Fired Employee Entitled to Both Damages and Full Pension Benefits

Richard Waterman had worked for IBM for 42 years when the company fired him without cause.  IBM provided him with 2 months notice of the termination of his employment.  He was 65 years old.  Waterman sued IBM to enforce his contractual right to be given reasonable notice of termination.  The trial judge set the appropriate period of notice at 20 months.  When he was fired, Waterman had a vested interest in IBM's defined benefit pension plan.  Under the terms of the plan, IBM had contributed a percentage of Waterman's salary to the plan on his behalf.  Upon termination, Waterman was entitled to a full pension and his termination had no effect on the amount of his pension benefits.  The trial judge declined to deduct the pension benefits paid to Waterman during the notice period in calculating his damages.  IBM's appeal was dismissed by the British Columbia Court of Appeal.  

 

The Supreme Court of Canada, Justice Cromwell writing for the majority, dismissed IBM's further appeal.  Chief Justice McLachlin and Justice Rothstein dissented.

 

Justice Cromwell held that the rule that damages are measured by the plaintiff's actual loss does not cover all cases.  He ruled that pension benefits are a form of deferred compensation for an employee's service and constitute a type of retirement savings.  They are not intended to be an indemnity for wage loss due to unemployment.  

 

In this case, it was clear to the court that a "compensating advantage" had arisen:  Waterman received both his full pension benefits and the salary he would have earned had he worked during the period of reasonable notice.  Had IBM given him working notice, he would have received only his salary during that period.  A compensating advantage arises if a source other than the damages payable by the defendant ameliorates the loss suffered by the plaintiff as a result of the defendant's breach of a legal duty.  A problem only arises with a compensating advantage when the advantage is one that: (a) would not have accrued to the plaintiff but for the breach; or

(b) was intended to indemnify the plaintiff for the sort of loss that resulted from the breach.

 

Justice Cromwell saw this case as akin to the "private insurance exception" - in general a benefit will not be deducted if it is not an indemnity for the loss caused by the breach and if the plaintiff has contributed in order to obtain entitlement to it.  In addition, the deduction issue was subject to broader policy considerations. 

 

Justice Cromwell held that in this case the factors clearly supported not deducting Waterman's retirement pension benefits from his wrongful dismissal damages.  Waterman's contract of employment was silent on the issue but it did not have any general bar against receiving full pension entitlement and employment income.  Waterman's retirement pension was not an indemnity for wage loss, but rather a form of retirement savings.  While IBM had made all of the contributions to fund the plan, Waterman had earned his entitlement to benefits through his years of service.  Therefore, as in the private insurance exemption, the pension benefits were not an indemnity and Waterman had contributed to the benefits.

 

Finally, the broader policy concerns in this case supported not deducting the pension benefits.  Justice Cromwell held that the law should not provide an economic incentive to dismiss pensionable employees rather than other employees.

 

In his dissenting opinion, Justice Rothstein wrote that the private insurance exception has no application to this case.  The case required an assessment of Waterman's loss under the terms of a single contract which gave rise to both the right to reasonable notice and a right to pension benefits.  Waterman's entitlement therefore turned on the ordinary governing principle that he should be put in a position that he would have been in had the contract been performed.  If his pension benefits were not deducted, he would have been given more than he bargained for and IBM would have been charged more than it had agreed to pay. 

 

Justice Rothstein wrote that employer-provided benefits are an integral component of the employment contract so deductibility of such benefits turns on the terms of the employment contract and the intention of the parties.  Under the terms of Waterman's employment contract he would have been eligible to receive pension benefits only upon being terminated or retiring.  Therefore, his contractual right to wrongful dismissal damages and his contractual right to his pension benefits were based on opposite assumptions about his availability to work.  Damages could not be paid on the assumption that he could have earned both. 

 

Unlike a defined contribution plan, a defined benefit plan guarantees the employee fixed predetermined payments upon retirement for life.  Deducting the benefits would provide the wrongfully terminated employee with exactly what he would have received had the employment contract been performed:  an amount equal to his salary during the reasonable notice period and thereafter defined benefits for the rest of his life.

 

In this case, Waterman's wrongful dismissal had no impact on his pension entitlement and he could not have received both his salary and his pension benefits had he continued to work for IBM through the reasonable notice period.

