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Ontario Bar Association | Association du Barreau de l'Ontario
The Ontario branch of the Canadian Bar Association | La division ontarienne de l'Association du Barreau canadien
The articles that appear in this publication represent the opinions of the authors. They do not represent or embody any official position of, or statement by, the OBA except where this may be specifically indicated; nor do they attempt to set forth definitive practice standards or to provide legal advice. Precedents and other material contained herein are intended to be used thoughtfully, as nothing in the work relieves readers of their responsibility to consider it in the light of their own professional skill and judgment.
Administrative Law
Fresh Perspectives on the Rule of Law Sebastian Spano*
A renewed interest in the rule of law is one development that may have a significant impact on the administrative law landscape in 2007. Two recent decisions from British Columbia, one from the Court of Appeal and one from the Supreme Court, have raised a number of important questions about the rule of law and what it implies as a constitutional imperative. These cases will likely generate considerable discussion about how to articulate the principle, its content, its application to administrative tribunals, its limits, its sources, and the extent to which it may invalidate or render inoperable otherwise validly enacted legislation.
The Rule of Law and Tribunal Independence
In McKenzie v. Minister of Public Safety and Solicitor General, 2006 BCSC 1372, the B.C. Supreme Court declared of no force and effect as against the petitioner, otherwise validly enacted legislation on the basis that the legislation interfered with the security of tenure, and thus, the independence, of a provincially appointed residential tenancy arbitrator. The security of tenure to which arbitrators are entitled was held to have its source in the unwritten constitutional principle of the rule of law. The judgment extends the principle of judicial independence to adjudicators appointed pursuant to provincial legislation where that legislation may not provide for security of tenure if those adjudicators perform quasi-judicial functions, particularly in areas of adjudicative jurisdiction that were drawn from the courts.
The judgment represents an important refinement of, if not an actual challenge to, the principles enunciated by the Supreme Court of Canada in Ocean Port Hotel v. British Columbia (General Manager, Liquor Control and Licensing Branch), [2001] 2 S.C.R. 781. In Ocean Port, the Court refused to extend the unwritten constitutional principle of judicial independence, rooted in the preamble to the Constitution Act, 1867, as articulated by Lamer, C.J. in the Provincial Court Judges Reference, to at-pleasure appointees of the B.C. Liquor Appeal Board. It rejected the argument that where an administrative tribunal performs adjudicative functions, particularly where the tribunal has the power to impose sanctions comparable to the powers possessed by courts for violations of statutes, the principle of judicial independence should apply. The Court held instead that the degree of independence that a tribunal requires is to be determined by the legislation that created the tribunal. In other words, it is for Parliament or a legislature to determine the degree of independence that a tribunal may enjoy.
In the McKenzie case the Court considered the argument that Ocean Port must be read in light of subsequent Supreme Court of Canada judgments on judicial independence, particularly Bell Canada v. Canadian Telephone Employees Assn., [2003] 1 S.C.R. 884 and Ell v. Alberta, [2003] 1 S.C.R. 857. It was argued that the Court in Bell Canada acknowledged the existence of a type of tribunal to which the principles in Ocean Port may not apply, that there may be said to be a “spectrum” of tribunals, and that tribunals at the “high end” of the spectrum performing judicial or quasi-judicial functions did not the fit the broad characterization of tribunals in Ocean Port. In Ell, the Court extended the unwritten principle of judicial independence to justices of the peace in Alberta because they exercised judicial functions “related to the basis upon which the principle is founded.”
Mr. Justice McEwan’s functional approach to the issues in McKenzie distinguishes between tribunals. Not all tribunals, he held, are so closely associated with the executive that they are government decision-makers, or instruments of the executive, and therefore not required to be constitutionally independent. Mr. Justice McEwan concluded that those tribunals which are “constituted to try issues of law as between private citizens”, or perform judicial functions, many of which were once performed by courts, require constitutional independence.
The Rule of Law and Access to Justice
A different element of the rule of law was addressed by the B.C. Court of Appeal in Christie v. British Columbia, 2005 BCCA 631. In that case a majority of the Court struck down the Social Services Tax Amendment Act (No. 2), 1993, S.B.C. c. 24, which imposed a 7% tax on fees billed for legal services. The Supreme Court of Canada has granted leave to appeal the decision, with the appeal scheduled to be heard on 21 March 2007 (File 31324, Attorney General of British Columbia v. Dugald E. Christie). The basis for the decision was that the legislation offended the principle of access to justice as an element of the rule of law. The court considered two sources for the rule of law: the rule as an unwritten constitutional principle; or, one of two principles mentioned in the preamble to the Canadian Charter of Rights and Freedoms (“Whereas Canada is founded upon the principles that recognize the supremacy of God and the rule of law…”). The Court held that the tax impeded all persons trying to access legal assistance. This includes legal services “related to the determination of rights and obligations by courts of law or independent administrative tribunals.” To the extent that the legislation purported to tax these services, it was held to be unconstitutional.
The Christie case is to be contrasted with the Supreme Court of Canada’s most recent pronouncement on the rule of law in British Columbia v. Imperial Tobacco Canada Ltd., 2005 SCC 49. In that case, Major J., writing for the Court, held that the rule of law, as developed in cases such as Re Manitoba Language Rights, [1985] 1 S.C.R. 721 and Reference Re Secession of Quebec, [1998] 2 S.C.R. 217, embraces three principles: that the law is supreme over government officials and private individuals, thereby precluding the exercise of arbitrary power; that it requires an order of positive laws which preserve and embody a more general normative order; and that the relationship between the state and the individual be regulated by law. Major J. considered it difficult to conceive, on the basis of these three principles, that the rule of law could ever be used to invalidate legislation. On Major J.’s conception of the rule of law, any constraints on the actions of a legislature can only be in respect of the legislative requirements as to the manner and form by which legislation is enacted, not in respect of its content.
Looking Ahead
Both McKenzie and Christie represent a significant shift in the discourse around the rule of law. The Courts in both cases have made important pronouncements in fashioning the rule(s) to meet current realities both in the administrative law and constitutional law fields. These pronouncements are significant beyond the level of doctrine and will no doubt have important practical implications for practitioners.
* Sebastian Spano, Parliamentary Information & Research Service – Law & Government Division, (613) 995-7918, SpanoS@parl.gc.ca. Sebastian is the Newsletter Editor of the Administrative Law Section.
The ADR Section Considers An Act to Amend the Human Rights Code Barry B. Fisher*
In December of 2006, the Ontario Legislature passed Bill 107, An Act to Amend the Human Rights Code. The major focus of the Bill was to allow for direct access to the Human Rights Tribunal, thereby eliminating the previous procedure where the Human Rights Commission in effect had carriage on any case before the Tribunal.
Our Section saw this as a major opportunity to improve on the ADR components of the new procedure. We have therefore developed a position paper which we will be presenting to the OBA for their approval and then for submission to the Human Rights Tribunal as part of its public consultation process in developing the Tribunal Rules of Procedure.
The ADR Section proposes that the Bill and the Tribunal Rules incorporate the following proposal.
1. Mediation of all disputes would be mandatory, subject to exemption by the Tribunal, and therefore no hearing before the Tribunal could be started unless a mediation had already been held.
2. The Tribunal would provide the parties with the services of a Tribunal member at no cost to conduct the mediation. However, if all the parties wanted to use a mediator of their own choice, they would be free to do so, but the cost of doing so would be borne by the parties.
We will now explain in more detail these proposals:
Mandatory v Voluntary Mediation
The existing practice of the Commission and the Tribunal is to offer, but not require, mediation. According to the 2005-2006 Annual report of the Ontario Human Rights Commission, only in 1096 cases of the 2399 cases filed did the parties agree to conduct an early mediation without investigation. This means that only 45% of the cases filed actually went to mediation at the Commission. Once at mediation the success rate was quite high, in that 71 % of the cases were then settled.
We believe that under the new proposed scheme of direct access to the Tribunal it will be extremely important to develop new processes that will reduce the number of actual Tribunal hearings, or to limit the length of those hearings. We submit that the cornerstone of these processes should be mandatory mediation. If the settlement figures achieved through the existing voluntary mediation process carry forward to a mandatory system then presumably 70% of all cases will settle at mediation, whereas under the present system only 34.4% do so. Mandatory mediation would therefore substantially reduce the number of cases that actually proceeded to a Tribunal hearing. It is also reasonable to assume that the number of complaints filed will increase as the introduction of direct access to the Tribunal will hopefully dramatically shorten the time it takes to get to a hearing. It is well understood that the present undue delay in processing a human rights complaint undoubtedly discourages many complaints from even being filed.
Mandatory mediation has been proven to be an effective way of resolving disputes in Ontario where there is direct access to a tribunal or a Court. The Ontario Mandatory Mediation Program, (OMMP) set out in Rules 24.1 and 78 of the Rules of Civil Procedure, has dramatically changed the legal landscape of litigation in those areas that it is in force (Toronto, Ottawa and Windsor). An important reason for the program’s success has been the element of mandatory mediation. Without mandatory mediation, parties may tend to consider requesting or agreeing to mediation as a sign of weakness. Once mandatory mediation becomes part of the legal culture, lawyers quickly become very skilled in reaching settlements at mediation. It should also be noted that in the OMMP, the highest rate of settlement has been in the employment field. Since the majority of the complaints filed under the Ontario Human Rights Code are also work related, we have good reason to believe that the successful integration of mandatory mediation under the OMMP would carry forward in a mandatory mediation model for human rights complaints.
In order to enforce mandatory mediation, the Tribunal Rules would have to provide for a number of related issues.
First, it is recognized that even in a mandatory mediation process, there must be a mechanism for exempting those cases where mediation is not appropriate. The parties would have to apply to the Tribunal for an exemption from mediation. Consent of the parties alone would not constitute a sufficient reason for exemption. This is similar to Rule 24.1.05 of the Rules Of Civil Procedure which reads as follows:
EXEMPTION FROM MEDIATION
24.1.05 The court may make an order on a party’s motion exempting the action from this Rule.
Second, the Tribunal Rules would have to determine the date by which the mediation would have to occur and provide for a “gate keeper” process to insure compliance.
There are competing interests at stake here.
On the one hand, the parties should be given the flexibility to determine when they think it is best to conduct the mediation in accordance with their right of self determination of their own dispute.
On the other hand, it has been shown that early mediation, especially in employment or labour related disputes, is very important and can result in more meaningful settlements. As it stands now, although the Tribunal has the power to reinstate employees as a remedy, it is a power rarely exercised, largely because by the time the Tribunal hears the case many years have passed, making reinstatement virtually impossible. Requiring that the parties engage in a mediation at an early stage, especially when the prospect of a Tribunal hearing is in the near future, will enhance the parties ability to negotiate meaningful reinstatement agreements.
Moreover, there is another important consideration as to the timing of the mediation. On the one hand the parties need to be properly informed of the relevant facts of the case before they can be expected to settle their case at a mediation. On the other hand the longer the case remains unresolved, the higher the costs to the parties (and to the Tribunal) and the less likely that certain remedies will remain useful.
The Tribunal will undoubtedly be developing rules in regards to the production of documents, witness statements and other issues of disclosure. The timing of the mediation should be tied to the requirement of disclosure and production. We therefore recommend that the Rules provide that the mediation must take place no later than a specified number of days after the end of the production / disclosure stage.
In order to enforce the rule that mediation is mandatory, it is important for the Tribunal to have the ability to ensure that no case is heard by it, unless it has either been mediated or been previously exempted. Our recommendation is that this be determined at the time that the Tribunal schedules cases for a hearing. In other words, the parties would have to show the Tribunal that they have either had a mediation or have a scheduled date for mediation before the Tribunal will schedule a hearing date.
Delivery of Mediation Services
We recommend that the parties be able to conduct a mediation in one of two ways:
By using a Tribunal member at no cost to the parties, or
By using a mediator of their choice, with the cost of the mediator being borne by the parties.
Our rationale behind these submissions are as follows:
As our proposal would make mediation compulsory, it is important that the parties have access to qualified mediators at no cost to them.
There are two ways in which this could be provided; by using Tribunal members to mediate cases or by using staff mediators.
We submit that the preferable model is to utilize Tribunal members as mediators rather than staff mediators. Our reasoning is as follows:
1. Flexibility:
There are many models of alternative dispute resolution other than mediation. Many of these other models involve skills quite different from those usually found in those whose only practice is mediation. For instance there is a popular form of dispute resolution commonly used in the labour relations world called MedArb, which provides that the same person performs both the function of a mediator and an arbitrator. The Tribunal is mandated by Section 43(a) to provide procedures that are “alternatives to traditional adjudicative practices and procedures”. If staff mediators are utilized, the Tribunal would not be able to use MedArb as a dispute resolution technique, as only Tribunal members have adjudicative powers. Therefore if staff mediators were employed, they could only do traditional mediations and Tribunal members would have to be used to do many other forms of ADR. This splitting of ADR functions will undoubtedly lead to institutional inefficiencies and therefore backlog. By providing that Tribunal members would provide all the state funded dispute resolution functions, you increase the efficiency and the time frame in which disputes can be resolved.
2. Attracting High Quality Tribunal Members
Section 32(3)3 of the Code provides that one of the criteria in choosing Tribunal members shall be “aptitude for applying the alternative adjudicative practices and procedures that may be set out in the Tribunal rules.”
This means that Tribunal members must be more than traditional adjudicators; in fact one can easily imagine the Tribunal consisting of skilled ADR professionals with expertise in many different dispute resolution techniques. People of that nature will want to do mediations and therefore the ability to perform both mediations and adjudicative hearings will attract the best candidates. If potential candidates for Tribunal positions are told that the job consists only of endless hearing dates interrupted by writing days, this will not entice the same quality of candidate who is told that the position consists of a mix of mediating, adjudicating and writing.
It is critical to the success of the Tribunal that they attract excellent candidates. We know that the monetary compensation being offered for these positions does not compare with what a comparable lawyer could make in private practice, therefore quality of life and job satisfaction will go a long way to ensuring that the Tribunal attracts the best qualified candidates.
3. Credibility
There is certainly no question that one does not have to be a Tribunal member to be an effective mediator just like you don’t have to be a judge or former judge to be an effective mediator of civil disputes. However, we must remember that a large number of parties to these proceedings may well be self-represented. It would probably enhance the overall settlement rate, especially of those cases involving self represented parties, if they were aware of the fact that the person mediating their dispute was also a Tribunal member.
4. Cost Effectiveness:
Whether the mediations are performed by Tribunal members or staff mediators, the Province will still be paying for those services. We would imagine that the direct staffing costs of a Tribunal member as opposed to a staff mediator would show the Tribunal member as being more expensive. However, we suggest that when you look at the larger picture, the staffing costs may be very similar. For example, staff mediators would have to be supervised by a body of supervisors, managers and directors. Tribunal members on the other hand do not have such management oversight and supervision, as the Chair of the Tribunal is more like a “first among equals. Thus, the total staffing costs of the two models may in fact be quite similar. Moreover, if the settlement rate of Tribunal members conducting mediations was higher than that of staff mediators, then overall it may well turn out that the use of Tribunal members to conduct mediations (and thus less hearing days) would be more cost effective.
However, we also submit that the Tribunal mediator model not be the only acceptable mediation model, but that the parties also be able to engage their own mediator of choice if they agree to do so. Our reasons for proposing this additional delivery model are as follows:
Allowing the parties to choose their own mediator has a significant positive effect on the settlement rates. In other words, when parties choose their own mediator instead of having one assigned to them, they are more likely to settle. This is because mediation is an intensely human process, and not surprisingly, the personality and techniques of the mediator is highly relevant to the outcome. Some mediators are known as being highly facilitative, others more evaluative, some are fairly formal in their mediations, others are more “laid back”. One mediator may be seen as being very effective on age discrimination cases but not as effective on sexual harassment cases. Where lawyers are involved in the process, they have a wealth of knowledge as to the perceived strengths and weaknesses of mediators and spend a lot of effort in negotiating with the other parties the right mediator for their case.
As this mediator by choice would only be available if all of the parties agreed, there is no worry that one side could bully the other into choosing a mediator that they did not really agree to as that party could always insist on a staff mediator being assigned to the case. Moreover if the parties could not agree on a mediator, then a staff mediator would be assigned.
As the entire cost of the mediator by choice would be the responsibility of the parties, the Tribunal would save staffing costs every time the parties opted not to use a staff mediator. This could provide considerable relief to the Tribunal’s staffing budget.
At present, many human rights complaints are done at the same time as other legal proceedings such as court litigation or labour arbitrations. Since the parties may well be in a regime of mandatory mediation in the other proceedings, to require the parties to repeat the process using a staff mediator would be extremely unproductive. The chances of settling a case that is before two or more adjudicative bodies without the matters being discussed before a single mediator for all aspects of the case are slim to none. It would not be realistic to expect the staff mediators to mediate these types of disputes as their experience and training has not been focused on these non-human rights matters. Just as knowledge of human rights law is an essential prerequisite to mediating human rights matters, so to does a knowledge of other areas of law act as a prerequisite for other types of cases that form part of the overall dispute.
The Tribunal should set standards of eligibility over these mediators of choice as they would be performing a function required by the Tribunal Rules.
The sort of matters that could be regulated by the Tribunal could include requiring that each mediator of choice:
Be a member in good standing of a professional mediation organization that requires adherence to a Code of Conduct, e.g. the Ontario Bar Association – ADR Section or the ADR Institute of Ontario.
Undertake in writing to adhere to a specific Code of Ethics approved by the Tribunal. For example the Tribunal could designate an existing Code of Conduct for this purpose, such as has been done under the Ontario Mandatory Mediation Program (“the OMMP”). Currently, the CBAO “Model Code of Conduct” applies in its entirety to all mediators under the OMMP.
Have sufficient experience in and/or have taken an approved set of courses in human rights law.
These types of oversight functions are similar to those governing mediators under the OMMP.
6. To facilitate the creation of clear standards of competence for the selection of mediators of choice, we recommend that the Tribunal establish and maintain a roster of mediators who meet certain criteria, including the criteria set out above. The roster would be posted on the Tribunal website. These measures would allow the public to choose a mediator who meets certain required criteria and ensure that any mediation conducted by a roster mediator would qualify as a mandatory mediation under the Tribunal Rules, thereby allowing the matter to be scheduled for a hearing, in the event a mediated resolution is not achieved.
Conclusions:
1. Mediation of human rights complaints should be mandatory, requiring a Tribunal order if the parties want to be exempted. Case exemptions should only be made in exceptional circumstances.
2. The mediation should be required to be held no later than within a fixed number of days after the production, disclosure and investigative requirements have been completed.
3. The Tribunal would not schedule a hearing date unless the parties have already held or have scheduled a mediation, or have been exempted from mediation.
4. Tribunal members would conduct the mediations at no cost to all parties.
5. The parties would be at liberty to agree to use a mediator of their choice who was not a Tribunal member as long as they paid the mediator themselves.
6. The Tribunal would set standards for eligibility of the mediators of choice in order to protect the public and maintain a Web based public roster of those mediators.
* Barry B. Fisher, Barry B. Fisher Mediation & Arbitration, (416) 585-2330, barryfisher@rogers.com. Barry is the Past Chair of the Alternative Dispute Resolution Section.
Ontario’s Securities Transfer Act, 2006: New Rules for Securities as Collateral John Cameron*
This article originally appeared in Business Beat, Volume 17, No. 1, December 2006.
The new Securities Transfer Act, 2006 (Ontario) (the STA) has been proclaimed to come into force on January 1, 2007. It creates a complex set of rules relating to the transfer of securities that govern the rights and obligations of issuers of securities, securities intermediaries, investors and secured parties. Despite this complexity, the STA and related amendments to the Personal Property Security Act (Ontario) (the PPSA), which also come into force on January 1, 2007, will greatly facilitate the use of securities as collateral.
This article provides a brief summary of the important rules.1 To understand these rules, the reader must bear in mind that securities are held in North America under two systems: the direct holding system and the indirect holding system. The direct holding system applies where a direct relationship exists between an issuer and an investor. For example, the direct holding system applies to the relationship between a private company and its shareholders. The indirect holding system applies to the indirect relationship between an issuer and an investor, where the securities are held through a securities intermediary such as CDS Clearing and Depository Services Inc. (CDS),2 a bank or trust company acting as custodian, or a securities dealer. The indirect holding system depends in part on the direct holding system because for every security held in the indirect holding system, a direct relationship exists between an issuer and a person registered as the owner of a security or holding a bearer security, such as CDS.
The most common types of secured lending transactions that lawyers in private practice deal with occur under the direct holding system. For example, when a corporate borrower pledges the shares of its subsidiaries to secure a credit facility, and delivers the duly endorsed share certificates to the lender at closing, the direct holding system applies. While the terminology used in the PPSA will change slightly, the substance of the relevant rules applicable to secured transactions in the direct holding system remains largely unchanged by the STA. The most significant changes arise in the context of the indirect holding system, where secured parties will have a new ability to perfect their security interest by way of a “control agreement” between the securities intermediary, the secured party and the debtor (i.e., the investor).
The STA, together with the related PPSA amendments, contains an enormous amount of detail, including many subtle nuances. Simplifying greatly, I summarize the most important rules in practice below. For the purposes of this summary, I use the words “investor” and “debtor” interchangeably, depending on the context.
Methods of Perfection
Apart from some special rules, there are three methods to perfect a security interest under the new rules:
Registration: A secured party can continue to perfect its security interest by registering a financing statement against the debtor, whether securities are held in the direct or indirect holding system.
Control: “Control” is the best method to perfect a security interest, whether securities are held in the direct or indirect holding system. In essence, “control” means that the secured party has the ability to transfer the investment property without further action by the debtor.
Possession: A secured party can continue to perfect a security interest in a certificated security in registered form by obtaining possession of that security. With an appropriate endorsement, the secured creditor obtains “control” of that security.
Control in the Direct System
In the direct system, a security can be certificated or uncertificated. The method to obtain control varies depending whether the security is certificated or uncertificated:
Certificated Securities: For a bearer security, a secured party obtains control by receiving the certificate. For a registered security, a secured party obtains control by receiving the certificate, together with (i) an appropriate endorsement, or (ii) arranging for the issuer to register the security in the name of the secured party. These steps correspond to the steps that would be taken under current law for the secured party to acquire the status of a “good faith purchaser” of a certificated security.
Uncertificated Securities: If the security is not evidenced by a certificate, control is obtained by (i) arranging for the issuer to register the security in the name of the secured party, (ii) obtaining a control agreement from the issuer, or (iii) someone else having control for the benefit of the secured party. Most mutual fund securities are issued in uncertificated form. Until the new laws come into force, the only way to perfect a security interest in an uncertificated mutual fund unit is by registration of a financing statement under the PPSA. The new rules will introduce a new method of perfection – that is, by a secured party obtaining a control agreement from the issuer of the mutual fund security.
Control Agreement in the Direct System
In the direct holding system, a control agreement is an agreement between the issuer of an uncertificated security, the secured party and the debtor, under which the issuer agrees to comply with instructions from the secured party without the debtor’s further consent. A control agreement need not give exclusive control to a secured party. A debtor can retain the right to give instructions, and other secured parties can obtain (or may already have) a concurrent right to give instructions.
Securities Accounts in the Indirect System
Under the indirect system, a securities intermediary (such as CDS, a bank or trust company acting as custodian or a securities dealer) holds securities and other “financial assets” in a securities account for the benefit of its customer (e.g., an investor). In addition to securities, financial assets held in a securities account can include virtually any form of property if the securities intermediary and the customer agree that it is to be treated as a financial asset for the purposes of the STA. “Financial assets” also include any credit balance in the securities account unless the securities intermediary and the customer otherwise agree.
Security Entitlements in the Indirect System
An investor acquires a “security entitlement” when a securities intermediary indicates by book entry that a financial asset has been credited to that investor’s securities account. A “security entitlement” consists of a bundle of property and contract rights created under Part VI of the STA. A security entitlement is not bought or sold. Instead, when an investor sells a security or other financial asset in the indirect system, the securities intermediary extinguishes the investor’s security entitlement, and (if the related security or financial asset remains in the indirect system after the sale – as would normally be the case), a new security entitlement is created in favour of the purchaser.
Control in the Indirect System
A secured party obtains control of a security entitlement by (i) arranging for the securities intermediary to record the secured party as the entitlement holder, (ii) obtaining a control agreement from the securities intermediary, or (iii) someone else having control for the benefit of the secured party.
Control Agreement in the Indirect System
In the indirect holding system, a control agreement is an agreement between the securities intermediary, the secured party and the debtor, under which the securities intermediary agrees that it will comply with instructions from the secured party without further consent of the debtor. A control agreement need not give exclusive control to the secured party. A debtor can retain rights to give instructions, and other secured parties can obtain (or may already have) a concurrent right to give instructions.
Key Priority Rules
The key PPSA priority rules are as follows:
Control Trumps Non-control: A security interest perfected by control has priority over another security interest perfected otherwise than by control.
Two Security Interests Perfected by Control: If two or more security interests are perfected by control, they rank by priority in time to obtain control.
Securities Intermediary Priority: Despite the above rules, in the indirect holding system, a securities intermediary with a security interest in a security entitlement that it created has priority over other secured parties unless the intermediary otherwise agrees.
“Protected Purchasers”
In the direct holding system, a “protected purchaser” acquires priority over any adverse claim to a security by giving value without notice of any adverse claim to the security and obtaining control of the security. In the indirect holding system, there is no single corresponding rule; instead, there are a series of complex cut off rules and legal principles.
Conflict of Law Rules
There are four main conflict of laws rules.
Perfection by Registration of Financing Statement: Perfection of a security interest by registration of a financing statement must take place in the debtor’s location, which is defined in same manner as under the current PPSA – looking to the debtor’s chief executive office if it has more than one place of business.
Certificated Securities in Direct Holding System: Apart from the rule for place of perfection by registration, the rules for the validity, perfection and priority of a security interest in certificated securities point to the location of the certificate.
Uncertificated Securities in Direct Holding System: Apart from the rule for place of perfection by registration, the rules for the validity, perfection and priority of a security interest in uncertificated securities point to the issuer’s jurisdiction. The issuer’s jurisdiction is determined according to (i) the location of the registered office or head office of a federally incorporated non-Crown issuer, and (ii) the jurisdiction of incorporation or organization for other non-Crown issuers. An issuer has the flexibility to choose its own jurisdiction outside its jurisdiction of incorporation or organization. Uncertificated securities issued by the Crown will normally be held through the indirect holding system, so the conflict of laws rules for security entitlements will govern the validity, perfection and priority of security interests in security entitlements relating to most securities issued by the Crown.
Security Entitlements: Apart from the rule for the place of perfection by registration, the rules for the validity, perfection and priority of a security interest in a security entitlement point to the securities intermediary’s jurisdiction, which can be (and invariably will be) determined by contract between the securities intermediary and the security entitlement holder.
Where Will Litigation Occur?
Even with the new conflict of laws rules, a secured party must always ask, “Where is litigation likely to occur if the debtor does not repay?” The secured party should make sure that all steps have been taken in those jurisdictions to protect the secured party, in addition to the jurisdiction dictated by the STA.
Transitional Rules
The transitional rules offer a four-month period within which to make sure that previously perfected security interests under current law remain perfected under new law. If a security interest was perfected under the current rules, in most (if not all) cases, the circumstances relating to that perfection will likely be sufficient to perfect the security interest under the new rules. For example, if a secured party relied on the old rules for deemed possession of a security held in CDS, the facts will invariably establish that the secured party (or a person acting on its behalf) has control of the related security entitlement under the new rules.
The STA and related PPSA amendments are complex; but despite that complexity, the law is evolving in a fashion that recognizes market practices in the securities industry and that provides greater certainty to all market participants. Virtually identical legislation has already been enacted in Alberta, and is expected to come into force on January 1, 2007. Saskatchewan has introduced a similar bill. Quebec is working on draft legislation, which is expected to be introduced some time next year. British Columbia has drafted a similar bill, which is expected to be introduced early in the new year. These developments are welcome additions to Canada’s business laws, which all participants in the securities industry hope will be adopted in virtually identical form across Canada.
