Tuesday, August 6, 2019

End of the Road for Ecuadorian Villagers in Their Fight Against Chevron?


This is the case that keeps on giving – both blog posts and reader interes - although the legal saga that has generated all of those words may have come to an end.

Earlier this year, the Supreme Court of Canada refused to hear an appeal from a decision of the Ontario Court of Appeal that had dismissed all claims seeking to enforce an Ecuadorian judgment against an indirect subsidiary of Chevron Corporation in Ontario. The SCC’s dismissal of the Ecuadorian villagers application for leave to appeal meant that the appeal court’s ruling that Chevron Canada is a separate legal entity from Chevron Corp., has ended the litigation here in Canada.  Subsequently, US and Canadian media have reported that the Ecuadorian plaintiffs have now settled their action against Chevron by agreeing to dismiss their Ontario enforcement proceedings and to pay costs to Chevron.  The plaintiffs’ other enforcement actions have been dismissed by courts in Brazil, Argentina and Gibraltar.  Further, an international tribunal in The Hague found that the U.S. $9.5 billion judgment that the Ecuadorian courts had rendered against Chevron had been procured through fraud, bribery and corruption and were based on claims that had already been settled and released by Ecuador years earlier.  As a result, the tribunal concluded that the Ecuadorian judgment violated international public policy and should not be recognized or enforced by the courts of other countries.

U.S. courts had already found that the Ecuadorian judgment against Chevron was a product of fraud and racketeering and had prohibited the judgment from being enforced in the United States.  In addition, U.S. District Judge Lewis Kaplan ordered Chevron’s U.S. lawyer Steven  Donziger to pay Chevron $3.4 million U.S. in attorney’s fees.  Donziger told news services that his total liability in fines add up to about U.S. $10 million.

Chevron had filed a Racketeer Influenced Corrupt Organizations Act (“RICO”) lawsuit against Donziger and his law firm alleging that they had engaged in multiple acts of extortion and money laundering, wire fraud, witness tampering, bribery and obstruction of justice to procure the Ecuadorian judgment.  Justice Kaplan found in Chevron’s favour and held Donziger in contempt for breaching the RICO judgment.  The RICO judgment prevented Donziger from profiting from his fraud by selling interests in the Ecuadorian judgment.  The court found that Donziger had used a large portion of the U.S. $2.3 million that he had raised personally.  U.S. $1.5 million went to directly or indirectly to Donziger or into related accounts.

Donziger told news organizations that the costs sanction against him was based on a bogus case by Chevron.  “Chevron has used 60 law firms and 2,000 lawyers to attack me because I helped win a landmark environmental judgment in Ecuador against the company for dumping billions of gallons of toxic waste in indigenous and ancestral lands.”

A Brief History of the Proceedings

In 1993, a group of Ecuadorian citizens of the Oriente Region of the Amazon river basin filed a class action lawsuit in the U.S. Federal Court against Texaco and in 1994 a group of Peruvian citizens living downstream from the Oriente Region also filed a class action lawsuit against Texaco in U.S. Federal Court.  Both complaints alleged that between 1964 and 1992, Texaco’s oil operations had polluted the rainforests and rivers in Ecuador and Peru resulting in massive environmental damage and damage to the health of those who lived in the region.  In 2002, the U.S. Federal Court dismissed both lawsuits on forum non-conveniens grounds holding that Ecuador was the more appropriate forum for litigating these claims.  Texaco agreed that the courts in Ecuador and/or Peru would have jurisdiction over the plaintiffs’ claims.

In 2003, the villagers brought a class action lawsuit against Texaco (which had been acquired by Chevron in 2001) in Ecuador alleging severe environmental contamination of the land where Texaco had conducted its oil operations.  The plaintiffs alleged that this contamination had led to increased rates of cancer as well as other serious health problems for residents of the region. 

In early 2008 an independent expert recommended to the court that Chevron should pay between $7 and $16 billion U.S. in compensation for the pollution. In November 2008, the expert increased his damage estimate to $27 billion U.S.  In 2008 Chevron reportedly lobbied the U.S. government to end trade preferences with Ecuador over the lawsuit.  Following allegations of judicial  misconduct, the original trial judge recused himself from the case and a new judge was appointed.  In September 2010 the plaintiffs submitted a new damages assessment stating that the costs had risen to between $90 and $103 billion U.S.

