Ontario Appeal Court Dismisses Class Action Against Manulife For Pure Economic Loss

The Ontario Court of Appeal has affirmed a trial judge's decision to dismiss a class action against the Manufacturers Life Insurance Company (“Manulife”) on the basis that there was no cause of action for the plaintiffs' pure economic loss.

 

In Mandeville v. The Manufacturers Life Insurance Company, 2014 ONCA 417, the appeal court considered whether Manulife owed a novel duty of care to certain policyholders in connection with its decision to "demutualize" the company.  
 

As a mutual insurance company, Manulife was governed by the Insurance Company’s Act (the “Act”).  The Act required Manulife to obtain regulatory approval for the transfer (i.e., the demutualization) from the Canadian government.  Because the “block of business” in issue was located in Barbados, Manulife also needed the approval of the Barbados government.

 

Approximately 8,000 residents of Barbados had participating policies with Manulife that were transferred to the Barbados Insurance Company.  In demutualizing, Manulife converted from a mutual insurance company to a stock company.  Because the class members policies had been transferred to the Barbados Insurance Company, they were no longer Manulife participating policyholders and therefore were ineligible to share in the value of the company.

 

The class action brought by the Barbados policyholders claimed that Manulife was negligent and breached its fiduciary duty that it owed to them.  Their negligence claim was founded on the allegation that Manulife knew it was going to demutualize when it transferred its Barbados business and that it ought to have structured the transfer in a way that protected or preserved the class numbers’ rights to share in the value of Manulife on demutualization.  They sought damages equal to the amount that the class members would have received had they been treated as eligible policyholders on demutualization.

 

After a 29 day common issues trial, Justice Newbould of the Ontario Superior Court concluded that while Manulife owed the Barbados policyholders a prima facie duty of care based on foreseeability of harm and proximity, for policy reasons, he refused to recognize that duty of care.  Had he found Manulife liable, Justice Newbould would have ordered Manulife to pay damages of approximately $82 million, plus interest.

 

The class members advanced an alternative theory that claimed that Manulife should have compensated them for the loss of their “ownership rights” at the time of the transfer.  Justice Newbould also rejected this theory, but determined that if liability had been established on that basis, he would have ordered Manulife to pay damages of $24.5 million, plus interest.

 

The class members appealed to the Court of Appeal.  Manulife cross-appealed on the issue of damages.  Justice Gillese writing for the Court of Appeal (Justices Blair and Strathy) held that the appeal and the cross-appeal should be dismissed.

 

In coming to the appeal court’s decision, Justice Gillese reviewed the key concepts in play about how a mutual insurance company was established and how it demutualized.  She then set out a brief history of demutualization in Canada beginning in the late 1950’s when insurance companies in Canada became concerned about their vulnerability to hostile takeovers, the enactment by Parliament of amendments to the Canadian and British Insurance Companies Act (predecessor to the Act) to allow stock companies to mutualize and ending in the 1990’s when insurance companies began to see the advantages of converting back into stock companies. 

 

In 1990, Manulife decided to sell its life insurance in the Caribbean – Atlantic region because the business was too small to operate effectively and its growth prospects were poor.  Manulife eventually sold all of its business in the Caribbean, except for the business in Barbados.  In Barbados, an insurance company required approval of the Supervisor of Insurance in order to transfer all or part of its business to another company.  Justice Gillese explained in detail Manulife’s attempts to transfer its Barbados business.  It was finally able to reach an agreement to do so in 1996.  Manulife obtained regulatory approval to close the sale and transfer its Barbados policies from both the Canadian and Barbados regulators.  Manulife’s demutualization became effective approximately 3 years later, in September of 1999.

 

In 2002, the proceeding was certified as a class action by Justice Nordheimer.  Justice Nordheimer concluded that the regulatory approval given by Barbados Government did not automatically bar the Barbados policyholders from bringing the action.

 

Ten years after certification, the matter was brought to a common issues trial.

 

After reviewing the findings made by the trial judge, the Court of Appeal held that the appeal raised a single issue:  Did the trial judge err in refusing to recognize that Manulife owed the class members a duty of care at the time of the transfer?