This summary is a general discussion of certain legal and related developments and should not be relied upon as legal advice. If you require legal advice, we would be pleased to discuss with you the issues raised by this summary in the context of your particular circumstances.
* John Cameron, Torys LLP, (416) 865-8112, jcameron@torys.com. John is the Chair of the PPSL Subcommittee of the Business Law Section.
1 A more detailed description of the relevant rules is available in a paper published jointly by the Ontario Bar Association and The Law Society of Upper Canada: Cameron, “The New Securities Transfer Act, 2006: New Rules for Perfection and Priority”, November 20, 2006. 2 CDS Clearing and Depository Services Inc. is the successor to The Canadian Depository for Securities Limited, under a corporate restructuring completed in November 2006.
This article originally appeared in the December issue of the Not-For-Profit News. It also appeared in Charitable Thoughts, Volume 10, No. 2, December 2006.
It is the time of the year that we review the events of the year affecting the non-profit sector.1 Rarely, however, have we reflected on a year with more dismay than we do this time around.
To be sure there was some good news, particularly for those organizations which are aggressive fundraisers. The Conservative government came through on a key promise and eliminated the capital gains tax on all listed securities donated to public registered charities. This announcement triggered some truly enormous charitable donations, each of which was in excess of $10 million dollars. This is a far cry from the situation in the early days of this publication when a million dollar gift was considered hugely newsworthy. And the government at least held out the possibility that the incentive might be extended to private foundations.
In mid-November, the government finally (it only has been three years and eleven months since the initial announcement) brought forward legislation to implement the more generous definition of charitable organization/public foundation first announced in December 2002.2 The same bill also finally legislates the rules dealing with split receipting. The intervening years, since announcement, have been devoted in part to trying to fix up earlier flawed proposals as well as implementing second (and third) thoughts by both the sector and the finance bureaucrats.
A less remarked administrative change of heart by the CRA adopted the view that borrowing by a foundation (whether public or private) for investments purposes was acceptable. This reversed a thirty year position that such borrowing contravened certain provisions of the Income Tax Act. The change was effectively forced on the CRA by the decision of the Federal Court of Appeal in the Acorn Foundation case which dealt with the matter in an indirect fashion.
That was the good news.
While on the subject of court cases, the past year was gloomy. The cases involving “art flips” all went against the taxpayers involved and the fallout of the courts’ interpretation of how gifts in kind are to be appraised still has not been fully felt.
Aside from the Acorn Foundation case, the FCA found against organization in the Bayit Lepletot case (use of agency agreements), AYSA (whether the promotion of amateur sport is charitable)3 and the Redeemer Foundation case where the Appeal Court reversed the Federal Court Trial Division decision and said that charities have a legal obligation to reveal donors lists to a CRA auditor upon request. The Court also rejected Blake Bromley’s arguments in the Travel Just case, reported on elsewhere in this issue of Charitable Thoughts.
But the real damage was from an interplay of government decisions and the Charity Directorate’s performance.
We wrote about the very significant spending cuts announced by the government which seemed to be disproportionately tough on the non-profit sector. Indeed, one could conclude that their exercise had as much to do with settling political scores as it did with saving what amounted to minuscule amounts of money.
Part of that exercise involved the cancelling of groups which were used by the CRA for consultation, most notably from the sector’s point of view, the Charity Advisory Committee. We viewed this as a mixed event. We have been consistently sceptical of the engagement between the sector and government, most notably with the Charities Directorate. We have said in the past that we believed that members of the various advisory groups ran the danger of “going native”, becoming conduits for telling the sector what the government wanted to say rather than strongly pushing the sector’s views.
Put bluntly, we now are firmly of the belief that the whole exercise, carried on over a period of about five years, has resulted in a much worse environment for charities except in the area of better tax incentives for donations.
While on the basis of government decisions, the announcement of the plan to tax income trusts and give offsetting relief to investors by enhancing the dividend tax credit (DTC) is bad news for charities and other non-profits which hold these investments. The proposed regime should mean lower cash distributions from trusts while at the same time the offsetting DTC is of no use to non-profits. Those having such holdings now have a four year breathing space in which to make decisions but the government move highlights the fact that tax decision making seldom takes into account the non-profit sector.
Putting aside such things as the hugely flawed (both in policy and technical terms) new rules on disbursement quotas and other changes which were slipped into the revised legislation,4 it is abundantly clear that the introduction of intermediate sanctions which were proposed as a means to reduce revocations has been a disaster for the sector.
For example, the simplest example of an intermediate sanction was to be a fine for late or non-filing of the T-3010. What has happened, and a review of the Canada Gazette will confirm this, is that the CRA is revoking charities for failure to file at the same rate as in the past, but now are imposing the fine after the fact, if the charity wants to restore its status. This is a perversion of what had been a key recommendation of the sector.
We have also seen the Charities Directorate take back the audit function from Consulting and Audit Canada5 and the auditors seem to have become hugely more aggressive than ever before. It is clear to anybody who has the experience of advising on audits that not only are the auditors still poorly trained but that they have abandoned any semblance of using the audit as an “educational tool”. There have been too many cases where revocation is threatened on a first audit to believe anything else. These auditors are like the vast majority of CRA auditors, charged with finding fault in every audit. The failure to find fault is considered to be a failure of the process, so that the faults identified range from (legally) non-existent to extremely minor.
One of the factors which triggered the whole charity review exercise, a half dozen or so years ago, was the extreme inability of the Charities Directorate to deal with matters in a timely fashion. In those days, it was not unusual to have to warn a client that a simple registration might take a year. A few years ago, we were happy to write about the enormous improvement in the CRA’s handling of routine matters.
Now, we have a reversal. Why can it now take eight to ten months to deal with an application? Why can simple requests (a change in fiscal year or an address change) go unanswered for months? Why has the Directorate had to (over and over) publicly apologize on its website for its inability to get out the T-3010 forms?6
Other changes still have to be assessed. Aside from the late filing issue, how are intermediate sanctions to be determined? So far there have been few if any instances where the sanctions have been used insofar as we can tell. The new requirement that a charity faced with revocation must file a Notice of Objection and get a decision on that before heading to the Court of Appeal has not yet been really tested.7 Will the review at this level be genuinely fair? Do the personnel who do the review have enough charity law expertise? Next year should give us some clarification on whether this is a real first bite at the appeal apple or just another hurdle to be overcome.
Of course, there are other items which seem to have disappeared from the legislative horizon. We aren’t hearing much about the new federal non-profit corporation legislation. We should be grateful that in November legislation was finally unveiled which will implement the changes to the definitions of various categories of registered charities which were first announced on December 20, 2002.8
To be fair, the problems which we have outlined don’t apply to all. If you don’t get audited, if you don’t have to get anything done by the Charities Directorate, if you don’t rely on federal government funding, if you don’t hold income trust units as investments, if you don’t worry about disbursement quota calculations, getting your T-3010s in on time and so forth, you probably won’t have any concerns. But those who deal with multiple organizations (lawyers, accountants and other professional advisers and umbrella groups) have to be aware of what has happened in the past year…or two.
This was a bad year for the sector…except for fundraisers. We can only hope that things will look up in 2007, though we are far from sanguine about the possibility.
* Arthur Drache of Drache LLP, Ottawa and Miller Thomson LLP, Toronto.
1 Timing problems make this more of a ten and a half month review. 2 See other article in this issue. 3 The Supreme Court of Canada has given leave to appeal in this case. 4 One might look at the “improved” rules relating to the revocation tax calculations. 5 This group was effectively gutted by government a year or so ago. 6 There is some indication as we write that the problem may have been solved. We hope that is the case. 7 In October we were told that less than 30 Notices of Objection had been filed to date. 8 See an article on his subject which appears in this issue.
This article originally appeared in the Citizenship and Immigration Section Newsletter, Volume 10, No. 1, November 2006.
It all seems like a dream now. Can it really be true that as recently as 1995 all convicted permanent residents and Convention refugees, no matter what their sentence, had a right to a full appeal hearing in equity before an independent tribunal which could quash or stay the removal order made against them? Was it really possible then for a landed immigrant, convicted of murder but rehabilitated, to be allowed by the Immigration & Refugee Board to remain in Canada on terms and conditions? In fact it was true then,1 but it is certainly not true anymore.
In the last ten years the concept of independent adjudication in equity for such cases has been subject to assault from all angles. First the Immigration Act was amended to impose a “danger to the public” override that restricted the right of appeal of a removal order to those not so found.2 By this initiative the hopes for remaining in Canada of most of those permanent residents sentenced to penitentiary3 time were dashed.
Then, with the advent of the Immigration & Refugee Protection Act, the discretion inherent in the danger review process was excised from the law. Thereafter, pursuant to subsection 64(2) of IRPA, only those permanent residents sentenced to less than two years in jail have had access to a hearing before the Immigration Appeal Division of the Immigration & Refugee Board. Since 2002 long-term permanent residents, even middle-aged adults living here since young childhood, may be stripped of their status and sent packing, without a right to speak a word to the decision-maker about why they should be allowed to remain in Canada.
In this environment it is important that those without Canadian citizenship understand the limitations of their status in the face of a criminal conviction and that, when an allegation of criminality is made, they take steps from the beginning to assess the immigration implications for them both of a conviction, and of any sentence that might be imposed upon them.
Immigration & Refugee Protection Act
In general, the provisions of the IRPA have been interpreted in accordance with the “get tough” approach of that statute. As stated by Chief Justice McLachlin in Medovarski:
The objectives as expressed in the IRPA indicate an intent to prioritize security. This objective is given effect by preventing the entry of applicants with criminal records, by removing applicants with such records from Canada, and by emphasizing the obligation of permanent residents to behave lawfully while in Canada. This marks a change from the focus in the predecessor statute, which emphasized the successful integration of applicants more than security.4
As a consequence, the provisions of the Act were construed so as to restrict access to the IAD in transitional cases where the sentence imposed was two years or more,5 or where the violation of the terms of a stay happened before IRPA came into force.6
IRPA’s tougher approach to criminality is not restricted only to the appeal rights of permanent residents. Protected persons too are affected. Now, as before, a refugee claim may be suspended where criminal charges are laid.7 However, now those claiming protected status are ineligible to do so after a penitentiary sentence has been imposed in Canada or if, outside Canada, a conviction has registered for an offence equivalent to one punishable in Canada by ten years or more in jail.8 Prior to IRPA it was required that there be establishment of inadmissibility, and that a danger review, with the opportunity it presents for written advocacy. A danger finding was necessary to prohibit access to the Refugee Division.9
It should also be noted that the immigration consequences of criminality have been extended under IRPA even for Canadian citizens and for those permanent residents whose removal from Canada is not being sought. Formerly, sponsors of members of the Family Class could not be under an active or conditional removal order or confined in jail, and their right to sponsor was under suspension while they were before the courts for most offences under federal legislation.10 To these prohibitions, however, IRPA now has added bars to those who have been convicted in Canada or elsewhere of any offence, threat or attempted offence “of a sexual nature” or that caused bodily harm in the domestic context, unless subsequently there has been an acquittal, pardon or the passage of five years. In the case of an offence committed outside of Canada, there must be evidence of rehabilitation. Suspension of processing is now required where the sponsor is charged with an offence punishable by ten years or more in jail.11
Pre-sentence Custody
The situation worsened for immigrants and protected persons when pre-sentence custody began to be considered part of the sentence imposed by the criminal court. Now, where a sentence of even less than two years is imposed, access to the IAD will be unavailable where pre-sentence custody is incorporated into the term of imprisonment calculated by the court. Therefore there is no jurisdiction for a removal order appeal where, for instance, the sentencing judge imposed an 18 month term in jail, after explicitly crediting the offender for nine months of pre-sentence custody, even if the nine months was calculated at the rate of two or three months credited per month actually served.
While initially the IAD assumed jurisdiction in such pre-sentence custody situations,12 with the Allen, Atwal, and Smith and subsequent cases,13 the Federal Court went the other way. For instance, in Mr. Atwal’s first appearance before the Immigration Appeal Division, his appeal was granted and the deportation order against him was stayed on terms and conditions.14 He had received a sentence of six months in jail for robbery and 12 months consecutive for use of a firearm, on top of 20 months of pre-sentence custody. On oral review the Minister brought an application to discontinue the appeal because Mr. Atwal’s sentence, including the pre-sentence custody, exceeded the two-year threshold. This argument was rejected by the tribunal, and the application to discontinue the appeal was denied.
At the Federal Court, however, Justice Pinard followed the previously ignored Allen case, noting the Board had “focussed on a narrow interpretation of ‘sentence’ and ‘term of imprisonment’” and ignored the principles set out by the Supreme Court” in Wust,15 the principles set out by the Federal Court in Allen (above), the purposes of the Immigration & Refugee Protection Act, the sentencing principles expressed in the Criminal Code and the “reality of sentencing”.16 The matter was returned to the IAD, which now found it had no jurisdiction to proceed further.17 The Federal Court of Appeal has yet to rule on the pre-sentence custody issue.
One might be forgiven for concluding that, if it is the actual time in jail that is important, including pre-sentence custody, then when one is released early on parole for good behaviour, that the sentence has been shortened, in some cases so as to bring it back under the two-year mark. However, the Cartwright and Martin cases have put an end to that flight of fancy, as the Federal Court determined that it is the sentence imposed that governs, and not the amount of time actually served.18 As for the question of whether IAD jurisdiction is lost in the case of a conditional sentence, served in the community after pre-sentence custody, there is still no conclusive answer.19
After the Removal Appeal
Even, if one is successful in establishing jurisdiction in the IAD, and in arguing the case before that tribunal, it would be imprudent to be complacent. After a stay of removal has been imposed by the IAD, the Board now, as under the previous legislation, maintains the jurisdiction to review the case. Upon non-compliance with the terms of the stay, the Minister may apply to amend the conditions or dismiss the appeal.
Under IRPA, however, the Minister now has new tools to effect removal. Once a stay is imposed, if there is a new conviction with a sentence of six months in jail or more, or where the maximum available sentence is ten years in jail or more, regardless of penalty actually imposed, the stay is cancelled by operation of law and the appeal is terminated.20 This continues to be the case if the duration of stay is extended by the Board, through and until the removal order is quashed.21 Further, it is now clear that even comparatively minor offences, including lesser crimes and provincial offences such as speeding and possibly even parking infractions, can put an immigrant in jeopardy, if committed after he or she has been bound by the IAD to keep the peace and be of good behaviour.22
While statistics have not been reviewed, it seems that, over the years, there has been a trend to the imposition of a requirement for periodic reviews of stays by the IAD to monitor compliance with conditions, and to consider whether or not an extension of the term of the stay is required.
Avoiding Charges
Given the above, it is clear that the immigration cost of offending is greater than ever before. In the circumstances, what is counsel to do when their client is facing criminal or provincial charges?
First, it is important that your non-citizen clients be advised from the outset that the status you help them to obtain is subject to review in cases of criminality. By extension, all temporary residents should be advised that permanent resident status offers them enhanced protection, as citizenship does for protected persons and permanent residents.
Once charges are contemplated, a dialogue with the criminal lawyer should be established as soon as possible, and it should be drawn to his or her attention that success in criminal proceedings is measured differently in immigration law terms. For instance, to a criminal lawyer, pre-sentence custody can be seen as a two-for-one sale, but the immigration practitioner must be wary of its consequences, as set out above. A quick plea to a minor criminal or provincial offence may be recommended by criminal counsel where the legal fees for a trial seem an unnecessary extravagance, where the accused already has a lengthy criminal record, or where bail is denied but, in immigration terms, that conviction will advance or may even make the case for removal. Likewise, a conviction and finite sentence may seem to be preferable to a “not criminally responsible” finding and indefinite term in custody, but in immigration proceedings a conviction upon guilty plea may constitute a ground for removal, perhaps even summarily.
As the stakes in criminal proceedings may amount effectively to banishment from Canada, creative resolutions should be explored wherever possible, beginning with the development of alternatives to the laying of a charge, and continuing, if it is laid nonetheless, to diversion, participation in victim-offender reconciliation programs, discharges, peace bonds or Family Court restraining orders.
Even where prosecution must proceed, negotiation respecting the classification of the offence to which a plea is made may make a difference. For instance, conviction of a provincial offence, such as trespass to property, is generally preferable to conviction of a criminal offence such as trespass by night,23 as a provincial offence will not trigger inadmissibility. On the other hand, the straight summary offence of trespass at night is preferable to the electible offence of being unlawfully in a dwelling house as, pursuant to IRPA, all offences which may be prosecuted by indictment will be deemed for purposes under the Act to be indictable.24
Sentence Strategies
It is well established that the risk of deportation can be a factor to be taken into consideration in choosing an appropriate sentence, and tailoring that sentence to best fit the crime and the criminal. On this point, the leading case is still R. v. Melo, a decision of the Ontario Court of Appeal, in which Arnup, J.A. stated:
The fact that a convicted shoplifter may be in jeopardy under the Immigration Act is not, in itself and in isolation, a sufficient ground for the granting of a conditional or absolute discharge. It is one of the factors which is to be taken into consideration by the trial Court, in conjunction with all of the other circumstances of the case.25
Also noteworthy is R. v. Abouabdellah,26 in which the Quebec Court of Appeal reduced a sentence of a fine for shoplifting to a conditional discharge, so that a foreign student would not be deported, as that would be a “disproportionate” response to his transgression.
In some cases, for instance where the person concerned is already subject to a stay of deportation, no conviction can be countenanced. In others, such as where the person concerned is a temporary resident, every effort should be made to avoid conviction, although a realistic option of overcoming minor transgressions with a Temporary Resident Permit may exist. In yet other cases, where a conviction registers, a carefully crafted sentence may avoid otherwise devastating immigration consequences.
For instance, while, as indicated above, recognition of pre-sentence as part of a sentence may oust the jurisdiction of the IAD, pre-sentence custody is not likely to be a factor for immigration purposes where there is silence on the record respecting its effect on the calculation of the term of the sentence. For this purpose the “record” would include the warrant of committal, the endorsement on the indictment and the verbal judgment of the court. Note that, if there is an indication within this record that pre-sentence custody has been credited, the impact on sentence calculation of pre-sentence custody may be inferred, even if the manner in which it is credited is not explicitly expressed.27
Despite this, however, it is submitted that a credit for pre-sentence custody in a sentence is still discretionary, and should not be inferred absent evidence on the record that it was considered nor, of course, in the face of a statement by the court that credit was considered and rejected. This raises the issue of whether or not it might be possible for pre-sentence custody to be considered by a criminal court as a mitigating factor in imposing sentence, but one either silently or explicitly excluded from the calculation of the length of sentence, so that the impact of the pre-sentence custody in immigration terms is reduced.
As may be evident, avoiding the sentence thresholds in IRPA can be important. To a criminal court it may be a matter of little importance whether a sentence is six months or six months less a day, yet from an immigration perspective the former sentence constitutes serious criminality so as to render a permanent resident inadmissible, where the latter, in the absence of other inadmissibility, does not.28 Further, there is little additional deterrent impact to a two-year sentence, as opposed to a sentence of two years less a day but, as set out above, only the former terminates access to the IAD, assuming no pre-sentence custody has been credited.
Finally, in developing sentencing options with criminal counsel where there are multiple convictions, careful attention should be given to the distinction between consecutive and concurrent sentences. Appeal rights are lost where a permanent resident is sentenced for a single crime that has been punished in Canada by a term of imprisonment of two years or more.29 Criminal courts often render sentences globally, and the allocation of time between the charges may not always be considered by the court to be a matter of critical significance. Therefore, if a permanent resident is sentenced to three years, it may make little difference to the criminal court if the sentence is calculated as three concurrent sentences of three years, or three consecutive sentences of one year each. In the latter case, however, each of the sentences imposed individually is only one year in jail, less than the two-year cut-off, and access to the IAD is retained despite the penitentiary sentence. In the former case, as for each of the crimes the sentence was three years, each one exceeds the two-year threshold.
After the Sentence is Imposed
Once the criminal process has concluded, it is time to address its immigration consequences directly. If not already done, consideration should be given at this point to whether or not the person concerned may have a claim to Canadian citizenship, for instance, where he or she was born outside of Canada after 1977 to a Canadian citizen. While Canadian citizens cannot be deported, if a claim to citizenship is never asserted, deportation orders have issued.
Still, even if there is no possible citizenship claim, there is some scope for advocacy with the Immigration Officer who is reviewing the allegations of criminality, as under IRPA there is a limited authority not to issue a report, or not to refer a report for admissibility hearing.30 While the discretion of the Officer may not be broad, he or she may be persuaded in the case of a long-term permanent resident, for instance, that a warning is an adequate response to low-level or isolated criminality. An argument can certainly be made that submissions on whether or not a report or direction should issue should be received and considered.
Frequently sentence is imposed without any attention to its immigration ramifications. In such circumstances, the Courts of Appeal in three provinces have recognized that it is appropriate to reduce the sentence, even by many months and long after the limitation period for doing so has expired, where the consequences of doing so would do “no disservice to the fitness of the sentence” and the prospect of deportation without a hearing was a “serious but unintended collateral effect of the penalty”.31 While there is some authority going the other way,32 generally the criminal appeal courts have been accommodating.
If all else fails, a humanitarian and compassionate application pursuant to section 25 of IRPA is available to advocate for an exemption of the person concerned “from any applicable criteria or obligation of this Act”, including inadmissibility. In such cases a balance must be struck between filing the application early, which is a positive factor when a stay or removal is requested at the end of a sentence, and filing it later, after rehabilitation has been advanced through institutional programming and educational upgrading. For those who are loathe to spend any more than the minimum time in jail, parole for deportation, and the remote prospect of obtaining the Minister’s consent to return to Canada in the distant future, may be an attractive option.
For more than a decade the direction of immigration policy and decision-making has been ever more removal-oriented. This trend has been marked by a diminishing scope for discretion and independent decision-making within the removal process and, as a consequence, there is a more limited opportunity for advocacy in the face of criminality. The debasement of permanent resident status, and the value of citizenship, have never been clearer.
* Leslie H. Morley, Morley Law Office , (613) 542-2192 les@lesmorley.com. Leslie is a Member-At-Large of the Citizenship and Immigration Section.
1Stephen Paul O’Connor v. Minister of Citizenship & Immigration (1992), 21 Imm. L.R. (2d) 64. 2Immigration Act , R.S.C. 1985, c.I-2, as amended, s. 70(5)(c). 3 Terms of incarceration of two years or more are served in penitentiaries, Criminal Code of Canada, R.S.C. 1985, c. C-46, s.743.1(1). 4Medovarski v. M.C.I.; Esteban v. M.C.I., [2005] 2 S.C.R. 539, 2005 SCC 51. 5 Ibid. 6Singh v. M.C.I. 2005 FCA 417. 7Immigration Act, s.46.1 and IRPA 100(2)(b)) & (103(1)(b). 8IRPA (s.101(2)(a) & (b) & 112(3)(b). Ineligibility for referral to the RPD requires a danger finding where the conviction was outside Canada, IRPA, s.101(2)(b). 9Immigration Act, s.46.01(1)(e) 10Immigration Act, R.S.C. 1985, c.I-2, as amended, s. 5(2)(c) & (d) and (6). 11IRPA, s.133(1)(e) & (f); s. 133(2) and (3); and s.136(1)(c). 12M.C.I. v. Markland Davis (IAD TA1-26990), Néron, March 24, 2003; Iqbal Singh Atwal v. M.C.I. (IAD T99-06240), Néron, April 8, 2003; M.C.I. v. Kungansky Antoine (IAD MA2-03203), Lavoie, April 9, 2003; Ronald John Gomes v. M.C.I. (IAD TA2-21401), Kalvin, August 5, 2003 (reversed on appeal M.C.I. v. Gomes, 2005 FC 299); Dwight Anthony Smith v. M.C.I. (IAD VA2-02916), Clark, April 4, 2003 (reversed on appeal M.C.I. v. Smith, 2004 FC 63); Igor Stepanchikov v. M.C.I. (IAD TA2-07007), Whist, November 4, 2003; and, as respects a subsection 68(4) application, also in Timolie Albert Christie v. M.C.I. (IAD TA0-02536), Collins, October 30, 2003. 13Allen v. Minister of Citizenship and Immigration (May 5, 2003), IMM-2439-02, Snider J.; .M.C.I. v. Atwal, 2003 F.C. 7 (January 8, 2004), IMM-3260-03 (F.C.T.D.), Pinard J; and M.C.I. v. Smith 2004 F.C. 63 (January 16, 2004), IMM-2139-03 (F.C.T.D), Campbell J.. 14Iqbal Singh Atwal v. M.C.I. (IAD T99-06240), Néron, April 8, 2003. 15R. v. Wust, [2000] 1 S.C.R. 455. 16Atwal, (F.C.T.D.) ¶12-3. 17Iqbal Singh Atwal v. M.C.I. (IAD T99-06240), D'Ignazio, June 15, 2004. 18Cartwright v. M.C.I, 2003 FCT 792; and Martin v. Canada (M.C.I.), 2005 FC 60. 19 See David Matas, “Two years or more”, ImmQuest, II:8 (September, 2006), p.7 for a careful review of the interplay of the conditional sentence and pre-sentence custody. 20IRPA, s. 68(4). 21 Leite v. M.C.I. 2005 FC 984. 22Huynh v. M.C.I., 2003 F.C. 1426; and Stanhope St. Aubyn Cooper v. M.C.I. 2005 FC 1253 (FCTD). 23Trespass to Property Act, R.S.O. 1990, c. T.21, as am., s.2; and Criminal Code of Canada, s. 177. 24Criminal Code of Canada, s. 177 and 349(1); and IRPA, s.36(3). 25R. v. Melo (1975) 26 C.C.C. (2d) 510, at p.516. This case was cited with approval in R. v. Wisniewski, 2002 MBCA 93 (CanLII) (M.C.A.); R. v. Hamilton, 2004 CanLII 5549 (O.C.A.); and R. v. Kanthasamy, 2005 BCCA 135 (CanLII) (B.C.C.A.). Please note, however, that authority in Alberta tends in a different direction, for instance, R. v. Fung (1973), 11 C.C.C. (2d) 195 (Alta. C.A.). 26R. v. Abouabdellah (1996), 109 C.C.C. (3d) 477. 27Jamil v. M.C.I., 2005 FC 758. 28IRPA, s. 36(1) & (2). 29IRPA, s. 64(2). 30IRPA, s.44(1) & (2), and for the scope of review see Henandez v. M.C.I., 45 Imm.L.R. (3d) 249; Cha v. M.C.I, 2004 F.C. 1507; Leong v. Solicitor-General, 2004 F.C. 1126; and Correia v. M.C.I., 2004 FC 782. 31R. v. Lacroix, 2003 CanLII 36164 (O.C.A); R. v. Leung, 2004 ABCA 55 (CanLII); R. v Hamilton and Mason (2004) 186 C.C.C. (3d) 129; R. v Kanthasamy, 2005 BCCA 135 (CanLII); R. v. Curry, 2005 CanLII 32191 (O.C.A.); R v. Mai, 2005 BCCA 615 (CanLII) and R. v. Tigse, 2006 CanLII 10392 (O.C.A.). 32R. v. To, 2004 ABCA 197 (CanLII).
Tennis and Justice: A Love Match? Peter Henderson*
This article originally appeared in the Civil Litigation Section Newsletter, Volume 15, No. 1, September 2006.
There is a lot of talk these days about how lawyers should act. Many of the growing number of publications that arrive on a lawyer's desk these days purport to provide guidance on how lawyers should interact with each other, and with clients. Given the various perspectives from which the publishers of this commentary come at the issue, it's not surprising that there is a great divergence of opinion as to the, shall we say, degree of delicacy with which lawyers should conduct themselves.
