Also, Newfoundland announced that it would seek leave to appeal from the SCC of a related decision by the Quebec Superior Court (AbitibiBowater Inc. (Arrangement relatif à), 2010 QCCS 1261), affirmed by the Quebec Court of Appeal (Newfoundland v. AbitibiBowater Inc., 2010 QCCA 965), that Newfoundland’s environmental protection orders compelling Abitibi to clean up certain expropriated sites were claims subject to bankruptcy protection claims procedures. (TheCourt.ca reviewed the Quebec decisions here.)

This article will focus on the NAFTA claim and outcome.

Background and Facts

Abitibi was a failing company as a result of the worldwide drop in demand for newsprint resulting from the proliferation of internet based news sources. A US incorporated pulp and paper manufacturer, it operated throughout the province of Newfoundland for over a century. In 2008, the company announced that its last operating mill, located in Grand Falls-Windsor, would close in 2009. This marked the end of its active operations in the province.

However, Abitibi still retained numerous property rights, assets, and undertakings within Newfoundland amounting to well over $300 million. This included interests in hydroelectric facilities, surface rights, and paper mills, many purchased either from the province or third parties for proper consideration.

Less than two weeks after the final closure was announced the province rushed through the Abitibi-Consolidated Rights and Assets Act, S.N.L. 2008, c. A-1.01 (“Abitibi Act”), which expropriated the majority of the company’s provincial assets. In part, this canceled water and hydroelectric contracts and agreements between the province and Abitibi, ongoing legal proceedings Abitibi had against the province, and blocked Abitibi’s access to Newfoundland’s courts. In response, the company filed a Notice of Arbitration and Statement of Claim (pdf link) under NAFTA Chapter 11 seeking redress for the expropriation in the amount of $500 million.

(An overview of facts of the related NAFTA dispute was outlined by TheCourt.ca in a previous post. They were repeated here.)

Newfoundland Violated NAFTA Chapter 11

The controversial Chapter 11 of NAFTA provides foreign corporations which are parties to the NAFTA agreement with the right to make a claim against the state if actions taken by the government negatively affect a company’s investments. According to Abitibi:

damages…resulted out of the measures undertaken by Canada, through the actions of its constituent political subdivision the provincial Government of Newfoundland and Labrador…Canada is internationally responsible for these measures, which are a breach of its obligations under Section A of the Chapter Eleven of NAFTA…

The claim by Abitibi alleged that Articles 1110, 1105, 1102 and 1103 of NAFTA were breached. A cursory review of the applicable law and related facts demonstrates that, from a legal perspective, Newfoundland was clearly in the wrong.

Pursuant to Article 1110(1) of NAFTA, Canada is prohibited from expropriating the Canadian investments of a US company without a valid reason. The provision states:

No Party may directly or indirectly nationalize or expropriate an investment of an investor of another Party in its territory or take a measure tantamount to nationalization or expropriation of such an investment (“expropriation”), except:

(a) for a public purpose;

(b) on a non-discriminatory basis;

(c) in accordance with due process of law…; and

(d) on payment of compensation…

The expropriation was clearly discriminatory, Abitibi argued. Other companies that faced financial difficulties in the province had not been subjected to similar treatment. Furthermore, Abitibi contended, the Act was rushed through the legislature and the company was not given the opportunity to respond “in accordance with due process of law…”

In fact, according to the NAFTA claim, the company received a letter on a Friday demanding that it surrender “to the Province its entitlement to [Newfoundland's] natural resources…” by midday of the following Monday. Abitibi responded on Monday with a request to discuss the issue. On Tuesday, the province passed the Abitibi Act, the assets were expropriated, and compensation was not provided.

According to Article 1105, Canada must “accord to investments of investors of another Party treatment in accordance with international law, including fair and equitable treatment and full protection and security…” Obviously, this was not the case. Finally, Articles 1102 and 1103 compel Canada to treat foreign investors in the same manner as their domestic counterparts. As discussed, this did not happen.

Conclusion

The only possible argument that Canada could have made was that the expropriation was done for a public purpose pursuant to Article 1110, outlined above. For example, the Abitibi Act was put into force following the decision of the company to close the mill in the city of Grand Falls. Later, Premier Williams provided the laid-off workers with severance payments. This could be interpreted as an indication of his desire to compensate workers and that the expropriation of assets was done to accommodate this. However unlikely, a successful public purpose argument would only satisfy one requirement of Article 1110(1). Ultimately, compensation was not provided, the expropriation was conducted in a discriminatory manner, and not in accordance with due process of law.

Following his conviction for the second-degree murder of his daughter, Tracy, in 2001, Latimer was sentenced to life imprisonment.  Although eligible for full parole after 10 years of the sentence, he first applied for day parole in February 2008.  Conditions imposed upon him at the time included living in a halfway house.  In September 2008, Latimer’s day parole was extended to allow him to move to Victoria, BC and live in his apartment two nights a week, and spend the remaining five in a halfway house (a “two and five”).  After a lengthy period of day parole, Latimer applied for relaxed conditions, asking for a “five and two,” where he would be permitted to spend five nights per week in his Victoria apartment.  The Board denied this request in August 2009, citing a lack of “exceptional circumstances” required by Chapter 4.1 of the Policy Manual.

The Structure of the Parole System

For the benefit of all readers who may not be familiar with the Canadian parole system, I provide a brief explanation.

The federal government, through legislation (the Corrections and Conditional Release Act, S.C. 1992, c. 20 - “CCRA”), has created the framework under which a government agency, the National Parole Board, makes decisions.  The Board is an independent administrative tribunal and is responsible for making determinations with respect to parole.  This authority is granted to the Board in s. 107 of the CCRA.

Section 102 of the CCRA establishes rules for granting parole decisions.  Two criteria are identified as necessary.  Parole may be granted if the Board believes that:

1. The offender will not present a risk to society; and
2. The release of the offender will protect society by facilitating reintegration of the offender back into society.