In February 2011 the Ecuadorian judge issued a ruling against Chevron in the lawsuit.  Chevron was ordered to pay U.S. $8.6 billion in damages and clean-up costs with damages increasing to $18 billion if Chevron did not issue a public apology.  Chevron reported publicly that it believed that the ruling was illegitimate and unenforceable and filed an appeal.  In January 2012 a panel of three judges from the Ecuadorian Provincial Court of Appeal upheld the ruling.  Chevron subsequently appealed to Ecuador’s National Court of Justice. In October 2012 the Ecuadorian court issued an order permitting the plaintiffs to seize about $200 million of Chevron’s assets located in that country.  However, later the Ecuadorian Supreme Court upheld the August 2012 ruling for environmental damage but reduced the damages to $9.5 billion U.S.  Chevron further appealed to Ecuador’s National Court of Justice in the Constitutional Court and in 2019 the court upheld the U.S. $9.5 billion judgment against the company.

On September 26, 2013, I reported that Chevron had obtained a global anti-enforcement injunction against the plaintiffs in the United States District Court in New York.  However, the US Court of Appeal, Second Circuit reversed the injunction and held that the plaintiffs could seek to enforce the Ecuadorian judgment in any country in the world where Chevron had assets.

On a motion in the Ontario Superior Court of Justice, Justice Brown (as he was then) stayed the enforcement proceedings against the defendants, which included Chevron Canada.  That ruling was later set aside by the Ontario Court of Appeal which held that the plaintiffs did not deserve to have their entire case fail on the basis of an argument that had not even been made on the motion and allowed the enforcement action against Chevron to proceed in Ontario.  That decision was later upheld by the Supreme Court of Canada.  However, going back to court, the Ontario Court of Appeal eventually determined that Chevron Canada could not be held to answer for a judgment against Chevron because to do so would ignore the corporate separateness of Chevron Canada as a multi-level subsidiary of Chevron.

Patricio Salazar, one of the lawyers for the Ecuadorian villagers, said that the Supreme Court of Canada’s ruling left the U.S. parent company Chevron as the sole defendant and the plaintiffs would proceed immediately to trial to force Chevron to comply with the Ecuadorian judgment.

Regards,

Blair

Tuesday, June 4, 2019

SCC Throws Out Man's Conviction Because of Police Misconduct


In a 3 to 2 decision, the Supreme Court of Canada set aside a man’s gun and drug related convictions ruling that, in light of the police’s unlawful conduct, the admission of incriminating evidence would bring the administration of justice into disrepute.  (See R. v. Le, 2019 SCC. 34)

Tom Le was a 20 year old Asian-Canadian man who was arrested by police at a west-Toronto housing complex in May of 2012.  The complex was in a high crime area and the police were told by the complex’s security guards that the backyard of the house in which the police confronted Le was “a problem address” because of concerns about drug trafficking.

On the night in question, Le was chatting with four young black men in the backyard when the police showed up.  The men were doing nothing wrong.  They were just talking.  The backyard was small and was enclosed by a waist-high fence.  Without a warrant or consent, or without any warning, two police officers entered the backyard and immediately questioned the men about what was going on, who they were and whether any of them lived there.  They also required the men to produce documentary proof of their identities.  Meanwhile, a third officer patrolled the perimeter of the property, stepped over the fence and yelled at one man to keep his hands where the officer could see them.  Another office issued the same order.

One officer questioned Le and demanded that he produce identification.  Le responded that he did not have any with him.  The officer then asked him what was in the satchel he was carrying.  At that point, Le fled, was pursued and arrested and found to be in possession of a firearm, drugs and cash.  At his trial, Le sought to exclude this evidence under s.24(2) of the Canadian Charter of Rights and Freedoms (“Charter”) on the basis that the police had infringed his constitutional rights to be free from unreasonable search and seizure (under s.8 of the Charter) and from arbitrary detention (under s.9 of the Charter).

The trial judge convicted Mr. Le and held that he lacked standing to advance a s.8 claim because there was no objective reasonableness to any expectation of privacy that he might have had as a “mere transient guest” in the backyard.  The trial judge also held that Le’s detention was not arbitrary as the police had reasonable grounds to suspect he was armed.  A majority of the Ontario Court of Appeal agreed with the trial judge and found that if there were any breaches, they were “technical, inadvertent and made in good faith”.

On appeal to the Supreme Court of Canada, the court held that Le’s appeal should be allowed, the evidence excluded and his conviction set aside and acquittals entered.
The majority decision was co-authored by Justices Brown and Martin with Justice Karakatsanis concurring.  Justice Moldaver and Chief Justice Wagner dissented.

The majority of the SCC held that the circumstances of the police entry into the backyard had effected a detention that was both immediate and arbitrary and constituted “serious misconduct”.  It was precisely this sort of police conduct that the Charter was intended to abolish.  On balance the admission of the evidence would bring the administration of justice into disrepute.

