Thursday, November 2, 2017

Court Of Appeal Vacates Its Security for Costs Order in Ecuadorian Litigation against Chevron

When I last reported on this case Yaiguaje v. Chevron Corporation 2017 ONCA 827, less than a month ago, I reported that Justice Gloria J. Epstein of the Ontario Court of Appeal had ordered that the Ecuadorian plaintiffs post security for costs of more than $942,000 in order to continue with an appeal from a summary judgment order dismissing their against Chevron Canada.  In a decision released on October 31, 2017, a three judge panel of the Ontario Court of Appeal unanimously reversed Justice Epstein’s decision and vacated her order.  The panel (Justices Hoy, Cronk and Hourigan) held that the unique factual circumstances of this case compelled the conclusion that the interests of justice required that no order for security for costs be made.  Unlike their colleague, Justice Epstein, the panel concluded that the motion for security for costs was simply a tactical move made by Chevron to end the litigation.


The panel agreed that under rules of civil procedure, the court may make an order for security for costs where it is “just” to do so.   It held that the rule, as written, was permissive not mandatory and that even where the requirements of the rule have been met, a motion judge has discretion to refuse to make the order.  The panel held that the overarching principle to be applied in all of the circumstances is the justness of the order sought.


Because Justice Epstein’s decision was discretionary, it should be afforded deference.  However, an error in principle is one of the bases on which the court may interfere with a discretionary order. 


The panel held that in deciding motions for security for costs, judges are obliged to first consider the specific provisions of the rules governing such motions and then effectively take a step back and consider the justness of the order sought in all the circumstances of the case, with the interests of justice at the forefront.  They held that Justice Epstein had failed to take into account the second part of that analysis and that failure constituted an error in principle.  It therefore fell to the appeal panel to conduct the necessary analysis of the justness of the order.


In concluding that no order for security for costs should be made in this case, the panel considered the following:


  1. the Ecuadorian plaintiffs were seeking to enforce a judgment in which they have no direct economic interest.  Funds collected on the judgment will be paid into a trust and net funds are to be used for environmental rehabilitation or health care purposes in Ecuador.   In essence, this is public interest litigation;
  2. although there is no direct evidence of impecuniosity before Justice Epstein, the panel held that it would be highly impractical to obtain this evidence from the representative plaintiffs, let alone the 30,000 people who would indirectly benefit from the enforcement of the judgment.  The court found “there can be no doubt that the environmental devastation to the appellants’ lands has severely hampered their ability to earn a livelihood” and that if they accept the findings that underlie the Ecuadorian judgment, Texaco Inc. contributed to the appellants’ misfortune;
  3. in contrast, Chevron Corporation and Chevron Canada have annual gross revenues in the billions of dollars.  It is difficult to believe that either of these two corporations require protection for costs awards that could amount to a miniscule fraction of their annual revenues;
  4. there should be no bright line rule that a litigant must establish that litigation funding is unavailable to successfully resist a motion in an appeal for security for costs.  In this case counsel for the appellants advised the court that he was operating under a contingency arrangement and there was evidence that Chevron Corporation has sued some of the appellants’ former third party funders and the funders withdrew their financial support;
  5. it can’t be said that this case is wholly devoid of merit;
  6. there is no doubt the legal arguments asserted by the appellants are innovative and untested but that does not foreclose the possibility that one or more of them may eventually prevail; and
  7. the history of the litigation which has been ongoing for almost 25 years makes it clear that Chevron has and will employ all available means to resist enforcement of the judgment.  This reality makes it difficult to accept that the motion for security for costs is anything more than a measure intended to bring an end to the litigation. 
    For all of those reasons, the court set aside Justice Epstein’s order and denied Chevron’s motion to require the Ecuadorian plaintiffs to post security for costs on the appeal.      



Wednesday, November 1, 2017

UK Court Says Dishonesty Not An Essential Element of Cheating


In a judgment given on October 25, 2017, five justices of the Supreme Court of the United Kingdom held unanimously that dishonesty was not an essential element of the civil tort of cheating. 


In Ivey v. Genting Casinos (UK) Ltd t/a Crockfords [2016] UKSC 67, the Supreme Court upheld the decision of Mr. Justice Mitting of the Queen’s Bench Division of the High Court of Justice.  Lord Hughes wrote the decision for the court (Lord Neuberger, Lady Hale, Lord Kerr and Lord Thomas all agreed). 


The facts giving rise to this case are unique.  The claimant is Phillip Ivey, an American professional gambler.  Mr. Ivey widely acknowledged to be one of the world’s best poker players.  He also plays blackjack, craps, roulette and baccarat.  At issue in this case is a variant of baccarat known as Punto Banco.