However, s. 151 of the CCRA gives the Board the authority to develop additional parole guidelines, which were written and are now contained in the contentious Policy Manual.  Chapter 4.1 of the Policy Manual forms the basis of Latimer’s appeal to the Federal Court, as it was this section which was used to justify the denial of his extended parole application.

1) The Letter of the Law Is Not The Policy Manual

The first issue on appeal considered whether the Policy Manual was binding law. To determine this, the Federal Court had to decide whether the Policy Manual constitutes “hard law” or “soft law.”

Hard (binding) law can, in certain cases, be delegated legislation: Thamotharem v. Canada (Minister of Citizenship and Immigration), 2007 FCA 198.  However, guidelines and supporting regulations may also be held to be a weaker form of law – soft law.  In her reasoning, Mactavish J. held the Policy Manual is soft law by distinguishing the similar case of Bell Canada v. Canadian Telephone Association Employees, 2003 SCC 36.

In Bell Canada, the SCC found that guidelines issued by the Canadian Human Rights Commission (“CHRC”) were “akin to law” and constituted hard law.  In coming to this conclusion, the SCC emphasized that the guidelines were binding on board members.  Further, the French text of the governing Canadian Human Rights Act empowered the CHRC to interpret the legislation “par ordonnance.” (“by order/law,” roughly).   As a result of this specific wording, the Bell Canada guidelines were found to be hard, governing law.

Mactavish J. used this reasoning to differentiate this case.  As she pointed out, the guidelines of the Policy Manual were not binding on members of the National Parole Board.  The text of the governing statute was also different.  In ss. 151(2) of the CCRA (the section which authorizes the Policy Manual) the Parole Board is authorized to “adopt policies” (établit des directives).  In Thamotharem , Evans J.A. held the use of the word “directives” in another piece of legislation suggested “a less legally authoritative instrument than ‘ordonnance’” (which was the wording using in Bell Canada). The deciding factor in determining whether the Policy Manual was legally binding, then, hinged on one word – “ordonnance” versus “directives.”

2) The Policy Manual Found To Be An “Unlawful Fetter” On Board Members’ Discretion

The next issue on appeal was whether Chapter 4.1 of the Policy Manual is an “unlawful fetter” on Board members’ discretion.  Mactavish J. answered in the affirmative.

A guideline will be invalid if it is inconsistent and/or in conflict with a statutory provision.  Subsection 99(1) of the CCRA requires day parole offenders to return to an institution nightly, unless otherwise authorized in writing.  This finding gives complete discretion to the Board to authorize extended leave.  Thus, the manual limits the amount of discretion Board members can exercise, and, as such c. 4.1 was found to be inconsistent with the CCRA, and invalid.

Subsection 101 (b) also requires the Board consider all relevant information to a case (including reasons of a sentencing judge) when granting parole.  In has been determined, on multiple occasions, that Latimer is not a risk to society.  Further, in Latimer’s case (R. v. Latimer, 2001 SCC 1) the SCC recognized “the sentencing principles of rehabilitation, specific deterrence and protection [were] not triggered for consideration.”  After considering the above factors, Mactavish J. held that Chapter 4.1 of Policy Manual is invalid.

As for my opinion, I am pleased with the Federal Court’s decision to send Latimer’s parole application back for further review.  It seems as if the Parole Board has forgotten its primary raison d’etre: to protect society.  Of all the criminals that apply for parole, Latimer has a relatively low risk of recidivism. He committed a crime of mercy that was driven by his empathy and love for his child.  Robert Latimer was punished by the sentencing judge to serve as a deterrent to others who may choose to engage in mercy killing, and needs no further punishment from the Parole Board.  Society’s interests would be better served if the Board’s time and resources were spent on criminals who actually pose a threat to society.

Baiden argued that it would be unjust for him to be required to pay for the police’s costs and disbursements because parts of the discoveries of each officer were read in at trial as part of his case. Although the Police Act, R.S.B.C. 1996, c. 367 limited the possibility of claiming against each officer personally, he argued that it was reasonable and necessary to include them as defendants so that counsel could examine them for discovery.

Neilson J., writing on behalf of the unanimous Court of Appeal, held that the trial judge did not err in exercising his discretion to award limited costs and disbursements to five of the six police defendants. Baiden knew that he did not have evidence to fulfill the requirements under s. 21 of the Police Act in order to have an action against an individual police officer. Section 21 states

21  (1) In this section, “police officer” means a person holding an appointment as a constable under this Act.
(2) No action for damages lies against a police officer or any other person appointed under this Act for anything said or done or omitted to be said or done by him or her in the performance or intended performance of his or her duty or in the exercise of his or her power or for any alleged neglect or default in the performance or intended performance of his or her duty or exercise of his or her power.
(3) Subsection (2) does not provide a defence if
(a) the police officer or other person appointed under this Act has, in relation to the conduct that is the subject matter of action, been guilty of dishonesty, gross negligence or malicious or wilful misconduct, or
(b) the cause of action is libel or slander.

Neilson J. held that while Baiden “may have gained some useful information from their examinations for discovery, the Rules of Court… provide other means of accomplishing the same end without joining them as defendants.” The Court of Appeal’s decision is consistent with the policies of efficiency and economy that underpin the modern court system.

Neilson J. also held that the trial judge was correct to find that the circumstances of this case were indistinguishable from those in Ward v. Vancouver (City), 2010 SCC 27. Recall that in Ward, the plaintiff Ward was awarded damages for the violation of his s. 8 Charter rights. The Vancouver police mistook Ward as a person suspected of trying to pie former Prime Minister Jean Chretien in the face. Tysoe J., who wrote the trial decision in Ward, held that it was not reasonably necessary to have joined police officers as individual defendants when the City was vicariously liable for torts they committed, and awarded costs in favour of the police officers.

The Court of Appeal was correct to uphold the trial judge’s decision regarding the police’s costs and disbursements. Although the police did commit a tort against Baiden, that does not mean that Baiden could waste court resources and avoid paying costs and disbursements for using the less efficient route to obtaining information.

