpful.” 
Section 59(2) of the POA provides that, “although the provision that creates the penalty for an offence prescribes a minimum fine, where in the opinion of the court exceptional circumstances exist so that to impose the minimum fine would be unduly oppressive or otherwise not in the interests of justice, the court may impose a fine that is less than the minimum or suspend the sentence”. 
In November 2017, a resident of St. Catharines, Ontario called the Ministry of Environment and  Climate Change Pollution Hotline, claiming that one of the two ponds on his property had turned black.  Ministry officers investigated and observed a black pond with a faint organic odor.  The respondent, Henry of Pelham, a Niagara area winery, advised the Ministry that the corporation had spread a mixture of cattle manure and grape pomace on its lands for approximately two weeks and it had not been incorporated into the soil because of wet weather conditions.  The respondent speculated that the manure/pomace mixture may have entered one of the creeks that emptied into the pond through a tile drain.  As soon as Pelham became aware of this situation, it retained an environmental firm to assess it, prepare an action plan, replace a pump for the ponds aeration system that had not been operating for about one year, and arranged for black organic matter to be cleaned from the entrance to the pond.  These actions cost Pelham $12,000. 
At trial, the justice of the peace found that exceptional circumstances existed, not because of the monetary implications of the case, but because the nature of the offence and Pelham’s immediate actions in light of the offence and therefore the statutory minimum of $25,000 should not automatically be accepted as appropriate.
On appeal to a Superior Court judge, the appeal judge agreed that there were exceptional circumstances and concluded that a fine is “not in the interests of justice” when it is unfair.  He concluded that imposing a $25,000 fine in the circumstances would be seen as patently unfair and that the offence was a very modest incident.  He then asserted that it was not obvious that the Crown could have proved its charge without Pelham’s guilty plea.  However, he concluded that the fine should be raised from $600 to $5,000 instead of the minimum $25,000 prescribed by the Act. 
In short, both JP and the Superior Court judge had imposed fairly modest fines on Pelham for a discharge into a pond that had the effect of creating a “faint organic odor” for an unknown period of time.  Both courts held that the corporation’s acts were, essentially minimal, had no lasting effect, and took into consideration that Pelham had pleaded guilty to the charge of “discharging or causing or permitting the discharge of material into a water course” and had taken remediation measures at an expense of some $12,000.  They concluded that these were exceptional circumstances that justified departing from the minimum fine of $25,000 imposed by the Ontario Water Resources Act (“Act”).    
The Crown appealed that decision to the Court of Appeal.  Leave to appeal was granted by Justice Nordheimer.  At issue was whether the court should provide some guidance as to the operation of section 59(2) and how it affects the numerous statutes, other than the Act, that provide for provincial offences that are subject to a statutory minimum fine or sentence.  The Court of Appeal held that regulatory offences arise in a situation different from the criminal law.  They were strict liability offences where the Crown had to prove the commission of the prohibited act beyond a reasonable doubt and that liability followed unless the defendant could establish a defence of due diligence on the balance of probabilities. In addition, the main sentencing objective for regulatory offences was deterrence as opposed to punishment.  Under the Act, Pelham’s  offence was one of the more serious in which the higher range of penalties applied and that the corporation’s guilty plea put the $25,000 minimum fine in play. 
The Court of Appeal disagreed with both lower court decisions, but Justice Grant Huscroft, writing for the court, refused to identify circumstances where section 59(2) of the POA would allow the court to impose a lesser fine.  Justice Huscroft looked at the nature of minimum fines and held that they apply without regard to the circumstances of individual offenders or circumstances surrounding the particular offence.  It was an approach chosen to achieve deterrence by the legislature and the court’s responsibility to apply that approach.  In this case, the prosecutor chose to prosecute under part III of the Act where the minimum fine had to be imposed on a conviction unless relief under section 59(2) of the POA was warranted. 
Justice Huscroft went on to find that the court’s discretion in not applying a minimum fine was not unfettered but the difficulty was that the criteria in 59(2) of the POA was vaguely worded, i.e. the meaning of “exceptional”, “unduly oppressive” and “not in the interests of justice” were evaluative and comparative concepts that have no settled court meaning and leave room for interpretation in application.   Justice Huscroft held that such vague terms must be interpreted in context as the modern approach to statutory interpretation makes clear.  Trial judges must not recognize exceptional circumstances too readily less they become the norm.  Specifically, unduly oppressive includes financial hardship.  Interests of justice “allows consideration for broader residual considerations” and interests of justice does not mean fairness.     
He held that the appeal judge had erred in concluding that the circumstances of this case were exceptional and that it would not be in the interests of justice to impose the minimum fine under the Act.  The strength of the Crown’s case given the plea of guilt was irrelevant and the minimum fine ought to have been imposed.
Justice Huscroft summarized his reasoning as follows: 

1.      Section 59(2) applies exceptionally.  It will be an “unusual case” in which the imposition of a minimum fine would be considered “unduly oppressive” or “otherwise not in the interest of justice”. Justice Huscroft did not elaborate what he meant by “unusual”;
2.      Whether a minimum fine is unduly oppressive usually will depend on consideration of personal hardship.  The bar for relief is set very high where difficulty in paying a minimum fine is inadequate to justify discretionary relief;
3.      Whether a minimum fine is otherwise “not in the interests of justice” involves consideration of not only the interests of an individual offender but also the interests of the community protected by the relevant public welfare legislation; and
4.      The discretion under section 59(2) cannot be exercised arbitrarily.  Trial judges must explain their reasons for invoking section 59(2) and in particular must demonstrate both that circumstances are exceptional and that it would be unduly oppressive or otherwise not in the interests of justice to apply the minimum fine.
He held that in this case, the appeal judge erred in concluding that the circumstances were exceptional and not in the interests of justice because the appeal judge had determined that the interests of justice means no more than fairness.  Secondly, he concluded that the appeal judge had erred in engaging in a what he called “counterfactual” exercise by considering several factors that, in his view, would have rendered prosecution difficult had it occurred.  The judge had concluded that the facts in this case were so minimal that they created exceptional circumstances for the purpose of section 59(2).  Justice Huscroft held that the counterfactual analysis involved speculation on matters that the appeal judge was not entitled to consider. 
In the result, Justice Huscroft and his fellow appeal court Justices  -Watt and Fairburn - allowed the Crown’s appeal and imposed the minimum fine of $25,000 on Pelham.