In the most recent edition of the National magazine published by the Canadian Bar Association, an article on "Management mini-miracles” suggests a straightforward approach to client relations: "Don't be afraid to fire problem clients….When you're on vacation, think about the clients you least enjoy dealing with. When you return, fire them." Ironically, this edition of the National arrived plastic-wrapped together with the most recent version of the Canadian Bar Association Code of Professional Conduct, which counsels a more measured approach to the withdrawal of legal services: "The lawyer owes a duty to the client not to withdraw services except for good cause and upon notice appropriate in the circumstances."
Now, the two approaches suggested above are not necessarily mutually exclusive, and I would be among those who would argue that there is some merit to either approach. However, it could certainly be argued that the two approaches are difficult to reconcile on their face, and that a lawyer who followed a strict interpretation of the first suggestion might be placing him or herself on the wrong side of the second. The lawyer is faced with a professional rule of conduct that seems at odds with practical advice sanctioned by a (in this case the very same) professional association.
Strangely, this "rule vs. reality” dichotomy presents just as much of a problem when it comes to the issue of civility among lawyers. I say strangely because one would expect that there would be little disagreement among lawyers that civil and collegial dealings between counsel are a good thing. Certainly, not many lawyers have taken the position publicly that the promulgation of rules about civility and their creeping adoption by the courts are bad things.
In private, however, many lawyers view the discourse about civility in the legal profession as an anachronism, carried on and promoted by big firm lawyers to create a set of rules and a body of doctrine that favour themselves intrinsically. It is easier, some say, to conduct oneself with an air of civility when representing clients who have nothing but time and money, than when not. Others view such rules as an unnecessary and ill-advised interference with personal style, even the discussion of which focuses attention on counsel rather than where it belongs, on the dispute. They hold up as examples successful, highly-regarded counsel who were or are famously difficult to deal with.
Sometimes, the response by proponents of civility misses the point. Civility has nothing to do with being nice to opposing counsel, or even liking them. It simply has to do with counsel focusing their effort on the resolution of the dispute, rather than engaging in or reacting to conduct that distracts from that effort. Civility between counsel furthers the purpose of the justice system, in the same way as do rules of procedure. Counsel who engage in unduly “partisan” conduct or rhetoric do their clients and the system a disservice.
I attended the Rogers Cup in Toronto this summer, and during a particular match I was struck by the analogy between civility in tennis and civility in justice. During this match, there was a particularly (I would say obnoxiously) vocal group of supporters of one of the players. They chanted and yelled and waved flags. They engaged in all sorts of tennis heresy, such as screaming "out" when the opponent of their favoured player hit a shot close to the line. Several times the umpire requested that they settle down so that the players could concentrate on the match. In the final set, the player for whom this group was cheering looked in their direction and held a finger up to his lips, obviously entreating them to quell their enthusiasm. They persisted, however, and their distracting behaviour became an obvious factor in this player’s surprising loss to a much lower-seeded player.
Lawyers are not cheerleaders for their clients, and good clients know it. Uncivil, rude or obnoxious behaviour, whether it is born of an excess of enthusiasm for a particular client or something else, distracts everyone involved in the process, including the client, from the task at hand. It is counterproductive, and that is the reason, at least from a professional perspective, that it should be avoided.
I leave you with two other noteworthy aspects of the analogy that I drew from the tennis match. Firstly, no one involved in the process was consumed with trivialities. The occasional "Go Marcos!” was not only tolerated, but welcomed, because it was a positive addition in the context. Sometimes, a gentle admonition from the umpire was required to keep everyone focused on the matter at hand, but generally things proceeded on the understanding that in a contest emotions sometimes run high, and, just as it is advisable to contain one's own enthusiasm, it doesn't assist the process to overreact to every perceived slight.
Finally, the umpire of the contest was not concerned with crowd control, beyond the occasional admonition to keep matters focused. The umpire's focus was the resolution of the dispute between the two contesting players. Had one of the adoring fans of the eventually eliminated player persisted in creating an unacceptable distraction, he may have been escorted out of the stadium by security and thereby removed from the picture altogether. For the umpire, however, to become overtly involved in regulating the conduct of the "supporters" would have been to permit the distraction created by them to prevail, to the benefit of no one. As exciting as the match was, I was happy to see it brought to a well-played, timely conclusion.
* Peter Henderson, Kramer Henderson LLP, (416) 601-6820, pthenderson@kramerhenderson.com. Peter is the Chair of the Civil Litigation Section.
This originally appeared as part of the article: “The Ontario Bar Association’s 5th Annual Charter Conference – Report” in the Constitutional, Civil Liberties and Human Right Section Newsletter, Volume 10, No. 1, January 2007.
Barbara Jackman (Jackman and Jackman), posed the question, are there human rights protections for non-citizens when concerns about national security and a fear of strangers dominate? In 1985, when the Supreme Court of Canada decided the Singh case, there was reason to believe that the answer might be “yes” as the Court decided that the protections provided by section 7 of the Charter extended to non-citizens. Subsequent decisions indicate otherwise, Jackman argued.
In the Kindler and Ing cases, the Court upheld government decisions to extradite non-citizens to the U.S. in the absence of any assurances that the accused murderers would be spared the death penalty. In contrast, the Court insisted on such assurances in Burns and Raffy, a case concerning the extradition of co-accused Canadian citizens to face murder trials in the U.S. And in Suresh, the Supreme Court left open the possibility that government could justify the deportation of non-citizens suspected of having links to terrorism even where there is a risk that they will face torture overseas.
Jackman currently represents a client detained under the Immigration and Refugee Protection Act security certificate powers. A security certificate allows the Minister of Immigration to detain and process a non-citizen for deportation on the basis of classified and non-classified intelligence. The constitutionality of the Federal Court security certificate proceedings, which leave a single judge in the position of having to arrive at a final decision on the basis of evidence unseen by the public or the impugned non-citizen, has been argued before the Supreme Court in the Charkaoui case (heard together with Almrei and Harkat on June 13, 2006). A decision is anticipated early in 2007.
Sunil Mathai (Falconer, Macklin) who stood in for Julian Falconer, discussed Justice O’Connor’s recently released report on the actions of Canadian officials in relation to Maher Arar. Mr. Arar is being represented by Falconer, Macklin in his civil suit against the Canadian government.
After September 11, 2001, but before the introduction and enactment of Bill C-36, the Anti-Terrorism
Act, the Canadian Security Intelligence Service transferred a number of national security files to the RCMP. Some of those files ended up in the hands of Project A-O Canada, the RCMP operation that identified Maher Arar as a “person of interest” on the basis of Mr. Arar’s association with another Canadian citizen suspected of being associated with al-Qaeda, Abdullah Almalki. Subsequently, RCMP officers with Project A-O passed information about Mr. Arar to their U.S. counterparts, describing Arar as an Islamic extremist. En route from Switzerland to Montreal via New York on September 26, 2002, Mr. Arar was detained by U.S. authorities for over a week and then subjected to extraordinary rendition to Syria where he was held and tortured for nearly one year.
All this occurred, argued Mathai, in a climate of fear in which everything or anyone, but particularly everything and anyone Arab or Muslim, is treated as suspicious. With the federal government focused on preventing further terrorist attacks, the RCMP decided to redirect its energies, first to prevention, second to intelligence gathering, and third to criminal prosecution. Such a stark reversal of regular policing priorities came at the same time as the RCMP allowed criminal investigators to implement the force’s return to a national security and intelligence mandate; a mandate that had been stripped from the RCMP following the revelations of RCMP wrongdoing before the MacDonald Commission.
As the Arar case revealed, long-standing information sharing policies were breached as under supervised members of the RCMP operated on the basis that information-sharing caveats were “down”. Justice O’Connor, who expressly noted that there was nothing to indicate that Mr. Arar committed an offence or was a threat to the security of Canada, has recommended that there be ongoing independent, arms-length review of the RCMP’s information-sharing practices and arrangements. Mr. Mathai went further, urging the federal government to provide for fulsome oversight of the RCMP.
Ziyaad Mia described Canada’s response to the terrorist attacks of September 11, 2001 as the legalization of a “permanent emergency model.” The climate of fear that has pervaded policy development since the attacks, Mia argued, has opened the door to political and legal responses in Canada that threaten to undermine the rule of law. In particular, Mia raised concerns about a lack of accountability from, and increasing surveillance and secrecy by, the state in Canada.
Acknowledging the graciousness of RCMP Commissioner Zaccardelli’s personal apology to Mr. Arar, Mia nonetheless worried that no official had, (at that time), been held accountable for the damming actions of the RCMP. If the RCMP were a private corporation, the shareholders would be up in arms said Mia. Mia went on to discuss increasing surveillance, for example, of travelers in programs like the air passenger information database enacted under the Public Safety Act in 2002 and watch list powers such as the long anticipated Canadian version of the U.S. “no-fly” list. Referring to numerous reports of Muslim Canadians being questioned by the authorities about their prayer practices, their travel choices, and their political opinions, Mia painted a picture of a community subject to profiling and under a siege by suspicion. Mia also pointed to the increasing allowance new laws make for the use of secret evidence in proceedings such as the listing of individuals and organizations as terrorist entities. Citing remarks by Israeli Supreme Court Justice Barach, Mia reminded those assembled that we are always safer under the rule of law whatever threats we may face.
Professor Don Stuart (Queen’s University, Faculty of Law) criticized the Anti-Terrorism Act as a bill rushed through Parliament within three months, only to be made a permanent feature of Canadian law. Citing remarks made by former CSIS Director, Reid Morton, Professor Stuart argued that most of the new powers are simply unnecessary, while many are dangerous. Pointing to ministerial powers to issue fiats to authorize surveillance (the Minister of Defence) and keep evidence secret (the Minister of Justice) as dangerous examples of unnecessary powers, Stuart referred to Parliament’s Anti-Terrorism Act Review as having received more than a dozen great briefs on reform. While not optimistic of reform, he argued that the pressure for reform is building with each new report and revelation. A June 2005 SIRC report described a dangerous trend within CSIS towards the manipulation of facts. Stuart also contrasted remarks attributed to former Deputy Prime Minister Anne McClellan to the effect that if racial profiling occurs, “heads will role”, with the results of a survey tabled before the Senate indicating that 8% of Canadian Muslims have been visited by CSIS.
* Stephen McCammon, Legal Counsel, Information and Privacy Commissioner of Ontario, (416) 326-1920, Stephen.McCammon@ipc.on.ca. Stephen is the Newsletter Co-Editor of the Constitutional, Civil Liberties and Human Rights Section.
The Construction Industry and Environmental Protection Legislation Gregory D. Hersen*
Since 1994, environmental regulations have been in force in Ontario which deal with the disposal of waste on construction and demolition sites. Under these regulations, general contractors, property owners, architects and engineers are, or could be, responsible for ensuring compliance with various waste-disposal requirements. Prosecutions may result and fines may be imposed if these regulations are not complied with.
Surprisingly, many players in the construction industry are not aware of the requirements of these regulations. A key reason for this is that until recently, these regulations were not consistently enforced by the Ministry of the Environment. Lately, however, municipalities and the provincial government have increased their focus on waste reduction and diversion. These regulations are now being much more diligently enforced.
In March 1994, the Province enacted the "Waste Audits and Waste Reduction Work Plans" regulation and the "Industrial, Commercial and Institutional Source Separation Programs" regulation under the Environmental Protection Act. These Regulations apply to either a construction project or a demolition project with a total floor area of 2,000 square metres or more. Any person who undertakes a construction or demolition project – whether on their own behalf or on behalf of another person – is required to complete a waste audit and prepare and implement waste-reduction plans and source-separation programs for the waste that will be generated during the construction or demolition. The exact requirements are set out in detail in the regulations. It is not only the owner or the contractor who may be held liable for compliance.
Construction law practitioners may be surprised at how far-reaching environmental statutes can be. Obviously, owners and general contractors are affected. Architects and engineers who are acting in a pure consultancy role may not be liable for compliance, but they may have potential liability for compliance to the property owner, depending on the terms of their contract. In circumstances in which a design consultant is participating in a more direct role as a design-builder, or in any capacity that involves more than pure consultancy, the regulations may become directly applicable to them. In these cases it would be prudent for the design consultant to seek professional advice regarding their potential obligations under the regulations.
In addition to the construction context, these regulations apply to retail establishments, shopping complexes, office buildings, restaurants, hotels and motels, hospitals, educational institutions, large manufacturing establishments, and multi-unit residential buildings. Owners and property managers will certainly wish to ensure compliance with the regulations.
Lawyers practicing in the area of construction law should be aware of these issues and be able to advise their clients of their responsibilities and potential exposure if the regulations are not complied with.
* Gregory D. Hersen, Certified Specialist – Construction Law, Partner, Torkin Manes, (416) 777-5400, ghersen@torkinmanes.com. Gregory is the Chair of the Construction Law Section.
Corroborative Evidence and R v. Khelawon: At Last, Sanity from the Supremes!* Suhail Akhtar and Joe Dart**
Introduction
The principled exception to the hearsay rule is now a commonly used tool to elicit evidence from witnesses who cannot or will not testify for a variety of reasons. The Khan/Smith and B. (K.G.) tests are well-known to all criminal lawyers: is the out-of-court statement that is sought to be admitted both necessary and reliable?
But what do the courts mean by "reliable"? When the exception was created, the natural tendency was to look at evidence which corroborated the truth of
the statement and therefore enhanced its reliability. However, a line of cases, culminating in the Supreme Court of Canada's 2000 decision in R. v. Starr, dramatically changed that position and pigeon-holed the principled approach
to the hearsay rule into an often inflexible exercise. For six years, the decision
and the main principle (for the purpose of this paper), i.e. that corroborative evidence should not be considered at the threshold reliability stage of the hearsay statement voir dire, led to confusion and criticism. Finally, in R v.
Khelawon1 the Supreme Court of Canada (S.C.C.) reversed the corroborative evidence ruling in Starr and restored the analysis as originally intended in Khan/Smith/B.(K.G.). The restoration of the previous and more flexible approach was much-need because, as will be argued in this paper, the use of evidence outside the "four corners" of the statement is an essential ingredient in determining "reliability" and should therefore be a part of the test in admitting hearsay evidence.
The Initial Position in Canada
What should not be forgotten is that the original ground-breaking cases in Canadian law all used corroborative evidence in determining whether an out-of-court statement would be deemed admissible evidence. In R. v. Khan,2 the S.C.C. took account of a semen stain on the clothing of a young complainant to conclude that her statement was reliable. In R. v. Smith,3 the same court appeared to acknowledge the significance of other statements made by a hearsay declarant: the fact of a previous assault, the use of an alias by the declarant and her possession of a stolen credit card. All these factors had the effect of making the hearsay statement unreliable and therefore inadmissible for the truth of its contents. Finally, in R. v. B. (K.G.),4 the extension of the rule to cases where the declarant was actually available, the S.C.C. noted that reliability of the previous out-of-court statements could be gleaned from the fact that the evidence given at trial by the declarants was a lie.
The U.S. Position: Idaho v. Wright
The U.S. Supreme Court had already created its hearsay exception founded on the same premise adopted in the Canadian jurisdiction. The case which established it, Ohio v. Roberts,5 was decided in 1980 and enunciated the principle that if a hearsay statement did not fall within an established exception, it could only be admissible if it demonstrated "particularized guarantees of trustworthiness". Ten years later, the U.S. Supreme Court refined its requirements in the case of Idaho v. Wright.6 Two accused, Laura Lee Wright and Robert Giles, were charged with allegations that Giles had raped Wright's daughters while she held them down. The younger of the daughters volunteered information confirming the sexual assaults to a doctor who examined her. She, however, was deemed to be too young to testify and therefore the doctor became a prosecution witness recounting what he had been told. Wright appealed her conviction, arguing that her daughter's hearsay account should not have been allowed into evidence.
The Supreme Court divided, 5-4, on the issue. The majority held that the daughter's statement should not have been admitted. The key difference between the majority and the dissent was the use of "other evidence at trial which corroborates the truth of the statement". The majority held that only the circumstances surrounding the making of the statement could be used to demonstrate reliability of the statement itself. Reliability could only be shown by virtue of the statement's inherent trustworthiness and not by reference to other extrinsic evidence. Corroborating evidence would therefore permit admission of "a presumptively unreliable statement by bootstrapping on the trustworthiness of other evidence at trial". Thus the physical evidence of the abuse, the opportunity of the accused to commit the offence, and the corroborating testimony of the victim's older sister were irrelevant to a "showing of the particularized guarantees of trustworthiness" necessary for admission.
The minority, however, held that to ignore corroborating evidence would be undesirable and unworkable. It was a matter of "common sense" that the trustworthiness of a statement be evaluated by looking at independent confirmatory evidence. Justice Kennedy, writing for the minority, pointed out the legal absurdity that would occur in the operation of the rule espoused by the majority: a statement that was made spontaneously or under circumstances indicating reliability but which could be proven to be so inaccurate that its credibility would be fatally undermined would nevertheless satisfy the majority test and be admissible. The corroborating evidence in this case, physical and testimonial, pointed overwhelmingly in favour of admitting the hearsay.
The "common sense" approach is difficult to deny. What is even more puzzling is Justice O'Connor's basis for excluding corroborating evidence; i.e. that "it would permit admission of a presumptively unreliable statement by bootstrapping on the trustworthiness of other evidence at trial". Surely the point is that if the "other evidence" is trustworthy, the presumption of unreliability is displaced. What, therefore, is wrong with allowing such "bootstrapping"?
The Position in Canada: The Early Days
North of the border, the relaxation of the hearsay rule began to be applied across the Canadian jurisdiction with vigour. And, as in Khan, the existence of confirmatory evidence was not unnoticed by the court.
In Ontario, the Court of Appeal in R. v. D. (G.N.)7 held that statements made by a child complainant to care workers in a sexual assault case were admissible once the child was held to be incompetent. The court emphasized that in assessing the reliability of the statements, the utterances were not to be looked at "in isolation" but should be looked at as a whole, each statement providing an indicia of reliability to the other. In R. v. Persaud,8 a charge of second degree murder, the trial judge permitted the Crown to lead, as B. (K.G.) evidence, statements of two witnesses who had recanted their evidence at trial. As part of the reliability assessment the judge took into account the similarity of the two witnesses' prior statements and the physical evidence, bullets and casings found at the scene, which confirmed the truth of the prior statements. This procedure was approved of by the Ontario Court of Appeal.9
R. v. Kharsekin,10 a decision of the Newfoundland Court of Appeal, proposed that corroborative medical evidence could be used to assess the reliability of a murder victim's identification of the accused to the doctor who was examining him shortly before he died. On the other side of the country, the British Columbia Court of Appeal in R. v. Harvey11 permitted the admission into evidence of a recorded conversation of a witness who had been killed in an accident prior to trial. Its reliability was founded in part on the confirmatory evidence of an admission by the accused and evidence placing the accused at the location of the offence charged.
On the flip side of the coin, in the case of R. v. Meaney,12 the Newfoundland Court of Appeal held that hearsay statements should have been held unreliable as the maker had made false allegations in the past and had been shown to be manipulative. Similarly, in R. v. R. (D.),13 a case of sexual assault against children, the S.C.C. held that one of the complainants' out-of-court statements had been wrongly admitted as there was evidence that one of her brothers had entered into sexual activity with her and that she had previously lied to protect him and cover up any sexual activity that had taken place between them.
The undoubted high point of the corroborative component of the principled exception rule came, however, with the S.C.C.’s decision in R. v. U. (F.J.).14 The accused was charged with incest and sexual touching of his daughter. She gave a statement to the police outlining the allegations in detail and informed them that the last time that sexual activity had taken place was the day before she gave the statement. The accused was interviewed by the police and admitted having sex with the complainant and added that the last time they had indulged in sexual activity was the day before he gave the statement. At trial, the complainant recanted her previous statement and said that she had lied to the police. The accused, in testifying, denied having any form of sexual activity and he, too, claimed that he lied to the police. The S.C.C. held that the complainant's previous testimony was admissible under the Khan/Smith/B. (K.G.) exception. Necessity, of course, had been demonstrated due to the complainant's recantation at trial. Reliability had also been demonstrated as a comparison between the statements given by the complainant and the accused to the police demonstrated a "striking similarity". Using this similarity, the court concluded:
The statements made by the accused and by his daughter contained both a significant number of similarities in detail and the strikingly similar assertion that the most recent sexual contact between the two had been the previous evening. As a voir dire was also held with regard to the accused's statement, there was also sufficient evidence presented to found a conclusion that the accused and his daughter had neither a reason nor an opportunity to collude, and that the accused was not improperly influenced by the police officers who took his statement. On the basis of all these factors, I conclude that her statement was, therefore, substantively admissible at trial.15
It seemed therefore entrenched into the principled exception doctrine that the presence of extrinsic corroborative/conflicting evidence could be used to determine the reliability and thus admissibility of hearsay statements. One year later, however, the Ontario Court of Appeal would enunciate a different view.
R. v. Conway; R. v. Merz: Idaho v. Wright Rides Into Town
In December 1997, the tide abruptly turned. In R. v. Conway,16 the admissibility of a B. (K.G.) statement in a second-degree murder trial was examined by the Ontario Court of Appeal. The case itself involved the robbery of an elderly man which had resulted in his death. A key Crown witness recanted his testimony at trial and the Crown sought to have it admitted under the B. (K.G.) test. Since the witness' previous statement had not been made under oath, the court found that the test for threshold reliability had not been met as there were no other factors that could act as a substitute for the oath. The Crown therefore argued that the court could look at other confirmatory evidence to support the correctness of the ruling. The Court of Appeal disagreed:
For this proposition, the Crown relies on the minority decision of the Supreme Court of the United States in Idaho v. Wright (1990), 110 S.Ct. 3139. In that case, the majority concluded that hearsay statements of a child victim of sexual abuse who was unavailable to testify at trial did not bear adequate indicia of reliability. The court stated that the circumstances relevant to the admissibility of the statements include only those that surround the making of the statement. The issue of admissibility cannot be decided by reference to other evidence at trial; however, other evidence corroborating the truth of a statement can be looked at, but only on the issue of harmless error. The dissenting minority would have considered the existence of corroborating evidence, apart from the circumstances in which the statements were made, in determining their admissibility.
The decision of the majority to the effect that the relevant circumstances include only those that surround the making of the statement is consistent with the position of Chief Justice Lamer in KGB while the minority position does not appear to have been adopted in any reported case in Canada.17
The court appeared to be unaware of the other decisions, discussed earlier, which had indeed implicitly adopted the minority in Idaho v. Wright.
The position became unequivocal in the case of R. v. Merz.18 The accused had been charged with the first-degree murder of his former common-law wife after the couple had become involved in an acrimonious custody battle over their two children. The deceased's hearsay evidence contained a description of how the accused had threatened to kill her on two separate prior occasions. The trial judge admitted the testimony and, in the assessment of reliability, noted that the testimony could be "confirmed by other evidence". The Ontario Court of Appeal dismissed the accused's appeal, ruling that although the hearsay evidence should not have been admitted it did not, in the court's view, have an impact on the jury's verdict. Doherty J.A., writing for the court, ruled that the trial judge had erred in using the confirmatory evidence from other witnesses. It was his view that although use of confirmatory evidence was initially permitted by the courts, there had been a newer trend to the contrary:
The reliability inquiry, when made in the context of determining the admissibility of a hearsay statement, looks to those factors surrounding the making of the statement which tend to diminish the risks associated with the admission of out-of-court statements. Evidence from other witnesses which is consistent with the substance of an out-of-court statement is not a circumstance surrounding the making of that statement and cannot generally be seen as diminishing the risks associated with the admission of hearsay evidence.19
The final word on the issue came from the S.C.C. in R. v. Starr,20 the case that extended the principled approach of hearsay to the time-honoured traditional exceptions to the rule. The accused had been charged with two counts of first-degree murder and the Crown was permitted to use a statement made by one of the victims expressing an intention "to do an Autopac scam with Robert". The statement was admitted under the "present intention" exception to the hearsay rule. The S.C.C. held that since it had been made under circumstances of suspicion, it should not have been admitted into evidence. Following a comprehensive review of the hearsay rule and its exceptions, Iacobucci J., writing for the majority of the court, held that the Khan/Smith rule should be applied to all the traditional hearsay exceptions. Those exceptions, he added, were presumptively admissible and the fact that statements fell into those categories would normally be determinative of their admissibility. However, he added that there would be "rare" cases in which the circumstances surrounding the making of the statement would make it inadmissible. In determining the overriding authority of the principled approach, Iacobucci J. also provided the following guidance:
At the stage of hearsay admissibility the trial judge should not consider the declarant's general reputation for truthfulness, nor any prior or subsequent statements, consistent or not. These factors do not concern the circumstances of the statement itself. Similarly, I would not consider the presence of corroborating or conflicting evidence. On this point, I agree with the Ontario Court of Appeal's decision in R. v. C. (B.) (1993), 12 O.R. (3d) 608, 80 C.C.C. (3d) 467; see also Idaho v. Wright (1990), 497 U.S. 805. In summary, under the principled approach a court must not invade the province of the trier of fact and condition admissibility of hearsay on whether the evidence is ultimately reliable. However, it will need to examine whether the circumstances in which the statement was made lend sufficient credibility to allow a finding of threshold reliability.21
Curiously, in deciding the irrelevance of corroborating factors, Iacobucci J. failed to reference the case that had given birth to the rule and had become the exemplification of how a confirmatory factor could be used to decide reliability: Khan. Even more puzzling was the omission of any reference to another leading Supreme Court case which turned on corroborative evidence: U. (F.J.). Another noteworthy feature of the case is that this paragraph appears in a judgment written in over 50 pages and yet the exclusion of extrinsic evidence is almost a throwaway principle barely making an appearance. The principle itself would not, on the facts of the case, even be a point that would have been argued before the panel.
Whatever the circumstances, ten years after the adoption of the principled exception to hearsay, Idaho
v. Wright had arrived in Canada.
After Starr: Confusion
The Starr judgment appeared to end any uncertainty about the use of extrinsic evidence to evaluate the reliability of a hearsay statement. However, the use of corroborative evidence was still permitted in a limited number of cases. In R. v. Richardson,22 the court found hearsay evidence admissible, one of the bases being that the declarant's out-of-court statement was corroborated by another witness' conversation on the same topic. In R. v. Chrisanthopoulos,23 the Ontario Court of Appeal held that it was in the purview of the trial judge to use corroborative evidence in deciding the reliability of a 911 call which had been tendered as out-of-court hearsay. This, said the court, was one of "those rare instances" in which the use of extrinsic evidence was admissible. In R. v. Chang,24 the court reviewed the position of the co-conspirator's exception to the hearsay rule in the post-Starr world. The court held that it could pass the principled exception test but, in doing so, conceded that one of the tests to be used in the exception relied on corroborating evidence. Noting that Starr prohibited the use of corroborative evidence, the court commented that the Starr dictum was not "of universal application". The court, as support for this declaration, turned to the case of U. (F.J.).
Recently, the Ontario Court of Appeal re-affirmed the Idaho v. Wright approach in the case of R. v. Czibulka.25 In this case, the accused was convicted of the second-degree murder of his wife. The accused had called 911 to report that he had found his wife unconscious and that she may have taken an overdose of drugs. When the police arrived, the accused gave a number of statements to the police including details of assaults on the deceased in the past. During the investigation police found clumps of hair in the accused's apartment. The autopsy demonstrated that the deceased had not died of either alcohol or drug overdose. She had several injuries including fractured ribs, a fractured skull and numerous bruising over her entire body consistent with the fact that someone had been stomping on her. At trial, evidence was given of injuries seen on the deceased by witnesses prior to her death. The Crown sought to lead two pieces of hearsay evidence. The first was a letter written by the deceased to her cousin which had been received approximately three months before her death. The letter contained references to the deceased having handfuls of her hair ripped out, her face being trampled on by her husband's foot and being kicked and beaten. The second was a complaint by the deceased to her physician where she showed him some bruises which seemed fairly new. The deceased told her doctor that she wanted to show him the bruises "for the record" and that her husband had kicked her. The trial judge admitted the letter and the statement to her doctor. The Court of Appeal said that he was wrong to do so. Since there was no record of when the document had been made and under what circumstances it was written, a motive to fabricate and animus on the part of the victim, the statement could not be said to be reliable. Once again, the physical evidence, in this case the clumps of hair and extensive bruising, were not mentioned by the Court of Appeal in its assessment of reliability. The same physical factors that, it could be argued, lent significant weight as to the accuracy and truthfulness of the letter were factors that could not be considered. After all they were not part of the immediate circumstances of the statement.