 

The Court held that the nature of the appellants’ claim was not straightforward in this case.  Justice Gillese wrote that the question wasn’t whether the participating policyholders could be described as owners of a mutual insurance company.  It was whether at the time of the transfer to the Barbados Insurance Company, whether the class members had a legally recognized right or interest in respect of a possible demutualization by Manulife.  She held that they did not.  At the time of the transfer in 1996, mutual companies like Manulife were not permitted to demutualize.  That right only came into existence in 1999.  The terms of the class members’ policies did not refer to any right to receive benefits on demutualization.  In addition, there was no such right afforded by statute or regulation.  Because Manulife had no right to demutualize in 1996, the appellants could have had no right to share in the benefits of demutualization.

 

Justice Gillese concluded that a hope or mere expectancy is not illegally enforceable right or interest.

 

In addition, the Court of Appeal held that the appellants’ claim was one for pure economic loss.  Pure economic loss is loss suffered by an individual that is not accompanied by physical injury or property damage.  Damages claimed by the appellants is equivalent to the benefits the class members would have received had they been treated as eligible policyholders upon Manulife’s demutualization.  The damages are not causally connected to physical injury to their persons or physical damage to their property.

 

When a claim is made for pure economic loss, the Supreme Court of Canada in Martel Building Ltd. v. Canada, 2000 has held that such claims or require greater scrutiny when the court is deciding whether to recognize a duty of care.  The Supreme Court of Canada in Martel set out the policy reasons underlying the common law's traditional reluctance to permit recovery for pure economic loss:

 

            “First, economic interests are viewed as less compelling of protection than bodily security or proprietary interests.  Secondly, unbridled recognition of economic loss raises the spectre of indeterminate liability.  Third, economic losses often arise in a commercial context, where they are often an inherent business risk best guarded against by the party in whom they fall through such means as insurance.  Finally, allowing the recovery of economic loss through tort has been seen to encourage a multiplicity of inappropriate law suits.  

 

However, Canadian jurisprudence shows that there was no automatic bar to recovery for pure economic loss.

 

Justice Gillese utilized the test established in Anns v Merton Borough Council  to determine whether a novel duty of care between a mutual insurance company and its participating policyholders should be recognized in the present case.  Anns is a 2 stage test for determining whether a duty of care arises - i.e., 1) was the harm that occurred, the reasonably foreseeable consequence of the Defendant’s Act; and 2) are there reasons, notwithstanding the proximity between the parties that tort liability should not be recognized?

 

Applying the Anns test, the Court of Appeal agreed with Justice Newbould that the harm the class members suffered was a reasonably foreseeable consequence of Manulife’s transfer of their policies.  However, the appeal judges disagreed that a prima facie duty of care had been established.  They concluded that given the tenuous and inchoate nature of the interest that the policyholders sought to have protected, the proximity requirement had not been satisfied and a prima facie duty of care did not arise.

 

Having found no prima facie duty of care at the first stage of the Anns test, the Court held that it was unnecessary to continue the second stage and consider whether there were residual policy considerations that would negate the imposition of a new duty of care.  Despite that finding, Justice Gillese held that there were two policy considerations that precluded a duty of care -  the spectre of indeterminate liability and a multiplicity of inappropriate law suits. 


The court dismissed the policyholders' appeal.


Regards,


Blair 

 

Hybrid Trials Best Suited For Will Challenges In "Modest" Estates

In a decision dated April 4, 2014, Justice D. M. Brown of the Ontario Superior Court of Justice refused an applicant’s request for a hearing date for a summary judgment motion and instead ordered that the action be resolved by way of a hybrid trial.

 

The case involved a will challenge for a “modest” estate (about $750,000 in total).  Two of the deceased’s four daughters were challenging the will on the basis of lack of testamentary capacity and undue influence, among other grounds.  In refusing one daughter’s request for a summary judgment hearing date, Justice Brown cited the Supreme Court of Canada’s decision in Hryniak v. Mauldin, 2014 SCC 7, in which the Court stated:

 

            “[73]  A motion for summary judgment will not always be the most proportionate way to dispose of an action.  For example, an early date may be available for a short trial, or the parties may be prepared to proceed with a summary trial.  Counsel should always be mindful of the most proportionate procedure for their client in the case.”