Friday, November 30, 2018

Ontario Court Gives OK For Lawyer to Sue Law Society

The Ontario Court of Appeal is permitting lawyer Paul Robson’s action against the Law Society of Upper Canada (now the Law Society of Ontario) (“LSO”) and three of its employees for malicious prosecution and misfeasance in public office to proceed.  The appeal court’s decision overturned the decision of Justice Patrick Monahan of the Superior Court of Justice on a motion to strike by the LSO.  Mr. Robson argued before the court that he is a thorn in the side of the LSO and someone at the LSO wishes to silence him.

At the motion brought by the LSO, Justice Monahan had struck Mr. Robson’s fresh as amended statement of claim, without leave to amend, and dismissed his action against the LSO and four of its employees.  This was the second time that a Superior Court judge had struck Mr. Robson’s pleading without leave to amend.   On a prior motion, Justice Firestone had struck the plaintiff’s claim for negligence and his claims for malicious prosecution and misfeasance in public office on the basis that Mr. Robson had failed to plead the full particulars of his claims as required by the Rules of Civil Procedure (“Rules”).  As a result of that motion, Mr. Robson amended his claims for malicious prosecution and misfeasance in public office and responded to the law society’s demand for particulars.  The defendants then brought a second motion to strike which was heard by Justice Monahan.  Justice Monahan held that Mr. Robson’s pleading did not respond to the directions set out in Justice Firestone’s prior order and that he had failed to provide sufficient particulars of the LSO’s improper purpose or ulterior motive necessary to ground his claims. 

On appeal, a three judge panel of the Court of Appeal agreed with Mr. Robson that Justice Monahan had erred in striking the bulk of his claim and allowed the appeal with respect to the LSO and three of the four individual defendants. 

The background to this case began in 2002 when Justice Lax presided over a trial on the issue of whether Mr. Robson had acquired shares in certain companies while he was an undischarged bankrupt.  During the course of that trial, Justice Lax made a number of factual findings against Mr. Robson including a finding that he had attempted to conceal assets and the truth relating to such assets from the trustee in bankruptcy. 

As a result of the trial judge’s findings, the LSO began to investigate Mr. Robson’s conduct in 2002 in connection with his bankruptcy proceedings.  Separately, the bankruptcy trustee brought a motion to set aside Mr. Robson’s discharge from bankruptcy on the basis that he had obtained his discharge by fraud.  The trustee relied primarily on Justice Lax’s reasons.   Justice Campbell dismissed the trustee’s motion which was appealed to the Court of Appeal.   Justice Doherty, J.A., for the Court of Appeal, found that while Justice Lax had made a finding of fraud, that finding was not binding against Mr. Robson in subsequent proceedings because it was not “necessary” to the determination of the issue before Justice Lax., i.e. namely whether Mr. Robson had acquired the shares while an undischarged bankrupt.  Further, Justice Doherty held that since Mr. Robson did not have notice that the trustee was seeking a determination that he acted fraudulently and had not fully defended the action before Justice Lax, it would be unfair to preclude him from re-litigating the issue in subsequent proceedings. 

Seven years later, in 2013, a LSO hearing panel held that Mr. Robson had engaged in conduct unbecoming a licensee.  The LSO relied exclusively on the findings made by Justice Lax as to Mr. Robson’s fraudulent and dishonest conduct.  Mr. Robson was disbarred. 

In 2015 a LSO appeal panel overturned the hearing panel’s finding of professional misconduct.  It held that the hearing panel had erred in law in precluding Mr. Robson from leading evidence and from re-litigating the factual findings made by Justice Lax because Justice Doherty’s decision in Mr. Robson’s bankruptcy proceedings was controlling.  As a result the appeal panel set aside the disbarment. 

Mr. Robson then brought the action for negligence, malicious prosecution and misfeasance in public office against the LSO and four of its employees.  The Court of Appeal set out the applicable legal principles for the torts of malicious prosecution and misfeasance.  It then referred to rule 25.06(8) of the Rules which applies where these torts are pleaded.  The rule provides:  “Where fraud, misrepresentation, breach of trust, malice or intent is alleged, the pleading shall contain full particulars, but knowledge may be alleged as a fact without pleading the circumstances for which it is to be inferred.”   

Essentially, Mr. Robson’s fresh as amended pleading alleged that the respondents knew that Justice Lax’s judgment was not correct and that many of the facts that she relied upon were inaccurate but that they deliberately acted contrary to Justice Doherty’s decision and deliberately precluded unfavourable witnesses in order to harass and harm him.  In his oral submissions to the Court of Appeal, but not in his pleadings, Mr. Robson says that he is a thorn in the side of the Law Society and someone at the Law Society wishes to silence him.  The Court of Appeal concluded that the elements of both torts had been sufficiently pleaded.  The facts pleaded, if true, supported the inference of an improper LSO purpose.  If true, they also pointed to a deliberate and dishonest wrongful abuse of the powers given to a public officer.   