Czibulka raised some important and, in my view, troubling points, particularly in the "double standard" aspect in which extrinsic evidence is used to raise doubts about the reliability of a statement whilst being prohibited from enhancing its admissibility. These difficulties are discussed in detail below.
The Hearsay Riddle of Admissibility: When an Ultimately Reliable Statement Fails the Threshold
Test
One noteworthy feature of Czibulka is the dichotomy drawn by Rosenberg J.A. between the Khan/Smith and B. (K.G.) tests. The former, according to Rosenberg J.A., looks for "a circumstantial guarantee of trustworthiness that the statement is true and accurate" and cross-examination is unnecessary. The B. (K.G.) test looks for substitutes that the courts have relied upon to determine the truth or falsity of a statement, e.g. the oath and ability to observe the declarant's demeanour at the time a statement is made. In both models, says Rosenberg J.A., the judge is not concerned whether the statement is true or not because that is a question solely for the trier of fact.
This rule was severely flawed for the following reasons:
Provable not under oath v. Disprovable under oath
Consider the following two situations. In the first instance, a witness writes a letter to a friend which cannot be exactly dated. It is unknown what prompted the letter or what mood the witness was in. However, all of the content of the letter is confirmed by extrinsic corroborating evidence. In the second instance, a witness attends the police station and gives a videotaped statement under oath. Everything that witness says can be disproved by external contradictory evidence. Guess which statement had a better chance of being admitted under the Starr principles? This was the situation alluded to by the minority in Idaho v. Wright.
The Double Standard of Extrinsic Evidence
What was clear from the hearsay cases is that despite explicitly excluding corroborative and conflicting evidence at the threshold stage, the courts actually went on to consider extrinsic evidence. This, in my view, showed the deficiency in the approach that had been taken by the courts. The very factors that they insist were important, themselves, require consideration of the same factors that the courts insisted must be excluded.
For example, in Czibulka, motive to fabricate was a factor that the court considered to be most significant in determining reliability of the deceased's letter. After expressing the prohibition on using extrinsic evidence, the court turned to consider both the deceased declarant's relationship with (a) the recipient
of the letter (her cousin) and (b) the accused (her husband) in its examination of the deceased's motive. Noting that the deceased had been rebuffed by her cousin when she had asked to go to California, Rosenberg J.A. remarked that the statements in the letter may have been made to gain sympathy and therefore had the suspicion of untruth about them. Further, he stated, the relationship between the accused and deceased had been stormy and revealed a history of conflict. Surely these pieces of evidence could not be considered part of the immediate circumstances surrounding the making of the statement? By anyone's description, such events would be classified as extrinsic evidence. However, as Rosenberg J.A. admitted, this was a factor that could be considered in addition to the immediate circumstances in which the statement was made.26 The court appeared to be picking and choosing when it could use extrinsic evidence (in this case to demonstrate motive to fabricate and therefore unreliability). If that was the case, what was the justification for excluding corroborative or conflicting evidence to decide all aspects of the threshold question itself?27
Ending the Speculation
One of the guiding principles in the hearsay exception analysis is the "speculative analysis" involved in determining reliability. This approach emanates from Smith itself where Lamer C.J.C. indulges in a limited form of speculation to determine whether or not the deceased's utterances to her mother could possibly be made under circumstances of suspicion:
I wish to emphasize that I do not advance these alternative hypotheses as accurate reconstructions of what occurred on the night of Ms. King's murder. I engage in such speculation only for the purpose of showing that the circumstances under which Ms. King made the third telephone call to her mother were not such as to provide that circumstantial guarantee of trustworthiness that would justify the admission of its contents by way of hearsay evidence, without the possibility of cross-examination.28
It is clear from Smith that Lamer C.J.C. was taking into account evidence which was not part of the "four corners" of the statement. The basis for creating these imaginary scenarios was to demonstrate the suspicion surrounding the making of the statements sought to be tendered. However, accepting that such evidence does allow an examination of whether the statement carries the circumstantial guarantees of trustworthiness; would it not also be prudent to identify factors that eliminate the hypotheses that cause suspicion? In other words, if there is evidence to corroborate what is being said by the declarant, does that not end the speculation of suspicion and therefore give rise to the values of reliability?
The "Rare Case"
The Chrisanthopoulos case indicates that the U. (F.J.) rule was still very much alive. In that case, the court would have allowed corroborative evidence to form part of the reliability assessment of a 911 tape that the Crown sought to tender. However, the court added the following proviso:
. . . . . . .this was one of those rare instances, identified in R. v. U.(F.) (J.) (1995), 101 C.C.C. (3d) 97 (S.C.C.), in which it would have been permissible for the trial judge to consider the surrounding evidence as a means of testing the reliability of the 911 call.29
While the rare case exception was a noteworthy attempt at keeping the U.(F.J.) principle alive, one could have been excused for asking what distinguished the "rare case" where corroborative evidence may be used from the "ordinary case" where it could not? Why would events that confirm the contents of a 911 call (as in Chrisanthopoulos) be any different from events that may confirm the contents of a letter written by the deceased (as in Czibulka)?
A Higher Standard of Proof for the Threshold Test
The very terms "threshold" and "ultimate" appear to connote the fact that threshold reliability is very much the subset of "ultimate reliability", i.e. the truth of the contents. The question is: why did a statement's truthfulness not matter in assessing reliability at the threshold stage? In other words, if threshold reliability is a subset of ultimate reliability, why was it that the factors used to assess ultimate reliability were excluded from assessing threshold reliability? In R. v. Hawkins,30 Lamer J. described the function of the trial judge as being "limited to determining whether the particular hearsay statement exhibits sufficient indicia of reliability so as to afford the trier of fact a satisfactory basis for evaluating the truth of the statement."31 In my view, what was being put forward by the S.C.C. was not the exclusion of certain types of evidence in testing reliability but a lower standard in deciding admissibility; i.e. the statement did not have to be found to be the truth in order to be admitted. The fact that it was found truthful, however, could only make it more reliable. However, the principle of separating threshold reliability from ultimate reliability had the opposite effect. The judicial effect of creating the rule espoused in Starr and Czibulka was that it was often easier to prove ultimate reliability than it was threshold reliability. The illogical result: a statement that could be proven to be ultimately reliable or truthful may never even have been heard by the triers of fact because the very features that made it truthful were excluded in the admissibility assessment.
R. v. Khelawon – A Return to Khan/Smith and U.(F.J.)
At last, in December 2006, the S.C.C. released its decision in Khelawon, and provided some much needed common-sense to this area of the law.
Mr. Khelawon was accused of assaulting five elderly residents at the retirement home he managed in Toronto’s west-end. The complainants had given statements to various people, including the police. By the time of trial, none of the five complainants could testify (four had died, and one was incompetent). The trial judge admitted all of the statements based on their striking similarity to each other, and convicted Mr. Khelawon on two counts, while acquitting him of the remaining three. The Ontario Court of Appeal (Rosenberg J.A., Blair J.A. dissenting) overturned the trial judge’s ruling and excluded all of the statements, thereby acquitting Mr. Khelawon.32 The Court of Appeal’s ruling demonstrated how the jurisprudence had become obsessed with the analysis of "circumstances surrounding the statements".
The divided court was united in two aspects: that Starr had imposed a prohibition on the use of corroborative evidence in the reliability analysis and that Starr had not overruled U. (F.J.). In a case where there was a statement which had strikingly similar features to the hearsay statement, the court could compare the two statements to decide whether or not the hearsay was sufficiently reliable. Rosenberg J.A. held, however, that the statement that was being used to corroborate the hearsay statement had to deal with the same event. If not, the analysis would no longer be concerned with the circumstances surrounding the statement. Blair J.A. did not share the same concern.
Almost apologetically, after recognizing that in prohibiting corroborative evidence, Starr conflicts with Khan, Rosenberg J.A. proffered the following observation:
However, until the Supreme Court revisits the issue, it seems to me that this court is bound by the holding in Starr. The importance of flexibility in developing the hearsay principles can go only so far in a hierarchal system like ours.33
Thankfully, the S.C.C. did just that and restored the flexibility that was the pillar of the Court’s findings in Khan, Smith, B.(K.G.) and U.(F.J.). Over roughly 16 pages, the S.C.C. traced the history of the principled approach (including concise summaries of the major cases), restated the test for admissibility under it, and ruled that the reliability factors are no longer to be classified depending on threshold and ultimate reliability. Rather, the factors one must consider at each stage depend on what hearsay dangers are being addressed. Importantly, the new rule abrogates Starr’s holding vis-à-vis corroborative evidence. Some of the decision’s salient points include:
The defining features of hearsay are: 1) the fact that the statement is adduced to prove the truth of its contents, and 2) the absence of contemporaneous cross-examination;34
The governing framework for the admissibility of hearsay evidence remains unchanged:
Hearsay evidence is presumptively inadmissible unless it falls under an exception. The traditional exceptions remain in place;
An exception can be challenged to determine whether it is necessary and reliable, as required by the principled approach. The exception can be modified as necessary to bring it into compliance;
In “rare cases”, evidence falling within an existing exception may be excluded if there does not exist sufficient indicia of necessity and reliability;
If the statement does not fall under an exception, it can still be admitted if it’s determined, on a voir dire, to be necessary and reliable.35
Neither B.(K.G.) nor U.(F.J.) created a new category of hearsay exceptions of prior inconsistent statements based on fixed criteria. “Rather, these cases provide guidance – not fixed categories – on the application of the principled case-by-case approach by identifying the relevant concerns and the factors to be considered in determining admissibility”.36
Requiring reliability of a hearsay statement preserves the integrity of the trial process. Generally, reliability can be shown in two different ways, neither of which precludes consideration of the other: a) because of the circumstances in which the statement arose (Khan, Smith, etc. – In these circumstances, further cross-examination, for example, would be of marginal value); and b) where circumstances allow for sufficient testing by means other than contemporaneous cross-examination (B.(K.G.), U.(F.J.), etc.).37
When assessing the admissibility of a hearsay statement, factors should not be categorized as relating either to threshold or ultimate reliability. “Rather, the relevance of any particular factor will depend on the particular dangers arising from the hearsay nature of the statement and the available means, if any, of overcoming them.”38
Notwithstanding 5), the distinction between threshold and ultimate reliability remains important. The former determines the statement’s admissibility only, and it remains very important that ultimate reliability not be pre-determined on a voir dire. The trial judge should not encroach on the trier of fact’s domain.39
Furthermore, and contrary to past jurisprudence, the truth of the statement can be a factor in determining threshold reliability. While it’s true that, in some cases, where the truth and accuracy of the statement are not of concern because of the way in which the statement came about (i.e. Khan, Smith), in other cases, it is imperative to look at factors which may confirm the truth of the statement (i.e. U.(F.J.)).40
The principle enunciated at paragraphs 215 and 217 of Starr, i.e. that corroborative could not be used at the threshold reliability stage, should no longer be followed.41 The S.C.C. admitted that this principle has proven difficult and counter-intuitive.42
Ultimately, in Khelawon, the S.C.C. found that the statements in question were not sufficiently reliable to be admitted for the following reasons:
The declarant was elderly and frail, and his mental capacity was suspect (he suffered from paranoia and dementia);
In the case of the statement to the employee, which set in motion the complaint to the police, there was motive of that employee to lie – she had been given a termination notice only weeks earlier;
Some evidence of the complainant’s discontent with the way the retirement home was managed – thereby giving him some motive to fabricate;
The only one of the traditional hearsay dangers satisfied in this case was that the statement to the police was videotaped;
and – most importantly for the purpose of this paper –
There was evidence that his injuries could have been suffered by a fall.
The irony of this last factor should not be lost on anyone – i.e. that corroborative evidence considered at the threshold reliability stage, a principle for which this paper has advocated, worked against (as it did in Smith, for example) the admissibility of the statements! Further, factors b) and c) are noteworthy because, while they may have been considered “circumstances surrounding the making of the statement” under the Starr-line of jurisprudence, they undoubtedly take into account external evidence, i.e. the employee’s termination notice and the complainant’s past discontent with the home’s management. Thankfully, under Khelawon, these inherent contradictions (and headaches!) are now a thing of the past.
Post-Khelawon: R v. Blackman
The first reported judgment in which Khelawon was considered was the Ontario Court of Appeal’s
decision in R v. Blackman.43 The accused was charged with first-degree murder. One of the issues on appeal was whether the trial judge properly admitted statements of the deceased to his mother before his death. The Court of Appeal confirmed that Khelawon abrogated the principle that threshold and ultimate reliability required the assessment of different factors. Rather, the factors to consider at the admissibility stage will depend on the nature of the hearsay danger to overcome.44 In this case, there was evidence at the admissibility voir dire of events leading up to the statements, the contents of the statements, the timing of the statements, the declarant’s alleged past history of untruthfulness to the narrator of the statements, the declarant’s dealings with police on the matters in issue and the fact that the statements cast him in a bad light, and some evidence of the relationship between the declarant and the narrator. Further, while the declarant was not available for cross-examination, his mother, the narrator of the statements, was and therefore any exploration into the declarant’s potential to fabricate the statements could be done, at least partly, through her. The trial judge concluded, and the Court of Appeal agreed, that, based on all of these circumstances, the declarant had no motive to lie. Importantly, pursuant to Khelawon, it was appropriate for the trial judge to consider all of the circumstances, including those both surrounding and external to the statement itself, when assessing the presence or absence of a motive to lie.45
In addition to its findings on the motive to fabricate issue, the Court of Appeal also confirmed the principle enunciated in Starr and not overruled in Khelawon that the presence of a motive to fabricate did not, by itself, automatically preclude the admissibility of the statement in question. Rather, the Court of Appeal adopted the decision of Blair J.A., dissenting in Khelawon (Ontario Court of Appeal), that a motive to lie can take all forms, and may be overridden by other evidence capable of satisfying threshold reliability.46
Conclusion
From its inception, the principled approach to hearsay was designed to do away with the rigid strictures of the traditional exceptions and adopt a more flexible approach. Ironically, it developed into a form of pigeon-holed analysis where evidence was categorized in its use to determine the reliability of a hearsay statement. In the then-watershed case of Merz, the court declared that such evidence could be of no assistance in determining the reliability of an out-of-court utterance. The court stated that:
Evidence from other witnesses which is consistent with the substance of an out-of court statement is not a circumstance surrounding the making of that statement and cannot generally be seen as diminishing the risks associated with the admission of hearsay evidence.47
Thankfully, the S.C.C. in Khelawon put this notion to rest. There had never been an explanation or justification offered to explain exactly why extrinsic evidence could not be just as helpful in diminishing the risks associated with the admission of hearsay evidence as much as those factors surrounding the making of the statement.
Khelawon has already been criticized as complicating the principled approach to hearsay and by failing to provide trial judges the guidance as to what weight to place on certain factors.48 However, it is submitted that this criticism is misguided and ignores the contradictory point that, under the previous Starr-type approach, judges were forced to consider only the circumstances surrounding the making of the statement while many of those circumstances necessarily required a consideration of external factors (i.e. external factors leading to a declarant’s motive to lie, for example). Further, it potentially led to the absurd scenarios, referred to above, where an ultimately reliable statement failed to get past the threshold reliability stage. This criticism further misses the point, and one should not forget, that the purpose of the principled approach in the first place was to promote a flexible approach to the admissibility of hearsay statements when they did not fit nicely into one of the established exceptions. To categorize factors by the weight to be placed on them, for which the above-noted critic advocates, would be to return to the pigeon-holed approach to the rule that had developed after Starr. Rather, in Khelawon, the S.C.C. took the common-sense approach and held that any given factor could be important to the admissibility of a statement depending on the nature of the hearsay danger in question. Contrary to the Ontario Court of Appeal’s finding in Merz, quoted above, in certain cases, there is no better way to guarantee the reliability of a statement than by reviewing external evidence that supports its contents.
* This article expands on the piece originally written by Suhail Akhtar titled, Hearsay: The Denial of Confirmation, in Criminal Reports (Articles) 6th series, 2005.
** Suhail Akhtar, Assistant Crown Attorney, (416) 325-0342, suhail.akhtar@jus.gov.on.ca. Suhail is the Vice-Chair of the Criminal Justice Section.
Joe Dart, Assistant Crown Attorney, Scarborough. The views in this article are purely those of the authors and do not reflect in any way the views of the Ministry of the Attorney General.
1 [2006] S.C.J. No. 57. 2 (1990), 59 C.C.C. (3d) 92, 79 C.R. (3d) 1 (S.C.C.). 3 (1992), 75 C.C.C. (3d) 257, 15 C.R. (4th) 133 (S.C.C.). 4 (1993), 79 C.C.C. (3d) 257, 19 C.R. (4th) 1 (S.C.C.). 5 448 U.S. 56 (U.S. S.C., 1980). 6 497 U.S. 805 (U.S. Sup. Ct., 1990) 7 (1993), 81 C.C.C. (3d) 65 (Ont. C.A.) 8 (1996), [1996] O.J. No. 4736, 1996 CarswellOnt 5810 (Ont. Gen. Div.). 9 (August 17, 1999), Doc. C25638, [1999] O.J. No. 2989 (Ont. C.A.). 10 (1994), 88 C.C.C. (3d) 193, 30 C.R. (4th) 252 (Nfld. C.A.). 11 (1996), [1996] B.C.J. No. 1880, 1996 CarswellBC 1881, 1 C.R. (5th) 155 (B.C. C.A.). 12 (1996), 111 C.C.C. (3d) 55 (Nfld. C.A.). 13 (1996), 107 C.C.C. (3d) 289, 48 C.R. (4th) 368 (S.C.C.). 14 (1995), 101 C.C.C. (3d) 97, 42 C.R. (4th) 133 (S.C.C.). 15Ibid. para. 53. 16 (1997), 121 C.C.C. (3d) 397, 13 C.R. (5th) 139 (Ont. C.A.). 17Ibid. paras. 49-50. 18 (1999), 140 C.C.C. (3d) 259, 30 C.R. (5th) 313 (Ont. C.A.). 19Ibid. para. 51. 20 (2000), 147 C.C.C. (3d) 449, 36 C.R. (5th) 1 (S.C.C.). 21Ibid. para. 217. 22 [2003] O.J. No. 3215, 2003 CarswellOnt 3104 (Ont. C.A.). 23 [2003] O.J. No. 5252, 2003 CarswellOnt 5215 (Ont. C.A.). 24 [2003] O.J. No. 1076, 2003 CarswellOnt 1007, 9 C.R. (6th) 304 (Ont. C.A.). 25 [2004] O.J. No. 3723, 2004 CarswellOnt 3721, 24 C.R. (6th) 152 (Ont. C.A.). 26Ibid. at para. 50. 27 As a footnote to Czibulka, it appears that any controversy over the admissibility of the proffered statements mattered little in the end. On his retrial, which completed in Toronto in November 2006, Mr. Czibulka was again convicted, the jury taking only roughly 5 hours to render its verdict. 28Supra note 5 at 273. 29Supra note 25 at para. 9. 30 (1996), 111 C.C.C. (3d) 129, 2 C.R. (5th) 245 (S.C.C.). 31Ibid. para. 75. 32 [2005] O.J. No. 723. 33Ibid. para. 109. 34Supra note 3 at para. 35. 35Ibid. para. 42. 36Ibid. para. 45. 37Ibid. para. 49. 38Ibid. para. 55. 39Ibid. paras. 50, 93. 40Ibid. paras. 62-66 and 92. 41Ibid. para. 93. 42Ibid. para. 100. 43 [2006] O.J. No. 5041 (C.A.). 44Ibid. paras. 45-46. 45Ibid. paras. 59-60, and 63. 46Ibid. para. 69. 47Supra, note 20 at para. 51. 48 See Ottawa lawyer Lawrence Greenspon’s comments in Jennifer McPhee’s article in the January 8th, 2007 edition of the Law Times titled: “Mega-trials biggest criminal law issue of 2006”.
The Education Amendment Act (Learning to Age 18), 2006 (the “Act”) received Royal Assent on December 20, 2006, however several of the changes are yet to be proclaimed in force.
The Act is intended to increase the number of students graduating from secondary schools in Ontario by making attendance compulsory until students have reached the age of 18 years old and by expanding the educational opportunities available for earning credits towards an Ontario Secondary School Diploma to include Equivalent Learning opportunities. New consequences for failure to attend school that have implications for students, parents, guardians and employers have also been set out in the Act, but are not yet in force.
It is now compulsory for students to attend school until they are 18 years old; previously attendance was only compulsory until the age of 16. Under the Act, a parent or guardian of a student will be required to ensure attendance unless the student is at least 16 and has withdrawn from parental control.
There are significant consequences for those who do not comply with the Act; however, these provisions have yet to be proclaimed into force. A parent or guardian of a student required to attend school who fails to ensure their attendance may be guilty of an offence and on conviction liable to a fine of up to $1000. This is a significant increase from the previous maximum fine of $200. Further, a court may, in addition to or instead of imposing a fine, require a parent or guardian convicted of an offence to submit a personal bond.
Employers may also be liable upon conviction for a fine up to $1000 if they employ a student during school hours who is required to attend school. An exception exists for students and employers participating in an Equivalent Learning opportunity.
A student who refuses to attend or is habitually absent from school prior to reaching the age of 18, may be found guilty of an offence under the Provincial Offences Act. Once proclaimed into force, the Court will also have the power to order that the driver’s licence be suspended for a specified period of time (but no longer than their requirement to attend school). At the end of the suspension, the student may apply to the Registrar of Motor Vehicles appointed under the Highway Traffic Act for the reinstatement of their licence.
Participation in Equivalent Learning programs will meet the requirement of compulsory attendance. Equivalent Learning is defined as a learning situation that falls outside the instruction traditionally provided by a board of education and can include opportunities such as apprenticeships or workplace training programs. The Minister will have the power to establish policies, guidelines and standards with respect to Equivalent Learning and the Minister may provide further information addressing the requirement that school boards develop and offer Equivalent Learning opportunities to their pupils. The provisions related to Equivalent Learning are not currently in force and details have yet to be provided. It should be noted that the legislation specifically requires that Equivalent Learning opportunities not be of a lesser quality than opportunities provided in the traditional education system.
These changes to the Education Act are significant and implementation may raise several issues, including challenges for school boards in establishing and monitoring Equivalent Learning programs, prosecuting students for non-attendance and addressing the needs of students currently participating in alternative learning programs.
* Andrea Campbell, Student-at-Law, Keel Cottrelle LLP.
Ontario Government Proposes Brownfields Reform Marc McAree*
After extensive stakeholder consultation, a consortium of Ontario ministries, including Environment and Municipal Affairs, has proposed amendments to Ontario’s Brownfields laws and regulations. The changes are proposed to encourage the clean-up and redevelopment of contaminated sites by clarifying a number of liability and technical issues.
Some proposed changes, including clarification of various “reopener” provisions will be welcome by property owners and developers. Municipalities will gain civil immunity for issuing building permits based on incorrect Records of Site Condition (RSC).
However, many stakeholders will be disappointed that nothing will be done to limit the exposure of property owners to civil lawsuits. Also controversial is the proposal to eliminate horizontal severances – a legal technique that appears to offer potential to encourage lenders to finance Brownfields projects.
Proposals for changes and clarifications to Brownfields laws were posted for discussion on the Environmental Bill of Rights Registry (EBR) on January 16, 2007. The EBR posting link is http://www.ene.gov.on.ca/envregistry/029222ea.htm.
In brief, changes to the Environmental Protection Act (EPA), the Ontario Water Resources Act and the RSC would address:
Clarification of “reopeners.” Changes would allow owners, purchasers and lenders more certainty about their exposure to Ministry of the Environment orders when:
there is incorrect information in an RSC posted on the Environmental Site Registry (ESR);
there is offsite migration of contamination after the RSC is posted on the ESR;
there is a change of use after an RSC property has been sold;
there is non-compliance with risk management measures; or
there is non-compliance with soil management regulations.
Clarification that, prior to RSC filing, persons who conduct environmental site remediation are not considered to occupy or have charge, management or control.
Amendments that provide immunity from civil claims against municipalities and other authorities issuing building permits or making planning decisions if the lawsuit arises from inaccuracy in a filed RSC.
The elimination of horizontal severances as a redevelopment strategy - horizontal severances would be limited to title transfer to mineral rights only (currently horizontal severances do not require Planning Act approval).
Civil liability protection amendments to the Proceedings Against the Crown Act and Escheats Act to protect governments from civil claims in certain situations, and to protect government funds expended on securing or improving a property.
Regulatory framework amendments to:
govern pre-review by the MOE of RSCs (pre-filing audits); and
promote consultation about changes to the regulation governing Qualified Persons.
Technical amendments to:
provide authority to amend RSCs at the request of a property owner to correct any inaccuracy;
permit order notices to remain on the ESR despite compliance with the order, until a new and accurate RSC is filed (this authority already exists for emergency orders);
require owners filing an RSC to retain reports for a prescribed period of time; and
prescribe conditions governing on-site management of soils on properties after an RSC has been filed (currently MOE can only restrict soil management on stratified and RA properties).
Protections to encourage clean-up of abandoned mines by amending the Mining Act to protect mining companies participating in voluntary rehabilitation of Crown-held abandoned mines (if the volunteers did not cause the historic “hazard”).
As much as these proposed Brownfields reforms are intended to clarify the rules, the legal issues around cleaning up and redeveloping contaminated properties are becoming increasingly complex. Extra care should be taken by non-environmental lawyers and their clients to understand the new rules in the context of their clients’ transactions and clean-ups.
The Environmental Law Section is following these developments closely, and has struck a legislative review sub-committee that will provide comments to the Government about these Brownfields reforms by the submission due date of February 15, 2007.
* Marc McAree, Willms & Shier Environmental Lawyers LLP, (416) 862-4820, mmcaree@willmsshier.com. Marc is the Chair of the Environmental Law Section.
This article originally appeared as an Editorial in Matrimonial Affairs, Volume 18, No. 2, January 2007.
Should our laws recognize children who have three (or even more) parents? Assisted Reproductive Technologies now allow for genetic mothers, genetic fathers, birth mothers, intended mothers and intended fathers. Should our legislation attempt to define what our families should look like or should our legislation give legal rights and obligations to what our families are?
Those of us who welcome the growing number of new reproductive technology cases into our practice are noticing some astonishing emerging patterns of behaviour. Some fathers who donate their sperm to infertile or lesbian couples want to be part of the life of the child they spawned. And the parents are welcoming them. Some surrogate mothers are subsequently being welcomed into the life of the child they carried by the child’s genetic mother and genetic father. There is a current of behaviour out there now that is embracing an enlarged vision of the family for a child, and three parents belong to this current.
Our job as family lawyers is to assist these families so that the intended parents, whether genetically related or not to the child, have the legal rights and obligations that should flow from a parent/child relationship.
What are we doing? Are we turning away from the “nuclear” family concept to a more communal understanding of family? In some ways, it’s a heartening change from the patterns of single parents, serial parents, and child abandonment. Looking at a family from a child’s perspective, rather than the “settled intention” of the parents, may provide for a more inclusive family.
Is this a positive development? It’s worth considering. As family lawyers though, helping these families define themselves for the benefit of their children, sure beats helping separating families minimize the effects of divorce on their children.
