Wal-Mart Ordered to Compensate Former Employee for Workplace Bullying

To state the obvious, there is no precedent until it is done for first time.  So said the Ontario Court of Appeal in confirming a record damage award against an individual employee in the case of Boucher v. Wal-Mart Canada Corp. 2014 ONCA 419.

 Meredith Boucher began working for Wal-Mart in 1999.  She was a good employee.  In 2008, Boucher was promoted to the position of assistant manager at a Wal-Mart store in Windsor, Ontario.   She reported to the store manager, Jason Pinnock. 

 

For health reasons, Wal-Mart is required to maintain temperature logs which record temperatures of food and dairy products stored in its coolers.  Boucher was responsible for ensuring the logs were maintained.

 

In May of 2009, Boucher went on a month long Wal-Mart course and another assistant manager assumed responsibility for maintaining the temperature logs.  However, that employee did not complete the logs.  When Boucher returned to the Windsor store at the end of her course, Pinnock told her that the incomplete log would negatively affect the store’s pending evaluation and in turn would negatively affect his own evaluation as store manager.  Pinnock told Boucher to falsify the log.  Boucher refused to do so.  Because she refused, Pinnock subjected Boucher to a disciplinary “coaching” session.   Subsequently, Pinnock became abusive towards Boucher.  He belittled, humiliated and demeaned her, continuously, often in front of co-workers. 

 

Wal-Mart holds itself out as a business that regards its employees highly.  It has a number of workplace policies intended to reflect its concern for its employees.  One such policy is Wal-Mart's open-door communication policy.  Wal-Mart encourages its employees to report on a confidential basis concerns about how its stores are operated or how its employees are treated. 

 

Wal-Mart also has a prevention of violence in the workplace policy.  It undertakes to take all employee reports of incidents seriously and to protect an employee making a complaint from acts of retaliation.  In addition, Wal-Mart has a harassment and discrimination policy.  The purpose of this policy is to protect employees from unwelcome conduct that offends a person’s feelings.  Wal-Mart, through its policies, requires all of its employees to treat each other with dignity and respect. 

 

Accordingly, Boucher complained about Pinnock’s conduct and his treatment of her to three senior management representatives of Wal-Mart.  The management team said they would investigate her concerns.  They also told her to report any new incidents of misconduct.  But they also cautioned Boucher that if her concerns were found to be unwarranted, she would be held accountable for raising them. 

 

Wal-Mart’s management team investigated Boucher’s complaints.  They told her that they found the complaints to be “unsubstantiated”.  They also told her that she would be held accountable for making these unsubstantiated complaints but they had not yet decided what discipline she would face.  Pinnock on the other hand was not disciplined for his conduct or even cautioned about it.  He was spoken to only about his use of inappropriate language.   

 

Here is a sampling of Pinnock’s conduct.  He repeatedly told Boucher in front of other employees how stupid she was and that her career was blowing up; he pounded his chest and said “let me know when you can’t fucking handle it anymore”; he berated Boucher in front of other managers and customers saying “this is a fucking shit show, look at this fucking mess”; he constantly called Boucher an idiot and stupid.

 

After the management investigation at the end of Boucher’ shift, Pinnock again berated her because 10 extra skids of product had not been unloaded.  Pinnock grabbed Boucher by the elbow in front of co-workers.  He told her to prove to him that she could count to 10.  He prompted her by initiating the count, then told her to count out loud along with him.  Boucher was so humiliated she left the store.  Boucher sent Wal-Mart an email advising that she did not intend to return to work until her complaints about Pinnock were resolved to her satisfaction.  They never were and Boucher never returned to work.  Boucher commenced an action for constructive dismissal and damages.

 

The Court of Appeal commented on Pinnock’s motives.  Pinnock had told other managers at the store that he would not stop harassing Boucher, “not until she fucking quits”.  He was overjoyed when she did so.

 

At trial the jury awarded damages against Pinnock of $100,000 for intentional infliction of mental suffering and punitive damages of $150,000. 

 

Against Wal-Mart, the jury awarded damages of $200,000 for aggravated damages and $1 million in punitive damages. 

 

Pinnock and Wal-Mart appealed to the Ontario Court of Appeal.  The Court of Appeal reduced the damages against both Pinnock and Walmart.  It found that the jury had reasonably found Pinnock liable for intentional infliction of mental suffering.  His conduct was flagrant  and outrageous.  He intended to produce the harm that eventually occurred and Boucher had suffered a visible and provable illness.  The damages award of $100,000 was high but not unreasonable.  However, the award of punitive damages against Pinnock should be reduced to $10,000.  An award of $150,000 was not required for the purposes of retribution, denunciation and deterrence. 

 

As for Wal-mart, the Court of Appeal held that the award of aggravated damages against Wal-Mart in the amount of $200,000 was not excessive and did not result in double recovery by Boucher.  While Pinnock’s misconduct brought about Boucher’s mental anguish, the unfair way Wal-Mart dealt with that misconduct brought about her constructive dismissal.  Wall-mart’s own conduct justified a separate and substantial award for aggravated damages.