How to Play Punto Banco


The facts of this case are not in dispute.  Punto Banco is not a game of skill.  It is played with eight decks of cards, 416 cards in total, which are dealt from a shoe - face down by a croupier.  The croupier deals cards in a sequence from which no deviation is permitted to two positions on the table in front of her marked “player” (the Punto) and “banker” (the Banco), hence the name of the game.  The croupier deals one card to player, one to banker; a second card to player and a second to banker.  In some circumstances, she must deal one further card either to player or to banker or to both.  The basic object of the game is to achieve, on one of the two positions, a combination of two or three cards which when added together is nearer to nine in total than the combination on the other position.  Aces to nine count at face value, ten to king inclusive count as zero.  Any pair or trio of cards adding up to more than ten, requires ten to be deducted before the total count, thus four plus five equals nine but six plus five (which equals eleven) equals only one in the game. 


The gambler (or "punter" as they are known in the UK) bets before any card is dealt and can bet on player or banker.  It is possible to bet on a tie.  The house edge in Punto Banco is 1.24% if player wins and 1.06% if banker wins.


Before play begins, the cards are cut to eliminate a proportion of the shoe from those to be played.  Traditionally, seven cards out of the 416 in the shoe were cut, but some casinos routinely eliminate more.




On August 20 and 21, 2012, Mr. Ivey played fifteen shoes of Punto Banco at Crockfords Club in London.  He was aided by another professional gambler, Cheung Yin Sun (“Ms. Sun”).  Mr. Ivey won just over ₤7.7 million.  There is no dispute that he used a technique known as edge-sorting to achieve that win.


A deck of playing cards is manufactured in order to present a uniform appearance on the back of the card.  The backs of some cards are, however, not exactly uniform.  In casino games in which the orientation of the back of the card may matter, the casino attempts to use cards in which the backs and the edges are indistinguishable.  Edge-sorting is possible when the manufacturing process causes tiny differences to appear on the edges of the cards so that for example the edge of one long side is marginally different from the edge of another long side.  In some cases the machine which cuts the card leaves very slight differences or patterns which are visible on long edges of the cards.  Manufacturers assert that this is not a defect but is within a contractually specified tolerance of 0.3 millimetres.  Before a card is dealt from the shoe, it sits face down at the bottom of the shoe displaying one of its two long edges.  It is possible for a sharp-eyed person sitting close to the shoe (like Mr. Ivey), to see which long edge it is.  The information thus gained is only useful to the gambler if he knows or has a good idea of what card it is. 


Cards with a face value of seven, eight and nine are high value cards.  If the gambler knows that when the first card is dealt whether it is a seven, eight or nine, always to player, is a seven, eight or nine, he will know it is more likely than not, that the player will win.  If it is not one of those three cards, he will know that it is more likely than not that the banker will win.  Such knowledge will give the gambler a long-term edge of about 6.5% over the house.  Three conditions must occur before the gambler can gain that knowledge:  (1)  the same shoe of cards must be used more than once; (2) cards with a face value of seven, eight or nine must be turned through 180 degrees by comparison with all other cards; and (3) when reshuffled no part of the shoe must be rotated.  Step two is the process known as edge-sorting. 


If the casino realizes that the seven, eight and nine cards are being turned, it will take simple steps to avoid giving the gambler an advantage.  It is therefore essential for edge-sorting to work that the croupier does not realize that the seven, eight or nine cards have been deferentially sorted.  Two people can rotate the cards – the gambler or the croupier.  If the gambler touches the cards, most casinos, including Crockfords, will not permit that shoe to be reused.  Therefore, for edge-sorting to work at Crockfords, it is essential that the croupier is persuaded to rotate the relevant cards without her realizing why she is being asked to do so.  Casinos routinely play on quirky and superstitious behaviour by gamblers.  It is in the casinos’ interest that gamblers should believe that a lucky charm or practice will improve their chance of winning.  Consequently, a wide variety of requests by gamblers, particularly those willing to wager large sums, like Mr. Ivey, are accommodated by casinos.


Ivey’s Gambit


All of the games of Punto Banco that Mr. Ivey and Ms. Sun played were captured on CCTV, contemporaneously with audio recording.  The moment they persuaded the croupier, Kathy Yau, to rotate the cards was as 9:00 p.m. on August 20, 2012. 