The Feminist Legal Analysis Section commonly referred to as “FLAC” plays several roles in the OBA which I described in my previous piece for Sections in Review, “Friendly Feisty, and Feminist”. FLAC plays a “major role in advising the OBA and government on the proposed and existing laws on women, and making recommendations for legal change with a social justice focus.” (Be Heard! 2006-2007 Sections Guide). FLAC members analyze proposed legislation, court decisions, and scenarios from life – the unfairness of women’s situations that we learn about in our practices – and we speak out against inequities. Because of our proclivity in speaking out, I want to add formidable, in the sense of “inspiring respect or awe,” as another “F” word to describe FLAC.
In our focus on social justice issues, FLAC has been vigilant in challenging the government’s cuts to the Court Challenges Program, the Federal Law Commission, and other formerly funded Status of Women programs. Our concern about the loss of the Court Challenges Program is that it has provided many Canadian women with their only access to the use of their constitutional equality rights. As one well-known Canadian feminist, Shelagh Day, pointed out, “Equality rights have no meaning in Canada if women, and other Canadians who face discrimination, cannot use them. Constitutional cases are too expensive for women to mount on their own. Without this test case fund, women simply do not have access to the courts when their rights are violated.”
As for the Status of Women program, imagine our shock and dismay when it was revealed that the government took all mention of “equality” out of the terms and conditions of the Women’s Program and changed the rules so that women’s organizations can no longer use federal funds to advocate for women’s equality, including pressing for changes that will recognize the value and contribution that women make to the paid workplace and in the home. The Minister Responsible for the Status of Women, The Honourable Bev Oda, met with some women’s groups to inform them that new federal guidelines for funding will prohibit them from engaging in any advocacy or lobbying activities with federal funds. She also told them that the federal government has no intention of reversing the 5 million dollar cut to the department’s budget, in spite of wide-spread pressure to do so.
FLAC made a written submission to the CBA Standing Committee on Equity expressing solidarity and our support for whatever actions it took to protest recently announced government funding cuts. We chose this committee because there is not an exact CBA counterpart to FLAC, and as this is a federal issue, the OBA does not deal directly with the government. Several individuals on the FLAC Executive wrote individual letters to their own MPs, copied to the Minister Responsible for the Status of Women, asking that they renounce these cuts in Parliament and demand that the wrong-headed decisions be rescinded. Not to be pessimistic and admit that no action would be taken, we wanted our letters to register our disapproval and show our support for women less fortunate than ourselves. Feminists have learned to speak out against what they know is wrong, and wait patiently for the opportune time to help effect change.
Let me end this message by reminding you that although we tackle the larger social issues that seem to have no imminent solution, we are banded in this particular feminist group because we respect and admire how the power of law can improve women’s lives. We are proud to be formidable on behalf of women and children.
* Jean Franklin Hancher, (416) 231-6065, jeanfh@rogers.blackberry.net. Jean is the Chair of the Feminist Legal Analysis Section.
Government Cannot be Sued for Failing to Prevent the Spread of West Nile Virus Kathryn Frelick and Alia Karsan*
This article originally appeared in Health Matters, Volume 16, No. 2, January 2007.
In 2004, for the first time in Canada, the Ontario Superior Court of Justice found that a public authority could potentially be held liable in negligence for failing to prevent the spread of a disease. In doing so, the Court refused to strike out a claim that the government owed specific individuals a private law duty to take reasonable steps to prevent the spread of West Nile Virus (WNV). Further, it refused to strike out a claim that the Province had failed at the operational level to implement the plan it developed for the expected outbreak. The case garnered a great deal of public attention as it appeared to widen the scope of potential law suits against the government.
This decision was overturned on November 3, 2006, when the Court of Appeal held that the Ontario government did not owe such a duty of care to individuals, but rather, any duty was to the public at large. The case, Eliopoulos v. Ontario (Minister of Health & Long-Term Care),1 held that to impose a duty of care on the government would create an unreasonable and undesirable burden on the Province that would interfere with decision-making in the sphere of public health.
Background
The case involved George Eliopoulos, who was bitten by a mosquito in Mississauga and became infected with WNV in 2002. He was treated in hospital and released, but died in 2003 from complications following a fall. His estate and family members (the “respondents”) sued the Government of Ontario (“Ontario”), as represented by the Minister of Health and Long-Term Care (the “Minister”), in negligence. The respondents alleged that Ontario could and should have prevented the outbreak of WNV in 2002.
This action was one of approximately 40 similar actions brought by Ontario residents who contracted WNV in 2002. Ontario brought a motion to strike the respondent’s statement of claim on the grounds that it disclosed no cause of action. Both the motions judge2 and Divisional Court3 rejected Ontario’s submission. The motions judge held that Ontario failed to establish that it was plain and obvious that the estate could not succeed at trial. She held that once Ontario created and decided to implement a plan to prevent WNV and promote awareness in Ontario, it owed Mr. Eliopoulos a duty of care to act without negligence. Ontario appealed this decision at the Divisional Court; however, the Divisional Court agreed with the motions judge and dismissed Ontario’s appeal as well.
Decision of the Ontario Court of Appeal
Did the Ontario Government owe Mr. Eliopoulos a duty of care?
The Court of Appeal found that, while the Ontario government owed a duty to the public at large, there was not sufficient proximity between the public authority and Mr. Eliopoulos to give rise to a duty of care. As such, it struck out the claim for negligence.
The Test
In determining whether a public authority owes a private law duty of care to an individual or class, the court must apply a two-part test, which was first introduced in Anns v. Merton London Borough Council,4 and subsequently refined by the Supreme Court of Canada in Cooper v. Hobart.5 The test is as follows:
Was harm that occurred the reasonably foreseeable consequence of the defendant’s act?
Are there reasons, notwithstanding the proximity between the parties established in the first part of this test, that tort liability should not be recognized here?
The test requires that reasonable foreseeability of the harm be accompanied by proximity to establish a duty of care. The Eliopoulos action considered whether there was sufficient proximity between Ontario and Mr. Eliopoulos’ estate to establish that a private law duty of care existed. According to Cooper, proximity is determined by looking at expectations, representations, and reliance as well as evaluating the closeness of the relationship between the plaintiff and the defendant. The respondents asserted that proximity was established due to Ontario’s statutory duty to safeguard the health of its residents. They relied upon the provisions of the Health Protection and Promotion Act,6 (the “Act”) the purpose of which is stated in s. 2:
The purpose of this Act is to provide for the organization and delivery of public health programs and services, the prevention of the spread of disease and the promotion and protection of the health of the people of Ontario.
Based on this statement of purpose and the general implications of the Act, the Court of Appeal held that a general public law duty is owed which requires the Minister to endeavour to promote, safeguard, and protect the health of Ontario residents and prevent the spread of infectious diseases. However, the Court limited this duty, stating that it does not extend to a private law duty. The Act provides for a discretionary power that, if exercised, must be exercised by the Minister for the general public interest. It is not to be directed towards the protection of the private interests of the specific individuals.
In applying the second branch of the test, the Court held that policy considerations existed that were not favourable towards imposing a private law duty. The risk of contracting a disease spread by mosquitoes is one that all Ontarians are exposed to and is not a risk created by the government, nor is it a risk arising from the use of a public facility provided by Ontario. The government must be able to allocate the resources available in a manner that protects the health of its residents. The Court stated that public health priorities should be based on the best interest of the public. Implementing a private law duty would interfere with such decisions. The government should be free to make its decisions concerning allocation of resources without the fear or threat of potential future legal action.
Implementation of a Policy
The Court of Appeal disagreed with the respondent’s assertion that the province’s WNV prevention and surveillance plan (the “Plan”) was a policy decision that triggered a common law duty of care. The Plan was prepared by the Public Health Branch of the Ministry, provided information about WNV, and encouraged members of the public and local authorities to undertake surveillance and preventative measures. The strategy for implementing this preventative action was through public education.
The respondents relied upon the proposition that there is no private law duty on a public authority until it makes a policy decision to do something. At that point, and only at that point, does a duty arise at the operational level to use due care in carrying out the policy.7
The Court reasoned that the Plan for WNV awareness was not a policy decision that would engage the Province at an operational level given that the Province was only responsible for providing information. The implementation and operational duties were the responsibility of the local authorities and local boards of health. Justice Sharpe for the Court of Appeal noted that “…the Plan falls well short of the sort of policy decision to do something about a particular risk that triggers a private law duty of care to implement such policy at the operational level in a non-negligent manner.”8
As such, the respondents’ assertion that the Plan was a policy decision that imposed a private law duty on the government failed.
Implications
The decision of the Court of Appeal follows a number of other decisions that have considered whether public authorities owe a duty of care to a particular individual. For example, in another recent case, the Ontario Divisional Court dismissed an action against the Government of Ontario,9 and certain government servants, including the Minister of Health. The plaintiffs claimed that their daughter died as a result of hospital overcrowding, and commenced a claim against the Government alleging that decisions to reduce health care funding had contributed to the overcrowding and the resultant delay in treatment.
In dismissing the claim, the Court found that, although the Minister had a duty to the public as a whole, there was no duty owed to a particular individual. In looking at the statutes governing the duties of the Minister, the Court found that the Minister had a wide discretion to make policy decisions about the funding and restructuring of hospitals. The Minister was required to act in the public interest, which in and of itself did not give rise to a duty of care to a specific patient.
In Eliopoulos, the Court of Appeal recognized the distinction between policy decisions that are not actionable and operational decisions or actions that may give rise to an actionable claim and that give rise to a duty of care. A private law duty of care arises when the Government is carrying out its policy decisions at the operational level. Once the Government has made its policy decisions, it has a duty to exercise reasonable care in carrying out those actions. If it does not, it may be liable in negligence.
While the Court held that the Government’s WNV Plan was not operational in nature, to the extent that the Government is taking on a greater operational role in resource allocation and other types of decisions, it may be exposed to potential liability. The Government has an obligation to exercise reasonable care in carrying out its policy direction.
* Kathryn Frelick is a lawyer practicing in Miller Thomson LLP’s Health Industry Practice Group, (416) 595-2979, kfrelick@millerthomson.com. Kathryn is a Newsletter Editor of the Health Law Section.
Alia Karsan is a student-at-law at Miller Thomson LLP. 1 2006 CanLII 37121 (ON C.A.) <http://www.canlii.org/on/cas/onca/2006/2006onca10745.html>> 2 [2004] O.J. No. 3035 (S.C.J.) (QL) 3 [2004] O.J. No. 4396 (Div. Ct.) (QL) 4 [1978] A. C. 728. 5 [2001] 3 S.C.R. 537. 6 R.S.O. 1990, c. H. 7. 7Swinamer v. Nova Scotia (Attorney General), [1994] 1 S.C.R. 445 at 450. 8Eliopoulos v. Ontario (Minister of Health & Long-Term Care), [2006] O.J. No. 4400 at para 25. 9Mitchell (Litigation Administrator of) v. Ontario (2004), 71 O.R. (3d) 571.
Electronic Payments: Industry and Legal Developments and Trends Peter V. Nguyen*
Like many other industries to whom members of the OBA Information Technology and E-Commerce Section provide services, the electronic payments and transactions (“e-payments”) industry has experienced considerable change in the past few years. 2006 proved to be no different as there were interesting developments, both within the industry and the law, that directly affected nearly all the actors in the e-payment eco-system – from merchant retailers, financial institutions and credit card companies to technology service providers and individual consumers. This article seeks to: (a) provide OBA members with a glimpse of some of the key developments to help familiarize them with a growing industry; and (b) provide, from a legal perspective, some of the challenges that arise in advising companies in this industry including how existing laws, such as consumer protection and privacy laws, as well as industry rules and regulations, may apply to their client’s business.
Mobile payments
In the past year and a half, in the United States, several companies launched new services that seek to replace cash or credit/debit cards as the primary method of payment. Companies such as TextPayMe (www.textpayme.com), Obopay (www.obopay.com) and PayPal Mobile (www.paypal.com/mobile), which launched or gained significant traction in 2006, provide platforms that allow a consumer to forego reaching for his or her wallet or purse and, instead, reach for his or her mobile phone, to engage in typical commercial transactions (i.e. buying a DVD movie) as well as to conduct “peer-to-peer” payments (i.e. splitting a dinner bill among friends). Each of these companies facilitate these e-payment transactions by using a variant of the short message service (SMS) / text message functionality that is now available on almost every mobile phone. In Canada, WPS Wireless Payment Services Inc. (www.wpspay.com), a joint venture between Bell Mobility, Rogers Wireless and TELUS Mobility formed in November 2005, is expected to begin offering similar services to its respective customers in 2007.1
For Canadian companies developing technologies that seek to drive e-payments in the United States, where some have predicted 2007 to be “the year of mobile payments and banking”,2 navigating the regulatory regime will continue to be a challenge (i.e. in addition to federal banking laws which may apply, there are the myriad of state money transmittal laws). For those companies seeking to offer similar services in Canada, compliance with, among other things, the Proceeds of Crime (Money Laundering) and Terrorist Financing Act will be top of mind of members advising these clients, especially if the service permits large electronic money transfers.
Biometric payments
Another significant technological development in 2006 in the e-payments industry was the continued deployment, at a number of retail locations throughout the United States, and growing use, of the “Pay By Touch” biometric e-payment service.3 As with those companies in the mobile payments segment of the e-payments industry, the Pay By Touch (www.paybytouch.com) system also seeks to eliminate the need to carry a wallet or a purse; instead the Pay By Touch system allows an individual to pay for goods by simply using his or her fingerprint. For example, at the grocery checkout, all that an individual would need to do in order to pay for his or her groceries, would be to place his or her finger on a fingerprint reader; the individual would then be linked to his or chequing or credit card accounts and could then proceed to pay. From a legal perspective, it is not difficult to see the privacy issues that would clearly emanate from the use of such a system. Clearly, if such an e-payment system were launched in Canada, the federal Personal Information Protection and Electronic Documents Act (“PIPEDA”) (and its provincial equivalents) would apply – it is hard to imagine anything more personal than one’s fingerprint! It would be a given that members would of course advise any client in the biometric payments business to comply with PIPEDA’s requirement that, as an organization that collects, uses and discloses personal information, appropriate security safeguards need to be put in place.
Payment Card Industry Data Security Standard
However, as identified earlier, it is not only the legislative requirements that clients in the e-payments industry will need to worry about (especially as it relates to data security). To the extent that a client is an organization in the payment eco-system (excluding individuals) (e.g. the e-payment facilitator, the retail merchant, an outsourcing company providing technical services to the e-payment facilitator or the retail merchant), that processes VISA, MasterCard, Discover, American Express or JCB credit card transactions and credit card data, members should be sensitive to the fact that the client may be subject to the Payment Card Industry (PCI) Data Security Standard (DSS). The PCI DSS, developed by the aforementioned credit card companies, “represents a common set of industry tools and measurements to help ensure the safe handling of sensitive information…[and] provides an actionable framework for developing a robust account data security process – including preventing, detecting and reacting to security incidents” and were recently updated in September 2006.4 PCI DSS was developed in recognition of the fact that more and more sensitive personal and financial data (e.g. credit card holder information) was now accessible over the Internet and susceptible to hacking. As such, common data security standards needed to be established to ensure a minimum level of security for all the actors in the credit card payment system.
While PCI DSS is clearly not law, an organization may be contractually required to comply with PCI DSS. While members should recognize in advising their clients that in addition to being potentially onerous and costly to comply with the PCI DSS (i.e. documenting processes and procedures, acquiring hardware and software and engaging technology service providers to assist in achieving compliance, engaging third party assessors to validate compliance), any breach of the obligation to stay compliant with PCI DSS may have more serious repercussions, from the client’s perspective, than being in breach of a particular legislative requirement. This is because the potential penalties include, among other things, significant fines levied by their credit card processor or the termination of their ability to process any of the credit card transactions mentioned above. Such a result would undoubtedly be disastrous for clients.5
In my experience, references to PCI DSS have begun to make its way into commercial agreements. Very recently, the following provision was found in a services agreement being entered into by a client:
“Service Provider hereby represents that Service Provider and each of its subcontractor performing any bank or credit card services are, and will be at all relevant times, in compliance with payment card industry data security standards.”
Understanding the significance of such a statement was crucial in helping the client appreciate the potential costs and consequences of making such a representation without further negotiation.
Gift cards
One last development in the e-payments world in 2006 that should be mentioned was the announcement by the Ontario government that it would be enacting legislation that would directly affect the gift card industry. This is not surprising as gift cards have grown in popularity in the past few years.6
Prior to the enactment of the new law, merchant retailers that issued gift cards (or more generically referred to as prepaid or stored-value cards) would typically provide in the agreement that the gift card would either expire (i.e. the holder of the gift card would no longer be able to use the card even if he or she had a balance remaining on the card) or that after a period of time, the merchant retailer that issued the gift card would charge a “convenience fee” to the individual to allow the individual to continue to use the gift card (by debiting any unused balance on the gift card). While these practices were generally accepted as being legitimate, it remained an open question as to what happened to any unused funds remaining on the gift cards after expiry of the card or after fees had been deducted (e.g. would the merchant retailer that issued the gift card be entitled to keep the funds? Or were there any escheatment laws that would provide that the government had a claim on the money?) With the Consumer Protection and Service Modernization Act, 2006 (Ontario) (the “CPSMA”) receiving royal assent on December 20, 2006, the law on this issue has been clarified. The CPSMA amends, among other things, the Consumer Protection Act, 2002, S.O. 2002, c. 30, to make clear that the government is entitled to enact regulations that, among other things: (a) impose restrictions on gift card agreements, including prohibiting expiry dates; (b) govern fees that a supplier may charge a consumer under a gift card agreement; and (c) allow a consumer that is party to a gift card agreement, to cancel the gift card agreement. All indications from the government thus far would suggest enacting the regulations to ban expiry dates.
Other issues
The foregoing review merely skims the surface of some of the key developments in the past year as it relates to the e-payments industry. Other developments in 2006 that are bound to have an effect in the future on clients in the e-payments industry relate to, among other things: the impact of the launch of Google Checkout on the e-payments industry (and any corresponding e-commerce legislation regarding online payments); amendments that might stem from the 5 year review of PIPEDA (i.e. an obligation of organizations to notify of a data breach?); Industry Canada’s decision to reconvene the Authentication Principles Working Group (in light of Industry Canada’s recognition that the principles issued in 2004 apply to new authentication environments such as mobile commerce)7 and developments in the United States regarding the U.S. Federal Financial Institutions Examination Council (FFIEC)’s guidance that banks and other e-payment actors adopt two-factor authentication for online transactions. Without a doubt developments affecting the e-payments industry in 2007 will be interesting to observe!
* Peter V. Nguyen, Fraser Milner Casgrain LLP, (416) 863-4507, peter.nguyen@fmc-law.com. Prior to joining FMC, Peter was in-house legal counsel to two Canadian companies in the electronic payments and transactions industry.
1 It should be noted, however, that PayPal Mobile currently makes its service available to Canadians) 2 See, E. Malykhina, “2007 Is Looking Like The Year Cell Phone Banking Gets Started,” Information Week, November 27, 2006 available at http://www.informationweek.com/news/showArticle.jhtml?articleID=195900192 and S. Wellman “What Does 2007 Promise?” Information Week, December 15, 2006 available at http://www.informationweek.com/blog/main/archives/2006/12/what_does_2007.html wherein Wellman reports on the prediction of U.S. technology guru, Mark Anderson, that 2007 will see the first market application of mobile payments in the United States. Moreover, as further evidence of the growing significance of mobile payments, in early January 2007, VISA International, announced the launch of a mobile platform that “lays the foundation for the commercial availability of mobile payments and services to millions of mobile users around the world. The new platform is designed to foster collaboration between the financial services and mobile telecommunications sectors for the delivery of mobile payment applications and payment related services.” 3 In his article, Jonathan Curiel notes that by the middle of 2006, more than 2.5 million shoppers in the United States were using the Pay By Touch system. See J. Curiel, “The Last Days of Privacy,” San Francisco Chronicle, June 25, 2006, p. E-1 available at http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2006/06/25/ING4DJHBDU1.DTL 4https://www.pcisecuritystandards.org/about/faqs.htm#q15. The highlights of the September 2006 revisions include the requirements to: (a) build and maintain a secure network by installing and maintaining firewall configurations to protect cardholder data, (b) protect cardholder data by encrypting transmission of cardholder data across open, public networks, (c) maintain a vulnerability management program by using and updating anti-virus software and developing and maintaining secure systems and applications, (d) implement strong access control measures by restricting physical access to cardholder data and assigning a unique ID to each person with computer access, (e) regularly monitoring and testing networks and (f) maintaining an information security policy. More generally, the PCI DSS in its entirety is available for download at https://www.pcisecuritystandards.org/tech/download_the_pci_dss.htm. 5 For example, CardSystems Solutions Inc (“CardSystems”)., a U.S.-based processor of Visa, Master Card and American Express credit cards, had its computer systems hacked in 2004 and tens of millions of credit and debit card data was compromised. The U.S. Federal Trade Commission (FTC) issued a complaint against CardSystems for violating certain elements of the FTC Act and the FTC and CardSystems eventually settled (the terms of which were not made publicly available). While the FTC complaint and settlement were significant to CardSystems, arguably it was Visa’s decision to terminate the ability of CardSystems to process Visa credit cards transactions that had a greater impact on CardSytems’ ability to continue as an independent going concern. In fact, in an interesting development, it was Pay By Touch, the biometric e-payments company, that acquired CardSystems in December 2005. Of additional interest is the fact that, at the time of the writing of this article, TJX Companies Inc.(the parent company of U.S. retailers TJ Maxx and Marshall’s and Canadian retailers Winners and Home Sense) admitted that its information systems were hacked and that a “limited number” of credit and debit card account information were compromised. 6 A study by Statistics Canada published in December 2006 indicated that by the end of 2005, more than 8 in 10 large retailers were offering gift cards to their customers which represented an increase of 29% from 2003. See D. Bahta, R. Tsang, M. Weise, “Gift Cards: The Gift of Choice,” Statistics Canada Analysis in Brief, December 2006, 11-621-MIE2006051 available at http://www.statcan.ca/english/research/11-621-MIE/11-621-MIE2006051.htm 7 See http://strategis.ic.gc.ca/epic/site/ecic-ceac.nsf/en/h_gv00090e.html. Industry Canada also commissioned Duncan Consulting to prepare an environmental scan and assessment of market trends in authentication for e-commerce applications. See K. Duncan, “Authentication in Retail and financial Services: Market Scan & Analysis,” available at http://www.duncanconsulting.com/work/pdf/Industry_Canada-Authentication_Market%20Scan-Duncan_Consulting.pdf.
Wide Ranging Insolvency Reforms May Yet Become a Reality in 2007 Robin B. Schwill*
Bill C-55, An Act to establish the Wage Earner Protection Program Act, to amend the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act and to make consequential amendments to other Acts, received Royal Assent on Friday, November 25, 2005, becoming Chapter 47 of the Statutes of Canada, 2005. However, as a result, the rush to pass this legislation before the dissolution of the 38th Parliament pre-empted the normal committee review process. Consequently, the Act has not yet been proclaimed in force. The most current expectation is that the Act, together with comprehensive amending legislation, will be tabled in February 2007 by Minister Blackburn (the Minister of Labour, not the Minister of Industry). If unanimous consent is given, the Act, as amended, will likely be in force by the end of 2007.
Summary Overview
C-47 currently contains broad amendments to Canada’s insolvency laws in diverse areas including wage earner protection, collective bargaining agreements, wage claims priority, pension claims priority, national receivers, executory contracts, licences of intellectual property, assignment of contracts, debtor-in-possession financing, sale of assets, regulation of monitors, corporate governance, administrative charges, equity interests, as well as foreign proceeding recognition provisions similar to the recent Chapter 15 amendments in the U.S. Accordingly, these amendments will affect many different areas of law outside the strict purview of insolvency.
The following is a brief overview of highlights of some of these amendments as currently enacted by C-47 (without taking into account any proposed amending legislation which has yet to be formally introduced in Parliament).
Wage Earner Protection Program (WEPP)
An employee whose employment is terminated and who is owed wages earned in the six months immediately preceding a bankruptcy or receivership will be entitled to file a claim with the federal government for compensation towards such outstanding amount to a maximum of $3,000 less ordinary payroll deductions. WEPP payments cannot be assigned or pledged as security. The term “wages” includes the broad phrase “compensation for service rendered,” which would include vacation pay entitlements but not termination and severance pay amounts arising purely as a result of the termination of the employee’s employment. Employees who are employed for less than or equal to three months or who were an officer or director of the employer or who had a “controlling interest” in the employer’s business or who occupied a “managerial position” are not entitled to receive a WEPP payment.
Collective Agreements
It will not be possible to disclaim or assign a collective bargaining agreement (CBA) in the context of a proposal under the Bankruptcy and Insolvency Act (BIA) or restructuring proceedings under the Companies’ Creditors Arrangement Act (CCAA) and the CBA shall explicitly continue in force. If the insolvent employer cannot obtain the union’s agreement to amend the CBA, then the insolvent employer can apply on five days’ notice to the court for permission to give a notice to bargain to the union. If the parties agree to amend the collective agreement, then the union will have an unsecured claim for an amount equal to the value of the concessions granted by the union.
Priority of Wage Claims
An employee’s claim for unpaid wages, salaries, commissions or “compensation” for services rendered during the six months immediately before the bankruptcy or receivership is secured to a maximum of $2,000 on the current assets of the bankrupt or insolvent employer on that date (and an additional $1,000 maximum for the disbursements of a travelling salesperson). This secured claim ranks above every other claim, right, charge or security against the debtor’s current assets, regardless of when that other claim, right, charge or security arose, but does not rank ahead of the 30-day goods rights of suppliers and the special priority rights afforded to farmers/fishermen/acquaculturists.
Pension Plan Priorities
Amounts in respect of employee contributions collected but not remitted and regular required employer contributions due but not paid will now be a secured claim over all of the assets of a bankrupt or insolvent person in BIA receivership or proposal proceedings. Special payment obligations regarding past solvency or going concern deficiencies and any existing pension plan deficit amount are not included in the amounts to be given secured status. This secured claim ranks above every other claim, right, charge or security against the debtor’s current assets, regardless of when that other claim, right, charge or security arose, but does not rank ahead of: (i) the 30-day goods rights of suppliers; (ii) the special priority rights afforded to farmers/fishermen/acquaculturists; (iii) source deduction deemed trust amounts; and (iv) the wage claim security referred to above.
Executory Contracts
Specific authority will be afforded to debtors under either a BIA proposal or CCAA restructuring proceeding to be able to disclaim any agreement to which the debtor was a party on the date such proceedings were commenced (other than eligible financial contracts, commercial real property leases, collective agreements and financing agreements under which the debtor is the borrower) provided that 30 days’ notice has been given to the other contracting parties. A contracting party may object but a court may not prevent the disclaimer if the court is satisfied that a viable proposal or plan could not be made without the disclaimer of the agreement and all other agreements that the debtor has disclaimed. If an agreement is disclaimed, every other party to the agreement is deemed to have a claim for damages as an unsecured creditor.
Intellectual Property Licences
While a debtor who is a licensor may disclaim such licences, the disclaimer does not affect the licensee’s right to use the intellectual property so long as the licensee continues to perform its obligations in relation to the use of the intellectual property.
Assignments of Contracts
On application to the court with notice to all parties to the agreement, an insolvent person or trustee will be entitled to seek an order assigning the rights and obligations of the insolvent person under any agreement (other than an eligible financial contract, commercial real property lease — in a BIA proceeding only — where the debtor is the tenant, collective agreement, and agreements which are not assignable by reason of their nature) to any person who has agreed to the assignment. The court may not make the assignment under a BIA proceeding if the court is satisfied that the insolvent person is in default under the agreement, and may not make the assignment under a CCAA proceeding unless the court is satisfied that all financial defaults in relation to the agreement will be remedied.