 

The Court of Appeal found that the trial judge had erred in instructing the jury that the tort committed by Pinnock could be an actionable wrong by Wal-Mart that supported a finding of punitive damages against it.  However, the error was harmless as Wal-Mart had committed an actionable wrong that supported an award of punitive damages by breaching its duty of good faith and fair dealing towards Boucher.  In light of the compensatory damages awarded, an award of punitive damages in the amount of $1 million was not rationally required to punish Wal-Mart or to give effect to denunciation or deterrence.  The Court of Appeal reduced the punitive damages against Wal-Mart to $100,000. 

Regards,

Blair

 

The Value of Oaths -Telling the Truth for the Sake of the Truth

A few years into my litigation practice, a partner in the Toronto law firm where I worked asked me to conduct a trial for the brother-in-law of his legal assistant.  The brother-in-law, John, was an independent contractor whose contract had been terminated by a large corporation.  John sued the company, claiming that he was an employee rather than an independent contractor and thus was entitled to receive reasonable notice of the termination of his contract. 

At trial, John testified about the details of his relationship with the company.  After the briefest of deliberations, the judge gave oral reasons dismissing John's claim.  Looking down, disapprovingly at John, the judge said, "I find John's testimony to be quite phantasmagorical".

John looked at me, puzzled. 

"Blair," John asked, "What does that mean?" 

"It means that he doesn't believe you John," I answered.

John seemed relieved.  "Okay." was all he said.

In fact, I hadn't believed John either.  Although he had been under oath, John had not told the truth.  As a young lawyer, I quickly came to realize that taking an oath, or making an affirmation to tell the truth, did not always mean that a witness would do so.  I had discovered that witnesses would sometimes "bend" the truth to suit their purposes. 

I discussed the matter with a friend, a former associate who had left the firm to pursue a career in criminal law.  As circumstance would have it, my friend was writing an article on the subject of perjury.  "If I was the other lawyer," my friend said, "I would have charged John with perjury."  This time I was the one who was puzzled.  I knew that witnesses sometimes lied under oath.  In fact, as I gained more experience, I came to expect that someone involved in a proceeding – a party, a witness, perhaps even my own client, would lie under oath.  Despite that, very few people are prosecuted for perjury. I wondered if there was a connection. 

The Origins Of Oaths

If witnesses so casually ignore the importance of swearing an oath, why is it still a requirement in our judicial system?  As one judge put it, "Oaths and their substitutes are designed to emphasize the importance of telling the truth for religious or moral reasons – telling the truth for the sake of the truth."[1]  The difficulty appeared to be, is that people who have a motive to lie, will also lie under oath.  They might not necessarily tell the truth for the sake of the truth but they will certainly lie for the sake of their case. 

The challenge is that, in our adversarial system, oral testimony is the principal item of judicial evidence.  Such testimony is the statement of a witness in court which is offered as evidence of the truth of that which is stated.[2]  For many reasons, testimony was regarded as more reliable if it was supported by an oath. 

Oath-taking has a long history in judicial proceedings going back at least as far as 400 CE.  Twelfth century English courts held their judicial proceedings in the open air and upon the most significant hill in the area.  A local man of power and authority, such as the sheriff, would preside over the court but the largest local land owners were bound by custom to attend and be the "doomsmen" (judgment-men) of the court.  The sheriff took care of the procedures of the court and pronounced the overall sentence but the doomsmen were the participants who found the appropriate "doom" to fit the facts.  If the two litigants contradicted each other in fact, there was no capacity for holding a cross-examination and judging the worth of a witness statement.  In these circumstances, recourse would be to the supernatural to prove "by God" that one or the other was correct.  This proof took three forms:  (1) oaths and oath-helpers,  (2) ordeal; and  (3) trial by battle.[3] 

The Oath As A "Self-Curse"

Thus, the practice of administering an oath in judicial proceedings was rooted in the ancient concept of judicium dei, or divine judgment.  These forms of proof have been traced to a pre-religious, pre-animistic period of history where supernatural beings were unknown and people were believed to possess magical powers which could be invoked through an uttered curse.  In this form, the oath was a traditional self-curse which could be used as security for a promise.  A sworn witness who remained unharmed after testifying was presumed to have been adjudged by God to have spoken the truth.[4]

The Origin Of The Affirmation

An affirmation is a solemn declaration allowed to those who conscientiously object to taking an oath.  An affirmation has the same legal effect as an oath but is usually taken to avoid the religious implications of an oath.  The right to give an affirmation has existed in English law since the Quakers Act, 1695.  It has its origins in the refusal of Quakers to swear any oath, which would otherwise have barred them from holding many public positions.  Quakers believe in speaking the truth at all times, and so the act of only swearing to truth in court, rather than in everyday life, would have implied double standards.[5] 

The Oath In Civil Law Jurisdictions

The practice of administering oaths in judicial proceedings appears to be almost universal.  However, there are at least three systems of law which do not make use of oaths or affirmations namely, Chinese law, Slavic law and Swiss law.  In each of these jurisdictions, the absence of the oath is attributable in part to the absence of any ancient tradition of swearing oaths as a means of proof in itself. 

In Chinese law, the special significance of giving testimony is drawn to the witness's attention by utilizing the same method which is used in private law to emphasize the binding force of an agreement – the written form.  A Chinese witness is usually required to sign a bond or recognisance as to the veracity of his statements, either before or after giving evidence.  Before signing, he is instructed as to the obligations it entails and the punishment imposed for false testimony.  A witness who refuses to sign without good reason is also liable to a small fine.