In this latest case, Heron Bay Investments Ltd. v. Her Majesty the Queen, 2010 FCA 203, the Federal Court of Appeal (reasons for judgment by Sharlow J.A.) ruled that the actions of Hogan J. in Heron Bay Investments Ltd. v. The Queen, 2009 TCC 337 gave rise to a reasonable apprehension of bias and breached “the rules of procedural fairness.” The case was sent back to the Tax Court for retrial by another judge.

Background and Facts

The Heron Bay Corporation is a member of the Conservancy Group of corporations, which includes Rosehue Downs Developments Inc., Burlmarie Developments Inc., Shellfran Investments Ltd., Marlo Developments Inc., and Viewmark Homes Ltd. The Rosehue and Burlmarie corporations entered into an agreement to purchase property from Runnymede Development Corporation Ltd., an arm’s length corporation. Marlo, along with Shelfran and Viewmark, entered into an agreement to purchase the property from Rosehue and Burlmarie. Viewmark borrowed from Heron Bay for the purchase.

For the 1995 tax year, Heron Bay deducted the amount of the loan to Viewmark. According to Heron Bay, the loan was doubtful because the value of the property interest bought by Viewmark was less than the purchase price, thus there was a reasonable doubt that it would be repaid.

For tax purposes, a doubtful loan is one that stands the chance of not being reimbursed in full. The deducted amount must be included as income in the following year. But, if  the loan is still doubtful at the end of the year a new deduction is allowed. This can be repeated until the debt is recovered or is no longer doubtful. At that point the deduction is included as income. (If the loan becomes bad or uncollectible it can be deducted per s. 20(1)(p)(ii) of the ITA).

Pursuant to s. 20(1)(l)(ii) of the ITA, the amount of a doubtful loan can only be deducted from income if certain conditions are realized. The criteria in the present case were as follows:

(1) in the year in which the deduction is claimed, the taxpayer’s ordinary business must include the lending of money;

(2) the loan in respect of which the deduction is claimed must be made in the ordinary course of the taxpayer’s money lending business; and

(3) the loan must be doubtful at the end of the year in which the deduction is claimed, meaning that there must be a reasonable doubt that it would be collected.

The Tax Court of Canada ruled that the first criterion under s. 20(1)(l)(ii) was met; the year in which the deduction was claimed the taxpayer’s ordinary course of business included the lending of money. However, criterion two and three were not fulfilled—the loan was not “made in the ordinary course of the taxpayer’s money lending business” and there was not a reasonable doubt that at the end of the relevant taxation year the loan would be repaid. Hence, the deduction was disallowed.

The Federal Court of Appeal

Before the Federal Court of Appeal, Heron Bay argued that Hogan J. of the Tax Court was “wrong in law” by finding that criterion 2 and 3 were not met. Also, Heron Bay maintained:

the judge deprived Heron Bay of procedural fairness by considering authorities not cited by either party without giving the parties an opportunity to make submissions on those authorities, considering issues not pleaded by either party without giving the parties an opportunity to make submissions on those issues, and intervening excessively in the examination of witnesses, giving rise to a reasonable apprehension of bias.

At trial, Hogan J. referenced authorities not referred to by Heron Bay or the Minister. For example, Canada Trustco Mortgage Co. v. Canada, [2005] 2 S.C.R. 601 was not cited in the reasons of Hogan J., but referred to in his deliberations. As well, Hogan J. considered journal articles and additional secondary sources not cited or referred to by Heron Bay or the Minister. Nevertheless, according to the Court of Appeal, this alone did not indicate a breach of procedural fairness:

The judge cannot be precluded from referring in his deliberations to cases that are not cited by a party and are not referred to in his reasons…Nor can the judge, when addressing a legal issue raised by a party, be precluded from referring to a case he considers relevant to that issue merely because the case was not cited by a party… As to the judge’s reliance on articles by learned authors, it seems to me that he has simply adopted from those articles excerpts (including case references) stating principles that the authors have derived from jurisprudence relevant to the issues raised in the appeal…

According to the Court of Appeal, a “breach of procedural fairness” might have occurred if Hogan. J had relied on the impugned authorities to introduce “a principle of law that was not raised by either party expressly or by necessary implication, or had taken the case on a substantially new and different analytical path.”

It was Hogan J.’s application of s. 69 of the ITA, without allowing Heron Bay to make relevant submissions, that the Court of Appeal ruled a breach of procedural fairness. Section 69(1)(a) states that the acquisition of anything from someone at non-arm’s length, at greater than the fair market value, is deemed for tax purposes to have been acquired at fair market value. The Federal Court of Appeal ruled that even though this reference to s. 69 was a breach of procedural fairness, it was obiter and did “not justify a retrial.”

In the end, a retrial was ordered due to concerns regarding the Tax Court judge’s excessive intervention in examinations and cross-examinations. Excessive intervention by a judge can warrant a new trial (see James v. Canada (2000), [2001] 1 C.T.C. 227 (F.C.A.); R. v. Brouillard, [1985] 1 S.C.R. 39).

According to the Court of Appeal, the Tax Court judge “seemed to fall into the habit of taking over the questioning.” Moreover, Hogan J., during the examination of one witness, “adopted a position in opposition to Heron Bay on a critical issue in the case, giving rise to a reasonable apprehension that the judge was not a fair and impartial arbiter.”

The Libel Actions

The well-known businessman, Conrad Black, former Chairman of Hollinger International, launched six libel actions against directors and advisors of the company between February 2004 and March 2005.  It should be no surprise to readers that the publications forming the basis of the libel actions accused Black of improperly taking large sums of money from the company and violating securities law.  The libel suits allege the named defendants damaged and conspired to damage Black’s reputation internationally.  For the purposes of this case, the actions were restricted to Ontario publications and damages Black suffered in Ontario.