Detention can be either physical or psychological.  Psychological detention by the police can arise in two ways: where the accused is legally required to comply with a direction or demand by the police; or where the accused is not under a legal obligation to comply but a reasonable person in the accused’s position would feel obligated and conclude they were not free to go.  This detention fell under the second category.

There were three factors that aid in the analysis.

  1. The circumstances given rise to the encounter would reasonably be perceived by an individual as supporting a finding of detention.  The conduct of the police exceeded the norms of community policing.  There was no obvious cause for any police presence in the backyard and the police never expressly communicated to the men why they were there.  They immediately started asking questions and the height of the backyard fence allowed full interaction without entry.

  1. The second factor - the nature of the police conduct - supported the conclusion that tension arose as soon as the police entered the backyard and started asking questions.  When the police enter a private residence as trespassers it colours what happens next and supports a finding of detention.  The actions and language of the police showed that they were immediately taking control of the situation.  Coming over the fence to enter a private residence conveyed a show of force.  The reputation of a particular community or the frequency of police contact with its residents does not in any way license police to enter a private residence more readily or intrusively than they would in other, more affluent communities.  Here there was a tactical element to the encounter and the mode of entry could be seen as corrosive and intimidating by a reasonable person.

  1. Lastly, the third factor – the particular characteristics or circumstances of the individual involved i.e. Mr. Le – a reasonable person “imbued” with his experiences would conclude that there was tension from the moment the officers entered the backyard and started asking questions.  Courts need to appreciate that individuals in some communities may have different experiences and relationships with police then others and those experiences may impact upon their reasonable perceptions whether they are being detained.  At the detention stage the analysis takes into consideration the larger, historic and social context of race relations between the police and various racialized groups.  Because the focus is how the combination of a racialized context a minority status would affect the perceptions of a reasonable person in the shoes of the accused and not on what motivated the officers to act as they did a finding of that there had been no racial profiling has little bearing.

When a detention is established, the court must consider whether the detention is arbitrary.  The implied license doctrine, which allows the police or any member of the public on legitimate business to proceed from the street to the door of a house so as to permit convenient communication with the occupant does not apply in this case because if communication was the officer’s purpose, it did not require their entry onto private property.  The police had a subsidiary purpose – a speculative criminal investigation.  A suspect’s presence in a so called high crime area is not by itself a basis for detention.

The majority held that where evidence is obtained in a manner that infringes a charter right or freedom, s.24(2) provides that the evidence must be excluded if it is established that, having regard to all of the circumstances, its admission would bring the administration of justice into disrepute.  The focus is on the overall repute of the justice system viewed in the long term by a reasonable person, informed of all relevant circumstances and of the importance of charter rights and not on the impact of stating misconduct upon a particular criminal trial.  The more serious the state-infringing conduct and the greater the impact on the Charter-protected interest the stronger the case and conclusion.

Here good faith could not be ascribed to these officers’ conduct.  Their own evidence made it clear that they fully understood the limitations upon their ability to enter the backyard to investigate individuals.  This was serious police misconduct and weighed heavily in favour of a finding that admission of the resulting evidence would bring the administration of justice into disrepute.

In contrast, the dissenting judges found that the admission of the evidence would not bring the administration of justice into disrepute.  The dissenters focused on the trial judge’s findings of credibility and the finding by the trial judge that the police had a legitimate investigatory purpose for entering the backyard.  Accordingly, they held that such findings were entitled to deference.  The minority held that considering all of the circumstances it was clear that what must be done to maintain the good repute of the administration of justice was to admit the evidence because, in their view, the seriousness of the Charter-infringing conduct fell on the “low end of the spectrum”.

Regards,

Blair

Friday, May 10, 2019

SCC Restores Adjudicator's Award in Residential School Settlement

In a recent decision, the Supreme Court of Canada (SCC) held that courts had the jurisdiction to supervise residential school settlement agreements on an ongoing basis. 

In the case of J.W. v. Canada (Attorney General), 2019 SCC 20, the majority of the SCC in two separate concurring reasons, and with two judges dissenting, allowed the claimant’s appeal and reinstated an adjudicator’s award that granted him compensation. 

When the claimant was a young boy at a residential school, a nun touched his genitals over his clothing.  He was standing in line waiting for a shower.  He was wearing what he described as a “little apron”.