DIP Financing
C-47 provides statutory authority for the court ordered granting of security over the insolvent person’s property in connection with debtor-in-possession (DIP) financing. Any such security granted would rank in priority over the claims of any existing secured creditors of the debtor. Only the debtor may bring an application for an order authorizing DIP financing. If obtained on the initial order without notice, the DIP financing and corresponding court ordered charge will only be effective for the initial 30-day stay period. For DIP financing and the corresponding charge to be effective for longer than this initial 30-day period, the order must be sought after the initial application and on notice to all secured creditors likely to be affected by the security or charge.
Asset Sales
An insolvent person may not sell or otherwise dispose of assets outside of the ordinary course of business unless authorized to do so by a court. C-47 provides that an application for sale approval must be made on notice to all secured creditors who are likely to be affected by the proposed sale or disposal. In approving a sale, the court may also order that the assets be sold free and clear of any security, charge or other restriction provided that it also orders that the proceeds of realization shall be subject to a security, charge or other restriction in favour of the creditors whose security, charges or restrictions was so affected.
If the proposed sale is to a related party, the court may approve the sale only if the court is also satisfied that good faith efforts were made to sell to an arm’s length party and the consideration to be received is superior to that which would be received under all other offers actually received.
Corporate Governance
The court will be entitled, on the application of any person interested in the matter, to make an order removing any director of an insolvent company involved in proceedings under the BIA or the CCAA if the court is satisfied that the director is unreasonably impairing or is likely to unreasonably impair the possibility of a viable proposal or plan being made or is likely to act inappropriately as a director in the circumstances. The court may also fill any vacancy created by ordering the removal of any director.
Equity Interests
Under a BIA proceeding, a creditor is not entitled to claim a dividend in respect of a claim arising from the rescission of a purchase or sale of a share or unit of the bankrupt or in respect of a claim for damages arising from the purchase or sale of a share or unit of the bankrupt until all claims of the other creditors have been satisfied. In a CCAA proceeding, creditors having a claim arising from the rescission of a purchase or sale of a share or unit of the debtor or in respect of a claim for damages arising from the purchase or sale of a share or unit of the debtor, must be in the same class of creditors in relation to those claims and may not, as members of that class, vote at the creditors’ meeting called to vote on the plan or arrangement or compromise.
Cross-Border Insolvencies
A more expansive approach based on the Model Law on Cross-Border Insolvencies drafted by UNCITRAL, and akin to the new U.S. Chapter 15 provisions, has now been adopted into both the BIA and CCAA. Under these provisions, a foreign representative may apply to the court for recognition of a foreign proceeding on a streamlined evidentiary basis involving largely the submission of certified copies of orders or instruments creating the foreign proceeding and defining the authority of the foreign representative.
* Robin B. Schwill, Partner, Osler, Hoskin & Harcourt LLP, (416) 862-4208, rschwill@osler.com. Robin is the Chair of the Insolvency Law Section.
Bill 18 Heralds Changes to Vicarious Liability for Leased and Rented Vehicles in Ontario Randy Bundus*
This article originally appeared in the Insurance Law Section Newsletter, Volume
17, No. 2, December 2006.
The law respecting the vicarious liability of lessors and lessees for the negligence of the drivers of leased or rented vehicles in Ontario was changed on March 1, 2006. The changes created some significant gaps in coverage that are addressed by changes that have been made to the wording of a number of automobile policy forms. These wording changes will come into effect on January 1, 2007.
The law was changed by Bill 18, An Act to Implement 2005 Budget Measures and Amend Various Acts. Among other things, Bill 18 amended the Compulsory Automobile Insurance Act, the Highway Traffic Act, and the Insurance Act. Bill 18 was introduced into the Legislature in the late fall of 2005. The provisions respecting the amendments to these three statutes were proclaimed into effect on March 1, 2006.
Among the more significant amendments made to the Highway Traffic Act were the provisions creating a new vicarious liability on the lessee or renter of an automobile for the actions of a person who, with their consent, operated that automobile. Furthermore, amendments to the Insurance Act limit the lessor’s vicarious liability, but this limitation applies only in respect of damages for bodily injury or death. There is no such limit in respect of damages for property damage. The limit of the lessor’s vicarious liability in respect of damages for bodily injury or death is described in Section 267.12(a) of the Insurance Act. The amount is determined by taking the maximum of (1) $1 million, (2) the amount of third party liability insurance required by law to be carried in respect of the motor vehicle and (3) the amount determined by regulations, and subtracting the amounts that are recovered under the liability provisions of motor vehicle liability policies issued to persons other than the lessor in respect of the same incident.
The provisions of the Insurance Act respecting the order in which policies respond to claims arising out of incidents involving leased or rented vehicles has been changed. Previously, the policy insuring the owner was highest in priority and the policy insuring the driver for “drive other auto” coverage was excess. Under Bill 18, insurance available under the motor vehicle liability policy for which the lessee or renter is an insured named in the contract (“lessee’s policy”) is highest in priority; insurance providing the driver with “drive other auto coverage” (“driver’s policy”) would pay in excess of the lessee’s policy; and insurance under which the owner of the automobile is entitled to indemnity (“lessor’s policy”) is excess to the driver’s policy and the lessee’s policy.
It was determined, following an examination of the existing policy wordings, that coverage would be available for the new vicarious liability of lessee’s for automobiles leased under long-term leases, i.e. leases for periods greater than 30 days. The OAP No. 1, to which is attached the OPCF No. 5, Permission to Rent or Lease Automobiles and Extending Coverage to the Specified Lessee(s), insures the lessor, as owner, and permits the lessor to lease the automobile to a lessee. It also insures the lessee to the same extent as the owner, for the lessee’s liability arising from the use or operation of the leased automobile. However, the OPCF No. 5 will be amended, effective January 1, 2007, to deal with the argument that the amount payable under this policy would not reduce the limit of the lessor’s vicarious liability in accordance with Section 267.12(1)(a) of the Insurance Act. The OPCF No. 5 will be revised by the addition of the following sentence: “For the purposes of Section 267.12(1)(a) of the Insurance Act (Ontario) the policy shall be deemed to have been issued only to the lessee of the automobile, and not to the lessor”. Each of the lessor, lessee and driver of an automobile leased under a long-term lease is therefore protected for the new liabilities created by Bill 18.
A gap in coverage was recognized with respect to the new vicarious liability of a renter of an automobile that is rented for a period of 30 days or less. These automobiles are required to be registered by the rental company. They are insured under a standard owner’s policy, OAP No. 1, issued to the rental company, to which is attached the OPCF No. 5C, Permission to Rent or Lease (Unspecified Lessee – Short-term Lease Only). The liability insurance under such policies did not respond to the new vicarious liability imposed upon renters.
An IBC Committee worked with FSCO to find a way to address the absence of coverage for the new vicarious liability of renters. It was determined that this gap can be filled by amending the OAP No. 1, and the OPCF No. 27, and OPCF No. 2. The OAP No. 1 provides “drive other auto” coverage to the named insured and their spouse when they drive certain vehicles in certain circumstances. For example, the OAP No. 1 does not provide “drive other auto” coverage when the automobile being driven has a gross vehicle weight greater than 4,500 kilograms. The OPCF No. 2 and OPCF No. 27 endorsements provide “drive other auto” coverage to persons listed in those endorsements in the same circumstances under which the “drive other auto” coverage is provided under the OAP No. 1. Amendments to these two endorsements and to the OAP No. 1, which will come into effect on January 1, 2007, provide the persons insured under these forms for “drive other auto” coverage with protection against their new vicarious liability when they rent the types of automobiles for which they would have “drive other auto” coverage. IBC has encouraged its members to read the changes into existing policies, back to March 1, 2006, the date the new approach to leased and rented automobiles came into effect.
To deal with renters of vehicles and drivers of rented vehicles who have no other insurance, the OPCF No. 5C endorsement has been amended to provide the driver and renter with coverage under the rented company’s policy for their liability for incidents involving the rented automobile. The amount of coverage available to the driver and the renter under the rental company’s policy is reduced by the amount of insurance these persons have available through their own insurance policies. It can generally be assumed that nothing will be recoverable under the rental company’s insurance policy in respect of the driver’s or renter’s liability, if they have access to coverage under other auto policies.
Work is currently underway to develop endorsements and/or amendments to the Garage Policy and to the Non-Owned Auto Policy to make the coverage under these policies consistent with the new approach taken under the OAP No. 1 to cover the vicarious liability of a lessee in respect of a leased or rented vehicle. After FSCO approves these wording changes, they will be published on FSCO’s website www.fsco.gov.on.ca.
* Randy Bundus is Vice President and General Counsel at the Insurance Bureau of Canada, (416) 362-2031 ext 4904, rbundus@ibc.ca. Randy is a Member-At-Large of the Insurance Law Section.
How Trade and Investment Treaties Impact Our Clients (And What They Can Do About It) John W. Boscariol*
Is a regulatory barrier impeding your client’s access to an export market? Does a government measure discriminate against or otherwise harm your client’s operations? In recent years, there have been significant developments in international trade and investment protection law that offer potential remedies for regulatory measures that have a negative impact on business. International trade and investment agreements, including the North American Free Trade Agreement (NAFTA),1 the agreements of the World Trade Organization (WTO),2 and other regional and bilateral agreements, are having a growing influence on Canadian law and policy-making, and are creating opportunities for Canadian business. This is due, in large part, to the widening scope of these agreements, and significant improvements in the litigation and settlement of disputes that arise in respect of matters covered by them.
Most developing and industrialized countries are subject to obligations arising from these agreements, because they are WTO members or parties to regional free trade agreements such as NAFTA or bilateral investment protection agreements. These obligations apply to government policies, administrative and legislative measures, and even judicial action. They apply not only to national governments, but also in many cases to measures implemented at the provincial, state and other sub-federal levels.
Progression of International Trade Law
Over the last five decades, international trade law, primarily through the General Agreement on Tariffs and Trade (GATT),3 has achieved a measure of success in reducing tariffs and restricting the use of many non-tariff barriers to trade on imported goods. More recently, however, the scope of trade law has expanded to address other measures that inhibit the flow of world trade and investment. These efforts include liberalizing trade in services, enhancing the protection of intellectual property, regulating governments’ procurement of goods and services, restricting the use of technical barriers to trade and other measures that improperly obstruct international trade, and providing protection for foreign direct investment.
Obligations regarding the protection of foreign direct investment, which until recently could only be found in BITs between developed and developing countries (and which were expected to be enforced only by the former against the latter), have found their way into international trade agreements between industrialized countries – the most notable example being Chapter 11 of NAFTA. The multilateral liberalization of trade in services under the General Agreement on Trade in Services4 of the WTO has also led to the imposition of certain obligations regarding the treatment of investors as between industrialized countries.
Along with the expanding coverage of international trade and investment obligations, there has been a strengthening of the dispute settlement and enforcement mechanisms contained in these treaties. Dispute settlement under today’s trade agreements is by no mean perfect, but there is little doubt that it is a significant improvement over the old GATT system.
Obligations that arise under NAFTA and the agreements of the WTO are “binding” on countries that are party to those agreements in the sense that one country’s failure to comply with them will permit other countries to impose sanctions, most often by suspending benefits and concessions accorded to the offending country under the particular trade agreement at issue. This can include the imposition of punitive surtaxes on imports from offending countries. Generally speaking, these trade obligations are enforced on a government-to-government basis: complaints are launched and disputes are litigated by the governments of the countries that implement or are affected by the measures at issue, and not by private entities that could be directly affected by the offending measures.5 This is a major distinction from the remedies available under investment protection agreements.
Emergence of Foreign Investment Protection
There exist strong incentives for both capital importing and capital exporting nations to conclude foreign investment protection agreements – referred to as bilateral investment treaties in the United States and in many international circles, and as foreign investment protection and promotion agreements (FIPAs) in Canada. Most host governments do so to create an image of stability, and through the guarantees offered in these agreements, to attract much needed direct foreign investment in their countries. Governments of capital exporting countries see obvious benefits arising under these agreements for their businesses operating in foreign jurisdictions.
These treaties offer foreign investors various substantive protections, the core of which typically include:
(i) non-discriminatory treatment: the foreign investor and the investment must be accorded treatment no less favourable than that accorded to domestic investors (national treatment) and investors from any other country (most-favoured-nation treatment or MFN treatment);
(ii) fair and equitable treatment: the foreign investment must be accorded fair and equitable treatment in accordance with international law, including full protection and security; and
(iii) compensation for expropriation: expropriation, or measures equivalent to expropriation, must be for a public purpose, non-discriminatory, in accordance with due process of law and accompanied by payment of prompt, adequate and effective compensation.
Traditionally, when their operations were subject to discriminatory measures, unfair treatment or expropriation, foreign investors had only two means of addressing these problems with host governments: seek a diplomatic resolution of the issue through the investor’s government and the government of the host state, or take action in the domestic court systems of the host state. However, achieving an effective diplomatic resolution of these matters requires strong support from the investor’s government, and the investor has little, if any, control over that process. At the same time, the investor may view the domestic court systems, for one reason or another, as being inadequate, slow or biased towards the host government.
Over the last decade or so, international investment agreements have quickly emerged as a third option for businesses seeking protection of their investments in foreign jurisdictions. These investment agreements are an attractive alternative since they enable an investor to seek damages from the foreign government by litigating its claim before an independent arbitral tribunal. The private investor-state dispute settlement mechanism represents a significant and growing exception to the general principle of government-to-government enforcement of obligations under international treaties. This mechanism exits in NAFTA Chapter 11 and a number of bilateral investment agreements that Canada has negotiated with developing countries.
The growth in these agreements has been extraordinary – at the end of 2005, approximately 2,500 investment agreements had been concluded worldwide, over six times the number that existed in 1990.6 This development is a significant one as these treaties accord control of these disputes to foreign investors and independent arbitral panels, and not the investor’s home governments nor the local courts in host jurisdictions. It comes as no surprise, therefore, that these treaties have generated significant controversy, with some raising questions about their ultimate benefit to developing countries.7 Even governments of industrialized countries can often be the targets of investor claims, as is evident from the number of cases that have been filed against Canada and the United States under the private investor dispute mechanism in NAFTA Chapter 11.
The Canadian Experience
Canada, in addition to being a WTO member and party to NAFTA, is also a party to regional free trade agreements with Chile, Israel and Costa Rica, and to BITs with over 20 developing countries. Almost all of these agreements have come into force within the last 10 to 15 years. A complete listing of these agreements, as well as Canada’s ongoing negotiations for additional trade and investment treaties is set out in the tables below.
To date, at the WTO alone, Canada has brought 28 cases against other member countries who have taken measures alleged to violate their trade obligations. Canada has been the target of 15 WTO complaints by other countries and, as a result, has had to terminate or amend offending measures across a wide range of sectors, including automotive products, magazine publishing, pharmaceuticals, dairy products and regional aircraft.
So far, Canada has been sued by investors 13 times under NAFTA’s investment chapter, the template for most of Canada’s BITs. Investors have been successful in using this mechanism to challenge Canadian measures regarding the export of PCBs, the importation and inter-provincial sale of gasoline additives, and the allocation of export quotas.
Impact on Our Clients’ Strategic Decision-Making Process
As many companies already recognize the significance of international trade and investment agreements to their business operations, often the next challenge is to ensure our clients’ business decisions take into account the impact and opportunities these agreements provide. From the perspective of the corporate organization, the benefits of staying abreast of developments in these areas are at least threefold.
First, these agreements assist in identifying market opportunities. For example, an exporter may become aware of, and seek to improve its access to, new geographic or product markets arising as a result of continuing trade negotiations under existing agreements, the negotiation of new free trade agreements, or the accession of new members to existing trading arrangements, such as China’s recent accession to the WTO. More than ever before, governments are encouraging participation and input from interested parties in these processes.
Second, these agreements can provide effective tools to deal with market access or competitive issues facing the organization. An importer encountering difficulties in accessing the Canadian market may look to Canada’s obligations under international trade and investment agreements as one of the available remedies for addressing the situation. For decades, Japanese and European automakers were at a competitive disadvantage to their North American counterparts when importing into the Canadian market. They now benefit from non-discriminatory access to the Canadian market as a result of their governments’ successful challenges of Canada’s Auto Pact at the WTO.8 Foreign investors may also rely on bilateral investment treaties or the investment dispute provisions of Chapter 11 of NAFTA to challenge discriminatory or expropriatory measures undertaken by host governments.
Third, companies need to be aware of and plan for the potential negative impact on their business of trade agreements and the dispute resolution process – as is the case when a measure that has protected a domestic producer’s market must be removed (either through negotiations or as required by a trade agreement ruling), or when importers find themselves in the crossfire of a trade dispute, the result of which is the imposition of sanctions in the form of significant surtaxes on certain imported products. A recent example of the latter is Canada’s imposition of a 15 percent retaliatory surtax on imports of certain products from the United States in response to the U.S. failure to repeal its WTO-inconsistent Byrd Amendment.9
As the significance of trade and investment agreements grow, our clients need to have mechanisms in place to ensure that this information is fed into their strategic decision-making process in their business planning systems. These internal decision-making systems should incorporate all trade and investment agreements, including NAFTA, the agreements of the WTO, Canada’s regional trade agreements, as well as agreements currently being negotiated.
Overview of Canada’s International Trade and Investment Agreements
Free Trade Agreements – In Force
Agreement
Date in Force
Canada-Costa Rica Free Trade Agreement (CCRFTA)
November 1, 2002
Canada-Israel Free Trade Agreement (CIFTA)
January 1, 1997
Canada-Chile Free Trade Agreement (CCFTA)
July 7, 1997
Agreements of the World Trade Organization (WTO)
January 1, 1995
North American Free Trade Agreement (NAFTA)
January 1994
Canada-US Free Trade Agreement (CUSFTA)
January 1, 1989
Free Trade Agreements – Negotiations and Discussions
Country/Organization
Start of Negotiations
Status of Negotiations
Republic of Korea (South Korea)
November 19, 2004
Sixth round of negotiations in June 2006; no deadline for their conclusion has been set.
Dominican Republic
November 2002
Domestic consultation in 2002; discussion to set agenda; most recent meeting, July 2003; no future meetings are scheduled.
Andean Countries (Bolivia, Columbia, Ecuador, Peru, Venezuela)
August 2002
Most recent round of exploratory discussions held in May 2003; additional sessions to be held in future.
Caribbean Community and Common Market (CARICOM)
January 19, 2001
Domestic consultation in 2001; four meetings to identify issues for future negotiations; most recent meeting March 2005; no future dates.
Singapore
June 5, 2000
Multiple rounds of negotiations in 2002-2003; last negotiation November 3, 2003; no future negotiations are scheduled.
Central America Four (CA4) – El Salvador, Guatemala, Honduras and Nicaragua.
September 28, 2000
Informal meetings in May 2006, after ten rounds of negotiations could not yield an agreement; another informal meeting took place in July 2006.
European Free Trade Association (Iceland, Norway, Switzerland and Liechtenstein)
October 9, 1998
Last negotiations in May 2000; framework for a deal was reached on most issues; formal negotiation took place in November 2006; dates for next negotiating session not set.
Free Trade Area of the Americas (FTAA)
December 1994
Negotiations in stalemate since late 2005; Brazil and other Latin American countries at odds with United States over domestic farm subsidies; no date set for resumption of talks.
Canada’s Bilateral Investment Treaties
Country
Date
Status
Poland
November 22, 1990
In force (OECD-based).
USSR (Russia is continuing state)
June 27, 1991
In force (OECD-based).
Czezh & Slovak Federal Republic (currently binds both the Czech Republic and the Slovak Republic)
March 9, 1992
In force (OECD-based).
Hungary
November 21,1993
In force (OECD-based).
Ukraine
July 24, 1995
In force (OECD-based).
Latvia
July 27, 1995
In force (OECD-based).
South Africa
November 27, 1995
Signed but not yet in force.
Trinidad and Tobago
July 8, 1996
In force (OECD-based).
Philippines
November 13, 1996
In force (OECD-based).
Barbados
January 17, 1997
In force (OECD-based).
Romania
February 11, 1997
In force (OECD-based).
Ecuador
June 6, 1997
In force (OECD-based).
Egypt
November 3, 1997
In force (NAFTA-based).
Venezuela
January 28, 1998
In force (NAFTA-based).
Panama
February 13, 1998
In force (NAFTA-based).
Thailand
September 24, 1998
In force (NAFTA-based).
Armenia
March 29, 1999
In force (NAFTA-based).
El Salvador
May 31, 1999
Signed but not yet in force.
Uruguay
June 2, 1999
In force (NAFTA-based).
Lebanon
June 19, 1999
In force (NAFTA-based).
Costa Rica
September 29, 1999
In force (NAFTA-based).
Croatia
January 30, 2001
In force (NAFTA-based).
Peru
November 14, 2006
Signed but not yet in force.
India
N/A
Negotiations re-launched in 2004; seven rounds held with latest in August 2006; well-advanced text.
China
N/A
Negotiations re-launched in 2004, four rounds held with latest in September 2006.
Trade and Investment Cooperation Agreements (TICA)
TICA Partner
Date Signed
Southern Cone Common Market (MERCOSUR) – Brazil, Argentina, Paraguay and Uruguay.
June 16, 1998
Republic of South Africa
September 24, 1998
Andean Community(Bolivia, Colombia, Ecuador, Peru and Venezuela)
May 31, 1999
Trade and Economic Cooperation Agreements (TECA)
TECA Partner
Date Signed
The Kingdom of Norway
December 3, 1997
Confederation of Switzerland
December 9, 1997
Australia
November 15, 1995
Republic of Iceland
March 24, 1998
Memorandum of Understanding on Trade and Investment (MOUTI)
MOUTI Partner
Date Signed
Central America (Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua)
March 18, 1998
* John W. Boscariol, McCarthy Tétrault LLP, (416) 601-7835, jboscari@mccarthy.ca. John is the Co-Chair of the International Law Section.
1 The North American Free Trade Agreement entered into between the Government of Canada, the Government of the United Mexican States, and the Government of the United States of America, signed on December 17, 1992. 2 The Agreement Establishing the World Trade Organization, signed at Marrakesh on April 15, 1994. 3 The General Agreement on Tariffs and Trade, opened for signature 30 October 1947, 55 UNTS 187 (entered into force 29 July 1948). 4 The General Agreement on Trade in Services is set out in Annex 1B to the Agreement Establishing the World Trade Organization, signed at Marrakesh on April 15, 1994. 5 It should be noted that, although a private entity may not challenge a measure before the WTO, formal mechanisms exist in the domestic laws of the United States and the European Union that facilitate the bringing of cases under international trade agreements at the behest of commercial interests in those territories. Under Section 301 of the U.S. Trade Act of 1974, as amended (19 USC Section 2411), a petition may be filed with the U.S. Trade Representative requesting an investigation of a foreign country’s practices and their consistency with trade obligations. Under the European Union’s Trade Barrier Regulations (Council Regulation (EC) No 3286/94 of 22 December 1994), European firms can formally petition the European Commission to investigate other countries’ compliance with international trade agreements. Because no such mechanism exists under Canadian law, Canadian exporters and investors encountering measures that violate WTO or other trade agreement obligations must informally lobby Canada’s Department of Foreign Affairs and International Trade to bring a case under the auspices of the specific agreement at issue. 6 As of the end of 2005, 2,495 bilateral investment treaties had been concluded around the world: United Nations Conference on Trade and Development, Developments in International Investment Agreements in 2005, IIA Monitor No. 2 (2006), UNCTAD/WEB/ITE/IIA/2006/7 (New York: United Nations, 2003). During 2005 alone, 70 bilateral investment treaties were concluded worldwide. 7 Some have noted that although developing countries have flocked to sign bilateral investment treaties in recent years, such agreements have had a questionable impact on the welfare of developing countries, that would arguably be better off requiring potential investors to commit their investments without a binding bilateral investment treaty. See Andrew T. Guzman, “Why LDCs Sign Treaties That Hurt Them: Explaining the Popularity of Bilateral Investment Treaties” (1998) Vol. 38, No. 4 Virginia Journal of International Law 639-88. 8 A WTO Panel and the WTO’s Appellate Body determined that the duty-free treatment accorded by Canada to imports of automobiles, buses and specified commercial vehicles by certain North American manufacturers that satisfied production and value-added requirements was inconsistent with Canada’s WTO commitments. See Canada – Certain Measures Affecting the Automotive Industry (WT/DS139,142/AB/R) Panel Report February 11, 2000, Appellate Body Report adopted June 19, 2000. Effective February 18, 2001, the legislative provisions constituting Canada’s Auto Pact were repealed. See Order Repealing the Motor Vehicles Tariff Order, 1998 and Amending the Schedule to the Customs Tariff, SOR/2001-81 (15 February, 2001). 9 The U.S. Byrd Amendment, which permits U.S. producers to receive anti-dumping and countervailing duties paid upon importation of competitive product, was found by the WTO to be inconsistent with U.S. trade obligations. The United States failed to amend its legislation in accordance with the WTO recommendations, and as a result, Canada was permitted to retaliate with the imposition of a 15 percent surtax on U.S. live swine, cigarettes, oysters and certain specialty fish, starting May 1, 2005. See Department of Foreign Affairs International Trade News Release No. 56, “Byrd Amendment: Canada to Retaliate Against United States”, March 31, 2005. This retaliatory surtax expired on April 30, 2006, and Canada has not yet renewed it. The United States has since agreed to terminate the Byrd programs in 2007.
Ontario Arbitration Board Rules on Random Drug Testing Using Oral Fluid Testing Ailsa Jane Wiggins*
On January 1, 1992, Imperial Oil Limited (“Imperial”) introduced a comprehensive alcohol and drug program which included random alcohol and drug testing of safety sensitive employees. Entrop v. Imperial Oil Limited1 is one of the leading human rights cases in Canada on alcohol and drug testing. The Ontario Court of Appeal accepted that random alcohol testing was a bona fide occupational requirement for employees in safety-sensitive positions, provided Imperial accommodated employees who tested positive, to the point of undue hardship. The Court found that the Board of Inquiry, whose decisions were the subject of the appeal, had no jurisdiction to inquire into the drug testing provisions of Imperial’s policy, and set those findings aside. However, Mr. Justice Laskin decided to address the merits of the various aspects of Imperial’s policy on drug testing in any event. He found that random drug testing suffered from a fundamental flaw, a positive drug test using urinalysis shows only past drug use, not impairment. While the findings regarding drug testing are obiter dicta, the case remains important in relation to drug testing.
Following the decision in Entrop, Imperial made several amendments to its policy, including the temporary suspension of random drug testing pending an investigation into alternative testing technologies which might meet the concerns raised by the Court of Appeal in obiter. As a result of that investigation, Imperial re-introduced random drug testing on July 1, 2003 using oral fluid drug testing. On October 15, 2003, the union at Imperial’s Nanticoke, Ontario refinery filed a policy grievance challenging various aspects of Imperial’s alcohol and drug policy. Eight days of hearings were held between late 2004 and July 2005 by a board of arbitration chaired by Michael Picher. A preliminary award released on February 20, 2005 narrowed the issues in dispute.2 The most important issue before the Board was the legality of random drug testing. Imperial argued that since the oral fluid drug test proved impairment, it conformed to the Court of Appeal’s decision in Entrop and was therefore permissible. Picher distinguished Entrop on the basis that the Court had only considered the validity of random drug testing in the context of what was permissible under the Human Rights Code, not what was permissible under a collective agreement. The Board ruled that random drug testing of safety sensitive employees was not permissible even though the testing technology used proved current impairment.3 Picher reviewed the arbitral jurisprudence and concluded that the “Canadian model” for alcohol and drug testing in safety sensitive workplaces governed by collective agreements permits post-incident and reasonable cause testing, and random testing only as part of an agreed rehabilitative program.