 

Justice Brown held that in this case bringing a summary judgment motion would be a grossly disproportionate way to resolve the dispute for two reasons:

 

1. The estate was modest and summary judgment motions are expensive; and
2. Significant credibility issues were at play with conflicting versions of facts between two “antagonistic" daughters.

 

Justice Brown assigned a trial date for the autumn of 2014 and ordered that the matter proceed by way of a “hybrid form of hearing” in which any party who intended to testify at trial must file an affidavit which will serve as his or her evidence-in-chief, and a time-limited oral cross-examinations would be scheduled.  As to the evidence from non-party witnesses (if affidavits could not be obtained), each party must serve a detailed will-say of the anticipated evidence from such witnesses.


Regards,


Blair

Note : Justice Brown held that at the present time in the Toronto Region, trials of five days or less are available "virtually for the asking".  That has not been my recent experience.  I could not get a three day trial heard in Toronto, even though we had been given a trial date of the week of May 10th, on the basis that there were no judges available.  The trial coordinator advised us that we would be put over to a new date between September and December of 2014.

 

Executive Receives Prison Term For Bribery Of Foreign Official

In 1998, the Canadian Parliament enacted the Corruption of Foreign Public Officials Act (“Act”) in order to implement Canada’s obligations under the Convention on Combating Bribery in International Business Transactions as a signatory to the Organization for Economic Cooperation and Development.   Sixteen years later, on May 23, 2014, the first person convicted under the Act was sentenced to a three year penitentiary prison term.  In that time, only three other prosecutions were initiated under the Act, all involving corporations and all being resolved by way of guilty pleas.  The case of R. v. Nazir Karigar (2014) ONSC3093 was the first to proceed to trial. 

 

In this case, Mr. Karigar was convicted on a single count indictment of offering a bribe to a foreign public official.  He had conspired with several individuals employed by or associated with Cryptometrics Canada Limited of Ottawa, Ontario to offer bribes to officials of Air India and to an Indian cabinet minister.  The purpose of the conspiracy was to win a tender for a multi-million dollar contract to sell facial recognition software and related products to Air India.   However, Air India awarded the contract to another corporation. 

 

In his sentencing decision, Justice Hackland of the Ontario Superior Court of Justice took into account the following factors:

 

Aggravating Factors

 

1. The bribery scheme was sophisticated, carefully planned and intended to involve senior public officials at Air India and an Indian cabinet minister.  If successful, it would have involved the payment of millions of dollars in bribes and stock benefits over time;
2. Mr. Karigar’s participation in the bidding process involved other circumstances of dishonesty such as entering a fake competitive bid to create the illusion of a competitive bidding process and receiving confidential insider information in preparing the bid;
3. Mr. Karigar behaved throughout with a complete sense of entitlement, candidly relating to a Canadian Trade Commissioner that bribes had been paid and then urging the Canadian government’s assistance in closing the transaction; and
4. Mr. Karigar personally conceived of and orchestrated the bribery proposal and created financial spread sheets concerning the amounts he proposed be paid.   

 

Mitigating Factors

 

1. There was a high level of cooperation on Mr. Karigar’s part.  He exposed the bribery scheme to the authorities following a falling out with his co-conspirators.  He unsuccessfully sought an immunity agreement but avoided a great deal of trial time as a result of his extensive admissions;
2. Mr. Karigar had been a respectable business man all his working life prior to his involvement in the matter.  He had no prior criminal involvement.  He was in his late sixties and not in the best of health;
3. The bribery scheme was a complete failure.  Mr. Karigar and his co-conspirators failed to obtain the contract or any other benefits.  Accordingly, the harm resulting from the scheme was likely restricted to the promotion of corruption among a limited group of foreign public officials.