 

Regards,

 

Blair

Supreme Court Enlarges Public Interest Powers of Provincial Securities Commissions

Patricia McLean served as a director of Hucamp Mines Ltd., a reporting issuer registered in Ontario under the Ontario Securities Act, from March of 1996 to June of 2001.   Beginning in July of 2001, McLean began cooperating with the Ontario Securities Commission ("OSC") in respect of certain possible improper actions at Hucamp.  Although the OSC announced in July of 2005 that it would hold a hearing under its public interest powers to sanction McLean and others for their alleged misconduct at Hucamp, McLean did not enter into a settlement agreement with the OSC until September 8, 2008.  In the settlement agreement, McLean consented to the making of an order against her which barred her for 5 years from trading in securities, with some exceptions, and banned her for 10 years from acting as an officer or director of certain entities registered under the Ontario Securities Act.  

It was not until 15 months latter - January 14, 2010 - that the executive director of the British Columbia Securities Commission notified McLean that he was applying to that commission for a "public interest" order against her in British Columbia.   The BC Commission relied on McLean's settlement agreement with the OSC in bringing the proceeding.  However, section 159 of the BC Securities Act provides that all proceedings under that Act "must not be commenced more than 6 years after the date of the events that gave rise to the proceedings".   The BC Commission issued an order adopting the same prohibitions that were set out in the OSC's order.  In doing so, it interpreted that "the event" that had triggered the 6 year limitation period was McLean's entering into a settlement agreement with the OSC and not the misconduct that occurred in 2001 or earlier.  The BC Court of Appeal applied a correctness standard of review and upheld the commissions implied decision.  

McLean appealed to the Supreme Court of Canada.  The court dismissed her appeal.  

Justice Moldaver, writing for the majority of the court, held that that issue before the court was whether "the event" that triggered the 6 year limitation period, was the underlying misconduct that gave rise to McLean's settlement agreement with the OSC or the settlement agreement itself.  

Justice Moldaver found that in reviewing the ordinary meaning, the context and the purpose of the relevant provisions of the BC Securities Act, the Commission's conclusion that the event giving rise to the proceeding was McLean's settlement agreement was reasonably supported. 

He further held that the appropriate standard of review of the Commission's decision was "reasonableness", not correctness as the BC Court of Appeal had held.  Justice Moldaver held that both parties, i.e. the Commission and McLean, had proposed reasonable interpretations of the British Columbia Securities Act.  However, under the reasonableness review, the courts will defer to any reasonable interpretation adopted by an administrative decision maker, even if other reasonable interpretations may exist.  Because the Commission'`s interpretation was not shown to be an unreasonable one, there was no basis to interfere on judicial review. 

Justice Moldaver held that the modern approach to judicial review recognizes that courts may not be as qualified as an administrative tribunal to interpret that tribunal's home statute.  In particular, the resolution of unclear language in a home statute is usually best left to the administrative tribunal because the tribunal is presumed to be in the best position to weigh the policy considerations often involved in choosing between multiple reasonable interpretations of such language. 

Allowing secondary jurisdictions (British Columbia in this case) to wait until the conclusion of a primary proceeding (the OSC proceeding) obviates the need for parallel and duplicative proceedings that will overburden securities commissions and the targets of proceedings.  The Commission's interpretation of its statute therefore furthered the legislative goal of improving inter-jurisdictional cooperation between provinces and territories.

Finally, Justice Moldaver found that although the Commission's interpretation significantly extended the duration of time for which a person might be subject to regulatory action, of itself, that was not offensive to the purpose of limitation periods.  Limitation periods are always driven by policy choices in an attempt to balance the interests of the parties.  The Commission's interpretation struck a reasonable balance between facilitation of inter-provincial cooperation and the underlying purposes of limitation periods.  

Regards,

Blair

Ontario Court of Appeal Allows Enforcement Action Against Chevron To Proceed

Last September, I blogged about a decision of Justice David Brown of the Ontario Superior Court of Justice in which the judge concluded that the courts of Ontario had jurisdiction to hear an action commenced by Ecuadorean plaintiffs to enforce a US $18 billion judgment that they had obtained in Ecuador against Chevron Corporation ("Chevron").   However, this finding was not necessarily good news for the plaintiffs.  On his own motion, Justice Brown stayed the action on the basis that, "Chevron does not possess any assets in this jurisdiction at this time" and "the plaintiffs have no hope of success in their assertion that the corporate veil of Chevron Canada should be pierced and ignored so that its assets become exigible to satisfy the judgment against its ultimate parent". 