Statements were made on the Hollinger International website, which disclosed information relating to investigations conducted against Black and his criminal charges.  Specifically, the Internet-based releases accused Black of stealing hundreds of millions of dollars from the company, and stated that Black was determined to “line [his] pockets at the expense of Hollinger almost every day, in almost every way.”  The releases were available in Canada, and contact information was provided to Canadian media outlets.

After Black launched the action, the defendants motioned for a stay of proceedings, arguing that the Ontario Superior Court of Justice did not either have the jurisdiction to hear the case, or that Ontario was not the most convenient forum (the forum non conveniens test).  The motions judge disagreed, dismissing the motion on the basis of Muscutt v. Courcelles (2002), 60 O.R. (3d) 20 (C.A.), which established the test for assumed jurisdiction.  However, Muscutt was recently modified in Van Breda v. Village Resorts Limited (2010), 98 O.R. (3d) 721 (C.A.), leave to appeal to S.C.C. granted, [2010] S.C.C.A. No. 174, which required the Ontario court to re-apply a new test.

Ontario Can Assume Jurisdiction Using the Van Breda Test

The main issue on appeal asked whether Ontario could assume jurisdiction for the case in light of the new, reformulated Van Breda test for assuming jurisdiction to hear a case.

In Van Breda, the court modified the previously-used Muscutt test to determine whether a “real and substantial connection” exists which would allow Ontario to assume jurisdiction.  In a nutshell, Van Breda identified the crux of the test as the connection a plaintiff’s claim has to the forum, and the connection a defendant has to the forum.  The remaining Muscutt considerations were de-emphasized, becoming “analytical tools” which the court can use to assess the significance of the connections between the forum, the defendant, and the claim.  For further clarification on the Van Breda test, my colleague Christine Kellowan provides a thoughtful discussion here.

Karakatsanis J.A., writing for an unanimous bench, began by establishing that a rebuttable presumption of a real and substantial connection exists for the purpose of assuming jurisdiction against foreign defendants.  With that assumption, the defendant bears a burden to disprove a real and substantial connection.  Karakatsanis J.A. then analyzed the three Van Breda factors:

1. If the plaintiff’s claim is connected to the forum
2. If the defendants have any connection to the forum
3. What considerations of fairness should factor into a decision

1) The Plaintiff’s Claim Is Connected to the Forum

In this first step of an analysis, the Court of Appeal agreed with the motions judge that Black had significant connections to Ontario.

The defendants contended that Black did not live in Ontario and was a non-convicted felon.  Additionally, the business in question occurred in the United States, and US securities law was involved.

However, Karakatsanis J.A. held that Black has substantial connections to Ontario, since he lived in Ontario for 45 years, he owns property in Ontario, his family lives in Ontario and most importantly, his reputation had first been created in Ontario.  Further, the Van Breda test requires the analysis directly focus on ties that are relevant to the plaintiff’s claim, not the plaintiff himself.  The Van Breda decision also cautioned that it is irrelevant whether another jurisdiction is available.  In looking only at relevant facts, the judge found that the relevant facts supported a connection between Black’s claim and the Ontario jurisdiction.  Surprisingly, no mention was made in the reasons of Black’s decision to renounce his Canadian citizenship, a fact that many would consider material at this stage of the analysis.

2) The Defendants Are Connected to the Forum

The next branch of Van Breda requires defendants to have a connection to the forum in question.  Here, the Court of Appeal again agreed with the motions judge, who found the defendants would have been aware of Black’s ties to Ontario (although they themselves have no connection to the province).  The motions judge also concluded the defendants knew (or ought to have known) that their statements would likely be published by Ontario newspapers.  By providing Canadian media contact information, the defendants could reasonably foresee that Black’s reputation would be damaged in Ontario.

The defendants unsuccessfully attempted to argue that, in an Internet defamation case, statements made are in a class of their own and cannot be held subject to the reasonable foreseeability threshold.  In response to these arguments, Karakatsanis J.A. referenced another Internet defamation case – Barrick Gold Corp. v. Blanchard and Co. (2003), 9 B.L.R. (4^th) 316 (Ont. S.C.).  In this ruling, the judge upheld the objective standard in Internet defamation cases.  As a result, the judge held that the Hollinger defendants clearly directed the statements to the Canadian media; it is obviously foreseeable Black’s Ontario reputation would be damaged.

(3) It Is Fair For Ontario to Assume Jurisdiction

Finally, Van Breda requires that fairness should factor into a decision to assess the quality and strength of the connections established to determine whether they amount to a real and substantial connection.

The motions judge primarily focused on the difference between the law of libel in Ontario and in the United States.  If Black were to sue in New York or Illinois, he would not have available to him the presumptions of falsity, damages and malice which exist in Canadian law.  However, he found that the loss of advantage to a litigant is not necessarily unfair.  The motions judge therefore did not use the loss of juridical advantage in his fairness analysis.  Instead, it was concluded that it would be unfair to prevent Black from bringing the suits in Ontario as a result of his strong connections to the province.  The Court of Appeal agreed.

The Court of Appeal also considered any unfairness the defendants might experience by having Ontario assume jurisdiction.  They decided it would not be unjust to hold the Hollinger executives accountable in Ontario due to the nature of the activity.  Following Muscutt, Karakatsanic J.A. determined that this case is one falling into the category of an activity that “by [its] very nature involves a sufficient risk of harm to parties outside the forum …that any unfairness in assuming jurisdiction is mitigated or eliminated.”

Conclusion

Despite the attention many will give this case because it involves Conrad Black, the decision carries significant implications for the ever-developing Internet defamation jurisprudence.  Assuming the Van Breda test survives SCC scrutiny, the decision serves as a warning to those publishing on the Internet that publication can result in liability well outside of one’s jurisdiction so long as it is reasonably foreseeable that reputational damage could occur.

You Better R-E-S-P-E-C-T or Else

The facts of the case reflect the contemporary self-obsession with respect and maintaining one’s territory in gang culture. The two Largies were accused of participating in the murder of Mohamoud Ahmed. They were part of a group of men from the Malvern area of Scarborough, Ontario, that went in search of a person from a rival group that had apparently disrespected them on their territory. Ahmed was suspected of being that person, and was hit over the head with a metal pipe and shot to death. Later, it was revealed that Ahmed had not perpetrated the act of disrespect that apparently justified his death.