The Court of Appeal allowed Mr. Robson’s appeal except as it related to one LSO employee,  because Mr. Robson had provided no particulars as to her role in the LSO’s investigation and prosecution.

See Robson v. The Law Society of Upper Canada, 2018 ONCA 944



Friday, October 12, 2018

Ontario Judge Considers Systemic Anti-Black Racism As A Sentencing Principle

Earlier this year, a Toronto jury found Kevin Morris (“Morris”), a 26 year old black man, guilty of several gun-related charges including possession of an unauthorized firearm, possession of a prohibited firearm with ammunition and carrying a concealed weapon.  The jury acquitted Morris of assaulting a police officer with intent to resist arrest. Morris was sentenced to 15 months in jail.  Predictably, there was an outcry in some media and corners of the criminal justice community that the sentence was too lenient and “soft on crime”.  On September 11, 2018, several months after Morris’s conviction, Justice Shaun Nakatsuru, the trial judge, released his written reasons for the sentence, including why he spared Morris from serving time in a federal penitentiary.   The reasons run twenty-one pages in length.  At the end of the reasons, Justice Nakatsuru attached as an appendix a report entitled “Expert Report on Crime, Criminal Justice and the Experience of Black Canadians in Toronto,” written by three social scientists.  The appended report, also runs 21 pages in length, excluding another 10 pages of footnotes. 

The Crown objected to the admission of this report.  The Crown also objected to the admission of a second report entitled “Social History of Kevin Morris”, written by one of the social scientists.  The second report focussed on how systemic anti-black racism had affected Morris’s particular circumstances and led him to be where he is now.  However, both reports were either admitted or considered by Justice Nakatsuru on the basis that sentencing judges should take a broader and more liberal view of materials that should be admissible at a sentencing hearing.  The judge reasoned that the goal of a sentencing hearing is to arrive at a fit and proportionate sentence.  Justice Nakatsuru concluded that the more he knew about Morris and his crimes, the better he could arrive at such a sentence.  This was particularly important when it came to tackling the problem of the disproportionate imprisonment of black offenders.

Justice Nakatsuru described the facts of the case as being straight-forward.  In December of 2014, four years earlier when Morris was 22 years old, the police received a call about a home invasion in Scarborough.  As they were investigating the scene, the police came upon four black males walking in a parking lot.  The police stopped the young men.  Morris ran away.  As he was running, Morris discarded his jacket, which police eventually recovered and found that the jacket contained a loaded revolver.  Prior to trial, Morris brought a Charter application to stay the charges.  Justice Nakatsuru did not stay the charges but did find some Charter violations that were relevant to the sentencing. 

The Crown and the defence were far apart on the appropriate sentence.  The Crown asked for 4 to 4.5 years in jail.  The defence argued that the sentence should be 1 year before credit was given for the Charter breaches.  At the sentencing hearing, the defence presented the two reports.  The first report was written by Professor Akwasi Owusu-Bempah, Camisha Sibblis and Professor Carl James.  They are all very qualified academics and experts in their field.  Ms. Sibblis was the primary author of the second report.  As to the first report which dealt with anti-black racism in Canadian society, Justice Nakatsuru agreed with the Crown that an expert report was not required at the sentencing hearing because the law has “now long taken notice of these sorts of things”.  Justice Nakatsuru nevertheless found the report to be so useful that he attached it as an appendix to his reasons, noting “It is invaluable to have such a report available for every judge on every sentencing of a black offender.”.  Justice Nakatsuru indicated that he agreed with the authors’ conclusions which he set out in his reasons in full.  In part, the report concluded “that the social circumstances of Black Canadians in general, and of Black male Torontonians in particular, should be viewed as criminogenic…” and while “no one individual should be completely absolved of their own offending behaviour when it comes to offending behaviour, the social realities that have produced or contributed to such behaviour can be acknowledged, and serve to guide judicial decision making”.    

The second report was intended to provide the judge with more information about Morris, the accused.  The author provided her analysis as to the impact of systemic racism on Morris’s experience in and out of the justice system.  Justice Nakatsuru admitted the second report, but with some qualifications.  The judge indicated that he used his own independent evaluation of how systemic factors applied in Morris’s case and was free to disagree with what the author of the report had said.   While Justice Nakatsuru found that the reports were helpful to him, he also held that we live in a real world of limited resources, and recognized that not every accused is going to be able to present such sentencing reports to the courts for their assistance. 

Justice Nakatsuru held that in arriving at a fit sentence for Morris he was aware that the sentencing principles of general deterrence and  denunciation was most important for offences such as these.  In obiter he held that, “We have a serious problem with gun crime.  Reducing gun crime and its associated violence, is a long game.  Effective solutions take time, money and commitment.  There is no one single solution in the short term.”  He them commented on some of the issues that were responsible for gun crime including addressing social and economic inequalities and disadvantages, supporting smart and fair policing with adequate resources, dismantling gangs and getting at the reason why young people join them, and indicated that the problems are complex and the answers were not easy.   The criminal justice system plays an important role not only to deter gun crime with fit sentences but to make sure the criminal justice system demands the respect of the people who look to is for solution. 

Justice Nakatsuru ruled that when looking at the case in a principled manner, “broader systemic factors such as racism and the effects of colonialis must surely have some impact upon the application of general deterrence and denunciation".  He recognized that criminal judges have limited tools available to them to meet the objectives of sentencing.  But the law does not say that systemic and background factors should play no role in the assessment of the seriousness of the crime and the weight to be given to general deterrence and denunciation. 