In Switzerland, a trend towards abandonment towards the oath has also been accelerated by legislation – the Federal Law of Criminal Procedure has reduced the status of an exceptional measure.  The Federal Law of Civil Procedure, makes no mention of oaths at all, merely instructing the judge to admonish the witness as to his duty to tell the truth and as to the penalty of false testimony under the Penal Code.^[6] 

The present day take on Oaths – “ a lingering relic of primordial superstition and primitive mumbo jumbo"

Today, the rationale for swearing an oath to tell the truth is somewhat different:

The historic rationale was that the fear of divine retribution would focus one's mind and heart on telling the truth.  Today in our secular, modern, multi-cultural Canadian society, the fear of divine retribution may seem a quaint anachronism, if not a complete irrelevance.  The law however still recognizes the importance of an oath even if it is not directly tied to a belief in spiritual retribution.  Even in the absence of some religious significance, the solemnity of taking an oath still increases the witness' perception of the importance of telling the truth.[7]  

The present day purpose of oath-taking is to “bind the conscience” of the witness to tell the truth.^[8]  This purpose assumes, of course, that the witness has a conscience.  What about criminals and other notorious liars?  What use is it to administer an oath or an affirmation to a witness who has no (or little) conscience?

In 1993, the Supreme Court of Canada commented on the efficacy of oaths.  The Court was concerned about admitting into evidence, for the truth of their content, prior, unsworn statements that three witnesses had made to the police.  At issue were the "traditional hearsay dangers" including the absence of an oath or solemn affirmation when the statements were made.  The witnesses in the case were described thusly by the trial judge:

…those three witnesses were obviously and deliberately untruthful in their sworn evidence before me with respect to material matters.  Their account of how this fight occurred is not only at odds with the evidence of Steven Wright, Sean Dowling and in my opinion, Ruth Kazan (two independent witnesses), it is at odds with common sense.

…In my opinion, each of these three witnesses lied to me with respect to having lied to the police about what the accused said to them.  I have no doubt that their recantations are false.  That is that I have no doubt that on this point they were telling the police the truth as they knew it about what the accused said.  That finding is not necessarily the same as a finding that the accused made the admissions, but it is tantamount to that finding.[9]

Under the principled exception to the hearsay rule, prior inconsistent statements could be admissible if they met the governing principles of reliability and necessity.  The court held that there should be sufficient circumstantial guarantees of liability to allow a jury to make use of the statement, i.e. if the statement is made under oath, solemn affirmation or solemn declaration following an explicit warning to the witness as to the existence of severe criminal sanctions for the making of a false statement.  That way, the witness would be clearly made aware of the gravity of the situation and his duty to tell the truth.  The court held that while the oath will not motivate all witnesses to tell the truth, its administration may serve to impress on more honest witnesses the seriousness and significance of their statements, especially where they incriminate another person in a criminal investigation. 

However, the Court warned it is also clear that the sanction for lying under oath must be one that is a real threat to the witness.  Therein lies the challenge. 

Why are not more witnesses prosecuted for lying under oath?  Primarily for the simple reason that our courts and criminal justice system are presently overburdened and would possibly be under deluge if all witnesses who lied under oath were prosecuted. 

Some commentators have discounted the significance of the oath as a means of ensuring reliability for a statement".  A New Zealand commentator who had written that the oath is "no more than a lingering relic of primordial superstition and primitive mumbo jumbo".[10]  

The Future Of Oaths

Recently, in England, the Magistrates' Association, which represents magistrates in England and Wales, debated a motion to ask witnesses to promise to "very sincerely tell the truth" ( reminiscent of a Munchkins’ line in the Wizard of Oz ) but voted against the plan.  One magistrate's alternative oath would be to include an acknowledgement of the duty to tell the truth as follows:  "I understand that if I fail to do so, I will be committing an offence for which I will be punished and may be sent to prison."[11] 

Law reform commissions in various jurisdictions have considered the utility of oaths and affirmations.  The Canadian Task Force on Uniform Rules of Evidence has argued that the principles that apply to the competence of children should also apply to adults who take the oath:

The rationale of these cases is that in our modern secular age a witness need not profess a religious belief either in God or in future rewards and punishments.  (Children may not have formed religious beliefs)  The object of the law in requiring an oath is to get at the truth by obtaining a hold on the conscience of the witness.  [12]

Punishing Lying Under Oath

That motion was opposed by others who said that the way you stamp out lying under oath is to punish people who do so, not to get rid of the religious oath.[13]  So what of the threat of prosecution for perjury?

For a false statement made under oath to be considered perjury, it must be in regard to a material fact in the case.  Therefore, not all lying under oath will be considered perjury.  To be convicted of perjury, the prosecution must prove that the lying was intentional and that the witness intended to misrepresented the truth. 