In assessing the reasonableness of alcohol and drug testing policies in unionized workplaces, arbitrators apply the balancing of interests approach; the company’s concern for the well-being of its employees and the safety of its own operations in a manner most consistent with its obligations to the public, and the union’s interest in defending the privacy and dignity of the individual.4 The balancing of interests approach favoured by Picher does allow random drug testing in “some extreme circumstances. If for example, an employer could marshal evidence which compellingly demonstrates an out of control drug culture taking hold in a safety sensitive workplace, such a measure might well be shown to be necessary for a time to ensure workplace safety. That might well constitute a form of “for cause” justification”.5
In a forceful dissent, Roy C. Filion, Imperial’s nominee, pointed out that Imperial’s use of the oral fluid testing technology has not been the subject of a challenge under the Human Rights Code, presumably because it is acknowledged that a random drug testing regime which detects actual impairment complies with the Code. He stated that: “It is difficult to conceive how a drug testing process which complies with the Ontario Human Rights Code can, at the same time, violate the “respect and dignity” clause in the Collective Agreement.”
There is no doubt that this decision will be a disappointment to employers with unionized workplaces, who believe that random drug testing is a necessary safety measure, and that it should be justifiable in unionized and non-unionized workplaces if the test used shows only current impairment. If it is necessary to show an “out of control drug culture” to justify random testing in a unionized workplace, employers may well ask what evidence will be required. Will evidence of on the job drug use be enough, or will employers have to wait until accidents occur before they will be allowed to introduce random testing in unionized workplaces?
On January 22, 2007, Imperial Oil Limited filed a notice of application for judicial review. Stay tuned!
* Ailsa Jane Wiggins, Special Counsel, Gowling Lafleur Henderson LLP, (416) 369-7260, ailsa.wiggins@gowlings.com. Ailsa is a Member-At-Large of the Labour Relations Section.
1 50 O.R. (3d) 18 (C.A. 2000). 2 Imperial Oil and Communications, Energy & Paperworkers Union of Canada, Local 900, [2005] O.L.A.A. No. 213. 3 Imperial Oil and Communications, Energy & Paperworkers Union of Canada, Local 900 (11 December 2006), Ontario (Board of Arbitration). 4CAW – Canada and the Canadian National Railway Company, (2000) 95 L.A.C. (4th) 341 at 366 per Arbitrator Picher. 5 Supra, note 3, at para. 127.
Municipal Planning Reform and the Agency Cluster Pilot Project Colin Grant and Michael Stewart*
In addition to the many legislative changes to the municipal world that arrived in 2006, the OBA Municipal Law Section has taken great interest in the Ministry of Government Services’ ongoing “Agency Cluster Pilot Project.”
What is the Agency Cluster Pilot Project?
The Ministry of Government Services has commenced a cluster review of five tribunals that share common stakeholders and have related mandates. Called the “Agency Cluster Pilot Project”, the review is meant to ensure administrative justice agencies deliver high-quality public services that are effective, efficient and accessible. The five agencies are tribunals that hear appeals of decisions on municipal, environmental and land use related matters, as follows:
Assessment Review Board (ARB): Under the Ministry of the Attorney General, hears property assessment complaints related to value and classification, and hears municipal property tax appeals
Board of Negotiation (BON): Under the Ministry of the Attorney General, negotiates compensation settlements in expropriation cases
Conservation Review Board (CRB): Under the Ministry of Culture, reviews municipal and provincial decisions on designations of cultural heritage properties and provincial decisions on archaeological licences
Environmental Review Tribunal (ERT): Under the Ministry of Environment, adjudicates applications and appeals under various environmental and planning statutes
Ontario Municipal Board (OMB): Under the Ministry of the Attorney General, hears applications and appeals on land-use disputes and other municipal matters
The Ministry’s stated objectives for the Agency Cluster Pilot Project are to:
Provide a modern, accessible, efficient and effective tribunal system for municipal, environment and land-planning adjudication
Achieve administrative efficiencies and enhance consistency in tribunal practices, procedures and decision-making
Enable the government and the tribunal system to respond quickly and effectively to shifts in demand and emerging policy issues
The Ministry of Government Services has appointed Kevin Whitaker, Vice-Chair of the Ontario Labour Relations Board, to head up the Agency Cluster Pilot Project as Facilitator.
Municipal Law Section’s Submissions to the Agency Cluster Pilot Project
The Municipal Law Section has submitted to the Facilitator that the primary objective of the Agency Cluster Pilot Project must be to ensure that all of the tribunals involved in this proposal have the resources necessary to fulfill their important statutory roles. In particular, the OMB plays a central role in adjudicating disputes that directly impact the communities we live in across Ontario.
Recent Legislative Reforms
With the introduction of the new Provincial Policy Statement, the Greenbelt Act, the Places to Grow Act, as well as the recent significant amendments to the Planning Act (through “Bill 51”), matters before the OMB have become ever more complex. Under the provincial planning and growth reforms, the OMB will continue to play a critical role in Ontario’s land-use planning process. For example, some provincial government reforms have conferred new responsibilities on the OMB, including its appellate functions under the amended Ontario Heritage Act and its role as the final arbiter of architectural design matters under the site plan provisions of the amended Planning Act and the new City of Toronto Act.
The Role of the OMB
Approximately one hundred public statutes confer jurisdiction on the OMB. The decisions of the OMB are far-reaching and have a direct impact on the quality of life of citizens living in urban, rural and northern communities. Its decisions can, for example, determine issues of:
Public infrastructure projects and finance
the location and type of public infrastructure, including roads, bridges and community centres, and impact future municipal waste, waste water and water requirements;
municipal development charges levied on new developments;
the taking of private land for public uses;
Protection of the natural environment and heritage
the protection of natural areas;
the protection of agricultural lands;
the preservation of heritage structures;
Land use planning
the location, intensity and type of urban growth;
the efficient and safe integration of land uses in communities, including residential, commercial, and industrial uses, often with competing requirements for intensities of use, noise, odour and other emissions;
the redevelopment of vacant industrial lands (Brownfields), and the physical revitalization of downtown neighbourhoods.
The OMB is unique in the scope of its power and its decision-making authority. There is no tribunal in Ontario that has a similarly broad jurisdiction and responsibility as the OMB, and there is no comparable tribunal or agency in any other province.
Municipal Law Section Recommendations
The oldest tribunal in the province, the OMB has a demonstrated tradition of excellence. But there is no point in the provincial government making changes to “service delivery models” if the OMB will lack modern resources necessary to effectively perform its functions, and attract and retain qualified members. To ensure that the OMB succeeds in fulfilling its important public role, the OBA Municipal Law Section has made several recommendations to the Agency Cluster Pilot Project Facilitator, including:
The OMB should have the resources to implement technological improvements to its administrative and hearing processes, likely in conjunction with the other tribunals subject to the Agency Cluster Pilot Project. Achieving this goal may require the consideration of new funding mechanisms for the Board. It seems incongruous that the self-funded Ontario Energy Board, in direct contrast to the OMB, has significant staff resources at its disposal, and has the ability to disseminate hearing transcripts and other information to members of the public throughout the hearing process. The OMB has no such tools at its disposal, even though the OMB has as great (if not greater in some cases) impact on the quality of life of Ontario residents, with hearings often generating significant public interest.
The level of compensation and benefits to OMB members should be increased. The August 2005 submission of the Municipal Law Section to the Ministry of Municipal Affairs addressed this issue in greater detail.
It is fundamental that OMB members be free to make independent decisions on all matters that come before the Board. For this reason, the current practice of appointing members for terms of 3 to 6 years should be changed. For example, initial appointments to the Board should be increased, and the renewal process should allow for some appointments to exceed ten years, to assist the Board in attracting and retaining excellence and experience.
OBA Municipal Law Section
Are you interested in these issues? The Municipal Law Section of the OBA represents close to 350 private sector and public service lawyers, who represent various stakeholders in land use planning, environmental and municipal matters in Ontario. Members regularly practice before the Ontario Municipal Board, the Assessment Review Board, the Board of Negotiation, the Conservation Review Board, and the Environmental Review Tribunal, as well as other bodies, committees and agencies.
* Colin Grant, City of Brampton, (905) 874-2682, colin.grant@city.brampton.on.ca. Colin is a Member-At-Large of the Municipal Law Section.
Michael Stewart, Goodmans LLP, (416) 597-6284, mstewart@goodmans.ca. Michael is the 1st Vice Chair of the Municipal Law Section.
Establishment of an Expert Commission on Pensions in Ontario Louise Greig*
The OBA Pensions and Benefits Section is very excited about the Ontario government’s decision to establish an expert commission to review the pension system in Ontario. There has been no major government-sponsored examination of pensions in Ontario since the Task Force on Inflation Protection for Employment Pension Plans (known as the “Friedland Task Force”) commissioned in the late 1980s. The study by the Ontario Expert Commission on Pensions announced by Finance Minister Greg Sorbara on November 9, 2006 will therefore be the first review of pension laws in Ontario in more than 20 years.
The pension landscape in Ontario has changed dramatically since the Friedland Task Force conducted its review. The labour force in Ontario has become much more mobile since the 1980s. Pension legislation, which was designed for a more stable workforce, has not kept up with the changes in the labour market. As well, the recent downturn in the equity markets, combined with low interest rates, has had a major impact on the solvency of pension plans and has demonstrated how vulnerable defined benefit pension plans are to market forces. A third development in the pension area since the 1980s is the emergence of a significant body of pension court decisions. At the same time, there have been no material changes to the Ontario pension statute to address the policy issues raised by these court decisions. While members of our Section hold very different views on how the pension system should be changed, there is a general consensus that there is an urgent need for pension reform in Ontario.
The OBA Pensions and Benefits Section is one of many groups that have lobbied for pension reform in Ontario. Most recently, in a letter to the Minister of Finance dated June 2, 2006, our Section urged the Ontario government to initiate a bipartisan commission to study the issues facing Ontario pension plan sponsors and to make recommendations for legislative change. Representatives from the Section met with the Minister’s staff in July 2006 to discuss the Section’s concerns and recommendations. We believe that the Pension and Benefits OBA Section was particularly well-qualified to lobby for pension reform since it is one of the few organizations that is representative of both the employee and employer side practitioners and that the Section’s letter and subsequent meeting with the Minister’s staff played a role in the Ontario government’s decision to strike the Expert Commission.
The Expert Commission will be chaired by Harry Arthurs, a former Dean of Osgoode Hall Law School and President of York University. He will be assisted by an Advisory Committee consisting of Bob Baldwin, a consultant and former research director at the Canadian Labour Congress, Kathryn Bush, a lawyer in the Pension and Employee Benefits Group of Blake, Cassels & Graydon LLP and a former Vice-Chair of the Financial Services Commission of Ontario and a former Vice-Chair of the Financial Services Tribunal, Murray Gold, the head of the Pension and Benefits Department at Koskie Minsky LLP, and Ian Markham, the Director of Pension Innovation, Watson Wyatt Worldwide Toronto, an actuarial consulting firm. A report is scheduled to be issued in the Summer of 2008.
The Expert Commission’s mandate is to: “…examine the legislation that governs the funding of defined benefit pension plans in Ontario, the rules relating to pension deficits and surpluses, and other issues relating to the security, viability and sustainability of the pension system in Ontario.” The Commission’s areas of focus will include: pension plan funding and surplus, the Pension Benefits Guarantee Fund, full and partial plan wind ups, plan splits and mergers, asset transfers between pension plans and funding of defined benefit multi-employer pension plans.
As part of his review, the Chair of the Expert Commission will be engaging in public meetings or hearings and soliciting written input from a wide range of interested stakeholders on issues affecting the reform of Ontario’s regulatory pension framework. The OBA Pensions and Benefits Section will be participating in the consultation process and making submissions on various issues. Other Sections with an interest in pensions (e.g., the Insolvency Law Section) should also plan on making submissions to the Commission.
* Louise Greig, Osler, Hoskin & Harcourt LLP, (416) 862-4211, lgreig@osler.com. Louise is the Secretary of the Pensions and Benefits Section.
The Changing Face of Privacy Ann Cavoukian, Ph.D., Information and Privacy Commissioner of Ontario*
This article originally appeared in Eye on Privacy, Volume 7, No. 1, October 2006.
Although it may seem like yesterday since the government of Canada introduced comprehensive privacy legislation covering the private sector, the five-year review of that law is rapidly approaching. Since the federal Privacy Commissioner is in the best position to comment on the specifics of that legislation and how it might be amended to improve its operation, I would like to leave that task in her more than capable hands. Instead, on the eve of the review of that unique legislation, I would like to use this opportunity to take a sweeping look back over the privacy landscape and review some of the forces that have shaped the environment in which that law has operated over the past five years, and are likely to continue to have ongoing effects on privacy rights in the years to come.
The Personal Information Protection and Electronic Documents Act was enacted to protect citizens from the inappropriate collection, use and disclosure of personal information by private companies engaged in commercial activities. Private companies generally collect personal information in order to provide products and services to their customers. But, the information is also used for a variety of secondary businesses purposes such as improving relationships with customers and developing more effective marketing strategies. In fulfilling these secondary purposes, businesses have in the past commonly engaged in a variety of activities that are often perceived as privacy intrusive. Such practices include data mining, customer profiling, direct marketing, telemarketing and spamming.
While privacy legislation may have helped to restrict the privacy invasive practices of some businesses by limiting the amount of personal information that may be collected and by requiring consent, it has not prevented the proliferation of databases containing personal information that are held by private sector organizations. This proliferation of databases has numerous undesirable consequences for individuals. First, because security measures (including physical, technical and administrative safeguards) that are put in place to protect the information are not infallible, privacy and security breaches are inevitable. Such breaches have contributed substantially to the problem of identity theft. Second, the existence of databases of personal information means that others will find new uses for the data that may be completely unrelated to the original purposes for which the information was collected. Moreover, to the extent that these private sector databases may be linked together and/or linked to public sector databases, the potential uses for the information are greatly expanded.
Due to the vast reservoir of privately-held databases and the capacity of private companies to gather vast amounts of personal information through their interactions with consumers, one trend that has emerged over recent years is the requirement for private sector companies to provide intelligence to government agencies to assist in fulfilling public sector mandates such as law enforcement and public safety. For example, financial institutions are required to provide information to be used to combat organized crime and money laundering. To combat property crime, some jurisdictions require used goods retailers to collect and make available to the law enforcement community personal information about individuals who sell or pawn used goods. The federal government is contemplating the introduction of legislation that would require Internet service providers to provide personal information about their customers, upon request by the law enforcement community, for investigation of a variety of criminal activities. While this trend toward using private companies as agents for the state in the war on crime has existed for some time, it intensified dramatically following the events of September 11, 2001.
In the same year that the Personal Information Protection and Electronic Documents Act began to be phased in across the country, the world was rocked by a complex and coordinated terrorist plot resulting in the demolition of the Twin Towers in New York City. The events of September 11, 2001 would inflict severe psychological trauma that would shake the foundations of free and democratic societies around the globe. The events of that day dramatically altered the face of privacy over the years that ensued. Abruptly, in the face of the most pervasive threat to our security that the western world has ever experienced, our ongoing battle to preserve the right to privacy was fraught with new challenges.
In light of the new, seemingly irrational terrorist threat, it was difficult, if not impossible, for governments around the globe not to overreact. New laws were passed granting overreaching and unfettered powers to the state that trampled on the fundamentals of a free and democratic society, including the right to privacy. The normal rules of justice were dispensed with so that suspected individuals could be expeditiously arrested and detained indefinitely, without proper due process. Surveillance by the state intensified dramatically.
In the wake of 9/11, no one questioned the need for national security to trump other seemingly insignificant human rights. Privacy rights advocates were, for the most part, stunned into silence. The pendulum had swung in one direction. The time was ripe for pushing the national security agenda. Proposals to enhance law enforcement powers, previously rejected by the public as being unnecessarily intrusive and unconstitutional, were resurrected and embraced as part of the new national security agenda. The public was not interested in warnings about their diminishing privacy rights, as such rights were widely perceived as hampering national security efforts.
Law enforcement agencies were one of the major benefactors of the public’s new tolerance for highly invasive, anti-terrorist surveillance measures. Since the public would not object to personal information being amassed to combat terrorism, why not use that same information to fight all types of criminal activity? Legislation and policies and procedures that were developed and implemented in the wake of 9/11 tended not to preclude the use of intelligence gathered for anti-terrorism purposes for ordinary law enforcement purposes.
But, in the aftermath of the immediate, highly emotional reaction to the terrorist threat, the pendulum began to swing back. Cases emerged in the media highlighting the downside to these new sweeping and unfettered powers of the state. These cases demonstrated how easily such new powers could be abused resulting in innocent people being subjected to inconvenience, abuse and serious indignities by law enforcement agents and/or military personnel. The public began to question the effectiveness of some of the extreme security measures that were implemented immediately after 9/11 and to ask themselves whether such powers were necessary.
One of the more poignant and controversial examples of a reaction to the 9/11 crisis was the creation of no-fly lists. A major concern to privacy advocates was the complete lack of transparency surrounding the creation and use of such lists in Canada. Since 9/11, I have repeatedly tried to obtain credible information on: what lists are currently in use by airlines operating in Canada; whether airlines in Canada are required to use these lists for all domestic and international flights; whether airlines operating in Canada are required to provide passenger information to other countries; what sources of information are used in creating these lists; what criteria are used for including individuals on these lists; and if an individual is erroneously targeted as a security threat, how can they have their names removed from these lists? Even in my role as Information and Privacy Commissioner of Ontario, I have been unable to find answers to these important questions.
In Canada, the Public Safety Act, 2002 amended the Aeronautics Act to provide the Government of Canada with the authority to request and use passenger information for transportation and national security purposes. In addition, the federal budget of 2005 allocated $16 million over five years for the assessment and development of systems to collect information about air travelers for transportation and national security purposes.
Late in the summer of 2005, Transport Canada began consulting with airlines and other stakeholders on the implementation of a passenger assessment program, known as Passenger Protect. Under the program, the federal government intends to create a list of individuals who pose an immediate threat to aviation security and who will be prevented from boarding flights in Canada. The program will lay the foundation for future passenger assessment initiatives and permit airlines to provide information on individuals on this list to the federal government. As the government proceeds to formalize the collection of passenger information for this particular program, an open and transparent approach is essential.
Those who know me understand that I am both a pragmatist and eternal optimist when it comes to privacy. I believe we can have both national security and maintain our right to privacy. National security need not come at the expense of our privacy. Similarly, privacy can never come at the expense of national security. I believe that we can have a framework, incorporating both of these objectives, which can be applied in a consistent manner to each new proposal purported to enhance national security. This framework should incorporate the following principles:
The government must be completely transparent about the measures that are being put in place to combat terrorism;
The measures must be proportionate to the magnitude of the threat that we face;
Only those measures that have been demonstrated to have a significant impact on our national security should be adopted;
For each measure that is adopted, the enhancement to national security must clearly outweigh the costs in terms of diminishing our existing rights and liberties;
Each measure should be accompanied by clear criteria for identifying security threats and targeting individuals as a threat to security; and
Any measure that is adopted must be subjected to effective oversight, including due process for any individual who is wrongly targeted as being a threat to security.
Given the existing climate, it is difficult to see a clear solution to the privacy challenges posed by the ongoing terrorist threat. It would be easy to conclude that responsibility for balancing security with privacy rights must rest with the government of the day. But, the solution is not that simple. We are not powerless in this struggle. It is my view that preservation of the right to privacy will take a coordinated effort on the part of the public, businesses and governments at all levels.
Consumers can help to prevent their personal information from being used for identity theft and other unintended purposes by strictly limiting the amount of personal information provided to businesses. Consumers should not provide businesses with any personal information that is not essential for the provision of goods or services. Consumers also have choices about which companies they choose to do business with. Companies that make a concerted effort to minimize the collection of personal information and resist pressures to use that information for unrelated purposes should be rewarded with loyalty. This will help to ensure that those companies with the most privacy protective practices gain a competitive edge over those companies that are unconcerned about their customers’ privacy.
Private sector organizations can prevent themselves from becoming pawns in the war on crime and terrorism by giving serious consideration to minimizing the collection of personal information about their customers. In many instances, the collection of personal information is not necessary in order to provide goods and services and should be avoided altogether. In other cases, it may be possible for customers to interact with a company anonymously. Businesses should consider investing in privacy enhancing technologies that will facilitate anonymous transactions. Where the collection of identifiable information is necessary, it should be limited to that which is essential for fulfilling the intended purposes. Finally, personal information should be retained only as long as necessary to fulfill the intended purposes. If businesses wish to retain longitudinal data for market research and data mining purposes, all personal identifiers should be stripped from the data. To the extent that the number of databases containing personal information can be kept to a minimum, this will help to ensure that personal information is not readily available for unintended purposes, such as identity theft and fishing expeditions for routine law enforcement matters. Since the adoption of fair information practices will not ensure customer privacy in the face of requirements to collect and disclose personal information that may be imposed by the state, minimizing the collection and retention of identifiable information to the greatest extent possible is essential.
Finally, municipal, provincial and federal government organizations must resist the urge to conscript private companies in excessive surveillance exercises that target ordinary citizens engaging in lawful activities. Where massive surveillance programs can be clearly justified in the name of national security or public safety, the purposes for which any intelligence may be collected, used and disclosed must be specific and limited. Information collected without a warrant, court order, or reasonable grounds for suspicion of unlawful activity should not be used for routine law enforcement purposes.
In conclusion, there is no question that the privacy landscape has changed dramatically over the five years since the Personal Information Protection and Electronic Documents Act was first enacted. The terrorist threat that has dominated the environment is likely to continue to have adverse consequences for privacy rights in the years to come. Unfortunately, history has shown that once fundamental rights have been eroded, perhaps with justification during times of crisis, they tend not to be restored even when the crisis is over. Before eroding these rights further in the name of national security, rational public debate on these matters must take place. The time has come for a more objective assessment of both the terrorist threat and the effectiveness of anti-terrorist measures in protecting our security. It is time for individuals, businesses and governments at all levels to work cooperatively to repair the cracks that have started to appear in the foundation of our free and democratic society following the traumatic events of 9/11 by ensuring that our proposed remedies are not, in fact, worse than the diseases they are trying to cure.
* Appointed in 1997, Dr. Ann Cavoukian is currently serving her second term as Commissioner, which will extend to 2009. She has published two books: Who Knows: Safeguarding Your Privacy in a Networked World (1997), with Don Tapscott, and The Privacy Payoff (2002), with Tyler Hamilton.
Courts, Not Politicians, Should Decide on Bail Jamie Chaffe*
This article originally appeared inthe Toronto Star.
It is unusual for the president of the Ontario Crown Attorneys' Association to comment about the proceedings in the Ontario Legislature. But twice in recent weeks the opposition in the Legislature has introduced motions that, if adopted, would have inappropriately impinged on the independence of Ontario's Crown attorneys. That independence is one of the pillars of our judicial system.
Late last month, the opposition called on the government to direct assistant Crown attorneys to oppose all requests for bail for people accused of violent crimes. The Conservative party's motion said that "an alarming number of murders and other violent crimes" are committed by people out on bail. It also called on the government to review all orders granting bail for those charged with violent crimes.
Fortunately, the motion was defeated on Nov. 28. Then in early December, the Leader of the Opposition attempted to revisit the issue by introducing as a private member's bill the "Truth and Transparency in the Justice System Act."
Both these initiatives were a transparent attempt to politicize our judicial system. The issues these raise are so vitally important that they lead me, as the president of the Ontario Crown Attorneys' Association, to comment on them publicly.
Our association represents all of the front-line prosecutors in the province, the men and women who have dedicated their professional lives to upholding an oath that requires them to see that justice is done in Ontario.
While we share this common sworn duty, the members of the association have diverse political views. But I believe the events in the Legislature represent a danger to all members and to the public as well.
If the motion directing assistant Crown attorneys to oppose bail had passed, it would have represented a grave and inappropriate, if not unconstitutional interference with the independence of Crown attorneys.
In our legal system, the legislative branch cannot and should not direct the attorney general, much less his or her agents, to exercise their discretion according to its present particular inclination.
Assistant Crown attorneys take an oath of office that states they will "truly and faithfully, according to the best of my skill and ability, execute the duties, powers and trusts of provincial prosecutor for Ontario without favour or affection to any party ..."
The motion would have usurped the assistant Crown attorney's independence and removed one of the essential checks and balances of our legal system. This check and balance is vested in the independent, quasi-judicial role of an assistant Crown attorney in criminal proceedings.
The job of a Crown attorney is difficult and the challenge of that apparently simple oath is often monumental. It is not made easier by a legislative direction that fetters the discretion that forms the bedrock foundation of the Crown attorney's office.
More important, such interference is a recipe for injustice.
The bail motion was defeated. But the Leader of the Opposition attempted to revisit this issue through the aforementioned Truth and Transparency in the Justice System Act.
This act called for the collecting of statistics that the province or the federal government already keep as well as matters that are already squarely on the public record, including bail violations and proceedings to forfeit bail.
This bill was unnecessary. It did not address any of the fundamental challenges that are faced by our justice system in Ontario. Fortunately, it, too, was defeated.
Our justice system is conducted on the public record. Our Crown attorneys are accountable for everything they do through our attorney general to the Legislature. This Act was a transparent attempt to politicize our judicial system, which can only represent an attempt to undermine the rule of law in this province.
From hard experience, Crown attorneys know that when they exercise their discretion they may be criticized by the accused, the family of the accused, the victim, the alleged victim's family, special interest groups, the police, the media, the public and even the Legislature.
In order to rise above all of these particular interests and focus on the principles of the rule of law and the requirement that justice be done, Crown attorneys must be absolutely independent and insulated from partisan politics.
Crown attorneys cannot and should not be directed to do anything other than to see that justice is done, to the very best of their ability, by upholding the rule of law.
In bail hearings, that means examining the evidence against the accused, taking a position on detention or release based on a judicious review of that evidence, then marshalling the evidence before an independent justice or judge who must decide whether an accused should be held in custody or not.
There are three reasons to detain an accused under the law: to ensure the accused will return to court; to prevent the accused from committing further offences; and to maintain the public's confidence in the administration of justice.
If an accused is released into the community by order of the presiding justice, the Crown may apply for a review of that order to a higher court.
Crown attorneys must obey and uphold the rule of law in the conduct of a bail hearing as in the execution of all of their other work – implicitly they must be independent of political interference in the execution of these duties.
That means that Crown attorneys must be free NOT to oppose bail for those people charged with even violent crimes if they feel that detention is not warranted.
On occasion, prosecutors consent to bail in cases that involve violent offences. They do so for a myriad of justifiable reasons – reasons that would compel a right-thinking citizen to consent to a release order.
Our justice system cannot afford the replacement of prosecutorial independence with legislative intrusion that would direct that we arbitrarily ignore these hallowed principles.
Any attack on or interference with the independence of prosecutors to carry out their oath must be repelled vigorously. The rule of law requires no less.
* Jamie Chaffe is President of the Ontario Crown Attorneys' Association.
Rutherford Applicants Secure Parental Recognition for Lesbian Parents and Children Joanna Radbord*
This article originally appeared in Triangle, CBA National Sexual Orientation and Gender Identity Conference newsletter, January 2007.
In 2005, four lesbian families, known as the Rutherford Applicants, began a proceeding in family court asking for recognition of their parentage immediately on their children's birth registrations under the Vital Statistics Act (VSA). Inclusion of both mothers' particulars on a birth registration document would provide the listed parents with presumptive proof of parentage: that is, the listed parents would be considered parents absent proof to the contrary. The VSA birth registration document is what most people rely on to provide evidence of parentage when dealing with daycares, schools, border crossings, and with other third parties in their day-to-day lives.