Mr. Ivey began the Punto Banco game by betting modestly by his standards – between ₤4,000 to ₤75,000 per bet.  He was losing.  At 8:56 p.m. he requested a new shoe of cards.  At 8:57 p.m., Mr. Ivey asked the senior croupier overseeing the game, “If I win, can I say I want the same cards again?”, to which the senior croupier replied yes “because he was not bending them”.   Mr. Ivey had avoided touching the cards from either the first or second shoe onwards.  At that point, Justice Mitting describes in detail the video proceedings at the Punto Banco table captured by the CCTV.  Mr. Ivey and Ms. Sun persuaded the croupier to cut only seven cards from the end of the shoe.  Ms. Sun persuaded the croupier to turn the cards in a particular way in order to “change her luck”.  They then persuaded the croupier to keep the same shoe because they had won with that shoe.  The cards were reshuffled by a machine but the croupier did not rotate them before they were shuffled.  Mr. Ivey increased his betting so that the average stake was never less than ₤149,000.  By the end of the game he had won just over ₤7.7 million.  He was provided with a receipt for that amount and told it would be wired to him.


Crockfords’ Investigation


Crockfords’ practice when any large win by a gambler occurs is to conduct an investigation to determine how it happened.  Its investigation determined that Mr. Ivey had been edge-sorting, which he later freely admitted.  Accordingly, Crockfords did not pay Mr. Ivey his winnings but refunded him his stake of ₤1 million.  Mr. Ivey sued Crockfords for his winnings.


Trial Decision


The casino denied liability on, among other grounds, that there was in implied term that Mr. Ivey would not cheat and that term had been broken. 


Justice Mitting held that if Mr. Ivey had cheated then he would not be entitled to recover his winnings.  He also found that in the UK there was a “complete dearth of authority on cheating at common law, at least in the civil context".  In addition, there was a dispute among gaming experts as to whether edge-sorting does or does not amount to cheating.  Experts were called by both parties. 


Mr. Ivey described what he and Ms. Sun did as “legitimate gamesmanship”.  While the trial judge was not satisfied that the edge-sorting amounted to deception of such a kind as to vitiate the gaming contract, he held that it was deception nonetheless.  Mr. Ivey and Ms. Sun succeeded in persuading the casino staff not to depart from their usual practice of humouring high stakes gamblers by acceding to a request which in their view did not affect the outcome of the game.  But it did. 


The fact that Mr. Ivey did not see himself as cheating was not determinative of the issue.  The trial judge held that what he did amounted to cheating because:  (1)  he gave himself an advantage throughout the play of the sixth and subsequent shoes by knowing or having a good idea whether the first card was or was not a seven, eight or nine; (2)  he did so by using the croupier as his innocent agent by turning the seven, eight and nine cards differentially; and (3) he did so in circumstances in which he knew that she and her superiors did not realize the consequence of what she had done at his instigation. 


Accordingly, the judge found that Mr. Ivey had converted a game of essentially pure chance into a game in which his knowledge was greater than that of the croupier and greater than that which he would reasonably have expected it to be. 


Accordingly, the judge found that conduct that amounted to cheating for the purposes of civil law and it was immaterial that the casino could have protected itself against the cheating by simple measures.


The Appeal


Mr. Ivey appealed this decision to the Supreme Court.  The court dismissed his appeal and agreed with the trial judge.  In doing so, it held that it was necessary to determine whether cheating necessarily involves dishonesty.  It held that the answer was no.  Mr. Ivey had argued that he had not been dishonest, he had just simply engaged in “advantage play”. 


The court rejected that argument.   It held that cheating's essentials normally involve a deliberate act designed to gain an advantage in the play which is objectively improper given the nature, parameters and rules of the game.  The Court of Appeal agreed with the trial judge’s conclusions that Mr. Ivey’s action amounted to cheating.  It held that it is an essential element of Punto Banco that the game is one of pure chance, with the cards delivered entirely at random and unknowable by the gamblers or the house.  The court held that what Mr. Ivey did was "to stage a carefully planned and executed sting".  The key factor was arranging of the several packs of cards in the shoe differentially sorted so that Mr. Ivey would not know whether the next card was a high or low value one.  However, he had gained the knowledge through the unwitting but directed actions of the croupier, tricking her into thinking that what she did was irrelevant.  The court found that what Mr. Ivey did was much more than observe the cards.  He took positive steps to fix the deck.  That conduct, in a game which depends on random delivery of unknown cards constituted cheating.  While it was cleaver and skillful and must have involved what the court referred to as “remarkably sharp eyes”, it cannot alter that truth.     