Statistics in the United States show that perjury prosecutions are extremely rare, arising from both civil and criminal proceedings.  In 1996, the US Sentencing Commission indicated that in federal cases, only 86 of 42,436 convicted criminal defendants were found guilty of perjury, encouraging perjury or bribing a witness.[14] 

Prosecutors have had difficulty convicting some of the world's most notorious alleged liars.  For example, former baseball player, Roger Clemens, was acquitted in 2012 of, among other charges, two counts of perjury and three counts of making false statements when he testified at a deposition and a nationally televised hearing before the US Congress in 2008.  The charges centered on his repeated denials that he had used steroids and human growth hormone during his baseball career.  A seven year investigation into the major league baseball's homerun record holder, Barry Bonds, yielded a guilty verdict on one count of obstruction of justice in San Francisco, with the jury deadlocked on whether Bonds had lied to a grand jury when he denied knowingly taking performance enhancing drugs.[15] 

And perhaps the most notorious liar of all, Lance Armstrong, who lied for years as to whether he used performance enhancing drugs in winning his seven Tour de France titles, escaped prosecution for perjury because prosecutors conceded that Armstrong's intentional lying under oath was "probably too old".[16]  

As a result, realistically it is only the threat of prosecution, as unlikely a possibility that such a threat presents, that will serve as a deterrent to lying under oath.  Until prosecutors turn that threat into something that is less than hollow, an oath or affirmation will continue to rely on the moral conscience of the witness to tell the truth for the sake of the truth. 

Regards,

Blair

---

[1] Pomerance, J. in R. v. Carter and Dodd, 2012 ONSC 286, para. 16

[2] Cross on Evidence, 6^th Ed., Butterworth & Co. Ltd., at page 37

[3] English Legal History, wordpress.com April 28, 2013

[4] The Law Reform Commission - Ireland, Report on Oaths and Affirmation - 1990

[5] Wikipedia – Affirmation in Law

[6] The Law Reform Commission Report on Oaths and Affirmation, Ireland, 1990

[7] R. v. Nitsiza, 2001 NWTSC 34 at para. 8

[8] Ian McKenzie, The Truth, The Whole Truth and Nothing but the Truth, Slaw, March 5, 2012

[9] R. v. B (K.G.) 1993 1 SCR 740

[10] McKenzie, supra, footnote 8

[11] Robert Pigott BBC News, October 19, 2013

[12] Canadian Task Force on Uniform Rules of Evidence

[13] Pigott, supra, footnote 11

[14] Criminal Law Attorney – Criminal Law Lawyers Nationwide!!

[15] Joseph White, Associated Press Sports Writer, published The Toronto Star, June 18, 2012

[16] Mail Online, January 22, 2013

Supreme Court Limits Appeals from Commercial Arbitration Awards

One of the benefits of commercial arbitration is finality.  Parties to a commercial arbitration agreement have the ability to contract out of any appeal.   The giving up of appeal rights is one of the most significant factors that a party should consider when entering into an arbitration agreement.    Many provincial arbitration acts provide that a party to an arbitration agreement may appeal the decision of the arbitrator on a question of law only and that leave to appeal must be granted.  This supervisory role of the courts was recently tested in a case – Sattva Capital Corp. v. Creston Moly Corp. 2014 S.C.C. 53 – that went all the way to the Supreme Court of Canada.

 

In this case, Creston was obliged to pay a finder’s fee to Sattva as a result of Sattva introducing Creston to an opportunity to acquire a molybdenum mining property in Mexico.  According to the agreement, the finder’s fee of US$1.5 million would be paid in Creston shares.  The dispute between the parties concerned which date should be used to determine the price of the Creston shares and thus the number of shares to which Sattva was entitled.   Sattva argued that the share price was dictated by the market price definition in the agreement, i.e. the price of the shares “as calculated on close of business day before the issuance of the press release announcing the acquisition”.  Creston claimed that the agreement's “maximum amount” proviso meant that Sattva would receive shares on the date the fee was payable.  

 

The difference in interpretation amounted to approximately 9 million shares.

 

The parties entered into arbitration pursuant to the British Columbia Arbitration Act (“Act”).  The arbitrator found in favour of Sattva.  Creston sought leave to appeal the arbitrator’s decision pursuant to the appeal provisions of the Act.   Leave was denied by the BC Supreme Court.  Creston successfully appealed that decision and was granted leave to appeal the arbitrator’s decision by the BC Court of Appeal.  

 

A BC Supreme Court judge heard the appeal and upheld the arbitrator’s decision.  Creston again appealed that decision to the BC Court of Appeal which once again overturned the motion judge and found in favour of Creston.  Sattva appealed that decision and the Court of Appeal’s decision to grant leave to the Supreme Court of Canada.

 

The Supreme Court of Canada overturned both decisions of the BC Court of Appeal and restored the arbitrator’s award.  

 

Questions Answered By The Court

 

In reaching its decision the Supreme Court asked: when is contractual interpretation to be treated as a question of mixed fact and law and when should it be treated as a question of law?;  How is the balance between reviewability and finality of commercial arbitration awards under the Act to be determined?; and  Can findings made by a court granting leave to appeal with respect to the merits of an appeal bind the court that ultimately decides the appeal?

 

In answering these questions, the Supreme Court overturned its historical approach to contractual interpretation. 

The Court held that appeals from commercial arbitration decisions are narrowly circumscribed.  Under the relevant section of the Act, appeals are limited to questions of law, and leave to appeal is required if the parties do not consent to the appeal.  The court may grant leave if it determines that the result is important to the parties and the determination of the point of law may prevent a miscarriage of justice.