In arriving at the sentence for Morris, Justice Nakatsuru considered a number mitigating factors including the factors set out in the second report.  In all of the circumstances he found that a sentence of 15 months was the fit and appropriate sentence in order to deter and denounce.  After finding some Charter violations, Justice Nakatsuru reduced the jail sentence to 12 months accounting for the “dead” time that Morris had already spent in jail.

Justice Nakatsuru recognized that some would see the sentence as being too lenient.  He responded, “In my opinion, we have to get past this idea of waiting for the perfect person to be lenient.  Waiting for the most benevolent soul by the standards of the privileged and the few before we decide to extend consideration for leniency.  For we may be waiting a long time.” 

see R. v. Morris, 2018 ONSC 5186



Wednesday, July 25, 2018

Ontario Court Allows Increased Political Activity By Charities

In an important decision released on July 16, 2018, Justice E.M. Morgan of the Ontario Superior Court of Justice held that the provision of the Income Tax Act (“ITA”) which restricted a charity’s “political activities” to a maximum of ten per cent of its resources were unconstitutional because it offended the charity’s right of freedom of expression contained in the Canadian Charter of Rights and Freedoms (“Charter”).  As a result, Justice Morgan ordered the Canada Revenue Agency (“CRA”) to immediately cease interpreting and enforcing the impugned section of the ITA in that manner.  In doing so, Justice Morgan effectively ended CRA’s “political activities” audits of Canadian charities and opened the door for charities to engage in much more non-partisan political activity.

In this case, (Canada Without Poverty v. AG Canada, 2018 ONSC4147), CRA had threatened to revoke the charitable status of Canada Without Poverty (“CWP”) on the basis that the charity was offside the maximum 10 per cent rule concerning its political activities.  CWP argued that the ITA’s distinction between “charitable activities” and “political activities” was artificial and that almost all of its work could be labelled political activity in the sense that public advocacy for policy change was fundamental to its charitable purpose of poverty relief. 

ITA Prohibits “Political Activities” By Charities

Section 149.1(6.2) of the ITA defines the extent to which a registered charity can devote its resources to political activities and provides that where a charity devotes substantially all of its resources to charitable activities, it can only devote ten per cent of such resources to political activities, provided that the political activities are “ancillary and incidental” to its charitable activities and the political activities do not include the direct or indirect support or opposition to any political party or candidate for public office. 

The CRA has the power to revoke a charity status if it determined that the charity carried on more than the allowed ten per cent of its activities as political activities as opposed to charitable activities.  As a matter of interpretation, the CRA divided political activities into two general types – submissions directly to government and public advocacy.  In doing so, the CRA acknowledged that there could be policy and advocacy components to charitable activities.  In this respect, political activities and charitable activities are not always treated as distinct. 

Section Violates Guarantee of Freedom of Expression

Canada Without Poverty challenged the overall distinction between charitable activities and political activities that were embodied in the ITA and challenged the CRA rule of interpretation enforcement limiting political activity to ten per cent of its resources.  It argued that there was no valid distinction between political expression and (with the exception of partisan political involvement) and charitable activities and so the distinction in the ITA was redundant violated the guarantee of freedom of expression under section 2(b) of the Charter .  CWP argued that the infringements could not be justified under section 1 of the Charter. 

Justice Morgan agreed.  He held that there is no widely agreed upon definition of what is political.  Certainly there was no definition of political activities in the ITA.  Virtually all of Canada Without Poverty’s activities are communicative or expressive and in that sense “political”.  Justice Morgan wondered whether one could “coherently distinguish between political activities and charitable activities or for that matter any other kind of activities”.

CWP argued that public advocacy for policy change was fundamental to its charitable purpose of poverty relief.  Without this component its charitable activities could not accomplish their purpose.  CWP’s approach to relieving poverty is one that strives for the full civic engagement of people living in poverty.  Its purpose is to relieve poverty by sharing ideas with its constituency.  Relying on various international studies on poverty relief, CWP placed its resources and efforts behind civic engagement and public dialogue with the goal of bringing about legislative policy change for the effective relief of poverty.  Justice Morgan held that while this approach may be in keeping with contemporary activism in the field, it was out of step with ITA and the CRA policy statement on interpretation and enforcement of the ITA.  Canada Without Poverty argued that the CRA’s ten per cent rule should no longer be applied because there was no cogent distinction between non-partisan political activities and charitable activities and therefore no reason for political activities to be ancillary or incidental to charitable activities.    

Justice Morgan found that even the Minister of National Revenue in a consultation report agreed with many of the positions taken by CWP.  The consultation panel had recognized that a key principle with respect to charitable activities is that public advocacy and charitable works go hand in hand in a modern democracy and are seen as an essential part of the democratic process.  

Canada Without Poverty challenged the sections of the ITA as infringing its right to freedom of expression.  Justice Morgan held that it would be difficult to express the importance of freedom of expression as a Charter right any higher than the Supreme Court of Canada has put it, “fundamental – because in a free, pluralistic and democratic society we prize a diversity of ideas and opinions for their inherent value both to the community and to the individual”.   Justice Morgan held that there was no doubt that the activity in which the charity wished to engage, i.e. public advocacy of policy change, is within the guarantee of freedom of expression.  CWP argued that non-partisan political advocacy is an accepted charitable activity under the ITA.  The arbitrary ceiling of ten per cent of the organization’s resources restricted the charity’s expressive conduct.  It was the ten per cent restriction that was the target of CWP’s complaint not the status itself. 