The Ecuadorian plaintiffs appealed to the Ontario Court of Appeal from Justice Brown's order imposing a stay of the action.  Chevron and its co-defendant in Ontario, Chevron Canada,  cross-appealed from the judge's finding that Ontario had jurisdiction to hear the case. 

The Court of Appeal unanimously allowed the plaintiffs' appeal and dismissed Chevron's cross-appeal.  Justice MacPherson wrote the judgment of the court. 

Justice MacPherson briefly summarized the facts of the case, noting that since the date of Justice Brown's decision, the highest appeal court in Ecuador had affirmed the judgment of the intermediate appeal court for damages for remediation for Chevron's alleged environmental pollution and costs totaling US$9.51 billion, but had allowed Chevron's appeal with respect to punitive damages.  The bottom line was that there was a final judgment in Ecuador against Chevron for US$9.51 billion.  The Ecuador plaintiffs sought to have this order recognized and enforced in Ontario against Chevron and Chevron Canada.

The Court of Appeal held that the appeal and cross-appeal identified two distinct and separate issues:

1.    Did Justice Brown err by, on his own initiative, staying the action? and

2.    Did Justice Brown err by concluding that an Ontario court has jurisdiction to determine whether the judgment of the Ecuadorean court should be recognized and enforced in Ontario? 

The Court of Appeal considered the jurisdictional question first.  The three justices agreed with Justice Brown's analysis.  Justice MacPherson found that the ruling of the Supreme Court of Canada in the Beals v. Saldhana case was "crystal clear" about how the real and substantial connection test is to be applied.  That case held that the real and substantial connection test requires that a significant connection exist between the cause of action and the foreign court and that the enforcing court was required to determine whether such a connection existed, i.e. the exclusive focus of the real and substantial connection test is on the foreign jurisdiction.   There is no parallel or even secondary inquiry into the relationship between the legal dispute and the foreign country and the domestic Canadian court being asked to recognize and enforce the foreign judgment (as Chevron had argued).

Once it is established that the foreign court had a real and substantial connection to the subject matter of the action, the analysis shifts to a consideration of whether the judgment is enforceable in Ontario as a matter of domestic law.

It was clear that the Ecuadorean judgment against Chevron satisfied the requirements of Rule 17.02(m) of Ontario's  he Rules of Civil Procedure, i.e. that a statement of claim may be served on a defendant without a court order outside Ontario where the claim is based on a judgment of a court outside Ontario.  With respect to Chevron Canada, Justice Brown correctly found that Chevron Canada had a physical, non-transitory, presence in Ontario and carried on business in Ontario.  

However, the Court of Appeal disagreed with Justice Brown's decision to stay the action on his own motion pursuant to section 106 of Courts of Justice Act.  Justice MacPherson gave several reasons for this decision.  

Firstly, Chevron and Chevron Canada are sophisticated parties with excellent legal representation.  They chose not to attorn to the jurisdiction of the Ontario courts and did not seek a stay of the action.  The Court held that Justice Brown's decision to stay a major case involving poor and vulnerable foreign residents and one of the world's largest corporations in a long and difficult process in a foreign court and a huge damages award was entirely his own construct.  No party had sought it.  Consequently, the issue was not argued before Justice Brown and no cases were put before him regarding the appropriateness of granting a discretionary stay.  

Secondly, Chevron and Chevron Canada made the decision to refuse to attorn to Ontario's jurisdiction "with their eyes wide open".  Having made this choice, they were limited to making only a jurisdictional objection in their motion. 

Thirdly, against the backdrop of no law and no argument on section 106, what Justice Brown really did was to embark on a disguised, unrequested and premature rule 20 and/or rule 21 (summary judgment) motion.  He made significant findings about the corporate and legal structures of Chevron and Chevron Canada and the viability of the plaintiffs' action as pleaded in the statement of claim.  Those issues deserved to be addressed and determined in the context of a record and legal arguments made under the rules 20 or 21 or at trial.  To do so, without a complete record would constitute an injustice to the plaintiffs. 