After a detailed review of the law, the court held that the facts of the case did not arise to the legal element of dishonesty.  However, it was incorrect to suggest that the trial judge’s findings that Mr. Ivey was truthful when he said that he did not regard what he did as cheating amounted to a finding that his behaviour was honest.  It was not.  It was a finding that he was, in that respect, truthful.  A dishonest person may sometimes be truthful about his dishonest opinions.  The court held that the better conclusion was that Mr. Ivey’s conduct was, contrary to his own opinion, cheating and was, contrary to his own opinion also dishonest. 

However, the court also held that dishonesty was not an essential element of the civil tort of cheating in the sense that there was no requirement that a defendant must appreciate that his conduct was dishonest.




Friday, October 6, 2017

Ecuadorian Villagers Ordered to Post Security for Chevron's Legal Costs

This is yet another chapter in the long-running saga in the case of Yaiguaje v. Chevron Corporation (2017 ONCA 741).  It is also the seventh time that this case has been a subject of a blog post by me. 


In this instalment, Justice Gloria J. Epstein, of the Ontario Court of Appeal, ordered that the Ecuadorian plaintiffs post security for costs of over $940,000  –  approximately $591,000 for Chevron Canada and $352,000 for Chevron Corporation – in order to continue with an appeal from a summary judgment order dismissing the plaintiffs’ action against Chevron Canada. 


Background in Ecuador


From 1964 to 1992, Texaco Inc., its subsidiaries and various partners engaged in oil extraction activities in the Lago Agrio region of Ecuador’s Amazon basin.  Litigation followed against Texaco alleging a variety of environmental, health and other tort claims related to Texaco’s extraction activity.  Texaco and the Ecuadorian plaintiffs finalized a settlement in 1998.  Chevron Corporation acquired Texaco in 2001.  Litigation continued to take place concerning the validity and the effect of the settlement. 


The Ecuadorian plaintiffs in this case represent approximately 30,000 indigenous villagers from Ecuador’s Oriente Region.  After seven years of litigation, in February of 2011, an Ecuadorian trial court found Chevron liable for US$17.2 billion.  The amount of the judgment was subsequently reduced to US$9.5 billion.


Chevron, which has no assets in Ecuador, refused to acknowledge the Ecuadorian judgment.  The plaintiffs have sought to enforce the judgment in various jurisdictions around the world.    


North American Litigation


Chevron sought and obtained a global anti-enforcement injunction against the plaintiffs in the United States District Court for the Southern District of New York.  The District Court judge found that the Ecuadorian judgment had been obtained by fraud and prohibited the judgment from being enforced in the United States.  On appeal, the United States Court of Appeal, Second Circuit, held that the plaintiffs could seek to enforce the judgment in any country in the world where Chevron had assets. 


In 2012, the plaintiffs commenced an action in Ontario against Chevron and Chevron Canada, seeking to enforce the judgment.  Chevron and Chevron Canada initially disputed whether Ontario courts had jurisdiction simpliciter to recognize and enforce the judgment.   Ultimately, the Supreme Court of Canada, in a decision released in September 2015, held that Ontario courts had jurisdiction over the enforcement action.  However, the Supreme Court also held that Chevron and Chevron Canada were free to argue against enforcement based on their separate corporate personalities and any other applicable defences. 


After the Supreme Court ruled, the enforcement proceedings came back before Justice Hainey of the Ontario Superior Court of Justice on two motions for summary judgment.  Chevron Canada moved for summary judgment against the plaintiffs and the plaintiffs moved for summary judgment against Chevron Canada.  In addition, the plaintiffs moved to strike the defences pleaded by Chevron in its statement of defence. 

Summary Judgment Ruling

Chevron is a Delaware company with its head office in California.  Chevron Canada is a seventh level indirect subsidiary of Chevron with its head office in Calgary, Alberta.  The plaintiffs, in addition to seeking payment of the US$9.5 billion, also sought a declaration that the shares of Chevron Canada are exigible to satisfy the Ecuadorian judgment. 


Justice Hainey found in favour of Chevron Canada on both issues and granted summary judgment in its favour.  He held that the shares and assets of Chevron Canada were not exigible and available for execution and seizure pursuant to the Execution Act to satisfy the Ecuadorian judgment.  He also held that Chevron Canada’s corporate veil should not be pierced so that its shares and assets were available to satisfy the judgment.


Court of Appeal’s Security for Costs Ruling


The plaintiffs have appealed that decision to the Ontario Court of Appeal.   Chevron Canada and Chevron sought an order for security for costs in excess of over US$1 million, US$160,000 for the appeal and the rest for the previous proceedings. 