It  was unclear what role the Largies played in the murder until the police came across an informant who learned about the details of the murder from the accused. According to the informant, Gavra told him that he shot the man, while Karl froze. Pursuant to s. 184.2, the police applied to a judge to intercept private communications between the informant and the Largies. In support of their application, the police provided the judge with the consent of the informant, CPIC records, a statement of the informant, and a robbery complaint made by Ahmed.

The Requirements under s. 184.2

The OCA ultimately dismissed both of the Largies’ arguments in regards to s. 184.2. Watt J.A. on behalf of the unanimous court held that investigative necessity was not a requirement for participant surveillance. Whereas the Largies argued that both probable cause and investigative necessity were constitutionally required, the OCA held that only probable cause was required. Due to the lack of supporting precedent, Largies relied upon the presence of investigative necessity in    s. 186(1)(b) to support their position. After comparing the provisions on party surveillance and third party surveillance, Watt J.A. stated,

Some discrepancies exist between the participant and third party surveillance schemes. Of importance here is the absence from s. 184. 2 of any requirement that the affidavit disclose and the judge find investigative necessity. Section 184.2 contains no equivalent of either s. 185(1)(h) or s. 186(1)(b).

This analysis yielded the conclusion that there was no legislative intent that investigative necessity be required for participant surveillance.

The Governing Principles

The state of the law on participant surveillance was summarized neatly by Watt J.A. at paragraphs 39-40. According to R. v. Duarte, [1990] 1 S.C.R. 30,  s. 184.2 is subject to the requirements in s. 8 of the Charter. The state must meet the standard explicated in Hunter v. Southam Inc., [1984] 2 S.C.R. 145, which is reasonable and probable grounds, established upon oath, to believe that an offence has been committed and that there is evidence to be found at the place of the search. The decision in R. v. Garofoli, [1990] 2 S.C.R. 1421, excluded the possibility of any lesser minimum requirements, given the intrusive nature of electronic surveillance.

The above restatement of the law is uncontroversial. A more controversial issue regarding s. 184.2 is the Largies’ argument regarding the independence of the judge who authorized the participant surveillance. Watt J.A. did not seem to question how the judge could authorize the police`s application after only one hour of deliberation, even though she had been submitted a 240 page application. He stated that “[t]he record is naked of any evidence to rebut the presumption that the authorizing judge discharged her statutory and constitutional obligations.” Although Watt J.A. did save himself by pointing out that the Largies did not challenge the trial judge’s review of the authorizing judge’s decision, the Largies did provoke the question: had the authorizing judge rubber stamped the application?

It would be dangerous territory to require a judge to satisfy minimum time periods for certain tasks – such a proposition would be absurd given that individuals process information differently and different of tasks require varying amounts of time. However, it is my opinion that Watt J.A. too quickly dismissed the Largies’ argument regarding the time that it took the authorizing judge to review the application. In order for the public to have confidence in the justice system, judges must not only be independent, but they must also be perceived to be independent. There is a perception that the authorizing judge did not read the almost three hundred pages that were given to her. Whether or not all of those pages were required to be read is debatable. It is possible that the police provided more information than was necessary, and that the judge had more than enough information to authorize the application. At the same time, it is also understandable, given the assumption that the judge would have read the entire application, why the Largies would bring up such an argument. Accordingly, more attention should have been paid to the issue of the perception of independence.

In the case of GlaxoSmithKline Inc. v. The Queen, 2008 TCC 324 [Glaxo I], the “reasonable in the circumstances” standard was applied to payments for a pharmaceutical product purchased by Glaxo Canada (“Glaxo”) from a non-arm’s length non-resident person, Adechsa SA (“Adechsa”), both members of the Glaxo Group of companies (“Glaxo Group”). The Minister and Tax Court of Canada agreed that the reasonable amount was the fair-market value of the pharmaceutical product.

However, according to the Federal Court of Appeal decision in Glaxosmithkline Inc. v. Canada, 2010 FCA 201 [Glaxo II], (reasons for judgement by Nadon J.A.) the failure of the Tax Court of Canada to “consider all relevant circumstances which an arm’s length purchaser would have had to consider…”, including a related licensing and purchasing agreement, was a legal error. Essentially, determining the price that is “reasonable in the circumstances” is a contextual process and not merely an exercise in determining the fair market value.

Legal Framework

Section 69(2) of the ITA states:

69. (2) Where a taxpayer has paid or agreed to pay to a non-resident person with whom the taxpayer was not dealing at arm’s length as price, rental, royalty or other payment for or for the use or reproduction of any property, or as consideration for the carriage of goods or passengers or for other services, an amount greater than the amount (in this subsection referred to as “the reasonable amount”) that would have been reasonable in the circumstances if the non-resident person and the taxpayer had been dealing at arm’s length, the reasonable amount shall, for the purpose of computing the taxpayer’s income under this Part, be deemed to have been the amount that was paid or is payable therefor.

Pursuant to this section, a payment to a non-arm’s length non-resident person has to be an amount not greater than what would be “reasonable in the circumstances” if the payment was made to an arm’s length person.

Background and Facts

For the four years at issue (1990-1993), Glaxo purchased the pharmaceutical ingredient ranitidine, which is marketed as Zantac, from Adechsa SA (“Adechsa”), a related non-resident company, for the price of between $1512 and $1651 per kilogram. In the same period, two generic Canadian pharmaceutical companies purchased the same product for much less—between $194 and $304 per kilogram.

The Minister reassessed Glaxo for the years 1990-1993 for overpaying for the drug randitine and as a result its income was increased to account for the difference between the price paid and what the Minister considered to be the amount “reasonable in the circumstances.”