In 2014, J.W. brought a claim for compensation in accordance with the Independent Assessment Process (IAP), the adjudicative component of the Indian Residential Schools Settlement Agreement (2006) (“Agreement”).  The Agreement represents the negotiated settlement of thousands of individual and class actions lawsuits relating to the operation of residential schools.  Nine provincial and territorial superior courts approved the Agreement.  The Agreement includes a procedure for settling individual claims through the IAP.  The IAP describes which harms are compensable.  The Agreement also includes a system of internal reviews but contains no right of appeal to the Courts.  However, supervising judges from each province oversee the administration of the Agreement. 

J.W. claimed compensation in accordance with the IAP alleging that the incident with the nun constituted compensable sexual abuse within the meaning of the IAP.  J.W.’s claim was rejected by the initial adjudicator because, despite the fact that she believed his account of what happened, she was not satisfied that the nun had acted with a sexual purpose, which she concluded was an essential element in order to demonstrate that the incident was compensable.  J.W. was entitled to two levels of internal review under the terms of the Agreement.  Both of those were unsuccessful.  He then brought a Request for Directions (RFD) to a supervising judge pursuant to the Agreement.  The supervising judge found errors in the adjudicator's interpretation of the IAP and remitted J.W.’s claim for re-adjudication.  A reconsideration adjudicator allowed J.W.’s claim this time and awarded him compensation however, before that decision was implemented, Canada appealed the supervising judge’s decision.  The Manitoba Court of Appeal found that there was no basis upon which the supervising judge could intervene and overturned the decision.  However, on appeal to the SCC, the majority of the Court, by a 5 to 2 margin, ruled that J.W.’s appeal should be allowed and that the reconsideration adjudicator’s award of compensation should be reinstated. 

Justice Abella wrote the reasons for 3 of the 5 majority judges.  She held that J.W.’s claim was precisely the type of claim that was contemplated by the parties to the Agreement.  Failure to correct the initial adjudicator’s errors would unacceptably undermine the whole purpose of the Agreement.  Courts may intervene in relation to IAP adjudications when exceptional circumstances are present.  The parties went to significant lengths to make the Agreement a complete code by including levels of internal review and choosing not to include any provisions granting court access.  However, the necessity of ongoing judicial supervision was recognized when the courts approved the Agreement.  As a result, there is a “foundational link” between judicial supervision and the Agreement.  Given the goals of the Agreement, significant and ongoing judicial supervision is necessary.  Without it, the Agreement would not have been recognized.

In J.W.’s case, the initial adjudicator’s decision was an unauthorized modification of the IAP.  She substituted the wording of the IAP with her own and added the requirement that the nun must have had a sexual purpose which was unsupported by the IAP’s language.  These additional requirements were not agreed to by the parties.  That amounted to a failure to implement the terms of the IAP which warranted judicial intervention.

Justice Abella’s reasons were supported and concurred in by Chief Justice Wagner and Justice Karakatsanis.

Separate reasons were written by Justice Cote with Justice Moldaver concurring.  Justice Cote held that while the parties do not have an option of seeking judicial review of IAP decisions, they can file RFDs with the supervising courts to resolve issues relating to the implementation and administration of the Agreement after fully exhausting the internal review mechanisms in the Agreement.  The Agreement contemplates recourse to the supervising courts in certain specific circumstances.  This creates an alternative avenue for dealing with claims that would otherwise be dealt with by IAP adjudicators.  However, it does not permit the courts to intervene in IAP decisions.  

Parties may seek judicial recourse only in cases where the IAP adjudicator failed to apply the terms of the Agreement.   The test for judicial recourse is whether there has been a failure by the IAP adjudicator to apply the terms of the IAP which amounts to a failure to enforce the Agreement. 

Additionally, Justice Cote held that should circumstances arise which were not contemplated by the parties, courts must have the power to intervene to ensure that the parties receive the benefits of the Agreement.  In this case, the supervising judge erred in scrutinizing the initial adjudicator’s interpretation of the IAP and substituting his own.  He was only entitled to determine whether the adjudicator had considered the correct terms.  While the supervising judge erred in his analysis, this was an exceptional case in which reconsideration was appropriate.  J.W.’s claim had given rise to a unique dilemma for which the Agreement provided no internal recourse and which therefore required the court to craft a remedy.

Dissenting reasons were written by Justice Brown with Justice Rowe concurring.  Justice Brown held that the Agreement was a contract and therefore interpreting its terms required a court to discern the parties’ intentions.  The Agreement expressly precluded judicial intervention even where the IAP had been incorrectly interpreted and applied.  It is a complete code that limits access to the courts, preserves the finality of the IAP and respects the expertise of IAP adjudicators.  Given the finality promised by the IAP, the parties would have seen prolonged litigation of IAP claims in the courts to be undesirable.