Fourthly, Justice Brown erroneously imported a forum non conveniens argument into his reasoning on the stay.  Justice MacPherson held that there was a serious problem with such an  analysis.  The location of Chevron's head office and Chevron's place of business in the United States and the lack of any connection between Chevron and Chevron Canada were issues that were at the heart of the conflict between the parties.  They could not be decided by easy resort to a potential action in New York.  It was an error in principle for Justice Brown to stay the action on these grounds absent a hearing on the matter and an opportunity for the plaintiffs to fully contest this very issue.  Additionally, the forum non conveniens analysis was not appropriate, and indeed may be irrelevant, in the recognition and enforcement context.

Fifthly, there was a disconnect between the rationale underlying Justice Brown's reasons on the jurisdiction issue and the content of his reasons on the discretionary stay issue.  His jurisdictional reasons properly opened the door to a "hugely significant decision of Ecuador's highest court possibly being recognized and enforced in Ontario".   However, his discretionary stay analysis "completely undermines the jurisdiction of the court" by pointing to a myriad of factors that show that New York was the better forum and suggested that the case not be heard in Ontario.  In Justice MacPherson's view, this derailment was premature in the context of the respondents not raising the discretionary stay issue. 

Sixthly,  Justice MacPherson did not share Justice Brown's concern about the waste of judicial resources where "there is nothing to fight over".  He held that the long history of this litigation and especially Chevron's role in it, suggested the opposite.  He held that the picture is an obvious one.  For 20 years Chevron has contested the legal proceedings of every court involved in this litigation - in the United States, Ecuador and Canada.  Chevron even sought and briefly obtained a global injunction against enforcement of the Ecuadorean judgment.  Accordingly, the recognition and enforcement action in Ontario is not an academic exercise and would not be an "utter and unnecessary of valuable judicial resources."  

In these circumstances, Justice MacPherson held that the Ecuadorean plaintiffs do not deserve to have their entire case fail on the basis of an argument against a position that was not even made and to which they did not have an opportunity to respond.  He held that it is not the role of the court to weed out cases on this basis and it is a risky practice for a judge to second guess counsel on strategy in the name of judicial economy.

The Court of Appeal held that this case cries out for assistance, not unsolicited and premature barriers and allowed the appeal.

Regards,

Blair

Supreme Court Finds That Unlawfully Obtained Evidence Still Admissible

In a decision, delivered by Justice Thomas Cromwell of the Supreme Court of Canada, the court found that even though a police search of an accused's personal computers was unlawful, the evidence obtained as a result of the search should not be excluded, because the "violation was not serious" and because the police believed on reasonable grounds that the computer search was authorized by a warrant.  

 

In this case ( R v. Vu, 2013 SCC 60 ) the police charged Vu with production of marijuana, possession of marijuana for the purpose of trafficking and theft of electricity.  The police obtained a search warrant authorizing the search of a residence for evidence of theft of electricity.  The warrant allowed the police to search for documentation identifying the owners and/or occupants of the residence.   Even though the Information to Obtain a Search Warrant ("ITO") indicated that the police intended to search for, among other things, "computer generated notes", the warrant did not specifically refer to computers or authorize the search of computers.  In the course of their search of the residence, police found marijuana.  They also found two computers and a cellular telephone.  A search of these devices led to evidence that Vu was the occupant of the residence. 

 

At trial, Vu claimed that these searches had violated his rights under s. 8 of the Canadian Charter of Rights and Freedoms ("Charter") - which gives everyone the right to be free from unreasonable searches and seizures - and asked the judge to exclude the evidence.  The judge concluded that the ITO did not establish reasonable grounds to believe that documentation identifying the owners and or occupants would be found in the residence and so the warrant could not authorize the search for such documents.  In addition, the trial judge found that police were not authorized to search the personal computers and cellular telephone because those devices were not specifically mentioned in the warrant.  She excluded most of the evidence obtained as a result of those searches and acquitted Vu of the drug charges.  