In Glaxo I, Rip A.C.J. (now C.J.) of the TCC deemed the reasonable amount to be the fair market value of ranitidine, as substantiated by the prices paid by the generic companies. The excess amounts paid to Adechsa were deemed to be benefits, and pursuant to s. 56(2) of the ITA, subject to non-resident withholding tax.

When Determining the “Reasonable Amount” Under s. 69(2) Business Circumstances Must be Taken Into Account

The main issue in the present case was what considerations were to be taken in order to determine what was a “reasonable amount” pursuant to s. 69(2) of the ITA. According to the Court of Appeal, for s. 69(2) to take effect the following criteria must be met:

1. There must be a taxpayer (as defined in subsection 248(1);

2. who paid or agreed to pay;

3. to a non-resident;

4. with whom the taxpayer was not dealing at arm’s length;

5. an amount and as a price, rental, royalty or other payment for or for the use or reproduction of any property, or as consideration for the carriage of goods or passengers or for other services;

6. the amount must be “greater than the amount that would have been reasonable in the circumstances if the non-resident person and the taxpayer had been dealing at arm’s length”.

The Federal Court of Appeal was primarily concerned with criterion 6. Glaxo contended that the business circumstances surrounding the transactions should have been taken into account when determining the price that would have been “reasonable in the circumstances.” The company argued that s. 69(2) should not apply if it could be determined that any reasonable business person, in the same situation, yet dealing at arm’s length, would have paid the amount.

To buttress this argument, the company contended that related license and supply agreements, which in part required that Glaxo purchase the product from Adechsa, should be taken into consideration; to do otherwise would be “ignoring a crucial business circumstance.” In part, the agreements provided the Glaxo subsidiary with select intellectual property rights, including the use of the ranitidine patent and associated trademark, along with “other patented and trademarked products.”

Conclusion

In Glaxo I, the Tax Court rejected the impact of the agreements. In Glaxo II, the supply and license agreements were together held to potentially validate the price difference at issue. According to the Federal Court of Appeal, the Tax Court of Canada erred by misunderstanding the test for s. 69(2). Real world conditions must be taken into consideration, “including all relevant circumstances which an arm’s length purchaser would have had to consider…” As a result, the issue was returned to Rip C.J. of the Tax Court for a rehearing.

A Brief History of Proposition 8

Before launching into a legal analysis, a quick outline of the proceedings leading up to the decision may be helpful.

Proposition 8 was included on the ballot during the November 2008 state elections and allowed voters to decide whether a constitutional amendment should be implemented stating that “only marriage between a man and a woman is valid or recognized in California.”  Despite many pre-election legal challenges, Proposition 8 made it onto the 2008 ballot and passed with a simple majority of 52.24%.

Several lawsuits were soon launched in both the State Supreme Court and the Federal District Court.  The case in question, Perry v. Schwarzenegger (No C 09-2292) in the U.S. District Court, was launched by two same-sex couples.   On August 4, 2010 Vaughn R. Walker C.J. of the U.S. District Court overturned the proposition, temporarily staying the case to allow suspension of his ruling pending appeal.

The Legal Framework

In part, the lawsuit contended that restricting the definition of marriage to a union between a man and a woman violated both the due process and equal protection clauses of the 14th Amendment of the US Constitution.  Most of the relevant case law is concerned with due process and thus is the focus of my analysis.  

The due process clause (Section 1) of the 14th Amendment states, “…nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.”  In a nutshell, the due process clause ensures all citizens receive an equal, fair and clear application of the law.  Additionally, substantive due process considers the reasons why a law is enforced.  If an unreasonable law is passed, substantive due process may render it unconstitutional. 

In his analysis, Walker C.J. deemed marriage to be a fundamental right available to all and found Proposition 8 to be a violation of substantive due process.  By referencing multiple precedential cases, he set out a strong case for ruling Proposition 8 unconstitutional.

The “Strict Scrutiny” Test

Under the US Constitution, a violation of a right must withstand “strict scrutiny” (similar to Canada’s section 1 of the Charter).  Since this weblog is Canadian, I have taken the liberty of outlining the similarities of this American equivalent to the Oakes Test in my analysis.

First, the use of “strict scrutiny” means the government must demonstrate a compelling interest (our “pressing and substantial” requirement).  Next, the intrusion must be narrowly tailored to support the compelling interest (similar to the Canadian “rational connection” requirement).  Further, the impugned provision must be the least-restrictive means of doing so (minimal impairment).

Walker C.J.’s analysis centred mainly on the requirement that the legislation have a compelling interest.  He posed the crucial question as concerning a new right:

The parties do not dispute that the right to marry is fundamental.  The question presented here is whether plaintiffs seek to exercise the fundamental right to marry; or, because they are couples of the same sex, whether they seek recognition of a new right. (p. 110-11)

Walker C.J. began by addressing the argument that reproductive capacity is relevant in defining marriage.  He pointed out the state had never used reproductive capacity as a condition for issuance of a marriage license.  Indeed, if that were the case, the elderly could not be married.

The judge also considered the history of marriage, and gender roles within a marriage.  He addressed this point by finding that the gender roles attributed to a man and a woman come from an “artifact of time” which has now passed.  Moreover, he referenced other past state-sponsored exclusions from marriage which are now defunct, such as race.  Throughout US history, exclusions based on personal characteristics have been disallowed though, at the time, the issue may have been contentious.

Most importantly (in my opinion) Walker C.J. pointed out that gender is not relevant to the state when determining obligations that spouses may owe each other, and to their dependents.  These days, it is not uncommon to have a single-father household or see a divorced wife pay her husband alimony.  If gender roles are equal in this sense, then it only makes sense that the genders would be equal in marriage as well and unimportant to its definition.  

Therefore, Walker C.J. found that the proposition was unable to withstand strict scrutiny, primarily due to a lack of a compelling reason for the obvious discrimination. 

To the Ninth Circuit … and Beyond!

This rational analysis into the rights of same-sex couples inspires hope that the rights of individuals can withstand the intolerance of the religious right.  However, the journey is far from over.  A notice of appeal has been filed in the case and will be heard before the 9th Circuit Court of Appeals. 