 Merely because the Agreement does not contain certain terms does not mean that there is a gap waiting to be filled by judges.  

Regards,

Blair

Thursday, April 11, 2019

Equity, Diversity, and Inclusion and the Law Society of Ontario's Bencher Election


I will not be voting for any bencher candidates that do not fully and openly support equity, inclusion and diversity initiatives.  Here’s why.

I graduated from Queen’s University law school in 1983.  I was the only black student, and one of only a handful of racialized (non-white) students, in my class of 150.  One day, after I’d asked a question in a lecture, a classmate to whom I’d never spoken looked perplexed.  He asked me whether I was a foreign student.  No, I’m from Kitchener, I replied.  After second year of law school, I applied  for an articling position in Toronto.  During an interview, a partner of the firm said to me – “You’re black, you must come from a poor family.”  No, I’m from a pretty average, middle class family, I replied.  (My mother, although a single parent, was a psychology professor at the University of Guelph).  I didn’t get the articling position.  Several years into practice, a client who I was meeting for the first time looked at me, surprised, and said  “You didn’t sound black on the phone.”  Frankly, since the person was client I didn’t reply.  I just smiled (in a black sort of way).   A couple of years ago, I was attending a reception with judges of the Ontario Court of Justice, as a member of The Advocates’ Society’s board of directors.  I was the only racialized lawyer in a small group.  During introductions, one of the judges turned to me (and only me) and asked, “Are you a sole practitioner?”  No, I’m a partner in a 100 lawyer law firm I replied. 

I could go on, but you get my point.  More than 35 years later, I’m still being asked the same questions that, to some, may seem innocent, but to me are at best annoying and at worst offensive.  Whether or not they intended to so, all of these people put me in a position where I got my back up.  Suddenly, I was on the defensive, trying to justify why I was in the place that I was, doing what I was doing and speaking the way that I speak.  These questions and statements are examples of “unconscious bias”.  They made my “lived experience” so much different from the experience lived by for example, white, middle class law students from Kitchener.  

In the last two weeks of April, Ontario lawyers and paralegals will vote to elect benchers of the Law Society of Ontario (LSO).  These are the people that, over the next few years, will decide how to tackle the important issues that are presently facing the legal profession in our province.  In my view, equity, diversity and inclusion in the profession is one such issue.  The last convocation of benchers decided that the issue was important enough to establish a working group to address challenges faced by racialized licensees.  In 2016, the working group released a report that recommended a number of specific initiatives.  As one of the D&I initiatives, the LSO introduced a Statement of Principles (SOP).  Pursuant to the SOP, all licensees are required to create and abide by an individual SOP that acknowledges their obligation to promote equality, diversity and inclusion generally, and in their behaviour toward colleagues, employees, clients and the public.

Not surprisingly, following the LSO’s introduction of the SOP, there ensued a vigorous debate in the profession, including at my firm, about whether the SOP was somehow offensive because the LSO was purporting to dictate behaviour to intelligent, educated professionals.  Comments made to me went something like this:  How dare the LSO encroach on our independence and freedom of expression with some Orwellian principle?  Isn’t it trite to say that we all believe that that racism and discrimination are bad?  We don’t need the LSO to tell us that!  

Give me a break.  Sure. I agree that the LSO’s approach to the SOP is ham-fisted.  However, sometimes you need to be act with a fist to bring about change.  In my experience, attitudes simply don’t change with the passage of time.  People don’t magically become more enlightened. Real change happens because the people to whom it matters, simply refuse to accept the status quo.  If attitudes change, we’ve learned that the outward manifestation of those attitudes into meaningful action can be painstakingly slow.  It has proven to be the case in a profession that seems incredibly resistant to change.  In terms of diversity and inclusion,  the legal profession has not yet fully embraced the concept.

Racialized and other equity seeking lawyers still face disproportionate barriers in obtaining articling positions, and in the licensing process.  They continue to be underrepresented in proportion to Ontario’s population in legal workplaces and at all levels of seniority.  Lawyers like me are becoming impatient.  A speaker at a recent D&I seminar hosted by my firm told us that sometimes you need to be disruptive to accelerate the pace of change.

Inclusion is an important concept.  To feel included in the profession means a sense of pride and belonging.  It means feeling that your contributions as a member of the profession are respected and valued.  At the very least, it means not being subjected to annoying and inane comments and questions that require you to defend and justify your membership in the profession.  If the LSO doesn’t take up that cause on behalf of its licensees, who else is  going to do it?  We need to drag the profession into the 21st century, and sometimes being disruptive is the only way to accomplish that goal.