 

Jurisprudence Under The Act

 

Justice Hackland considered the relevant jurisprudence, i.e. the only three other prosecutions that have come before the courts:

 

1. In R. v. Watts [Hydro Kleen] (2005), Hydro Kleen pleaded guilty to bribing a foreign official.  It operated in Canada and the United States and its employees travelled between the two countries for work.  At times its employees experienced difficulties entering the United States.  Hydro Kleen hired a US immigration officer as a “consultant” and paid him $28,300 to facilitate the passage of its employees into the US.  Unknown to Hydro Kleen, the immigration officer also made it more difficult for employees of its competitors to enter the US.  A joint submission with respect to sentencing was accepted by the court which imposed a fine of only $25,000;
2. In R. v. Niko Resources Ltd. (2011), Niko Resources pleaded guilty to providing improper benefits ($195,984) to a foreign public official in Bangladesh in order to further business objectives.  The court accepted the parties joint submission on penalty which involved a fine in the amount of $9.49 million.  The court considered the seriousness of the crime and the principle sentencing objective of denunciation and deterrence;
3. In R. v. Griffiths Energy International (2013), Griffiths Energy pleaded guilty for paying a $2 million bribe and shares to a corporation owned by the wife of a foreign ambassador.  A new management team at Griffiths discovered that the bribe had been paid by their predecessors.  Current management acted quickly to fully investigate the matter and self-report the crime to authorities and pleaded guilty, saving the cost of a lengthy and complex trial.  A joint submission as to a penalty($10.35 million) was accepted by the court.

 

Justice Hackland held that in light of these decisions, it is clear that the bribery of foreign officials must be viewed as a serious crime and the primary objectives of sentencing must be denunciation and deterrence.  The more recent cases, Griffiths Energy and Niko Resources, clearly demonstrated that a substantial penalty is to be imposed by the courts even in circumstances where a guilty plea was entered and the accused has cooperated with authorities. 

 

Cases Of Fraud Under Section 380 Of The Criminal Code

 

Justice Hackland reviewed a number of cases in which the courts discussed the principles of general deterrence and noted that a fraud against a government agency is not a victimless crime as it results in a reduction in resources available to people who rely on government services.  Where the need for general deterrence is particularly pressing, incarceration would normally be preferable and to be effective, usually a conditional sentence must be punitive.

 

Justice Hackland considered the recent Court of Appeal case in R. v. Drabinski where the court allowed sentence appeal reducing the jail time imposed by the trial judge.  The court held that:

 

“The deterrent value of any sentence is a matter of controversy and speculation.  However, it would seem that if the prospect of a long jail sentence will deter anyone from planning on committing a crime, it would deter people like the appellants who are intelligent individuals, well aware of potential consequences, and accustomed to weighing potential future risks against potential benefits before taking action.”

 

Of note in Drabinski, the court held that in fraud cases, traditional mitigating factors such as an accused’s prior good character and the personal consequences of the fraud cannot alone justify departure from the sentencing range. 

 

Cases Of Bribery/Corruption Under The Criminal Code

 

Finally, Justice Hackland considered a number of cases where accused were sentenced under such sections where the courts held that due to the serious public nature of the offences the overwhelming consideration in sentencing is that the sentence be a deterrent to others. 

 

Weighing all of the factors listed above, Justice Hackland sentenced Mr. Karigar to a 3 year prison term in penitentiary.  Commentators argue that such a sentence "sets a clear precedent for future convictions". 

Regards,

Blair   

 

Mandatory Retirement for Law Firm Partners Not Discriminatory

John Michael McCormick became an equity partner at Fasken Martineau DuMoulin LLP (“Faskens”) in 1979.  In the 1980s the equity partners of Faskens voted to adopt a provision in their partnership agreement whereby equity partners were required to retire and divest their ownership shares in the partnership at the end of the year in which they turn 65.  In 2009, when he was 64, Mr. McCormick brought a claim before the British Columbia Human Rights Tribunal (“Tribunal”) alleging that the provision in the partnership agreement constituted age discrimination contrary to the British Columbia Human Rights Code (“Code”).