 

The Crown appealed and the British Columbia Court of  Appeal set aside the acquittal and ordered a new trial.  In the Court of Appeal's view, the warrant had properly authorized the searches and there had been no breach of Vu's s. 8 Charter rights.  Vu further appealed to the Supreme Court of Canada.  He raised three issues:

 

1.    Did the search warrant properly permit a search for documentation identifying the owners and/or occupants?

 

With respect to this issue, Justice Cromwell agreed with the Court of Appeal that the ITO had established reasonable grounds to believe that relevant documents would be found in the residence.  It followed that the warrant properly authorized the search for that sort of material.  The Court of  Appeal found that the facts provided in the ITO were sufficient to support a reasonable inference on the part of the issuing justice that documentation evidence of ownership or occupancy would be found in the residence.  The ITO referred to the premises to be searched as a residence and as a "two story house".  It also indicated Vu owned the property and that electricity was being consumed there.  In Justice Cromwell's view it was a reasonable inference that a residence would be the place to look for documents evidencing ownership or occupation.  "Where else would one expect to find such documents if not in the residence itself."

 

2.    Did the warrant authorize the search of the computers and cellular phone?

 

Justice Cromwell held that s. 8 of the Charter seeks to strike an appropriate balance between the right to be free of state interference and the legitimate needs of law enforcement.  The police must obtain judicial authorization for the search before they conduct it, usually in the form of a search warrant.  The prior authorization ensures that before a search is conducted, a judicial officer is satisfied that the public interest in being left alone by government must give way to the government's interest in intruding on the individual's privacy in order to advance the goals of law enforcement.  An authorized search must be conducted in a reasonable manner.  This ensures that the search is no more intrusive than is reasonably necessary to achieve its objections.  Justice Cromwell reviewed the facts found by the trial judge and then noted that the general principle is that authorization to search a place includes authorization to search places and receptacles within that place.  However, this assumption is not justified in relation to computers because computers are not like other receptacles that may be found in a place of search.  He held that, "It is difficult to image a more intrusive invasion of privacy than the search of a personal or home computer.  Computers compromise the ability of the users to control the information that is available about them in two ways.  They create information without the users knowledge and they retain information that the users have tried to erase.  These features make computers fundamentally different from the receptacles of search and seizure lawyers have had to respond to in the past."

 

Justice Cromwell found that the traditional rule concerning the search of "receptacles" found within a search of a place simply cannot apply to computer searches and that prior authorization is required.  This means, in practical terms, that if police intend to search any computers found within a place they want to search, they must first satisfy the authorizing justice that they have reasonable grounds to believe that any computers they discover will contain the things they are looking for.  He added that the police may seize a computer if they come across one in the course of the search and the warrant does not specifically authorize its search and do what is necessary to ensure the integrity of the data and obtain a separate warrant at a later date.

 

3.    Should the evidence found on the computer be excluded?

 

Justice Cromwell found that in this case the search warrant did not authorize the search of computers found in Vu's residence.  However, he also found that the trial judge was wrong in concluding that the ITO contained no facts supporting a warrant to search for documents evidencing ownership or occupation of the residence.  Therefore he had to undertake his own analysis in view of that erroneous finding.  He found that the charter-infringing conduct by the police was "not serious", after all the ITO did refer to intention of the police to search for computer-generated documents and the state of the law with respect to the search of a computer found inside a premises was uncertain when the police carried out their investigation.  One of the police officers admitted in his testimony at trial that he intentionally did not take notes during the search of the computer so he would not have to testify about the details.  Justice Cromwell held that this was clearly improper and could not be condoned.  However, given the uncertainty in the law at the time, and the otherwise reasonable manner in which the search was carried out, Justice Cromwell concluded that the violation was not serious.  In addition, the record did not indicate that the police had gained access to any more information than was appropriate.  And the relevant question was, whether the truth-seeking function of the criminal trial process would be better served by admission of the evidence or by its exclusion.  He was of the view that, on balance, the evidence should not be excluded.  The police believed on reasonable grounds that the search of the computer was authorized by the warrant.  The search did not step outside the purposes for which the warrant had been issued and it did not include forensic examination.  The evidence retained was reliable, real evidence which was important to the adjudication of the charges on their merits.  

 

Accordingly, Justice Cromwell and a majority of the court dismissed Vu's appeal and upheld the order of the Court of Appeal setting aside the acquittals and directing a new trial.  

 

Regards,

 

Blair

Top Court Rules Union's Right to Picket Trumps Individuals' Right to Privacy

During a lawful strike that lasted 305 days, both the United Food and Commercial Workers, Local 401 ("Union") and a security company hired by the Palace Casino at West Edmonton Mall in Alberta. videotaped and photographed the picket line near the entrance to  the casino.  The Union posted signs in the area of the picketing stating that images of persons crossing the picket line might be placed on a website called www.casinoscabs.ca. 