Justice Morgan reviewed the evidence.  According to affidavit evidence adduced by CWP, its activities that could be seen as political encompassed far more than ten per cent of its efforts and resources.  It argued that the application of the impugned sections of the ITA imposed restrictions on all expressive activity whose goal was entirely wrapped up with communicating to the public that a law or policy decision at any level of government should be changed or retained for the purpose of relieving poverty.  This ten per cent restriction was fundamentally at odds with the charity achieving its charitable purpose because virtually everything the charity did was “political”.  The fact that a parliament allowed political activity, but the restriction was arbitrarily limited to ten per cent, infringed the charity’s freedom of expression rights.  CWP adduced evidence that it would not be able to function absent its charitable status.

Justice Morgan held that as a registered charity, Canada Without Poverty had a right to effective freedom of expression, i.e. the ability to engage in unimpaired public policy advocacy towards its charitable purpose.  The burden imposed by the sections of the ITA and by the policy adopted by CRA in enforcing that section runs counter to that right.  Accordingly, CWP’s right to freedom of expression under section 2(b) of the Charter was thereby infringed. 

Prohibition Can Not Be Justified Under Section 1 of Charter

Justice Morgan then looked at whether the impugned sections of the ITA could be saved because they were justifiable under section 1 of the Charter. 

Having found that the section of the ITA violated section 2(b) of the Charter so that it burdens CWP’s pursuit of public policy advocacy, it was necessary to turn to section 1 of the Charter.   At that point the burden shifted to the Attorney General to establish that the infringement was reasonable and justified in a free and democratic society. 

The analysis follows the Oakes test (Supreme Court of Canada case – R. v. Oakes).  In full, the test considers whether the legislative objective is pressing and substantial, whether the means chosen by the legislature is rationally connected to the objective, whether the legislation minimally impairs the right of free expression, and whether it is proportional considering the deleterious and salutary effects on the right.  All these tests must be addressed in sequence.  The failure of government to pass any one of the hurdles results in the conclusion that the infringement of the Charter is diversified. 

Justice Morgan held that the first question to arise under Oakes is whether “the state’s action under challenge has good ends”.   In considering the answer to that question, Justice Morgan looked at the right that was being infringed.  He quoted former Chief Justice McLachlin in saying that, “It is difficult to image a guaranteed right more important to a democratic society than freedom of expression…it seems that the rights enshrined in section 2(b) should therefore only be restricted in the clearest of circumstances.”   

Justice Morgan rejected the Attorney General’s submission that the ITA section was a permissive one, i.e. it permitted a charitable organization to devote substantially all, rather than all of its resources to charitable activities.  He held that it was obvious that rather than being permissive the section was prohibitive in that while it permitted ten per cent of an organization’s resources to be devoted to public policy advocacy, it prohibited the remaining 90 per cent of the resources from being devoted to public policy advocacy. 

Seen that way, the objective of the section of the ITA was to limit political expression, i.e.  keep it to a small percentage of the organization’s time, effort and resources.  He held that the government had offered no rationale for the ten per cent ceiling or not answered the question as to why parliament had not opened registered charity status to organizations pursuing political purposes but had limited political speech in furtherance of accepted charitable purposes.  He held that there was an artificial distinction made in the sections between charitable activity and non-partisan political activity and that having not established a pressing and substantial objective, the government’s case had not passed the first hurdle of Oakes.  Accordingly, there was no justification for the infringement of the charity’s right to freedom of expression under section 2(b) of the Charter.

Justice Morgan ordered and declared that:

  1. CRA cease interpreting and enforcing the section of the ITA that limited ten per cent of a charity’s resources to political activities;

  1. the phrase “charitable activities” used in the ITA be read to include political activities without quantum limitation in furtherance of the organization’s charitable purposes;

  1. there be a declaration that the impugned sections of the ITA are of no further force and effect; and

  1. the exclusion from charitable activities of partisan political activities remained in force.




Thursday, July 12, 2018

Tribunal : Law Society of Ontario Failed in its Duty to Accommodate Lawyer

In a recent decision of the Law Society Tribunal (“Tribunal”),-  Law Society of Ontario v. Burtt, 2018 ONLSTH 63 - panelist Larry Banack dismissed an application by the Law Society of Ontario (“LSO”) seeking a finding that one of its lawyer  licensees had committed professional misconduct.  Mr. Banack found that the lawyer’s alleged misconduct, i.e. his failure to cooperate with a Law Society investigation was the direct result of a disability and that the Law Society had not discharged its legal obligation to accommodate the lawyer’s disability to the point of undue hardship.

Interestingly, despite evidence that many lawyers who are the subjects of LSO’s disciplinary proceedings are suffering from a mental illness such as depression which can amount to a disability under the Ontario Human Rights Code (the “Code”), Mr. Banack found that the circumstances of this case were “highly unusual”.  His findings were largely based on the particular facts of the case, i.e. that the LSO knew that the lawyer was suffering from a disability that resulted in him “freezing” and therefore was unable to provide a written response to the LSO’s request for communication.

In this case, Mr. Burtt admitted that he had not responded in writing to the LSO.  However, Mr. Burtt asserted that he was not capable of providing written responses, as demanded by the LSO, by reason of a documented disability that caused him to “freeze” when confronted with the investigation.  The defence that was asserted by Mr. Burtt resulted from a previous discipline proceeding in 2015.  As a result of that proceeding, the LSO with the consent of Mr. Burtt, commissioned and received two psychological reports.  Those reports were contained in the LSO’s file and both reports concluded that Mr. Burtt was suffering from a psychological condition which negatively affected his ability to respond to the LSO within specified time frames. 