Faskens applied to have the claim dismissed on the grounds that the complaint was not within the jurisdiction of the Tribunal and that there was no reasonable prospect that that it would succeed.  Faskens argued that McCormick, as an equity partner, was not in the type of workplace relationship covered by the Code. 

The Tribunal  concluded that there was an employment relationship and concluded that Faskens had discriminated against McCormick.  Faskens' application for judicial review was dismissed by the British Columbia Supreme Court.  However, the British Columbia Court of Appeal allowed Faskens’ appeal, concluding that McCormick, as a partner, was not in an employment relationship with Faskens pursuant to the provisions of the Code. 

McCormick ‘s further appeal to the Supreme Court of Canada was dismissed.

The Supreme Court, with reasons written by Justice Abella, unanimously held that the Code was a quasi-constitutional legislation which should be “generously” interpreted to permit it to achieve its broad public purposes.  Those purposes include the prevention of arbitrary disadvantage or exclusion based on enumerated grounds so that individuals deemed to be vulnerable by virtue of a group characteristic can be protected from discrimination.  The Code achieves these purposes by prohibiting discrimination in a context such as employment. 

Deciding who is in an employment relationship for the purposes of the Code means examining the “two synergetic” aspects in the relationship:    control exercised by an employer over working conditions and remuneration, and corresponding dependency on the part of the worker.  The test is who is responsible for determining working conditions and financial benefits and to what extent does a worker have an influential say in those determinations.  The more the work life of individuals is controlled, the greater their dependency and, consequently their economic, social and psychological vulnerability in the workplace. 

Control and dependency are a function of whether the worker receives immediate direction from or is effected by the decision of others and also whether he or she has the ability to influence decisions which critically affect his or her working life.    Ultimately, the key is the degree of control and the extent to which the worker is subject and subordinate to someone else’s decision-making over working conditions and remuneration. 

Applying the control/dependency test to this case, Justice Abella found that in addition to the right to participate in the management of the partnership, McCormick benefited from other control mechanisms, including the right to vote for and stand for election to the firm's board; the duty that the other partners owed him to render accounts; the right not to be subject to discipline or dismissal; the right on leaving the firm to his share of Faskens' capital account; and the protection that he could only be expelled from the partnership by a special resolution passed by a meeting of all equity partners and a regional resolution in his region.     

The court found that as an equity partner and based on his ownership sharing of profits and losses and the right to participate in management, McCormick was part of the group that controlled the partnership, not a person vulnerable to its control and for over 30 years had benefited financially from the retirement of other partners.  McCormick was not ever in a subordinate relationship with the other equity partners.

Interestingly, the court held that it is not to say that a partner in a firm can never be an employee under the Code but in the absence of any genuine control of McCormick in the significant decisions effecting the workplace, in this case there was no employment relationship between him and Faskens under the provisions of the Code.  Accordingly, the court found that the Tribunal had no jurisdiction over McCormic’s relationship with Faskens.  

Regards,

Blair

"Abdicating" Trustee Found Liable For Loss of Trust Monies

The Ontario Court of Appeal has held that a trustee, who abdicated her discretion and responsibility by improperly delegating those powers to two other trustees, was jointly and severally liable with the other trustees for trust funds that were wrongfully removed from the trust.  See Penman (Litigation Guardian of) v. Penman 2014 ONCA 83

Mary Lou McGillvray, appealed from the decision of Justice L.B. Roberts of the Ontario Superior Court of Justice to the Ontario Court of Appeal.  Justice Roberts had found Ms. McGillvray jointly and severally liable, together with her two nephews, Randal Penman and Mark Penman, for the sum of $453,048.20 plus interest, on account of trust funds that were wrongfully removed from a trust created by Ms. McGillvray’s late brother and her sister-in-law for the benefit of their grandchildren.  At all relevant times, Ms. McGillvray and her nephew Mark Penman were co-trustees of the trust.  Although he was not named as a co-trustee, Randal Penman was a trustee de son tort of the trust.  Ms. McGillvray was also one of the executors of her deceased brother’s estate.