 

The Supreme Court held that the BC Court of Appeal had erred in finding that the construction of the finder’s fee agreement constituted a question of law.  The issue raised a question of mixed fact and law and therefore the Court of Appeal erred in granting leave to appeal.  

 

In reaching its decision, the Supreme Court said that the historical approach to contractual interpretation, according to which determining the legal rights and obligations of the parties under a written contract was considered a question of law should be abandoned.   It held that contractual interpretation involves issues of mixed fact and law because it is an exercise in which the principles of interpretation are applied to the words of the written contract, considered in light of the factual matrix of the contact.  

 

While it may be possible to identify an "extricable" question of law from the exercise, such circumstances will be rare.  The goal of contractual interpretation, which is to ascertain the objective intentions of the parties, is inherently fact specific.  Accordingly, courts should be cautious in identifying “extricable” questions of law in disputes over contractual interpretation.

 

Legal errors made in the course of contractual interpretation include the application of an incorrect principle, the failure to consider a required element of a legal test, or the failure to consider a relevant factor.  In this case, Creston’s application for leave to appeal did not raise a question of law. 

That finding in and of itself was sufficient to dispose of the appeal.  However, the Supreme Court continued with its analysis.

 

The Court also held that:

a)  In order to rise to the level of a miscarriage of justice for the purposes of the Act, an alleged legal error must pertain to a material issue in the dispute, which, if decided differently, would affect the result of the case.  According to this standard, a determination of a point of law “may prevent a miscarriage of justice” only where the appeal itself has some possibility of succeeding.  An appeal with no chance of success will not meet the threshold of “may prevent a miscarriage of justice” because there would be no chance that the outcome of the appeal would cause change in the final result of the case.

 

b)  At the leave stage, it was not appropriate to consider the full merits of the case and make a final determination regarding whether an error of law was made.  However, preliminary consideration of a question of law by the court granting leave is necessary to determine whether the appeal has the potential to succeed and thus to change the result in the case.  The Court held that the appropriate threshold for assessing the legal question is whether it has “arguable merit” meaning that the issue raised by the applicant cannot be dismissed by a preliminary examination of the question of law.

 

 Assessing whether the issue raised by an application for leave to appeal has arguable merit must be done in light of the standard of review in which the merits of the appeal will be judged.  The leave court’s assessment of the standard of review is only preliminary and does not bind the court which considers the merits of the appeal.

 

c)  The words “may grant leave” in the Act, confer on the court a residual discretion to deny leave even where the requirements of the Act are met.  However courts should exercise such discretion with caution.

 

d)  Appellate review of commercial arbitration awards is different from judicial review of a decision of a statutory tribunal, thus the standard of review framework developed for judicial review by the court in the case of Dunsmuir v. New Brunswick, 2008 S.C.C. 9 is not entirely applicable to the commercial arbitration context.   However, because judicial review is analogous in some respects to arbitral appeals, aspects of the Dunsmuir framework are helpful in determining the appropriate standard of review to apply in the case of commercial arbitration. 

 

In the context of commercial arbitration, where appeals are restricted to questions of law, the standard of review will be reasonableness unless the question is one that would attract the correctness standard, such as constitutional questions or questions of law of central importance to the legal system as a whole and outside the adjudicator’s expertise.  The question at issue here did not fall into one of those categories and therefore the standard of review in this case was reasonableness.

 

In this case, the arbitrator’s reasoning met the reasonable threshold of justifiability, transparency and intelligibility. 

 

e)  A court considering whether leave should be granted is not adjudicating the merits of the case.  It decides only whether the matter warrants granting leave, not whether the appeal will be successful, even where the determination of whether to grant leave involves a preliminary consideration of law at issue.  For this reason, comments by a leave court regarding the merits cannot bind or limit the powers of the court hearing the actual appeal.   

Regards,

Blair

 

Supreme Court Rules Early Dismissal of Cases Beneficial

In Quebec, Article 165 of the Code of Civil Procedure (“Code”) provides the courts of that province with a mechanism, at a preliminary stage, to put an end to actions that are bound to fail.  In a recent Supreme Court of Canada decision (Canada (Attorney General) v. Confederation des syndicats nationaux, 2014 SCC 49), the court ruled that judges must be cautious in exercising this power:  although the proper of administration of justice requires that the court’s resources not be expended on actions that are bound to fail, the cardinal principle of access to justice requires that the power be used sparingly, where it is clear that an action has no reasonable chance of success. 

 In this case, the court agreed that an action brought by the Confederation des syndicats nationaux and the Federation des travailleurs et travailleuses du Quebec (referred to collectively as the “Unions”) was bound to fail, finding that the application of the doctrine of stare decisis was fatal to it.  A previous decision of the Supreme Court of Canada had settled the law on the legal issues that the action raised.  That previous decision deprived the Unions’ motion to institute proceedings of any legal basis. 

The Code

The motion was based on an article in the Code which was designed to avoid a trial where an action has no basis in law, even if the facts in support of it are admitted.  The court held that the Code "favoured the sound and effective management of judicial resources", i.e. the power of the courts to dismiss actions at a preliminary stage and held that the tool  “is a valuable housekeeping measure essential to effective and fair litigation.  It unclutters the proceedings, weeding out the hopeless claims and ensuring that those that have some chance of success go on to trial.” 