 

Several individuals who were recorded crossing the picket line filed complaints with the Alberta Information and Privacy Commissioner under the Personal Information Protection Act of Alberta ("PIPA").  PIPA restricts the collection, use and disclosure of personal information by a range of organizations. 

 

The Vice-President of the casino complained he was photographed or videotaped and that two pictures of him were used on a poster displayed at the picket line with the text, "This is (X's) police mug shot."   Images of his head were also used in Union newsletters and strike leaflets with captions intended to be humorous.  Another complainant, a member of the public, testified that cameras were trained on the entrance to the casino where he would regularly meet friends.  A third complainant testified that she had been photographed and videotaped while working near the casino entrance.  No recordings of the complainants were placed on the website.

 

The privacy commissioner appointed an adjudicator to decide whether the Union had contravened PIPA.  The adjudicator concluded that the Union's collection, use and disclosure of the information was not authorized by PIPA.  On judicial review, PIPA was found to violate the Union's rights under section 2(b) of the Charter of Rights and Freedoms ("Charter") which provides that, "Everyone has the following fundamental freedoms:...(b)  freedom of thought, belief, opinion and expression, including of freedom of the press and other media of communication".  The Alberta Court of Appeal agreed and granted the Union a constitutional exemption from the application of PIPA.  The employer appealed this finding to the Supreme Court of Canada. 

 

The Supreme Court substantially dismissed the appeal.  [Alberta (Information and Privacy Commission) v. United Food and Commercial Workers, Local 401 2013 SCC 62]

 

The Court held that PIPA establishes a general rule that organizations cannot collect, use or disclose personal information without consent.  None of PIPA's exemptions permitted the Union to collect, use and disclose personal information for the purpose of advancing its interests in a labour dispute.  The court held that the central issue in this case was whether PIPA achieved a constitutionally acceptable balance between the interests of individuals and controlling the collection, use and disclosure of their personal information and a union's freedom of expression.  To the extent that PIPA restricted collection for legitimate labour relations purposes, it breached section 2(b) of the Charter and could not be justified under section 1.  Section 1 provides that, "The Canadian Charter of Rights and Freedoms guarantees the rights and freedoms set out in it subject only to such reasonable limits prescribed by law as can be demonstrably justified in a free and democratic society."

 

The court found that the purpose of PIPA is to enhance an individual's control over his or her personal information by restricting the collection, use and disclosure of personal information without that individual's consent.  The objective is to ensure individual autonomy, dignity and privacy, which are significant social values. 

 

However, the court also found that PIPA did not include any mechanisms by which a union's constitutional right to freedom of expression could be balanced with the interests protected by the legislation.  There is a long recognized fundamental importance of freedom of expression in the context of labour disputes.  The court found that PIPA prohibited the collection, use or disclosure of personal information for many legitimate, expressive purposes related to labour relations.  Picketing represents a particularly crucial form of expression with strong historical roots.  The court found that PIPA imposed restrictions on a union's ability to communicate and persuade the public of its cause, impairing its ability to use one of its most effective bargaining strategies in the course of a lawful strike.  This infringement of the right to freedom of expression was disproportionate to the government's objective of providing individuals with control over the personal information that they exposed by crossing a picket line.  It was therefore not justified under section 1 of the Charter. 

 

Given the comprehensive and integrated structure of the statute, the government of Alberta and the Information and Privacy Commissioner requested that the court not select specific amendments, requesting instead that the entire statute be declared invalid so that the Alberta legislature could consider the Act as a whole.  The declaration of invalidity was granted by the court but was suspended for a period of 12 months to give the legislature the opportunity to decide how best to make the legislation constitutionally compliant.  

 

Regards,

 

Blair

Guatemalan Plaintiffs sue HudBay and Subsidiaries in "Novel" Negligence Actions

Justice C.J. Brown of the Ontario Superior Court of Justice dismissed a motion brought by HudBay Minerals Inc. ("HudBay") and two of its subsidiary corporations, including one Guatemalan corporation) to dismiss novel actions for negligence.  In the this case, the plaintiffs sued HudBay for its failure to prevent the harm allegedly caused by its security personnel at mining projects owned by HudBay's subsidiary corporations in Guatemala. (Choc v. Hudbay Minerals Inc. 2013 ONSC 1414)

 

The plaintiffs are indigenous Mayan Q'Eqchi' from the El Estor region of Guatemala.  They started three separate actions: Margarita Caal Caal v. HudBay;  Angelica Choc v. HudBay; and German Chub Choc v. HudBay.