It is likely a social issue of this magnitude will eventually travel to the US Supreme Court.  There, it is likely that the liberal four (Kagan, Sotomayor, Ginsburg, and Breyer) will uphold marriage equality.  Hopefully, the last vote will come from Justice Kennedy, who is rumoured to also support marriage equality.  While a Supreme Court decision is a long way off, this first step on the road to American marriage equality is quite a refreshing development.

How It All Began

In 2004, Jennifer Lewis began her position as Executive Director of the Terrace Tourism Society. She went on maternity leave at the end of 2006.  A contracted employee was hired to replace her as interim Executive Director during her leave.  Shortly after, the Society found itself in financial trouble as a result of a municipal decision to cut funding. Immediately, the interim Executive Director was laid off and Lewis’ signing authority on bank accounts was removed.  On February 19, 2007 the Society passed a dissolution resolution where they decided the Executive Director position would be removed.

The Society, at this time, recognized it would owe Lewis severance pay as her position would eventually be eliminated (as a result of the company’s closing).  On March 7, 2007 the Society contacted Lewis asking for more information on whether severance had been discussed in her contract. Severance had not been discussed. Twelve days later, Lewis commenced an action against the Society in Small Claims Court for wrongful dismissal.  As a result of the lawsuit, the Society informed Lewis her employment was terminated for just cause.  In July 2007, Lewis sued the employer in the BC Supreme Court for wrongful dismissal and/or constructive dismissal.

The trial judge dismissed Lewis’ lawsuit, finding that she had not been constructively dismissed and that the filing of a Small Claims lawsuit formed the requisite just cause to terminate her employment.  Additionally, the court found that the Society had intended to offer severance to Lewis but could not do this as Lewis had taken a “pre-emptive strike” against the employer by launching the Small Claims case.

Two issues arose on appeal: first, whether the company’s effective shutdown constituted constructive dismissal and second, whether commencing litigation constituted just cause for Lewis’ dismissal.  I focus on the first ground of appeal.

The Court of Appeal Finds Lewis Was Constructively Dismissed

Constructive dismissal occurs when an employer changes a fundamental term or condition of an employment contract without providing reasonable notice of the alteration to the employee.  It is considered repudiation of the contract by the employer, regardless of whether or not the intention existed to continue the employment relationship (Farber v. Royal Trust Co., [1997] 1 S.C.R. 846).  In the case at hand, the issue concerned when and if Lewis could have considered herself constructively dismissed before the company offered appropriate severance (as there was never any question whether the position would be terminated, it only was a matter of when).

Levine J.A. writing for the majority, held that Lewis’ legal right to reasonable notice on termination of her position was not altered upon commencement of a maternity leave.  In determining this, the majority relied on s. 67(1)(a) of the Employment Standards Act, R.S.B.C. 1996 (“Act”), which expressly protects employees on leave from dismissal with notice that coincides with the period of leave.

In coming to this decision, Levine J.A. did not distinguish active employees and those employees on leave.  Instead, she held that Lewis’ job was clearly terminated when the Society resolved to cease operations and eliminate the position that Lewis held.  According to Levine J.A.,

It is irrelevant, in my opinion, that the appellant was not at the time attending her workplace…she knew of these actions, and they could leave no reasonable doubt in her mind that her employment had come to an end.

The majority was not convinced that the employer’s intention to calculate and offer severance was enough to negate a finding of constructive dismissal. Since Lewis was constructively dismissed and her employment contract had been repudiated, she was free to launch a claim in the Small Claims Court.

The Dissenting Judge Provides Convincing Reasons for Differentiating Between Active and Separated Employees

Frankel J.A., dissenting, opted for an approach that took into account the “totality of the circumstances.”

First off, Frankel J.A. referenced ss. 54 and 56 of the Act, which establish minimum standards for treating employees on pregnancy/parental leave.  In interpreting the Act, he determined the “core obligations” of an employment relationship are “held in abeyance during the leave period.”  He went on to describe Lewis’ relationship with the Society as being a “shell” in which she was entitled to recommence being the executive director upon her return.

Next, the judge emphasized that the “totality of the circumstances” is crucial when analyzing a constructive dismissal claim.  In Frankel J.A.’s opinion, the nature of the changes being made with respect to the Society had no immediate effect on Lewis’ employment status.  In his words, “What the Society did was remove a signing authority Ms. Lewis was not exercising, and close a workplace to which she was not going.”

In my opinion, I am inclined to agree with Frankel J.A.’s dissent.  The majority decision sets a dangerous precedent that suggests that employees on leave are immediately constructively dismissed if their position is altered or terminated in the future.  As Frankel J.A. wrote at para. 35, “To conclude otherwise would be tantamount to saying that an employee on leave will have been constructively dismissed whenever an employer begins a process of downsizing or winding up that will result in the elimination of that person’s job.”  Accordingly, employers should given a time period wherein severance can be provided without fear of being accused of constructively dismissing an employee.

The crucial aspect missing in the majority reasoning is that the employer was in the process of calculating a severance package for Lewis.  Lewis commenced litigation twelve non-business days after speaking to a Society committee member. This member was merely asking for more information, and promised to get back to Lewis with respect to her severance package.  At the very least, her decision to launch the Small Claims action was hasty since the Society did not have a chance to provide severance.

I suggest that a more preferable solution would be for employers to be given a reasonable period of time in which to investigate business affairs and calculate appropriate severance pay before an employee may consider themselves constructively dismissed.  If Lewis had been working, she could have received working notice.  Since she was not working, her employer was left the remaining option of severance in lieu of notice.  During the tumultuous time where an organization is disbanding, I would hope the courts would allow employers enough time to accurately determine severance pay.

Employees of this era are more educated on their rights to parental leave. They are entitled to receive these benefits, and should be able to fight for them.  However, it is also important to ensure that courts exercise restraint when considering these types of cases.  If an employee is on leave and cannot be given working notice, then the employer’s circumstances should be considered. In the appropriate circumstances, a “grace period” for severance calculations should be given.