Justice Epstein held that the general principles for posting security for costs applied to such a motion in the Court of Appeal.  Under Ontario's rules of civil procedure, an order for security for costs could be made where plaintiffs are ordinarily resident outside of Ontario.  Justice Epstein found that in this case there was no dispute that the Ecuadorian plaintiffs reside outside of Ontario.  The issue and relevant considerations were:  could they demonstrate on a balance of probability that they were impecunious and, if not, could they demonstrate that there was a good chance of success on the appeal.


Novel Submission by Plaintiffs


In addition, the Ecuadorian plaintiffs also advanced what the judge referred to as “a novel submission”, one that their counsel submitted should become part of the law pertaining to security for costs, i.e. that in an action for recognition and enforcement of a foreign judgment which was tantamount to a class action, security for costs should never be ordered. 


Justice Epstein found that the plaintiffs could not demonstrate impecuniosity.  They had filed no evidence as to their finances beyond three settlement agreements which she held were not “evidence” in any event. 


As for the merits of the appeal, Justice Epstein agreed with Justice Hainey’s analysis and concluded that the plaintiffs did not have a good chance of success on the appeal. 


Justice Epstein considered in detail the plaintiffs argument that the court should adopt “a new approach” to recognition and enforcement actions.  However, she did not accept the plaintiffs submission that the action was analogous to a class proceeding.  She held that even if she were to accept that argument, this would not prevent security for costs being ordered where justice of the case warrants it.


Justice Epstein held that litigants seeking to enforce a foreign judgment should not be put in a more advantageous position than domestic litigants.  The Supreme Court of Canada’s earlier decision in the case did not change that principle.  It stood for the proposition that Canadian courts should take a "generous approach" in finding jurisdiction to allow litigants holding foreign judgments to bring enforcement actions.  Justice Epstein held that she did not read the SCC's decision as saying that when such enforcement actions are brought before Canadian courts they should be treated differently than cases involving domestic litigants.  In fact, she held that the Supreme Court’s Chevron decision actually undercut the plaintiffs argument.   In that decision, Justice Gascon had held, “enforcement is limited to measures – like seizures, garnishments or executions – that can be taken only within the confines of the jurisdiction, and in accordance with its rules” and that “whether recognition and enforcement should proceed depends entirely on the enforcing forum’s laws”.   

As a result, the Court of Appeal was unable to accept as a general rule, that courts should approach security for costs differently in an appeal involving enforcements of foreign judgments and ordered that the Ecuadorian plaintiff's post security for costs.




Thursday, September 28, 2017

Two Year Limitation Period Applies to Foreign Judgments

In the recent case of Independence Plaza One Associates, LLC v. Figliolini 2017 ONCA44, the Ontario Court of Appeal confirmed that:


  1. a two-year limitation period applies to a proceeding on a foreign judgment; and
  2. the limitation period begins to run, at the earliest, when the time to appeal the foreign judgment has expired or, if an appeal is taken, the date of the appeal decision.

The court held that the time may be longer if the claim was not “discovered” within the meaning of section 5 of the Limitations Act, 2002 (“Limitations Act”) until a date later than the appeal decision.
In this case, the plaintiff had obtained a judgment against the defendant on January 24, 2013 in the New Jersey Superior Court in the amount of US$115,248.  The defendant’s appeal to the Appellant Division of the court was dismissed on July 17, 2014. 
The plaintiff brought an application in the Ontario Superior Court of Justice based on the New Jersey judgment.  The application was commenced more than two years after the New Jersey judgment was rendered but less than two years after the dismissal of the appeal.  The appellant, in the Court of Appeal, pleaded that the application was time-barred because it was commenced more than two years after the New Jersey judgment.  The application judge rejected this position and granted judgment in favour of the respondent. 
The Ontario Court of Appeal (Chief Justice Strathy and Justices Pardu and D. M. Brown) dismissed the appeal but considered two issues:

  1. whether no limitation period applies to a proceeding on a foreign judgment because it falls under section 16(1)(b) of the Limitations Act; or
  2. whether, if there is a two year limitation period, the time does not begin to run until appeal rights in the foreign jurisdiction have been exhausted. 


The decision of the court was delivered by the Chief Justice.  The court began its analysis by stating that the correct approach to resolving the two questions raised on the appeal begins and ends with provisions of the Limitations Act, which is a comprehensive and exhaustive scheme for dealing with limitation periods.


Justice Strathy explained the purposes of statutes of limitation.  He held that such statutes reflect public policy about efficiency and fairness in the justice system.  They promote finality and certainty in legal affairs so that potential defendants are not exposed indefinitely for past acts.  They ensure the reliability of evidence because evidence becomes unreliable with the passage of time and limitation periods promote diligence because they encourage litigants to pursue claims with reasonable dispatch.  This latter justification was related to this case. 