 

However, because dismissing an action at a preliminary stage can have very serious consequences the courts must be cautious in exercising this power.  As a result, an action will not be dismissed at such an early stage in the proceedings unless it is “plain and obvious” that it lacks a basis in law. 

 

The plain and obvious situation opens the door to a dismissal of an action that is apparent from the allegations set out in the motion.  The facts alleged in the motion must be assumed to be true.

Operation of Stare Decisis

 

In respect of dismissing an action on the basis of stare decisis, the Supreme Court held that judgments rendered under the article of the Code often concerned situations in which the right being claimed was clearly prescribed.  An action will sometimes be dismissed if it is clear that an authoritative decision had already resolved the issue or issues raised in the motion.  The court held that the doctrine of stare decisis is "not inflexible".   The precedential value of a judgment may be questioned “if new legal issues are raised as a consequence of significant developments in the law, or if there is a change in the circumstances or evidence that fundamentally shift the parameters of the debate” where, on the other hand, the legal issue remains the same and arises in a familiar context, the precedent still represents the law and must be followed by the courts. 

Accordingly, the judge must be satisfied in light of the record and the alleged facts that the precedent relied on by the applicant actually concerned the entire dispute that it should normally resolve and that it provided a complete, certain and final solution to the dispute. 

The Case

In 1996 the federal government carried out a major reform of the employment insurance program when it enacted the Employment Insurance Act (“1996 Act”).  One of the main components of the reform concerned the mechanism for setting the premiums payable by workers and employers who contributed to the program and thus the method of financing the program.  Faced with periodic deficits in the program and fearing the effects of an economic downturn on the Consolidated Revenue Fund, Parliament sought to create a reserve to enhance the program's stability while avoiding significant fluctuations in premiums. 

 

In 1998 and 1999, the Unions went to court to strike down certain provisions of the 1996 Act, arguing that the premium-setting mechanism was unconstitutional because the annual surpluses in the account were being reallocated by the government to its general expenses, including budget deficit reduction (there was a surplus of several billion dollars in the account).  In the Unions’ view, this was a misappropriation of monies that were supposed to be ear-marked for employment insurance.

 

In December of 2008, the Supreme Court declared that the measures adopted in the 1996 Act were valid and constitutional with the exception of the measures that applied in 2002, 2003 and 2005.  For those years, premium rates had been set by sections in the 1996 Act that made it possible to disregard the criteria which governed the exercise of the power to set rates.  The Supreme Court accepted that for the years in question,  the improper exercise by the Governor in Council of the power conferred on Parliament was a technical defect and it suspended the effect of the declaration of invalidity of the impugned sections to enable Parliament to rectify the situation.

 

In July of 2010, Parliament enacted the Jobs and Economic Growth Act (“2010 Act”) which provided for, among other thing, closing the Employment Insurance Account and creating a new account called the Employment Insurance Operating Account retroactive to January 1, 2009.  

 

The 2010 Act did not specify that the balance of the Employment Insurance Account, which at that point amounted to over $57 billion was to be transferred to the new Employment Insurance Operating Account.   This is the context in which the litigation began.

 

In April of 2011, the Unions filed a motion in order to have certain provisions of the 2010 Act declared unconstitutional.  The Attorney General of Canada argued that the issues raised by the Unions had already been decided by the Supreme Court in 2008 and moved to dismiss the action under an Article of the Code on the basis that it was unfounded in law. 

 

The motion to dismiss was granted by the Quebec Superior Court.  The motion judge held that the Supreme Court had previously held it its 2008 case, that the monies from the program belonged to the government and not to the contributors.  The accumulated surpluses formed part of the government’s revenues, did not have to be used solely for the employment insurance program and were not a debt owed to the program by the Consolidated Revenue Fund.  Accordingly, she dismissed the action. 

 

The Quebec Court of Appeal set aside the motion judge’s decision and found that the action was concerned more with the ”effects of the act of eliminating the balance and resulting accounting entries” that flowed from the 2010 legislative amendment than with the use of the surpluses that had accumulated in the account.  The Court of  Appeal held that the issue had not been disposed of by the Supreme Court in its 2008 decision since the legislation in question had not yet been enacted.  The Court of Appeal also noted that the Union’s allegation that the Consolidated Revenue Fund was indebted to the Employment Insurance Account was one of the facts that the trial judge had to assume to be true. 

 

In allowing the appeal, the Supreme Court held that before granting a motion to dismiss on the basis that an authoritative decision had already resolved the issue before him or her, the judge "must be satisfied in light of the record and the alleged facts that the precedent relied on by the applicant concerned the entire dispute that it should normally resolve, and that it provided a complete, certain and final solution to the dispute". 