At trial, Pickton was convicted of six counts of second degree murder stemming from the disappearance of a number of women from Vancouver’s notorious downtown eastside. Throughout the hearing, the Crown was consistent in its claims that Pickton alone shot and killed the six women. Pickton’s defence avowed the possibility of the involvement of others and asserted that the Crown failed to prove Pickton was the sole perpetrator. The goal of the defence, as usual, was to simply raise a reasonable doubt that Pickton murdered the woman.

The Impugned Jury Instructions

Counsel for Pickton requested that the trial judge instruct the jury according to the Crown’s theory (that Pickton was the sole perpetrator and shot the six women) and again in relation to the defence theory that others were involved. On agreement of both parties, the following instruction was given to the jury by the trial judge:

If you find that Mr. Pickton shot [name of victim], you should find that the Crown has proven [element 3, the identity of the killer]. On the other hand, if you have a reasonable doubt about whether or not he shot her, you must return a verdict of not guilty on the charge of murdering her…

During the trial the jury posed the following question to the judge in relation to the above instruction:

When considering Element 3 [the identity of the killer] on one or more of the counts, are we able to say “Yes”, if we infer that the accused acted indirectly?

In response, the judge instructed the jury of the following:

If you find that Mr. Pickton shot [name of victim] or was otherwise an active participant in her killing, you should find that the Crown has proven this element. On the other hand, if you have a reasonable doubt about whether or not he was an active participant in her killing, you must return a verdict of not guilty on the charge of murdering her…[Emphasis added]

The defence claimed that the insertion of the phrase “or was otherwise an active participant in her killing” suggested that the accused may have aided or abetted the crimes, and as a result the trial judge should have instructed the jury on the law of aiding or abetting.

Pursuant to s. 21 of the Criminal Code, R.S.C. 1985, c. C-46, liability for offences may occur by primary or principal liability (the accused actually committed the offence), or by secondary (or party) liability (the accused took part in the offence). In general, whether the accused committed the offence or aided and abetted, the legal consequences are the same. The relevant section states, in part:

(1) Every one is a party to an offence who

(a) actually commits it;

(b) does or omits to do anything for the purpose of aiding any person to commit it; or

(c) abets any person in committing it…

The Defence Argued that the Trial Judge Moved the “Goal Posts”

The defence argued that the impugned instruction, including the newly introduced phrase—“was otherwise an active participant in her killing”—presented an alternate, ill-defined route to conviction late in the trial. What’s more, the introduction of the possibility of the involvement of others represented new “goal posts” and “adversely [impacted] on the fairness of the trial.”

On denying the appeal, Charron J., writing for the majority, argued two main points. First, the theory that others may have possibly been involved could not have come as a surprise to the jury or the defence. In fact, throughout the trial Pickton’s counsel consistently argued the potential implication of others. According to Charron J.:

The fallacy of Mr. Pickton’s argument lies in the fact that the defence theory itself put the participation of others at issue. Throughout the trial, the defence by its approach urged the jury to consider that others may have actually killed the victims.

The second point related to the adequacy of the jury instructions. Even though there was no explicit instruction on aiding and abetting, the majority ruled that the relevant law had been explained to the jury sufficiently, considering the facts and evidence.

Different Paths Leading to the Same Conclusion

The first point is reasonable. For the defence to argue that the “goal posts” had been moved and that they were somehow surprised by the introduction of “an alternate, ill-defined route to conviction” was a tactic that could not stand on the facts. However, the characterization of the impugned instructions as presenting an “ill-defined route to conviction” was rational. Even though it is unlikely that the defence was taken off guard by the alternate route to conviction, in my opinion the jury should have been more clearly instructed on that route, hence the use of the term “ill-defined.”

With all due respect, the majority’s assertion that the vague jury instructions in this instance were sufficient to educate the jury on the law of aiding and abetting sets a flawed precedent. Even more curious is the majority’s acknowledgement that the aiding and abetting instructions should have been given. Charron J. stated:

Based on the evidence, the trial judge could have, and in hindsight probably should have, also instructed the jury on Mr. Pickton’s potential liability for acts of aiding and abetting… [But]…[t]he instructions could not have led the jury into improper reasoning.

Here, Charron J. appears to assert that since, in the present case, the outcome would not have changed as a result of modified instructions, those instructions were not necessary.

LeBel J.’s Partially Concurring Opinion

In a partially concurring opinion, LeBel J. held the impugned instruction did represent an “ill-defined route to conviction.” However, despite the error by the trial judge, the evidence weighed so heavily in favour of Pickton’s guilt that the appeal should be dismissed.

According to LeBel J.: “”it is…important that the applicable law be carefully delineated and clarified for future cases…” Besides, the curative proviso found in s. 686(1)(b)(iii) of the Criminal Code permits an appeal court to dismiss the appeal “if it is of the opinion that no substantial wrong or miscarriage of justice has occurred”, even if the trial court decision contains “a wrong decision on a question of law.” Accordingly, “the proviso will…apply [if] there is overwhelming evidence of the guilt of the accused and, on that evidence, a properly instructed jury would necessarily return a verdict of guilty…” Such is the case here.

Conclusion

I find LeBel J.’s arguments to be more persuasive. As Canada’s highest court, the SCC should make a concerted effort to clarify the law as much as possible. Furthermore, providing specific instructions and relying on the use of the curative proviso in s. 686(1)(b)(iii) results in a similar outcome for the accused. Not only would the guilty verdict have been upheld, but the law clarified in the same instance.

By ensuring that the instructions were explicitly communicated to the jury, the SCC would either be raising or upholding a specific standard in relation to the adequacy of jury instructions. It is unclear how this could be a negative. According to LeBel J:

“it remains the duty of the trial judge to convey to the jury as triers of fact the relevant legal principles and how they apply to the evidence adduced at trial, so as to avoid the legally irrelevant uncertainty which otherwise might arise.”