Ms. McGillvray’s central submission on the original application was that she had acted honestly and reasonably, in good faith, and with the benefit of legal advice from her nephew, Randal Penman, an Alberta lawyer.  She maintained that she was “duped” by her two nephews who wrongfully used the trust funds for their own benefit and that no act or omission on her part caused the loss of the trust funds. 

Justice Roberts disagreed.  She held that Ms. McGillvray had breached her obligations as a co-trustee of the trust, including her fiduciary obligations and made adverse findings as to Ms. McGillvray’s credibility and reliability of her testimony.  The finds included:

1. Ms. McGillvray had signed a director’s resolution authorizing Mark Penman to invest funds in the exercise of his unfettered discretion;
2. she failed to make any inquiries regarding the investment of the trust funds or Mark Penman’s dealings with the funds;
3. she was not misled by her nephews regarding the use and investment of the trust funds; and
4. she did not act reasonably in relation to her duties as a co-trustee of the trust and did not comply with her statutory duty of care as a trustee as set out under section 27(1) of the Trustee Act (the “Act”).  To the contrary she abdicated her duties entirely by improperly delegating all her powers, duties and authority as co-trustee to her two nephews.

The application judge found that it was “willful neglect and default” of a trustee to place trust funds in the hands of another (even a co-trustee) and allow it to remain there for years without any inquiry or any assurance that the trust is being properly administered.   

The Court of Appeal found that these findings of fact were available to the application judge on the evidentiary record before her.  Ms. McGillvray had failed to establish that the findings were tainted by "palpable and over-riding" error.  Accordingly, there was no basis for interference with the findings.

The Court of Appeal considered whether Ms. McGillvray could be relieved of liability by operation of law or under the terms of the trust indenture.  In this regard, it also upheld the decision of the application judge.  Justice Roberts held that McGillvray could not rely on the protection of section 35(1) of the Act which excuses trustees from liability for breaches of trust and failure to seek direction of the court where it is found that they acted honestly and reasonably.   This relief was not available to Ms. McGillvray because the alleged loss arose out of investment of the trust property and subsection 35(2) of the Act expressly provides that subsection (1) does not apply in those circumstances.  Moreover, the Court of Appeal held that Ms. McGillvray had not acted reasonably and therefore would be unable to rely on that section of the Act.

As to the trust indenture, the relevant section of it read that the trustees would not be responsible for the acts or defaults of each other or for any error in judgment or any act of omission or commission not amounting to actual fraud in the management and administration of the trust property.  Justice Roberts held that this paragraph did not apply to immunize Ms. McGillvray from personal liability because an exculpatory clause will not protect a trustee when it is found that the trustee improperly delegated the power or discretion in question.  Each trustee must actively consider his or her discretion and will not be exonerated for passively acquiescing in the actions of a co-trustee.   The law does not distinguish between passive and active trustees.  In accepting a trusteeship, the trustee assumes a duty to the beneficiaries of the trust.

Again the Court of Appeal agreed with the application judge and added that clauses of that kind will not protect the trustee when it is found that she improperly delegated her power or discretion.

In dismissing Ms. McGillvray’s appeal, the Court of Appeal commented that she remained free to pursue indemnification from Randal and Mark Penman for their wrongdoing in relation to the trust, should she be so advised.   

Regards,

Blair

    

Supreme Court Rules in Favour of Roadside Police Searches

In September of 2006, two police constables were in a marked police cruiser monitoring traffic on the Trans-Canada highway just west of Caronport, Saskatchewan.  They observed a car driven by Benjamin MacKenzie traveling toward them.  The police radar indicated that the car was traveling at a speed of 112 km per hour, only 2 km per hour over the posted limited.  However, the constables saw that the front end of the car was “pitching forward like it was slowing down very fast”.  They attributed this to a sudden and rapid deceleration of the car from 112 km per hour to 89 km per hour – the speed at which the car was traveling when it passed their police cruiser. 

The officers pursued Mr. MacKenzie.  Two kilometers down the road they spotted his car parked on the side of the highway.  They had not signaled for him to stop.  They wanted to give him a warning about speeding, even though they were unsure how fast he had been driving. 