 

In this case, the Supreme Court held that Unions’ action was bound to fail.  The action's underlying premise was that a balance in the Employment Insurance Account is a debt owed by the Consolidated Revenue Fund to that account.  In the Unions’ view, the premiums paid in the context of the employment insurance program are constitutionally valid only if they are properly accounted for.  The court held however, that its 2008 decision settled the law in that regard and it deprived the motion to institute proceedings of any legal basis.  In that case, the Supreme Court held that the amounts collected as contributions to the employment insurance program formed part of the government’s revenues and could be used for purposes other than paying benefits.  Although, the connection between the program and the premiums was a fact that could be considered in determining the nature of the levies, it was wrong to say that the validity of these levies depended on the existence of that connection. 

 

Furthermore, the Supreme Court held that no debt of the Consolidated Revenue Fund to the Employment Insurance Account ever existed, since the government cannot be indebted to itself. 

Because the action had no reasonable chance of success the section of the Code applied and was appropriate to dismiss the action at the preliminary stage.

Regards,

Blair

 

BC Court Enforces $4.5 Million SEC Disgorgement Judgment

In dismissing an appeal from a order enforcing a United States judgment, the British Columbia Court of Appeal held that it was the character of the foreign judgment that governed whether it was enforceable, not the way in which the parties responded to it. 

On August 18, 2011, the United States District Court for the Southern District of New York (“US Court”) rendered a judgment against William Peever and Phillip Curtis.  The judgment was for injunctive relief and the disgorgement of profits derived from illegal price manipulation of stock of American corporations.  The suit was advanced by the United States Securities and Exchange Commission (“SEC”).

 

Peever and Curtis consented to the injunction, admitted liability and did not contest the quantum of the judgment.  They were ordered by the US Court to pay the sum of $4,506,535.66 into court.

 

The SEC brought an action in British Columbia to ask the court of that province to recognize and enforce the judgment.  Peever and Curtis resisted the enforcement proceedings on the basis that the judgment was penal or public in nature, a recognized exception to the enforcement of foreign judgments in Canada.  Notwithstanding such argument, a BC trial judge held that the judgment of the US Court should be recognized and enforced.  Peever and Curtis appealed from that decision to the British Columbia Court of Appeal.

 

In dismissing the appeal ( United States (Securities and Exchange Commission) v. Peever 2014 BCCA 141 ) the Court of Appeal recited the facts and noted that the US Court’s judgment was final, obtained in a civil proceeding within the court’s jurisdiction and from which no appeal was taken. 

 

In respect of the appellants' arguments that the judgment was penal or public in nature, the Court disagreed, holding that the SEC’s mandate was to enforce securities laws.  On the evidence, a vital part of its mandate was to distribute disgorged funds to defrauded investors.  Peever and Curtis argued (and it was not disputed by the SEC) that the SEC is not bound by statute to distribute disgorged funds in accordance with its policy.  Should it not do so, any fund established would be retained by the United States federal government as general revenue, although that would be subject to court approval.  Peever and Curtis argued that in that event, a judgment for disgorgement would not constitute a civil remedy because the government had suffered no loss but would rather serve a penal purpose in imposing a fine for wrongdoing or a public purpose in deterring others from offending.

 

The trial judge considered that argument and held that, given the judgment was prima facie enforceable (a final judgment within the US Court’s jurisdiction), Peever and Curtis bore the onus of establishing that it was not to be enforced because to do so would “accomplish a foreign penal or public law purpose”.  The question became whether they had demonstrated that it was more likely than not that if the judgment was enforced in BC its enforcement would serve a penal or public law purpose in the United States.  The trial court held that based on the evidence, the SEC’s policy was to distribute the proceeds of judgment to injured investors and that given the judgment described a mechanism that the SEC could employ to achieve that distribution he found that Peever and Curtis had not shown that it was more likely than not that the SEC would simply keep the proceeds of judgment to itself.  Accordingly, he found that the defendants had not discharged their burden of proof of showing that enforcement of the judgment in BC would be to serve a foreign penal or public law purpose. 

 

On appeal, Peever and Curtis argued that the trial judge had erred in burdening them with the onus of establishing that argument. 

 

However, the BC Court of Appeal agreed with the trial judge.  It held that in its view, it was the subject or character of the judgment itself that governed, quite apart from the way in which the parties responded to it. 

On its terms, the judgment was clearly not penal or public in nature.  It provided for the disgorgement of profits with such profits being paid into court to be invested and held as a fund subject to further court order.  It contemplated the SEC obtaining court approval of a plan for distribution to the victims of the fraud.  The disgorging of profits facilitated restitution which was a civil remedy.  As a result, the Court of Appeal concluded that there was simply no basis on which it could be said that the character of the judgment was penal or public in nature. 

Regards,

Blair

 

Ontario Appeal Court Reduces 70 Year Old's Dismissal Notice Period By Six Months

In a recent ruling, the Ontario Court of Appeal reduced the wrongful dismissal award of a 70 year old employee by 6 months.

 

In the case of Kotecha v Affinia Canada ULC (2014 ONCA 411).  The Court reduced the motion judge’s award of a 24 and one-half months to 18 months on the basis that "there were no exceptional circumstances that would justify" the longer award.

 

Affinia is a manufacturer of auto parts.  Kotecha was 70 years old and had worked for Affinia for 20 years as a machine operator.  He installed rivets on brake pads.  At the time of his dismissal, Kotecha was earning $18.23/hour.  Based on a 40 hour work week, this wage equated to approximately $38,000.00 per year. 