The Chief Justice explored former Limitations Act in Ontario, the history of Limitations Act and the “new” Limitations Act.


He reviewed section 16(1)(b) of the Limitations Act that provides that “there is no limitation period in respect of a proceeding to enforce an order of a court, or any other order that may be enforced in the same way as an order of the court”.     


The issue is whether that section applied to a proceeding on a foreign judgment.  The court held that it did not.  After a lengthy discussion about what section 16(1)(b) applied to, Justice Strathy held that the common feature was the concept of enforceability.  Section 16(1)(b) of the Limitations Act applies to court orders and to other orders that are enforceable in the same way as a court order.   That common thread did not extend to foreign judgments.  Domestic judgments are directly enforceable in Ontario by means of the execution procedures in rule 60 of the Rules of Civil Procedure, including writs of seizure and sale, garnishment or the appointment of a receiver.  In contract, a foreign judgment creates a debt obligation in which a proceeding in Ontario must be brought first.  In other words, a foreign judgment is one step removed from being an order of an Ontario court for the purposes of section 16(1)(b) of the Limitations Act. 

Justice Strathy held that there were good reasons for giving different treatment for limitations purposes to Ontario judgments and foreign judgments, including the principle of territorial sovereignty.  In addition, a foreign judgment debtor has some limited defences to the recognition and enforcement of the foreign judgment.  Accordingly, he concluded that section 16(1)(b) of the Limitations Act did not apply to proceedings of foreign judgments.


The Court of Appeal did agree with the application’s judge with respect to the two year limitation period. 


It held that the question of a judgment’s finality in the foreign jurisdiction is not relevant to statutory limitation periods to commence a proceeding on a foreign judgment but to the conditions that a foreign judgment creditor must satisfy to succeed on the proceeding.  The test under the Limitations Act is not whether the judgment is final it is when the claim is discovered, a fact that is ascertained through the application of section 5(1) of the Limitations Act aided by the presumption in section 5(2).


Section 5(1) provides that a claim is discovered on the earlier of the day on which the claimant first knew that having regard to the nature of the injury or damage a proceeding would be an appropriate means to seek to remedy it.  Cases have held that the legislature added the words “appropriate means” as an element of discoverability.  Appropriate means legally appropriate.  Appropriateness must be assessed on the facts of each case.


In the usual case, it would not be legally appropriate to commence a legal proceeding on a foreign judgment in Ontario until the time to appeal the judgment in the foreign jurisdiction has expired or all appeal remedies have been exhausted. 


Such an approach is consistent with other cases, it avoids the risk of multiplicity of proceedings by not requiring the judgment creditor to commence a proceeding on a foreign judgment in Ontario before all proceedings in the foreign jurisdiction had run their course.  It furthers the purpose of the Limitations Act by deterring the unnecessary litigation that may result from commencing an Ontario proceeding on a foreign judgment that is subsequently overturned.


The Court of Appeal held that the foregoing approach to discoverability does not preclude a foreign judgment creditor seeking such relief as an interim Mareva injunction or a stay of execution pending the appeal.     



Friday, September 15, 2017

Supreme Court Okays Extradition of Alleged Honour Killers to India

India v. Badesha, 2017 SCC 44


On June 9, 2000, the body of Jaswinder Kaur Sidhu was discovered in a village in the Indian State of Punjab.  It is the theory of the Indian government that she was the victim of an honour killing arranged by her uncle, Surgit Singh Badesha (“Badesha”) and her mother, Malkit Kaur Sidhu (“Sidhu”).  Both Badesha and Sidhu are Canadian citizens and live in Canada.  India sought the extradition of Badesha and Sidhu for the offence of conspiracy to commit murder.  The Minister of Justice (“Minister”) ordered their surrenders after receiving assurances from India regarding their treatment if incarcerated, including health, safety and consular access, and after determining in accordance with the relevant provisions of the Extradition Act, that their surrenders would not be unjust or oppressive.  A majority of the British Columbia Court of Appeal concluded that the Minister’s orders were unreasonable and set them aside.


On appeal to the Supreme Court of Canada, in a 9 – 0 decision, the court restored the Minister’s surrender orders and allowed the appeal.   


The judgment of the court was delivered by Justice Moldaver. 


Justice Moldaver wrote: 


The Minister’s surrender orders are subject to review on a standard of reasonableness.  In this case, it was reasonable for the Minister to conclude that, on the basis of the assurances he had received from India, there was no substantial risk of torture or mistreatment of Badesha and Sidhu that would offend the principles of fundamental justice protected by s. 7 of the Canadian Charter of Rights and Freedoms, and that their surrenders were not otherwise unjust or oppressive. 