Mr. MacKenzie was the only occupant of the car.  As one of the constables approached his window, Mr. MacKenzie, unprompted, said he was sorry, he knew he was speeding  and that he would slow down in future.  When Mr. MacKenzie handed over his license and registration documents the police noticed that his hands were shaking.  Mr. MacKenzie appeared to be sweating, with beads of sweat forming on his forehead and his breathing was very rapid.   His carotid artery was pulsing very rapidly.  In addition, the police noted that Mr. MacKenzie’s eyes had a pinkish colour to them.  

Mr. MacKenzie’s level of nervousness was extremely high.  When questioned about the details of his trip he gave contradictory answers in a short period of time.  As a result, the police asked him to step out of the car on the basis that they believed that he was under the influence of drugs.   They then advised Mr. MacKenzie of his Charter rights, including his right to counsel.  Mr. MacKenzie said he understood his rights but declined to call a lawyer.  

The police asked Mr. MacKenzie if he would consent to a search of his car.  When Mr. MacKenzie refused to consent, the police used Levi, a “single-profile” narcotic detector dog, who had been assigned to them.  Levi conducted a perimeter search of the car and by his actions indicated the scent of drugs was in the rear hatch area.  The police arrested Mr. MacKenzie and began a manual search of the car.  They found several gift-wrapped boxes in the rear hatch which ultimately led to the discovery that they contained marijuana.  The police arrested Mr. MacKenzie for possession for the purpose of trafficking.

At trial, the police testified that there were a number of factors that led them to believe that Mr. MacKenzie might be involved in trafficking marijuana:

1. his erratic driving;
2. his extreme nervousness;
3. physical signs consistent with the use of marijuana; and
4. Mr. MacKenzie was traveling on a known drug pipeline.

Mr. MacKenzie’s case did not proceed to  trial.  In a pre-trial motion he moved to have the marijuana excluded from evidence on the basis of arguments grounded in his right under Section 8 of the Canadian Charter of Rights and Freedoms (“Charter”) against unreasonable search and seizure.  Mr. MacKenzie argued that the police lacked reasonable suspicion that he was involved in a drug-related offence when they had their dog sniff his vehicle.

The trial judge agreed with Mr. MacKenzie and excluded the evidence and directed that a verdict of not guilty be entered against him.   The Saskatchewan Court of Appeal reversed the decision, finding that “the constellation of objective factors” was sufficient to meet the reasonable suspicion standard.  The Court of Appeal set aside the acquittal and remitted the matter to trial.

In a 5 – 4 decision, the Supreme Court of Canada agreed with the Court of Appeal and dismissed Mr. MacKenzie’s appeal.  The majority decision was written by Mr. Justice Moldaver.  

Justice Moldaver found that reasonable suspicion for the police must be grounded in objectively discernible facts.  While it is critical that the line between a hunch and reasonable suspicion be maintained to prevent the police from engaging in indiscriminate or discriminatory practices, it is equally vital that the police be allowed to carry out  their duties without undue skepticism or the requirement that their every move be placed under a "scanning electron-microscope".

Officer training and experience can play an important role in assessing whether the reasonable suspicion standard has been met.  Therefore in assessing whether a case for reasonable suspicion has been made out, the court should analyze the objective reasonableness through the lens of a reasonable person standing in the shoes of the police officer.  Police training and experience should not be accepted uncritically by the courts.  The courts don’t owe deference to a police officer’s view of the circumstances because of his or her training or experience in the field.  Essentially a trial judge must appreciate the significance  of police training and experience when evaluating the worth of the factors considered in forming the belief that the accused might be involved in a drug-related offence.   

In this case, the trial judge accepted the that the police officers' testimony was credible.  The factors identified by the officers provided the objective basis needed to support his belief that Mr. MacKenzie might be involved in a drug-related offence.  Looking at the totality of the evidence through the lens of an officer with training and field experience in the transportation and detection of drugs, the officers’ subjective belief that Mr. MacKenzie might be involved in a drug-related offence was objectively substantiated.