In the previous matter, Mr. Burtt had been reprimanded and ordered to comply with a psychiatric treatment plan which remained in effect up until the date of the hearing before Mr. Banack.  In making his finding against the LSO, Mr. Banack relied on testimony from an LSO investigator that not only had he not read the two psychological reports that were contained in the LSO’s file but had only learned of them on the morning of the hearing. 

The Code prohibits discrimination with respect to membership in a trade or occupational association on specified grounds, one of which is disability.  In a previous case – Law Society of Upper Canada v. Czernik (2010 ONLSHP 122) – the Tribunal held that:  “The Law Society and the Tribunal are subject to the Code and must apply the duty to accommodate where there is a proven disability at play.  A failure to fulfill professional obligations that is caused by a disability must be accommodated by the Law Society and the Panel”.      The LSO was required to accommodate Mr. Burt to the point of undue hardship.  Mr. Banack found that he was satisfied that the record before him was sufficient to make the findings as to the scope and content of the LSO’s duty to accommodate.  Not only did Mr. Burtt tell the LSO about the prior disciplinary proceedings and the psychological reports, the decisions were publicly available on CanLII and it was part of his LSO file. 

In addition, the information available to the LSO’s investigators from their own observations of Mr. Burtt, his conduct and his communications with them ought to have been enough to alert them to consider the existence of a condition which required accommodation.  Mr. Banack found that the difference in this case, as compared to many before the Tribunal, was that Mr. Burtt had responded to the LSO on a timely basis and as Mr. Banack found, was to be contrasted with the ‘typical” response of the licensees in similar circumstances which included evasion, denial, obfuscation and disregard of professional obligations.  In this unusual case, the investigators engaged with an apparently cooperative licensee in lengthy conversations in which he disclosed a prior proceeding and medical reports, offered promises of cooperation and did not seek to avoid or fail to communicate with them.  He simply failed to follow through on his commitments.

All of this should have alerted the LSO’s investigators that the situation called for alternative thinking which by any other name amounted to accommodation.  The issue then became one of whether the accommodation afforded by the LSO, i.e. providing additional time for Mr. Burtt to respond to it was sufficient in the circumstances.  Mr. Banack found that it was not.  He found that in the “highly unusual” circumstances of this licensee who was known to be suffering from a disability that resulted in freezing but engaged in protracted dialogue with the investigators, the burden was on the investigators to at least canvass what alternative approach might have fulfilled their objectives.  In other words, that was no engagement in the express thought process of inquiry concerning the need for or scope of accommodation that was required. 

In this case, it was impossible for Mr. Burtt to comply with the LSO’s requirement of written cooperation.  The LSO had alleged that Mr. Burtt “failed to cooperate with the Law Society investigation by failing to provide a prompt and complete response to written requests made by the Law Society’s investigators”.  Mr. Banack reviewed rule 7.1-1 of the Rules of Professional Conduct, and held that a requirement to respond in writing is not found in either the rules or the notice of application.  In other words, the LSO could have accommodated Mr. Burtt’s disability by allowing him to respond orally to their inquiries and to attend at his office to obtain the information that it needed.  He concluded that the LSO had failed to satisfy its onus of demonstrating what considerations, assessments and steps were undertaken to accommodate Mr. Burtt “to the point of undue hardship”.   

In dismissing the LSO’s application, Mr. Banack concluded that Mr. Burtt’s disability was the cause of his inability and failure to provide a written response to the investigator’s demands.  Mr. Burtt did not fail to comply with his regulatory obligations but only failed, by reason of his disability, to comply with the manner to which compliance was demanded. 



Friday, June 8, 2018

Ecuadorian Villagers Barred From Enforcing Massive Environmental Judgment Against Chevron Canada

This is my ninth instalment about this case.  It probably won’t be my last. 

In the latest chapter of Yaiguaje v. Chevron Corporation, 2018 ONCA 472, the Court of Appeal for Ontario rejected arguments by the Ecuadorian villagers who are seeking to enforce a US$9.5 billion judgment against Chevron Corporation in Ontario.  The villagers argued that the Execution Act (“Act”) permitted execution on Chevron Canada’s shares and assets to satisfy the Ecuadorian judgment.  Secondly, they argued that the court should pierce the corporate veil between Chevron Canada and Chevron Corporation in order to render Chevron Canada’s shares and assets “exigible” i.e. – subject to seizure and sale to satisfy the judgment.

Justices Hourigan, Huscroft and Nordheimer heard the case.  All three justices dismissed the appeal, however, Justice Nordheimer wrote separate reasons which may give the Ecuadorian’s a glimmer of hope in seeking leave to appeal from this decision to the Supreme Court of Canada.   


From about 1964 to 1992, Texaco Inc. drilled for and extracted oil in the Oriente region of Ecuador which were the villagers’ traditional lands.  The oil company’s activities resulted in extensive environmental pollution.  In 2001, Texaco was acquired by Chevron Corporation.  Following an eight year trial and two appeals in Ecuador, the villagers obtained a US$9.5 billion judgment against Chevron Corporation.  They sought to enforce their judgment in the United States.  However, Chevron Corporation obtained an order in the state of New York holding that the Ecuadorian judgment had been obtained by fraud and preventing enforcement proceedings anywhere in the United States.  As a result, the villagers sought to enforce the Ecuadorian judgment against the assets of Chevron Canada in Ontario.  After a number of proceedings, including a jurisdictional issue that went all the way to the Supreme Court of Canada, the matter came back to the Superior Court of Justice in Ontario where a motion was brought for summary judgment.  Justice Hainey, the motion judge, dismissed the villagers’ claims on both of its arguments.  The villagers appealed the decision to the Ontario Court of Appeal. 