On an intellectual level, I can understand why some have a problem with the SOP.  On a practical level, I can’t fathom why some bencher candidates would invest the amount of time and energy it would take to make stopping the SOP the cornerstone of their platforms.  Whatever the reason, I will not be voting for any of them.

Regards,

Blair

Tuesday, April 9, 2019

SCC: Party Autonomy in Arbitration Trumps Access to Justice Concerns


In a 5 to 4 decision, the Supreme Court of Canada held the concept of “party autonomy” and holding parties to a valid arbitration agreement trumped access to justice and policy concerns.  The Court allowed an appeal from the Court of Appeal for Ontario in which the majority ruled that part of a class action should be stayed and should proceed by way of arbitration even where there was a possibility of duplicating proceedings and inconsistent results.

In this case, the plaintiff Avraham Wellman proposed a class action for damages against TELUS Communications Inc. (“TELUS”) on behalf of about 2 million Ontario residents who had entered into mobile phone service contracts with TELUS during a specified time frame.  The proposed class consisted of both consumer and business customers.  Wellman alleged that TELUS had engaged in an undisclosed practice of rounding up calls to the next minute such that customers were overcharged and were not provided the number of minutes to which they were entitled.  TELUS’s standard terms and conditions in its service contracts included an arbitration clause stipulating that all claims arising out of or in relation to the contract (apart from collection of accounts) must be determined through mediation and then arbitration.

The arbitration clause was invalidated by Ontario’s Consumer Protection Act to the extent that it would otherwise prevent class members who were consumers from pursuing their claims in court.  However, it did not apply to business customers.  TELUS sought to have the class action stayed with respect to business customers, relying on the arbitration clause.  The motion judge dismissed TELUS’s motion for a stay and certified the action.  She held that Section 7(5) of the Arbitration Act, 1991 (“Act”) grants the courts discretion to refuse a stay where it would not be reasonable to separate the matters dealt with in the arbitration agreement from the other matters.  The motions judge held that this discretion could be exercised to allow business customers’ claims that were otherwise subject to the arbitration clause to participate in the class action where it was reasonable to do so.  The Ontario Court of Appeal dismissed TELUS’s appeal.

Justice Moldaver wrote the opinion for the majority of the SCC (Justices Gascon, Cote, Brown and Rowe concurred).  Justice Moldaver held that Section 7(5) of the Act does not grant the court discretion to refuse to stay claims that are dealt with in an arbitration agreement. 

This finding is somewhat perplexing because Section 7(5) of the Act reads as follows:

The court may stay the proceeding with respect to the matters dealt with in the arbitration agreement and allow it to continue with respect to other matters if it finds that,

(a) the agreement deals with only some of the matters in respect of which the proceeding was commenced; and

(b) it is reasonable to separate the matters dealt with in the agreement from the other matters.

However, Justice Moldaver held that in keeping with the modern approach that sees arbitration as an autonomous, self-contained, self-sufficient process to which the parties agree to have their disputes resolved by an arbitrator, courts should generally take a hands off approach to matters governed by the Act.  The general rule reaffirms the concept of party autonomy and upholds the policy underlying the Act that says that parties to a valid arbitration agreement should abide by their agreement.  Paragraph 7(5)(a) and 7(5)(b) set out two preconditions.  The first precondition is met if the agreement deals with only some of the matters in respect of which the proceeding was commenced.  The second precondition is met if it is reasonable to separate the matters dealt with in the agreement from the other matters.  If both preconditions are met, instead of ordering a full stay, the Court may allow the matters that are not dealt with in the arbitration agreement to proceed in Court and may stay the court proceeding in respect of the matters that are dealt with in the agreement.  Justice Moldaver held that policy considerations cannot be permitted to distort the actual words of the statute, read “harmoniously” with the scheme of the statute, its objects and the intention of the legislature.  In this case, the legislature had already spoken to some of the concerns by shielding consumers from the potentially harsh results of enforcing arbitration agreements through the Consumer Protection Act.  The legislature made a careful policy choice to exempt consumers and only consumers.  That choice must be respected and must not be undermined by reading Section (7)(5) in a way that permitted courts to treat consumers and business customers as one and the same. 

Justice Moldaver held that while there can be no doubt as to the importance of promoting access to justice, this objective cannot, absent express direction from the legislature, be permitted to overwhelm the other important objectives pursued by the Act.  To do so would undermine the legislature’s objective of ensuring parties to a valid arbitration agreement abide by their agreement, reduce the degree of certainty and predictability associated with arbitration agreements, and weaken the concept of party autonomy in the commercial setting. 