The dissenting judges held a much difference view.  They held that judges must scrutinize dog-sniff searches and that courts must remain vigilant and not shirk their role in evaluating police conduct for Charter compliance, particularly where the only effective check on that action is after the fact independent judicial assessment.   

The dissenters (decision written by Justice LeBel) held that police cannot simply draw on their experience in the field to create broad categories of “suspicious” behaviour into which almost anyone could fall.  Such an approach risks transforming the already flexible standard of reasonable suspicion into the generalized suspicion standard that has been rejected in the past.  The "constellation of facts" grounding reasonable suspicion must be based in the evidence tied to the individual and capable of supporting a logical inference of criminal behaviour.  While undertaking an objective assessment of the evidence from the police officers perspective, a court should not show that police officer’s testimony any particular deference.  The danger of placing undue emphasis on an officer’s testimony is that a court may inadvertently subvert the objective component of the reasonable suspicion standard.

Justice LeBel, held that in this case the police lacked the requisite reasonable suspicion to conduct the dog-sniff search.   Specifically, the police lacked objective grounds on which to justify deploying a sniffer dog to search Mr. MacKenzie’s car.  He found that the trial judge had not committed an error of law or a palpable and over-riding error of fact.   He understood the reasonable suspicion standard.  The police in this case relied on markers that applied broadly to innocent people or markers only of generalized suspicion that were at best highly equivocal.  The dissenting judges would have allowed Mr. MacKenzie's appeal and restored the decision of the trial judge.

Regards,

Blair

Court Orders Mistrial Due to Poor Jamaican Patois Interpretation

Section 14 of the Canadian Charter of Rights and Freedoms (“Charter”) provides a constitutional right to the assistance of an interpreter for a party or witness who does not understand or speak the language in which the proceedings are being conducted or who is deaf. 

In a recent decision of the Ontario Superior Court of Justice, Justice Conlan allowed a defence application and declared a mistrial where an accused who was charged with the offence of importing cocaine had not been provided with an accredited interpreter of Jamaican Patois.  Justice Conlan declared the mistrial on the basis that the accused, Michael Bryan’s right to make full answer and defence and his right to a fair trial were compromised by the deficiency in interpretation services provided at the Brampton, Ontario court.

Mr. Bryan and his co-accused, Ryan Douglas, were tried jointly before a jury on a single-count indictment alleging the offence of importing cocaine.  The allegation was that the two accused has ingested cocaine and brought the drug into Canada on an airplane from Jamaica.

The primary defence for each accused was duress – that their families had been threatened by thugs in Jamaica and that such threats caused them to swallow pellets of cocaine before flying from Jamaica to Toronto’s Pearson International Airport.   

During the course of the trial, an accredited interpreter who was attending the trial brought to the defence counsel’s attention that there had been several deficiencies with the interpretation of Mr. Bryan’s testimony.  The defence applied for a mistrial.

The interpreter who testified in a voir dire at the trial, was 33 years old.  He had lived in Jamaica for the first 25 years of his life, had worked as a youth ambassador for the United Nations and worked for three years as an interpreter for the United States Peace Corp.  The interpreter pointed out numerous inconsistencies and  mistakes in the Patios interpretation provided to Mr. Bryan, some of which amounted to a paraphrasing of his evidence.  Even Mr. Bryan had to stop the trial interpreter on two occasions to correct mistakes

Justice Conlan, allowed the mistrial application.  He held that, while there was no requirement or even an expectation that the interpretation be perfect, the minimum constitutional threshold to meet the obligation under section 14 of the Charter requires that the interpretation must be continuous, precise, impartial, competent and contemporaneous.  While poor interpretation can be accepted, it is not appropriate for the court to second-guess and speculate as to whether there has been a breach of section 14 of the Charter.  The accused is entitled to the minimum constitutionally protected threshold afforded by section 14. . 

Justice Conlan found that the trial was too far along to stop and start again with the same jury.  Accordingly, even though it was a joint trial with Mr Douglas, Justice Conlan found that nothing short of the remedy of a mistrial would suffice in those circumstances.

Regards,

Blair