 

Affinia admitted that Kotecha was dismissed without cause.  Kotecha brought a motion for a summary judgment to fix the length of the notice requirement and his damages. 

 

At the motion, the judge considered the factors in Bardal v. Globe and Mail Ltd  as set out by the Supreme Court of Canada i.e. the character of the employment, length of service, age of the employee and the availability of similar employment having regard to the experience training and qualifications of the employee.  The judge concluded that this was a simple case of wrongful dismissal and having regard to other cases with similar facts, fixed the notice period at 22 months.  Her ruling did not include the 11 weeks of working notice that Affinia had given Kotecha. 

 

Affinia appealed to the Court of Appeal.  Before the appeal court, Affinia argued that the motion judge had erred in disregarding an unreported judgment of another judge in a case against it (Sharma v Affinia Canada) and that on almost identical facts, that judge in that case had awarded 13 months as reasonable notice.  Affinia argued that the motion judge was bound by the doctrine of stare decisis to award a similar period of reasonable notice in this case.

 

The Court of Appeal rejected that argument.  It reiterated that the principle of stare decisis required that courts render decisions that are consistent with the previous decisions of higher courts.  While other decisions of the Superior Court are persuasive, they are not binding.  Moreover, the Court held that the determination of the appropriate notice period is a very fact-specific exercise and is calculated in accordance with numerous factors set out in Bardal.

 

However, the Court held that judges should strive to ensure that notice periods, which are inherently individual, are consistent with the case law.  The Court found that was not done in this case.  Taking into account the period of working notice that Affinia had given Mr. Kotecha, the total notice period awarded to him was 24 and ½ months.  The Court held that this was excessive and that there were no exceptional circumstances that would justify the award.  It did not accept Affinia’s position that a 13 month notice period was appropriate but rather “adjusted” the notice period to 18 months, less the working notice of 11 weeks. 

The decision seems harsh given that, at 70 years old,  Mr. Kotecha has virtually no chance of getting another job.  One would have thought that his advanced age was an "exceptional circumstance" that would have persuaded the court to award a period of notice in the 20 to 24 month range. 

Regards,

Blair

 

Appeal Court Confirms Litigation Privilege In Regulatory Investigations

In a recent decision, the Alberta Court of Appeal concluded that litigation privilege may be properly claimed by a target of a regulatory investigation.  In TransAlta Corporation v. The Market Surveillance Administrator (2014 ABCA196), the court allowed an appeal from a decision of a chambers judge of the Alberta Court of Queen’s Bench which held that the term “solicitor-client privilege” in section 50 of the Alberta Utilities Commission Act (“Act”) referred only to the privilege dealing with obtaining legal advice and did not extend to litigation privilege. 

 

In its ruling, the court reaffirmed the importance and protection afforded to litigation privilege claims, recognizing that there is a need for both legal advice and protection of an associated zone of privacy when a party is facing an investigation that could result in a prosecution with serious consequences. 

 

The facts of this case first arose in the 1990s, when Alberta decided to de-regulate its electricity and natural gas industries.  Alberta established an independent body, the Market Surveillance Administrator (“MSA”) to oversee both industries. 

 

TransAlta owned several power generation stations in Alberta.  In February of 2011, MSA received a complaint that TransAlta was timing the maintenance shutdown of some of its power plants to occur during periods of high demand to improperly influence the price of electricity. 

 

MSA initiated an investigation and as part of the investigation, issued a formal request for production of documents.   TransAlta began producing documents in response to this request which continued for several months.  During the course of document production, TransAlta claimed privilege, both solicitor-client and litigation privilege over a number of documents.  MSA disputed the claim for litigation privilege and TransAlta applied to a judge of the Court of Queen’s Bench for an order that it had claimed privilege properly over the documents. 

 

The issues in dispute before the chambers judge included whether litigation privilege came within the “general rubric” of solicitor-client privilege under section 50 of the Act.

 

In overturning the chambers judge’s decision, the court of appeal held that she had interpreted section 50 of the Act too narrowly in finding that the term solicitor-client privilege did not include litigation privilege.  The court reasoned that the mere fact that the two privileges may have differences in scope and operation, did not answer the question of interpretation.  The court held that the common law still treated litigation privilege as being an aspect of solicitor-client privilege and that the Alberta legislature would have had this understanding in mind when it drafted the wording contained in the Act. 

 

Further, even if “solicitor-client privilege” did not include litigation privilege, it was still open to TransAlta to resist production of the documents on the basis of litigation privilege because section 50 of the Act was procedural in nature and did not exclude claims for litigation privilege or for any other privilege recognized at common law. 

 

Finally, the court held that if TransAlta was entitled to advance a claim for litigation privilege, it was necessary to consider whether there could be a basis for such a claim in the context of an investigation by the MSA.  The court held that while an investigation undertaken by the MSA will not result directly in criminal convictions or prison, nevertheless the consequences of being found guilty of an offence under the Act could result in millions of dollars of fines and other penalties of a very substantial nature.  Indeed, the ongoing business of the company could be put into jeopardy.  Thus, there was an obvious need for legal advice and the zone of privacy contemplated by litigation privilege when a party or parties are facing an investigation which could result in the prosecution of offences with such potential consequences. 

Regards,

Blair