The Execution Act Argument

The villagers argued that section 18(1) of the Act allows the sheriff to seize any interest of a judgment debtor and that Chevron Corporation has an “indirect interest” in Chevron Canada.  The villagers submitted that because this case involves the enforcement of a foreign judgment, the court must, for the reasons of comity, interpret the Act in an expansive manner to facilitate the collection of the debt.  Justices Hourigan and Huscroft (the majority decision was written by Justice Hourigan) disagreed.  They held that enforcement of a foreign judgment is done in accordance with domestic law.  One cannot have one set of enforcement rules for domestic judgments and a second far more expansive set of rules for foreign judgments.  

The majority held that the declaration that the villagers sought, i.e. that the shares of Chevron Canada were exigible was “a legal impossibility”.  A corporation’s shares do not belong to the corporation but to its shareholders.  In fact, under the Canada Business Corporations Act, corporations are prohibited from owning their own shares.  The Act, is procedural only and does not grant substantive rights to judgment creditors.  Its only function is to facilitate the collection of judgments to enforce a judgment debtor’s existing rights.  In other words, there must be an existing legal right which permits seizure of the assets.  Chevron Canada does not hold such a right.  A shareholder (albeit indirect) of a corporation does not have a right to claim a proportionate share of the corporation’s assets while it is ongoing.  That right only arises if and when the corporation is wound up because at that point there is no existing entity capable of holding the assets.  

Granting the order sought by the villagers would ignore the corporate separateness of the subsidiaries in between Chevron Corporation and Chevron Canada.  In addition, the proposed interpretation of the Act would have a significant policy impact on how corporations carry on business in Canada.  As a result, they rejected this ground of appeal. 

Piercing the Corporate Veil Argument

The villagers alternatively submitted that the court had the ability to pierce the corporate veil “when the interests of justice demanded it”.  They relied on Justice Bertha Wilson’s passage in the Supreme Court of Canada case of Kosmopoulous v. Constitution Insurance (“Kosmopoulous”),  when she said that the corporate veil can be lifted when to enforce it would yield a result “to flagrantly opposed to justice, convenience or the interests of the Revenue”.   

The Court of Appeal held that Kosmopoulous was decided thirty years ago and since that time the law has developed.  In the case of Trans-America  Life Insurance Co. of Canada v. Canada Life Assurance Co. (“Transamerica”) (decided in 1996), Justice Sharpe held that there are only three circumstances where the court will pierce a corporate veil:  (1)  when the court is construing a statute, contract or other document; (2) when the court is satisfied that a company is a “mere fa├žade” concealing the true facts; and (c) when it can be established that the company is an authorized agent of its controllers or its members, corporate or human.  The majority held that the Court of Appeal has repeatedly rejected an independent just and equitable ground for piercing the corporate veil in favour of the approach taken in Transamerica.  The Transamerica test is consistent with the principle reflected in the various business corporation statutes in Canada that corporate separateness is the rule.  

The majority held that it is important that the courts be rigorous in their application of the Transamerica test because the rule is provided for in the statute and stakeholders of corporations have a right to believe that, absent extraordinary circumstances, they may deal with the corporation as the actual person.  It held that Transamerica effectively modified Kosmopoulous and that the question for determination in this case is whether this court is prepared to sacrifice certainty for the sake of expediency. 

There was no suggestion or evidence that Chevron Canada was established or used for a fraudulent or improper purpose.  The majority rejected the argument that they should in effect “do the right thing” for the Ecuadorian villagers because at this stage the equities of the case were far from clear.  On one hand the appellants had suffered devastating loss through no fault of their own.  On the other hand, the United States court had found that the Ecuadorian judgment was the result of a massive fraud.  The court held that what they were really being asked to do was to assist the villagers in doing an end-run around the United States courts by breaking with well-established jurisprudence where there is no principled basis to do so.  They dismissed the appeal on that ground as well.

Justice Nordheimer’s Dissent

Justice Nordheimer agreed with the result reached by his colleagues.  He also agreed with their analysis of the case in respect of the Act.  However, Justice Nordheimer did not agree with the analysis of the majority judges concerning whether to pierce Chevron Canada’s corporate veil. 

He held that Transamerica, the case that the majority had heavily relied upon, could be distinguished on the facts.  Transamerica dealt with imposing liability on a party whereas in this situation, the issue concerned enforcing a judgment debt.  In the latter situation, liability has already been established.  The proceeding has moved past the hurdle of finding liability to a stage that concerns the remedies that are available to enforce a valid judgment.  In Justice Nordheimer’s view, Transamerica could not simply be lifted out of the liability context and dropped into and applied to the judgment enforcement context.  In fact, Justice Nordheimer held that it would be very difficult to conceive of a factual situation where the Transamerica test could be met, that is where the corporate structure would be found to have been used as a shield for fraudulent or improper conduct solely in the context of enforcing a judgment. 

Justice Nordheimer also disagreed with his colleagues’ reading of the Kosmopoulous case and found that he could see situations where the court would be willing to lift the corporate veil in the interest of third parties who would otherwise suffer as a result of that choice.  He found that the Ecuadorian villagers might well fall into that category were it not for the findings of the United States courts respecting the fraudulent manner in which the judgment had been obtained.  In Downtown Eatery (1993) Ltd. v. Ontario (“Downtown Eatery”), a 2001 decision of the Court of Appeal, the court pierced the corporate veil despite expressly finding that neither the corporate structure or the reorganization leaving the judgment debtor corporation without assets was fraudulent.  It did so because the reorganization created an injustice.  Justice Nordheimer held that Downtown Eatery was arguably more relevant than Transamerica because it post-dated Transamerica and was involved in enforcement of a judgment debt as opposed to finding of liability. 