Where a person sought for extradition faces a substantial risk of torture or mistreatment in the receiving state, their surrender will violate the principles of fundamental justice and the Minister must refuse surrender under s. 44(1)(a) of the Extradition Act.  Where there is no substantial risk of torture or mistreatment and the surrender is Charter compliant, the Minister must nonetheless refuse the surrender if he is satisfied that, in all of the circumstances, it would be otherwise unjust or oppressive.  In this regard, the Minister may take into account the circumstances alleged to make the surrender inconsistent with the Charter, the seriousness of the alleged offence and the importance of Canada meeting its international obligations. 


In assessing whether there is a substantial risk of torture or mistreatment, diplomatic assurances regarding the treatment of the person may be taken into account by the Minister.  Where the Minister has determined that such a risk exists and that assurances are therefore needed, the reviewing court must consider whether the Minister has reasonably concluded that, based on the assurances provided, there is no substantial risk.  However, diplomatic assurances need not eliminate any possibility of torture or mistreatment; they must simply form a reasonable basis for the Minister’s finding that there is no substantial risk of torture or mistreatment.  The reliability of diplomatic assurances depends on the circumstances of the particular case and involves the consider of multiple factors.


In this case, the Minister was satisfied that, based on the assurances he received from India regarding their treatment, Badesha and Sidhu would not face a substantial risk of torture or mistreatment.  The Minister took into account relevant factors in assessing the reliability of the assurances, which formed a reasonable basis for the Minister’s conclusion that their surrenders would not violate the principles of fundamental justice.  The inquiry for the reviewing court is not whether there is no possibility of torture or mistreatment, but whether it was reasonable for the Minister to conclude that there was no substantial risk of torture or mistreatment. Given the circumstances, the Minister’s decision to order the surrenders of Badesha  and Sidhu fell within a range of reasonable outcomes.



Thursday, August 3, 2017

Alberta Court of Appeal Closely Examines Employer's Privilege Claims

The Alberta Court of Appeal recently released its decision in Alberta v. Suncor Energy Inc., 2017 ABCA 221.  The court upheld the importance of lawyer-client and litigation privileges, holding that they play a "central role" in the Canadian justice system,.  However, where an employee had been fatally injured, the court took a closer look at the factual basis for the employer's claims of privilege over documents that formed part of its investigation into the death. 
On April 20, 2014, an employee of Suncor Energy Inc. (“Suncor”) was fatally injured at a worksite near Fort McMurray, Alberta.  The Alberta Occupational Health and Safety (“OHS”) officers issued a stop-work order that day.  Immediately after the accident, anticipating litigation, Suncor began an internal investigation and threw a privilege blanket over all information relating to the investigation.  Legal counsel for Suncor directed the investigation team to segregate all documents and to endorse all material as “privileged and confidential”. 
The Suncor investigation team interviewed witnesses, recorded statements and collected photographs.  On May 5, 2014, OHS issued a demand under relevant section of the Alberta Occupational Health and Safety Act (the “Act”) for Suncor to provide copies of the witness statements, as well as employees’ names and contact information.  Suncor replied and provided the names and contact information of employees but asserted privilege over the witness statements collected by its investigation team.   Later, nearly a year after Suncor had provided OHS with a copy of its report on the accident, OHS issued another demand for information and copies of witness statements, notes, records, photos and other documents collected by Suncor.   Suncor claimed privilege over certain documents and information.  OHS issued an administrative penalty against Suncor.
The province of Albert filed an originating application seeking an order that Suncor provide the refused materials and allow OHS to interview Suncor’s internal investigators or at least provide further particulars about the claims of privilege.  At the return of the application, the judge held that the dominant purpose of Suncor’s internal investigation was in contemplation of litigation and upheld its claim for privilege on that basis.  The judge ordered Suncor to meet with a referee who would assess the claims of privilege and provide recommendations to the court. 
Alberta appealed that decision to the Alberta Court of Appeal. 
The Alberta Court of Appeal concluded that the application judge had erred in finding that the dominant purpose of Suncor’s investigation was in contemplation of litigation so as to clothe all material “created and/or collected” during the investigation with legal privilege.  However, it also held that the judge had not erred in invoking the referee process under the Alberta Rules of Court. 