In the Caal action, the plaintiffs were 11 women, who alleged that they were gang raped by mining company security personnel, police and military during their forced removal from their village as requested by a HudBay subsidiary.     

 

In the Choc action, the plaintiff alleged that her husband, a respected indigenous leader and outspoken critic of mining practices, was beaten and shot in the head by security personnel of a HudBay subsidiary in the context of a land dispute.

 

In the Chub action, the plaintiff alleged that a gunshot wound left him paralyzed from the chest down and that he was shot in an unprovoked attack by security personnel employed at HudBay's subsidiary's mining project in the context of a land dispute.  

 

The actions arose out of a dispute as to ownership of land in Guatemala.  At all material times, the HudBay defendants maintained that they had a valid legal right to the land while the Mayan communities claimed that the Mayan Q'Eqchi' were the rightful owners of the lands which they considered to by their ancestral homeland.  The plaintiffs alleged that the defendants' claim to ownership was illegitimate because the rights of the defendants were derived from a dictatorial, military government which granted those rights during the Guatemalan civil war at a time when the Mayan Q'Eqchi' were being massacred and driven off their lands. 

 

In 2011, the Constitutional Court of Guatemala, the highest court in the country, ruled that the Mayan Q'Eqchi' communities had valid legal rights to the contested land and ordered the Guatemalan government to formally recognize those rights.  When the Mayan Q'Eqchi' had originally attempted to reclaim their ancestral homelands, there were allegedly numerous forced evictions, burning of hundreds of homes, murders and alleged human rights atrocities, including those giving rise to the three actions. 

 

The defendants brought three motions:  (i)  a motion to strike the statements of claim on the basis that they disclosed no reasonable cause of action against HudBay; (ii)  a motion to dismiss the Caal action as being statute-barred pursuant to the provisions of the Limitations Act, 2002; and, (iii)  a motion disputing the court's jurisdiction over the Guatemalan subsidiary.  

 

The court ordered that the three actions be consolidated and the motions were heard together before Justice Brown.  She dismissed all three motions.   

 

The Rule 21 Motion To Strike

 

On this motion the defendants argued that there was no recognized duty of care owed by a parent company to ensure that the commercial activities carried on by its subsidiaries were conducted in a manner designed to protect people in foreign countries.  In addition, they pleaded that HudBay was not responsible at law for the actions of its subsidiaries. 

 

Amnesty International Canada intervened in the motions to support the position of the plaintiffs. 

 

With respect to the vicarious liability claim, Justice Brown held that the plaintiffs pleaded in the Choc action that the Guatemalan subsidiary was an agent of HudBay.  In doing so, the plaintiffs had pleaded an exception to the rule of separate legal personality, i.e. where the corporation has acted as the authorized agent of its controllers, corporate or human, the allegation is not patently ridiculous or incapable of proof and must be taken to be true for the purposes of the pleadings motion.  Accordingly, the claim against HudBay on the basis of actions by its foreign subsidiary was allowed to proceed.  

 

In respect of the claim for direct negligence against HudBay, the judge held that the plaintiffs had pleaded all material facts required to establish the constitute elements of their claim.  However, the duty of care that the plaintiffs pleaded was not an "established" duty of care.  Accordingly, it was necessary for Justice Brown to apply the test for establishing a novel duty of care (the Anns test), i.e. that the harm complained of was reasonably foreseeable; that there was sufficient proximity between the parties that it would not be unjust or unfair to impose a duty of care; and, that there was no policy reasons to negate or otherwise restrict that duty.  Justice Brown held that the plaintiffs had met all three parts of the test.  With respect to policy considerations, she held that they were competing policy considerations and that it was not plain and obvious that they should be fatal to the case at the pleadings stage. 

 

The Limitations Act Motion

 

The defendants sought to have the Caal action dismissed on the basis that it was statute-barred because it was commenced after the basic limitation period of two years after the day on which the claim was discovered. 