The dissenting opinion was jointly written by Justices Abella and Karakatsanis (Chief Justice Wagner and Justice Martin concurred).

The dissenting judges held that Section 7(5) of the Act did give courts discretion to allow the entire proceedings to continue in court even if some parties would be otherwise subject to an arbitration clause.  A discretionary ability to grant a partial stay logically includes the power to refuse a partial stay.  They held that the only interpretation that gives meaningful effect to the discretionary language of Section 7(5) is one that confers on judges the ability to allow both arbitrable and non-arbitrable dispute to proceed in court.  Otherwise the words “may stay the proceedings with respect to the matters dealt with in the arbitration agreement” are superfluous and add nothing. 

The dissenters reasoned that the Ontario Court of Appeal has since 2002 granted stays of proceedings that would otherwise be subject to arbitration and for nearly a decade has permitted otherwise arbitrable matters to be joined with class actions in the public interest of avoiding duplicative proceedings, increasing costs and risking inconsistent results.  They held that the overall purpose of the Act was promote access to justice because the court system can be costly and slow.  The court’s discretion to intervene was narrow to further the goals of expedient dispute resolution.  Arbitration was intended to be a means by which parties on a relatively equally bargaining footing chose to design an alternative dispute mechanism.  However, all of TELUS’s clients, both business and consumer, signed the same non-negotiable standard form agreement.  TELUS’s individualized arbitration clause effectively precludes access to justice for business clients when a low-value claim does not justify the expense.  It’s mandatory nature illustrates that the rationales of party autonomy and freedom of contract are not existent. 

By inserting the reasonable requirement in Section 7(5)(b) of the Act the legislature clearly contemplated that in certain circumstances, it would be unreasonable to separate matters dealt with in the arbitration agreement from other matters.  In this case, eliminating judicial discretion effectively eliminates access to justice.  TELUS’ interpretation would result in costly and time consuming factual inquiries on how to divide the arbitrable and non-arbitrable claims even where the substance of both claims is identical as in this case. 

Here to impose arbitration on willing parties violates the spirit of the Act and operates as an invisible barrier to a remedy and presumptively immunizes wrongdoing from accountability contrary to fundamental notions of civil justice.

TELUS Communications Inc. v. Wellman 2019 SCC 19

Regards,

Blair

Tuesday, January 22, 2019

Ontario Judge Awards Substantial Damages to Musician for "Despicable" Deceit By Former Girlfriend


I admit that I’m late to the party in reporting on this case, but it has such an interesting and unusual fact set that, when I read it,  I thought “better late than never”.  In a recent decision, Justice David L. Corbett of the Ontario Superior Court of Justice (Abramovitz v. Lee 2018 ONSC 3684), granted default summary judgment and substantial damages, including punitive and aggravated damages, against the defendant Jennifer Lee  for what the judge called “her despicable interference in Mr. Abramovitz’s career.”  Lee had impersonated the plaintiff Eric Abramovitz and frustrated a unique opportunity that Abramovitz had to advance his career as a professional musician.  She did so, apparently because she feared that Abramovitz would move to California and end their relationship.

The parties met in 2013 when they were both students at McGill University’s Schulich School of Music.  Abramovitz was a gifted musician, and an accomplished clarinetist.  He had studied the clarinet since he was seven years old with some of Canada’s greatest clarinet teachers.  He was the winner of a number of prestigious prizes and awards and in 2013 was named as a promising up and coming artist.

In December of 2013 Abramovitz applied to study at the Coburn Conservatory of Music in Los Angeles, California (“Coburn”).  He hoped to complete the last two years of his bachelor’s degree.  Every Coburn receives a full scholarship including tuition, room and board and a living stipend to cover meals and other expenses.  The scholarship was worth tens of thousands of dollars.

Abramovitz had applied to study under Yehuda Gilad, an internationally renowned "clarinet pedagogue". Gilad was recognized as one of the best clarinet teachers in the world and accepted only two new clarinet students per year at Coburn from dozens of applicants.  Students applied from all over the world to study with Gilad.  Abramovitz had long aspired to study with Gilad and after a very selective pre-screening process he was invited to a live audition at Coburn in Los Angeles in February of 2014.  Abramovitz and his parents flew to Los Angeles for this audition which was conducted in front of a committee of faculty members including Gilad.  Abramovitz was told he could expect a decision by April 1, 2014.

Meanwhile, Abramovitz and Lee’s relationship progressed quickly.  They began living together.  Abramovitz trusted Lee and let her use his laptop computer and gave her his passwords.