Finally, the majority’s finding that Chevron Canada was not an asset of Chevron Corporation was one that Justice Nordheimer found was “completely detached from real-world realities”.  He found that it was crystal clear that Chevron Canada was an asset of Chevron Corporation as that term is understood in common business parlance.  All of Chevron Canada’s shares are owned by Chevron Corporation (albeit indirectly) and it is ultimately controlled for all practical purposes by Chevron Corporation.  He held that the question was not whether the court was prepared to sacrifice certainty for the sake of expediency, it was whether the court was prepared to recognize that there may be situations where equity would demand a departure from the strict application of corporate separateness principle in the context of enforceability of a valid judgment whether foreign or domestic.  However, he found that the United States court’s finding that the Ecuadorian judgment was obtained by fraud put the apparently valid foreign judgment in question.  Canadian courts have not yet been called upon to make their own determination of the validity of the judgment.  Absent such a finding, even on Justice Nordheimer’s approach, the judgment could not be enforced.   



Friday, May 18, 2018

SCC - Careless Garage Not Liable For Injury to Teenager

Rankin (Rankin’s Garage & Sales) v. J.J. 2018 SCC 19 (Rankin)

The Supreme Court of Canada recently held (7-2) that the owners of a commercial garage did not owe a duty of care to a boy who was seriously injured after he and a friend stole a car from the garage even though the garage was negligent in allowing the car to be stolen.

In the summer of 2006, in the village of Paisley, Ontario, the plaintiff J (who was then 15 years old) and his friend C (then 16 years old) were at C’s mother’s house.  The boys drank alcohol, some of which was provided by C’s mother, and smoked marijuana.

After midnight, the boys left the house intending to steal valuables from unlocked cars.  Eventually, they made their way to Rankin’s Garage & Sales, a business located near Paisley’s main intersection.  The garage property was not secured and the boys began checking for unlocked cars.  C found an unlocked Toyota Camry parked behind the garage.  The keys were in the car’s ashtray.  Although he did not have a driver’s license and had never driven on the road before, C decided to steal the car so he could go and pick up a friend in nearby Walkerton, Ontario.  C told J to get in, which he did. C drove the car out of the garage and headed towards Walkerton.  On the highway, the car crashed and J suffered a catastrophic brain injury.

Through his litigation guardian, J sued Rankin’s Garage, his friend, C and C’s mother for negligence.  The issue on appeal to the Supreme Court was whether Rankin’s Garage owed J a duty of care. 

Justice Karakatsanis wrote a majority decision for seven justices of the court.  Justice Brown wrote a dissenting decision (with Justice Gascon concurring). 

The majority held that the case could be resolved based on a straightforward application of existing tort law principles.  It held that J did not provide sufficient evidence to support that Rankin’s Garage owed him a duty of care.

Because there is no clear guidance in Canadian case law on whether a business like the garage owes a duty of care to someone who was injured following the theft of a vehicle, the Supreme Court conducted an Anns/Cooper analysis.  That analysis provides that to establish a duty of care, there must be a relationship of proximity in which the failure to take reasonable care might foreseeably cause loss or harm to the plaintiff.  Once foreseeability and proximity are established, a prima facie duty of care is made out.  The question is an objective one, and properly focused, is whether foreseeability was present prior to the accident and not with the aid of 20/20 hindsight.

The court held that although the results of this case were tragic, physical injury to J was only foreseeable when there is something in the facts to suggest that there is not only a risk of theft of the car, but also a risk that the stolen car might be operated in a dangerous manner.  The risk of theft in general does not automatically include the risk of theft by minors.  The court found that in this case there was insufficient evidence to suggest that minors would frequent the premises at night or be involved in joyriding or theft.  Rankin’s Garage, as a commercial garage, did not have a positive duty to guard against the risk of theft by minors.  The fact that J was a minor does not automatically create an obligation for the company to act. 

The court held that J had not met the burden of establishing a prima facie duty of care because reasonable foreseeability could not be established on the factual record of the case.  A business will only owe a duty to someone who is injured following the theft of a vehicle when in addition to theft the unsafe operation of the stolen vehicle was reasonably foreseeable. 

The dissenting judges held a view that many may believe was more logical.  They held that the concept of “reasonable foreseeability” represents a low threshold and is usually quite easy to overcome.   A plaintiff must merely provide evidence to persuade the court that the risk of the type of damage that occurred was reasonably foreseeable to the class of the plaintiff that was damaged.  In this case, both the trial judge and the Ontario Court of Appeal held that it was reasonably foreseeable that an individual such as J could suffer physical injury as a consequence of Rankin’s Garage’s negligence in failing to properly lock, secure and store vehicles.  Justices Brown and Gascon concluded that the majority of the court had conceded that the risk of theft was reasonably foreseeable but, in order to hold the garage owner responsible, would have required additional evidence that theft would have occurred at the hands of a minor in order to find that physical injury to J was foreseeable.  The dissenting judges held that minors are no less likely to steal cars than any other individual.  In order to establish a duty of care, J was not required to show that the characteristics of the particular thief or the way in which the injury occurred were foreseeable.  Imposition of a duty of care was conditioned only upon J showing that physical injury to him was reasonably foreseeable under any circumstances flowing from Rankin’s Garage’s negligence.