 

However, section 10 of the Limitations Act provides an exception to the two year limitation period for claims based on an assault or sexual assault.  The provision reads as follows:

 

10 (1)    The limitation period established by section 4 does not run in respect of a claim based on assault or sexual assault during any time in which the person with the claim is incapable of commencing the proceeding because of his or her physical, mental or psychological condition.  

 

10 (3)   Unless the contrary is proven, a person with a claim based on a sexual assault shall be presumed to have been incapable of commencing the proceeding earlier than it was commenced.  

 

The plaintiffs argued, and Justice Brown accepted, that the language used in the Limitations Act of "claims based on sexual assault" is not intended to be limited to claims against the actual perpetrator, but is broad enough to include claims of vicarious liability and negligence against all persons whose acts or omissions contributed to the damage suffered as a result of the misconduct.  The Limitations Act specifically defines "claim" to mean "a claim to remedy an injury, loss or damage that occurred as a result of an act or omission".  Therefore, a "claim based on sexual assault" must include a claim to remedy injuries from a sexual assault caused by negligent acts or omissions.  In addition, the plaintiffs relied on the principle of interpretation that legislative provisions were to be given a large and liberal interpretation and are to be interpreted in line with their objectives.  They submitted that the purpose of section 10 of the Act was to make it easier for victims of sexual assault to bring their claims.  

 

Justice Brown accepted the submission and dismissed the Limitations Act motion.

 

As a result, there was no need to hear the jurisdiction motion because HudBay's foreign subsidiary conceded that if the first two motions were dismissed it would be a necessary and proper party to the Choc action.  

 

Regards,

 

Blair

 

Supreme Court Certifies "Indirect Purchaser" Class Action Against Microsoft

The Supreme Court of Canada has ruled that a class action commenced against Microsoft Corporation and Microsoft Canada (Microsoft) for allegedly overcharging for their operating systems may proceed in British Columbia ( Pro-Sys Consultants Ltd. v. Microsoft Corporation, 2013 SCC 57 )

The representative plaintiff in the class action alleged that, beginning in 1988, Microsoft engaged in unlawful conduct by overcharging for its Intel-compatible PC operating systems and Intel-compatible PC applications software.  The plaintiff sought certification of the class action under the British Columbia Class Proceedings Act ("Act").   The proposed class is made up of ultimate consumers, known as "Indirect Purchasers" who acquired Microsoft products from re-sellers. 

The British Columbia Supreme Court certified the proceeding as a class action.  Microsoft appealed from that decision.  The British Columbia Court of Appeal allowed Microsoft's appeal and dismissed the action, ruling that indirect purchaser actions were not available as a matter of law in Canada and therefore the class members had no cause of action. 

The plaintiff appealed that decision to the Supreme Court of Canada (SCC) which allowed the appeal.  

The SCC held that indirect purchasers do have a cause of action against the party who has caused the overcharge to occur at the top of the distribution chain and who has injured the indirect purchasers as a result of the overcharge being passed on to them".  The Court acknowledged that it had rejected the "passing-on"  defence in the context of the imposition of ultra vires taxes.  However, the fact that the passing-on defence had been rejected did not lead to a corresponding rejection of the offensive use of passing on.  Accordingly, indirect purchasers should not be foreclosed from claiming "losses" passed on to them.  The risk of double or multiple recovery where actions by both direct and indirect purchasers are pursued at the same time or where parallel suits are pending in other jurisdictions can be managed by the court. 

The SCC further held that In bringing the action, indirect purchasers willingly assumed the burden of establishing that they have suffered a loss.  Whether they meet their burden is a factual question to be decided on a case by case basis.  Indirect purchaser action may, in some circumstances, be the only means by which overcharges are claimed and deterrence is promoted.  Allowing such an action is consistent with the remediation objectives of restitution law because it allows for compensating the parties who have actually suffered the harm rather than reserving those actions for direct purchasers who may have in fact passed on the overcharge.

As to meeting the test for certification under the Act, the SCC held that the pleadings disclosed causes of action that should not be struck out at the certification stage.  No such remedy should be given by the courts unless it was "plain and obvious" that the plaintiff's claim could not succeed.  The class representative must show some basis in fact for each of the certification requirements set out in the Act, other than the requirement that the pleadings disclose a cause of action.  However, the certification stage is not meant to be a test of the merits of the action, rather it is concerned with forum and with whether the action can properly proceed as a class action.  

Regards,

Blair