Coburn got back to Abramovitz by email on March 27, 2014.  It offered Abramovitz a place to study with Gilad on full scholarship. 

Lee intercepted Coburn’s acceptance email and responded to it, impersonating Abramovitz.  She declined Coburn's scholarship offer because Abramovitz would be “elsewhere”.  Lee then deleted the acceptance email and recomposed another email purportedly from Gilad’s email account (which she established under her own name).  The fake Gilad email advised Abramovitz that he had not been accepted at Coburn.  Instead, the fake email from Gilad advised Abramovitz that he would not be given a full scholarship and would have to pay substantial amounts in expenses to attend another program at the University of Southern California and pay his own living expenses.  Lee knew that Abramovitz would not be able to afford this alternative, fake offer.

Abramovitz was completely fooled by this deception and stayed in Montreal and completed his music degree at McGill.  As a result, Gilad lost the two year full scholarship opportunity to study with Gilad.

Abramovitz brought an action against Lee in Ontario claiming damages on the basis of deceit, intrusion upon seclusion, invasion of privacy and intentional or negligent infliction of mental suffering.  In Justice Corbett’s view, this case was primarily about deceit – that is Lee’s impersonation of Abramovitz to send a false rejection letter to Coburn and her impersonation of Gilad to create an email account in his name and send a false rejection letter to Abramovitz. 

Lee was personally served with the statement of claim in Montreal.  She did not file a notice of intent to defend or statement of defence and was noted in default.  Abramovitz moved for summary judgment. 

Justice Corbett held that he was satisfied from the facts alleged in the statement of claim, which were deemed to be true by virtue of Lee’s default, and from the supplementary evidence filed by Abramovitz that Ontario had jurisdiction simpliciter because Lee’s primary residence was in Ontario.  Residence is the first presumptive connecting factor establishing jurisdiction.  Before attending McGill, Lee had lived with her parents in Ontario.  Her parents continued to live in Ontario and Lee maintained a residence at her parents’ home while she was away at school in Montreal.  Accordingly, she was domiciled both in Ontario and Quebec. 

Justice Corbett held that the law to be applied to the torts alleged in the statement of claim was the law of the place where the activity occurred i.e. the civil law of Quebec.  Quebec law is a “foreign law” in Ontario and the substance of Quebec law is a question of fact that has to be proved by evidence.  However, Abramovitz introduced no evidence of what the applicable law in Quebec was.  As a result, Justice Corbett relied on the presumption that the applicable law was, in substance, the same as Ontario common law.  The judge was satisfied that justice could be best done by applying Ontario law under the presumption that applies when foreign law is not proved.

Abramovitz’s damages were extensive.  They included loss of educational opportunity and loss of income caused by redirection of his career.  Justice Corbett held that his claim for loss of reputation by being rejected by Coburn was short term and would be addressed, at least in part, by the judgment. Under loss of educational opportunity, Abramovitz argued that he had lost a “big break” to study under Gilad that could have launched his career.  Instead he stayed at McGill and completed his Bachelor of Music.  After that he attended a two year graduate certificate in performance at USC and in those circumstances eventually had a chance to study with Gilad in a certificate program not a degree program two years later than he had hoped and not on full scholarship.  The judge was satisfied that Abramovitz had lost the value of his scholarship with Coburn and that his career had been delayed for about two years.  (Gilad’s affidavit was filed in support of the motion for summary judgment).  The judge fixed the lost income at two years of a starting salary with a reputable symphony orchestra.  He then awarded damages for loss of scholarship and Abramovitz’s additional educational costs.  All such losses amounted to US $334,000.00.  However, Abramovitz had claimed only $300,000.00 CAD for general damages in his statement of claim.  Considering the relevant currency exchange rate, the amount calculated by the judge exceeded the amount claimed.  However, in part because of the default nature of the proceedings, Justice Corbett awarded Abramovitz $300,000.00 CAD in general damages – the sum that he had claimed  and the sum for which Lee had been given notice.

Justice Corbett held that Lee’s conduct had been despicable, was sufficiently blameworthy to  merit awards of punitive and aggravated damages.  He assessed punitive damages at $25,000.00 to address the betrayal of trust by Lee.  He awarded aggravated damages of 25,000.00 to represent the “incompensable” personal loss suffered by Abramovitz by having a closely held personal dream snatched from him by a person he trusted.  Frankly, it is difficult to understand the apparently artificial distinction the judge made between the two heads of damage.  Nevertheless, the fact scenario is remarkable, and if true, worthy of sanction.

Regards,

Blair

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.
Regards,
Blair