The Rutherford Applicants also asked for declarations of parentage under s. 4 of the Children's Law Reform Act (CLRA). A declaration of parentage is a declaration in rem – it is conclusive proof for all purposes that a person is a parent of a child. Most parents have no need for CLRA declarations, but the Rutherford Applicants were concerned by the ruling of Justice Aston in AA v. BB v. CC, the case of a lesbian family who parent with an involved father, which held that declarations of parentage were not available to two mothers under principles of statutory interpretation.
The Rutherford Applicants wanted secure parental recognition for their families and for other lesbian parents and children. All the children of the Rutherford Applicant families were included as parties to the litigation and made their own s. 15 and s. 7 Charter claims.
The four Rutherford Applicant families included married spouses Melanie and Mel. Melanie gave birth to twins, Emerson and Alexander, and Mel impregnated her wife using her fertilized ova. Both women are biological parents: Melanie is the gestational mother and Mel the genetic mother. After they started the Rutherford proceeding, the government agreed that they were both parents and allowed both to be listed on their children's statements of live birth.
Rutherford Applicants Veronica and Rosemarie together decided to have a child, and are the mothers of daughter Ayoka. Only Rosemarie was recognized as Ayoka's mother on the statement of live birth. Rosemarie said, "it is an insult and a lie that Veronica is non-existent as Ayoka's parent. It jeopardizes Ayoka's security."
Applicants Bonnie and Beatrice married and wished to expand their family, giving birth to a son, Samuel. After litigation commenced, Bonnie was diagnosed with breast cancer before Beatrice had any legal recognition of her parentage. If Bonnie had died without Beatrice having parental recognition, Samuel's relationship to Beatrice would have been uncertain and vulnerable.
Applicants Rachel Epstein and Lois Fine are parents of Sadie Rose Epstein-Fine. While Rachel was pregnant, Lois cooked for her, tied her shoes when she could not bend over, attended the midwife appointments, was present at the birth and cut Sadie's umbilical cord. Only Rachel was recognized as Sadie's mother. Sadie swore an affidavit in the Rutherford proceeding describing her worries – how Lois might not be recognized as her mother by medical staff, "faking" her signature on her passport to reflect her legal name, and remembering to lie at border crossings and say she only has one mother. Sadie said, "Imagining winning the case – it would feel amazing. It would feel like we would not have to lie anymore. We would not have to worry about getting in trouble. Nobody could question who my mothers are anymore. I would feel more secure and safer. We could tell the truth. I could just be who I am, and sign my own signature, Sadie Rose Epstein Fine."
On June 6, 2006, Sadie and the other Rutherford Applicant children won their case. The government did not appeal. Justice Rivard struck down the birth registry scheme of the VSA as unconstitutionally discriminating against same-sex families. He suspended the declaration for 12 months to give the government time to correct the constitutional
violation.
Justice Rivard also granted declarations of parentage under s. 4 of the CLRA in favour of both mothers. He relied on his parens patriae jurisdiction, but noted that if there was no authority under parens patriae to grant the relief requested, then the CLRA discriminated against lesbian co-mothers in a manner that could not be justified in a free and democratic society.
The Ontario government hotly contested the recognition of lesbian co-mothers in the Rutherford proceeding. It claimed that the VSA birth registration document was meant to capture biological particulars, although the evidence was overwhelming that straight families using donor sperm or egg registered the particulars of the intended parents without question.
Indeed, through cross-examination of the Office of the Deputy Registrar General of Ontario, we obtained an internal government document that expressly required the rejection of applications by "same-sex parents.” There was clearly a conscious effort to "vet" the gender/sexual orientation of applicants and to reject the birth registrations of lesbian mothers.
The government also failed to respond appropriately to problems with the CLRA. In the Rutherford litigation, the government said that lesbian co-mothers did not need recognition under the VSA because they could get CLRA declarations. The government consented to the granting of CLRA declarations, alleging that there was authority to do so, despite the ruling otherwise in AA v. BB v. CC. The government then declined to participate at the hearing of AA before the Court of Appeal, failing to support the granting of declarations of parentage to two mothers.
In Rutherford, the government also stated that it would be possible to have three legally recognized parents at least in circumstances of egg donation – that is, the gestational mother, the genetic mother and the biological father. Again, the Rutherford Applicants, now party interveners in AA v. BB v. CC, had to alert the Court of Appeal to the government's position. The government has also seemingly implicitly recanted from this position in their response to Justice Rivard's striking down of the birth registry scheme under the VSA.
The government's purported answer to the Rutherford ruling was introduced Aug. 24, 2006. The government proclaimed a legislative amendment that had been on the books since 1994 but never proclaimed, alongside a regulation. It was the "easy fix" to the VSA, because the change could be made without debate in the legislature.
The VSA will now permit, effective as of Jan. 2, 2007, that two lesbian mothers may register their child's birth as parents, but only if the father is unknown and conception is by assisted reproduction. As usual, the government has attempted to do the minimum required, and failed to consider the equality rights of co-mothers. The violation of equality rights of lesbian families continues for those who use known donor
sperm, even for families involving two biological mothers.
If it causes psychological distress to deny a lesbian co-mother status as her child's parent, as the government essentially admitted by its failure to appeal Rutherford, how is there less distress because her family used a known donor, or the child has an involved father?
Once again, same-sex families have been ignored by the legislature. In every respect, this is an intolerable situation for lesbian mothers and our children. Same-sex families now await the decision of the Court of Appeal in AA v. BB v. CC, which was heard by Chief Justice McMurtry and Justices Labrosse and Rosenberg on Sept. 25 and 26.
The amicus curiae, the Rutherford Applicants, as party interveners, and the Office of the Children's Lawyer all argued that the CLRA discriminates against the appellant co-mother and her child on the basis of family status, and advocated a remedy that would advance the equality rights of diverse families in Ontario. The appellant AA, as well as the Rutherford Applicants, also argued that the CLRA discriminates on the basis of sexual orientation, and sought recognition for all same-sex families that involve a different-sex biological parent in their children's lives.
In 2006, we have a functional vision of the family across our laws. Ontario is an example and a leader internationally in its respect and recognition for diverse family forms. And throughout our family law evolution, no-one has ever suggested that a child can only have two parents.
Numerous statutes contemplate multiple parents: adoption, custody, access, child support, and spousal support legislation all provide for that possibility without distinction. Family law across Canada does not limit the number of potential parents of a child to two. Indeed, it has always been our approach that we should cast the net of potential parents who might provide for and love a child as widely as possible. The equality rights of parents and children in GLBT co-parenting families require that we maintain our commitment to a functional approach to family law and fully recognize parentage in non-nuclear families, in accordance with children's best interests.
This article originally appeared in the Sole, Small Firm and General Practice Section Newsletter, Volume 1, No. 2, January 2004.
I think I redefined “panic” last week when I attended on what was to be a simple motion. In the course of gowning—that arcane ritual of robing like the ecclesiastical jurists of old—I discovered that I did not have my tabs with me. I was “tabless” or as the French say, “sans tabs”. Without them, I would be “invisible” in the eyes of the court as I would not be properly “gowned”. Perhaps this is what is meant by “blind justice”.
I knew where they were—located at home in the gown bag I had carelessly dismissed as extra baggage. I thought I would just scoot into court with my gown over my shoulder exuding the confidence of a Philadelphia lawyer. I should have been in Philadelphia. Or anywhere for that matter. For in my haste to beat a path downtown, I had (so I thought) all the essentials: waistcoat, shirt (one that fits, I must say) and my somewhat-and-all-too-often wrinkled gown.
I even remembered to bring cufflinks although I would not have hesitated to use paperclips. After all, advocacy is the art of improvisation.
But how could I forget the piece de resistance, the icing on the cake, the hood ornament. Let’s face it. The tabs make the outfit. As medieval as these things look, they have their place. And for the moment, the place they ought to have been was around my neck.
Knowing I had to be in court, I began to scavenge in the rather empty barrister’s lounge. As my attendance on that day was by way of a special appointment, there was scarcely anyone around in the courthouse. Certainly there was no one around with as portly a frame as mine (OK, OK, read “chubby”). A box in the corner of the room yielded some old shirts but no tabs. The tops of the lockers were dusty and provided a number of hangers in good condition. I also found some jacket buttons, an empty file folder, an old Rulebook, $0.17 and a phone number for freelance legal research. Of course, I kept none of these with the exception of one hanger for my jacket.
Suddenly, as if out of nowhere, I saw it. A set of tabs dangling from a hanger holding a waistcoat. It looked like it had been there for some time. Should I borrow it, I thought? I was on a very brief motion. Surely I could put it on and get it back in place before anyone missed it. Or perhaps it was orphaned and needed a new neck. Maybe I was doing it a good service by using it. What if it was there temporarily and someone like me had to appear before a judge imminently? If they could not appear as a result of the missing tabs, would they be able to finish their case? Would they be disciplined by the Law Society for not meeting their client’s expectations or for having failed to attend in court? Would they have as frantic a moment as I had just a few minutes earlier?
I didn’t have much time to debate the issue or to feel guilty about what I had to do. I made my decision, reached for the tabs and made my way to the mirror. That’s when it began. The wrestling match. I suspected that the tabs would probably not fit but I had little choice in the matter. I would make them fit. I pulled at either end to connect the Velcro. Velcro. Yeah, a wonderful invention. But make a pair of short tabs fit a fat neck? Now, that’s an invention. I pulled and tugged, the sweat pouring down my face like Niagara Falls. All the while, I had my eye on the clock knowing full well that I would have to go to court with or without tabs.
Having failed to fit them on me, I did the next best thing. I tucked the dangling ends down my shirt at my neck. Not bad, I thought. Not perfect, but it will do. Technically, I was fully gowned. I just didn’t have them quite right. Did that matter? No one would know. I just hoped that they would stay tucked and that I did not have to move my head profusely in any manner. So, note to self: if I disagree with the judge, don’t show it by shaking my head!
When I got into court, my colleagues and I learned that the sitting judge was not gowning and was entertaining lawyers’ motions in his chambers where he sat, without robes, dressed to the nines in an elegant jacket and casual shirt. We dealt with the case and all the while, the tabs stayed intact. I could have gone in without them. But I didn’t. I was gowned, but not without incident!
They came off easy—those borrowed tabs—and were returned to the place where I had found them. I assumed that the rightful owner did not miss them. It was only ten minutes. I thought the whole ordeal lasted a lifetime.
I just want to take this opportunity to thank my anonymous colleague as well as publicly express my envy for his thin neck-size. Whoever said you needed thick skin to do litigation was not entirely correct.
Now, if I ever forget my waistcoat….
* Peter Hrastovec, Windsor Partner-in-Charge, Raphael Partners LLP, Barristers and Solicitors, Windsor, (519) 966-1300, ext. 421.
Domestic Contracts and Disclosure Corina Weigl and Laura West*
LeVan v. LeVan,1 a recent decision of the Ontario Superior Court of Justice, provides practitioners with new insight into the proper manner in which domestic contracts should be advised upon and drafted. In LeVan, the central issue in dispute was whether the parties’ marriage contract should be set aside and statutory equalization of their property ordered in its place. Justice Backhouse, in a decision that should serve as a cautionary tale for practitioners and clients alike, found that the parties' marriage contract should be set aside due to, among other factors, Mr. LeVan's failure to make full and complete disclosure of his assets and liabilities as required by the provisions of the Family Law Act (Ontario).2
1. Factual Background
Mr. and Mrs. LeVan co-habited for a year before the beginning of their seven-year marriage, which produced two children. Their marriage contract was drafted and executed during the period of their engagement, which lasted six months. Mr. LeVan, whose family controlled Westcast Industries Inc., a major car and truck part supplier, introduced the idea of the marriage contract to his future wife as a means of protecting his family's business interests. Mr. LeVan's parents had created a complex corporate structure of companies and trusts in order to keep their interests in Westcast within their family, and all of their children were aware of the necessity of procuring marriage contracts with their spouses for this purpose.
Mr. LeVan's solicitor, who was a family law practitioner at the large firm that handled the LeVan family's corporate interests, produced the initial draft of the contract, which was reviewed by Mrs. LeVan's first solicitor, a general practitioner. This draft contract provided for the exclusion of the family corporations and trust interests from equalization and limited Mrs. LeVan's support claim to the income and assets of Mr. LeVan that were not excluded from equalization pursuant to the terms of the contract. The financial disclosure that accompanied this initial draft of the contract did not reveal Mr. LeVan's income, nor the value of his corporate or family trust interests, which were substantial.
After Mrs. LeVan's solicitor reviewed the draft contract and financial disclosure provided to him, he requested further financial disclosure, especially with respect to Mr. LeVan's interests in the family trusts. He also prepared his own draft of the contract due to the one-sidedness and what he came to call the “unconscionability” of the one presented to him. In response, Mr. LeVan's solicitor provided him with a description of the main discretionary family trust, but no value was ascribed to the assets of the trust or Mr. LeVan's interests in the trust. In addition, no disclosure was made of the fact that it was the intention and practice of the trustees to treat their children, the main beneficiaries under the trust, equally with respect to trust distributions. Although Mrs. LeVan’s solicitor had requested the values of the assets in question, Mr. LeVan's solicitor construed this as a request for valuations and argued that such an analysis would be too costly and time-consuming. Instead, Mr. LeVan's solicitor merely stated that Mr. LeVan's contingent interest in the main discretionary family trust was of a "very minimal value", although, as noted by Justice Backhouse, a valuation done prior to the proceeding found that at the relevant time, the trust had assets of thirty million dollars; Mr. LeVan’s interest in which was conservatively valued at over three million dollars.
During the period in which the parties were receiving advice with respect to the contract, Mr. LeVan continually informed his wife that the marriage would not take place without the contract in place. He also provided his wife with advice about the terms and conditions of the contract that was contrary to that of her solicitor. Ultimately, as a result of these factors, and the direct input of Mr. LeVan and the indirect input of his solicitor, Mrs. LeVan fired her first solicitor, who had been pressing for changes to the contract and more complete financial disclosure. Four days before her wedding, she retained a new solicitor recommended to her by Mr. LeVan's solicitor.
Mrs. LeVan's new solicitor relied upon the disclosure forwarded to her by Mr. LeVan's solicitor and requested no further information with respect to Mr. LeVan's income and assets. She met with Mrs. LeVan only once, two days before the wedding, and the parties executed the contract that same day. Only minimal changes were made to the agreement at the request of Mrs. LeVan's new solicitor, and they did not impact on the main thrust of the equalization and support provisions that were in the original agreement drafted by Mr. LeVan's solicitor.
2. Judgement
In the LeVan decision, Justice Backhouse begins her legal analysis of whether the court should exercise its discretion to set aside the marriage contract by considering its statutory authority to do so pursuant to subsection 56(4) of the Family Law Act (Ontario), which provides as follows:
"A court may, on application, set aside a domestic contract or a provision in it,
(a) if a party failed to disclose to the other significant assets, or significant debts or other liabilities, existing when the domestic contract was made;
(b) if a party did not understand the nature or consequences of the domestic contract;
(c) otherwise in accordance with the law of contract.
According to Justice Backhouse, the proper manner in which to interpret this subsection is to first determine whether the party wishing to set aside the contract can bring him or herself within one of the subsections (a), (b), or (c), and then, if the party is successful in this regard, to determine whether the court should exercise its discretion to set the contract aside. For both parts of this test, the burden of proof lies with the party seeking to set the contract aside.
With respect to the LeVan's marriage contract, Justice Backhouse found that the first part of the test outlined above was met by Mr. LeVan's failure to disclose his significant assets and debts or other liabilities as required by the provisions of the Family Law Act (Ontario). According to the decision, the obligation of spouses to make complete, full and frank disclosure is not to be construed narrowly, and there is a positive obligation on every spouse to fully disclose, whether or not there has been a request for information. Proper disclosure requires the sharing of values of assets, debts and other liabilities, as well as the requirement to disclose income.
Mr. LeVan failed to disclose the value of his interests in his family's corporate and trust assets and provided inaccurate and misleading information with respect to the same. Some of his substantial corporate assets were omitted from disclosure altogether and inaccurate and insufficient information was provided with respect to his interests in the family's discretionary trust. For example, it was disclosed that his contingent interest in the trust had a "very minimal value", when in fact the trust had substantial assets, and no disclosure was made of the fact that it was the intention and practice of the trustees to treat Mr. LeVan and his three siblings equally with respect to trust distributions. An additional significant factor was the fact that no disclosure was made with respect to Mr. LeVan's income.
In the course of the decision, Justice Backhouse also comments on the fact that financial statements for the companies and trusts, and income tax returns for Mr. LeVan, were not disclosed, and she suggests that such additional information was accessible to Mr. LeVan's solicitor as a result of her firm's handling of the corporate affairs of the LeVan family.
Justice Backhouse’s analysis of whether the court should exercise its discretion to set aside the contract begins with an acknowledgment that it is not every breach of disclosure that will warrant a setting aside of a contract. Because public policy supports the making of domestic contracts, courts should not interfere lightly in such matters. The relevant jurisprudence has considered a number of factors important to the court’s exercise of discretion in this regard, including whether there is evidence of material misrepresentation, duress, unconscionable circumstances or the concealment of an asset or assets.
Justice Backhouse found that the court’s discretion should be exercised to set aside the LeVans’ marriage contract due to the factual circumstances surrounding its formation. Among the factors relevant to this determination were Mr. LeVan's deliberate failure to disclose his assets and liabilities, his misrepresentation of the purpose and extent of the contract to his wife, and his interference with his wife's receipt of independent legal advice. Also relevant to the court's holding in this regard were Mrs. LeVan's failure to understand the terms of the contact, her failure to receive independent legal advice and the fact that some of the legal advice she received was incorrect. Finally, the court also took into consideration the fact that the contract was unfair, in that the contract could have resulted in not only Mrs. LeVan receiving nothing, but also owing her husband an equalization payment, despite the fact she had modest assets at date of marriage and date of separation.
3. Implications
The LeVan decision presents many interesting implications for practitioners providing advice with respect to domestic contracts, two of which will be discussed below.
Firstly, the decision provides practitioners with some clear financial disclosure guidelines that should be followed in order to help ensure the long-term efficacy of the domestic contracts in which they are involved.
Clients should be advised of their positive obligation to ensure that full and frank financial disclosure is made prior to the contract’s execution. Clients should also be well versed in the two principles underlying the activity of financial disclosure; that is, the disclosure of all assets, income and liabilities, and the attribution of value to all such assets, income and liabilities.
For effective financial disclosure to occur pursuant to the LeVan disclosure model, a party cannot just simply disclose that he or she has substantial business interests; instead, he or she ought to disclose all of the corporations and other legal entities in which he or she has an interest, as well as the nature of those interests. Furthermore, if a party has an interest in a trust (regardless of the nature of his or her interest), the value of the trust ought to be disclosed, or at a minimum, the value of the party's interest in the trust ought to be disclosed. A description of the party’s interest in the Trust should be given and a description of the class of beneficiaries provided. In addition, if there is a history of distributions from the trust, some disclosure as to the nature of the distributions should be given. Where there have been no distributions, this should be disclosed as well. Finally, disclosure of a party's income via personal income tax returns ought to be provided.
Secondly, the decision provides some practical advice with respect to the manner in which solicitors should attend to their clients' domestic contracts. The decision reminds solicitors to ensure that they have sufficient time and opportunity to thoroughly address all relevant contractual and disclosure issues with their clients prior to a contract’s execution. It also suggests that solicitors may be responsible not only for reminding their clients of their disclosure obligations, but also for ensuring that the disclosure produced is complete and accurate, to the extent that such information is available to the solicitor. The decision also stresses how important it is that the parties understand the provisions of the contracts in which they are entering, thereby reminding solicitors to ensure such understanding is present prior to the execution of such contracts. Finally, the decision reminds both solicitors and their clients that, clients ought not do anything to interfere with their spouse’s solicitor/client relationship, as such interference could have an impact on a contract’s long-term viability.
* Corina Weigl, Partner, Fasken Martineau DuMoulin LLP, (416) 865-4549, cweigl@tor.fasken.com. Corina is the Chair of the Trusts and Estates Section.
Laura West, Associate, Fasken Martineau DuMoulin LLP.
The Effect of Procedural and Substantive Changes in the Law David Dinner* This article originally appeared in the Young Lawyers’ Division Newsletter, Volume 14, No. 2, December 2006.
Once again, research performed during the course of my practice has led to another brilliant article for our newsletter.
Whenever existing laws are modified or amended, a question is raised as to whether the change applies immediately to both past and future fact scenarios, or only those arising after the amendments come into force. Recent changes in the law in my area of practice sparked debate among the various practitioners: are the changes applicable to all ongoing claims or just those claims arising after the enactment of the changes?
In my opinion, the first place to start is Driedger on the Construction of Statutes.
Generally, it is presumed that new law has immediate and general application. In the words of Prof. Sullivan:
“There is no presumption against the immediate and general application of legislation. On the contrary, such application is presumed; it is the failure to apply legislation immediately and generally to all the facts that come within its apparent scope that requires explanation and justification.”1
This is not to say that all new law will apply to all facts immediately. Other presumptions, such as the presumption against retroactive application and the presumption against interference with vested rights, operate to prevent the application of new law to past facts or accrued rights. In determining whether the application of new law is retroactive or not, Prof. Sullivan offers the following examples:
“Suppose that on 1 January 1990 a provision came into force making it an offence for any person to sell tobacco products. To apply this provision to sales of tobacco occurring on 31 December 1989 would be a retroactive application of the provision...To apply the provision to transactions occurring on or after 1 January 1990 would be prospective.
Suppose that on 1 January 1990 a provision came into force making it an offence for the owner of a car to leave it parked on a designated street for more than forty-eight hours...to apply it in respect of parking that began at noon on 31 December 1989 and ended forty nine hours later would be prospective. This would be an immediate and general application of the provision to a continuing fact. The application would be immediate, in that the provisions came into force, and it would be general, because it applied to all existing parking, not just to parking beginning on or after 1 January.”2
Dickson J. outlined the presumption that new law is not intended to interfere with vested rights in the 1977 Supreme Court of Canada decision in Gustavson Drilling (1964) Ltd. v. M.N.R.:
“The rule is that a statute should not be given a construction that would impair existing rights as regards person or property unless the language in which it is couched requires such a construction...The presumption that vested rights are not affected unless the intention of the legislature is clear applies whether the legislation is retrospective [retroactive] or prospective...A prospective enactment may be bad if it affects vested rights and does not do so in unambiguous terms.”3
However, neither the presumption against retroactive application of new law nor the presumption that new law is not intended to interfere with vested rights apply to procedural provisions,4 as such provisions are presumed to have immediate application to both pending and future facts.5
Again in the words of Prof. Sullivan, the presumption can be formulated a number of ways:
Persons do not have a vested right in procedure;
The effect of a procedural change is deemed to be beneficial for all;
Procedural provisions are an exception to the presumption against retroactivity; and
Procedural provisions are ordinarily intended to have an immediate effect.6
As such, the issue then becomes whether a new provision is procedural in nature, or whether it is substantive.
A provision is procedural if it:
“governs the methods by which facts are proven and legal consequences are established in any type of proceedings...it must be determined in the circumstances of each case. A provision may be procedural as applied to one set of facts, but substantive as applied to another. To be considered procedural in the circumstances of a case, a provision must be exclusively procedural; that is, its application to the facts in question must not interfere with any substantive rights or liabilities of the parties or produce unjust results.”7
Thus, if a provision 1) governs the methods by which facts are proven and legal consequences are established in any type of proceedings and 2) does not interfere with any substantive rights or liabilities of the parties or produce unjust results, then it is procedural in nature and thus, immediately applicable. However, it is important to note that this determination may produce different results when applied on a case-by-case basis.
* David Dinner of Zarek Taylor Grossman Hanrahan, LLP, (416) 777-5210, ddinner@ztgh.com. David is the Chair of the Young Lawyers’ Division (Central Region).
1 Ruth Sullivan, Driedger on the Construction of Statutes, 3rd ed. (Toronto: Butterworths, 1994) at 517. 2 Ruth Sullivan, Statutory Interpretation, (Concord, ON: Irwin Law, 1997) at 186-87. 3 [1977] 1 S.C.R. 271 at 282. 4Supra note 2 at 508. 5Ibid at 543. 7Ibid. 8Ibid at 544-5.
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In December of 2006, the Ontario Legislature passed Bill 107, An Act to Amend the Human Rights Code. The major focus of the Bill was to allow for direct access to the Human Rights Tribunal, thereby eliminating the previous procedure where the Human Rights Commission in effect had carriage on any case before the Tribunal.
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Introduction
corroborated the truth of
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Bill C-55, An Act to establish the Wage Earner Protection Program Act, to amend the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act and to make consequential amendments to other Acts, received Royal Assent on Friday, November 25, 2005, becoming Chapter 47 of the Statutes of Canada, 2005. However, as a result, the rush to pass this legislation before the dissolution of the 38th Parliament pre-empted the normal committee review process. Consequently, the Act has not yet been proclaimed in force. The most current expectation is that the Act, together with comprehensive amending legislation, will be tabled in February 2007 by Minister Blackburn (the Minister of Labour, not the Minister of Industry). If unanimous consent is given, the Act, as amended, will likely be in force by the end of 2007.
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Is a regulatory barrier impeding your client’s access to an export market? Does a government measure discriminate against or otherwise harm your client’s operations? In recent years, there have been significant developments in international trade and investment protection law that offer potential remedies for regulatory measures that have a negative impact on business. International trade and investment agreements, including the North American Free Trade Agreement (NAFTA),1 the agreements of the World Trade Organization (WTO),2 and other regional and bilateral agreements, are having a growing influence on Canadian law and policy-making, and are creating opportunities for Canadian business. This is due, in large part, to the widening scope of these agreements, and significant improvements in the litigation and settlement of disputes that arise in respect of matters covered by them.
On January 1, 1992, Imperial Oil Limited (“Imperial”) introduced a comprehensive alcohol and drug program which included random alcohol and drug testing of safety sensitive employees. Entrop v. Imperial Oil Limited1 is one of the leading human rights cases in Canada on alcohol and drug testing. The Ontario Court of Appeal accepted that random alcohol testing was a bona fide occupational requirement for employees in safety-sensitive positions, provided Imperial accommodated employees who tested positive, to the point of undue hardship. The Court found that the Board of Inquiry, whose decisions were the subject of the appeal, had no jurisdiction to inquire into the drug testing provisions of Imperial’s policy, and set those findings aside. However, Mr. Justice Laskin decided to address the merits of the various aspects of Imperial’s policy on drug testing in any event. He found that random drug testing suffered from a fundamental flaw, a positive drug test using urinalysis shows only past drug use, not impairment. While the findings regarding drug testing are obiter dicta, the case remains important in relation to drug testing. 
This article originally appeared in Eye on Privacy, Volume 7, No. 1, October 2006.
LeVan v. LeVan,1 a recent decision of the Ontario Superior Court of Justice, provides practitioners with new insight into the proper manner in which domestic contracts should be advised upon and drafted. In LeVan, the central issue in dispute was whether the parties’ marriage contract should be set aside and statutory equalization of their property ordered in its place. Justice Backhouse, in a decision that should serve as a cautionary tale for practitioners and clients alike, found that the parties' marriage contract should be set aside due to, among other factors, Mr. LeVan's failure to make full and complete disclosure of his assets and liabilities as required by the provisions of the Family Law Act (Ontario).2 
Mr. and Mrs. LeVan co-habited for a year before the beginning of their seven-year marriage, which produced two children. Their marriage contract was drafted and executed during the period of their engagement, which lasted six months. Mr. LeVan, whose family controlled Westcast Industries Inc., a major car and truck part supplier, introduced the idea of the marriage contract to his future wife as a means of protecting his family's business interests. Mr. LeVan's parents had created a complex corporate structure of companies and trusts in order to keep their interests in Westcast within their family, and all of their children were aware of the necessity of procuring marriage contracts with their spouses for this purpose. 
This article originally appeared in the Young Lawyers’ Division Newsletter, Volume 14, No. 2, December 2006.