The Court of Appeal held that the relevant sections of the Act did not preclude claims of privilege.  After the application judge's decision was issued, the Supreme Court of Canada clarified the law pertaining to lawyer-client privilege and litigation privilege in Lizotte v. Aviva Insurance Company of Canada and in Albert (Information and Privacy Commission) v. University of Calgary.   Those decisions confirmed the central role of legal privilege in the justice system as well as the legal and policy reasons behind why privilege must be protected.  The Supreme Court held that both litigation privilege and lawyer-client privilege “cannot be abrogated by inference and that clear, explicit and unequivocal language is required in order to lift it”.
Lawyer-client privilege attaches to confidential communications between a client and a legal advisor that are connected to giving or seeking legal advice.  The communication does not have to be in contemplation of litigation and the privilege is of permanent duration. 
Litigation privilege attaches to documents created for the dominant purpose of litigation.  This includes any document created for the dominant purpose of preparing for related litigation that “remains pending or may reasonably be apprehended”.  The object of this inquiry is the purpose for which the document was created or came into existence as distinct from the purpose for which it may have been collected or put to use.   
Accordingly, the Court of Appeal held that if legal privilege does not cover particular records or information, and the requirements of the Act apply to those records or information, the question of whether the Act operates to override any aspect of privilege disappears.  Once the procedure for assessing the contested materials is complete, records or information sifted out of the scope of privilege will be subject to consideration under the correct legal interpretation of the Act.
In this case, the appeal judges found that the application judge had erred in finding that the dominant purpose of the investigation was in contemplation of litigation and that Suncor created and/or collected documents and material with the dominant purpose that they would assist in any litigation.   It held that a referee appointed under the Alberta Rules of Court must focus on the dominant purpose for creating each document as opposed to the purpose for its collection. 
Suncor could not simply by having legal counsel declare that an investigation had been commenced, throw a blanket over all materials “created and/or collected during the internal investigation” so as to clothe them with lawyer-client or litigation privilege.  The Court of Appeal held that where a workplace accident has occurred and the employer has statutory duties under the Act and simultaneously undertakes an internal investigation claiming legal privilege over all materials derived as part of that investigation, an inquiry is properly directed to a referee under the Alberta Rules of Court to determine the dominant purpose for the creation of each document.



Tuesday, June 20, 2017

Supreme Court finds no Discrimination in Company's Drug Use Policy

In a decision that was made remarkable by the dissent of a single judge, the Supreme Court of Canada dismissed an appeal from an employee of a mining company whose employment was terminated on the basis that he had violated his employer’s drug use policy.  See Stewart v. Elk Valley Coal Corp. 2017 SCC 30.
The employee, Ian Stewart, worked driving a loader in a mine operated by the company.  The mine operations were dangerous and maintaining a safe work site was a matter of great importance to the employer and its employees.  To ensure safety the employer implemented a policy requiring that employees disclose any dependency or addiction issues before any drug-related incident occurred.  If they did, they would be offered treatment.  However, if they failed to disclose and were involved in an incident and tested positive for drugs, their employment would be terminated.
Stewart used cocaine on his days off.  He did not tell his employer that he was using drugs.  When he was involved in an accident with his loader at work, he tested positive for drugs and later said that he thought he was addicted to cocaine.  The company terminated his employment.  Stewart, through his union representative, argued that he was terminated for addiction and that constituted discrimination under section 7 of the Alberta Human Rights, Citizenship and Multiculturalism Act.
The Albert Human Rights Tribunal (“Tribunal”) held that Stewart was terminated for breaching the company policy, not because of his addiction.  Its decision was affirmed by the Alberta Court of Queen’s Bench and by the Alberta Court of Appeal.
There were three sets of reasons written by the judges of the Supreme Court.  Six judges for the majority, two in separate but concurring in the result, and one dissent.
The majority (reasons written by Chief Justice McLachlin) held that the Tribunal decision was reasonable.  There was evidence that was capable of supporting the Tribunal’s conclusion that the reason for Stewart’s termination was not addiction but breach of a policy.  The separate concurring reasons were written jointly by Justices Moldaver and Wagner.  They held that the Tribunal’s conclusion that Stewart’s direct dependence was not a factor in his termination was unreasonable but that the Tribunal reasonably held that the employer had met its obligation to accommodate Stewart to the point of undue hardship.  Justice Gascon, the only dissenting judge, held that the Tribunal had improperly considered the issues in the case and effectively excluded Stewart from the scope of human rights protections.  While the Tribunal had cited the proper legal test for prima facie discrimination, the matter in which it applied the test and the lack of an evidentiary foundation for its findings demonstrated that its holding on “contribution” was unreasonable and thus unworthy of deference. 
Six Justices for the Majority
The majority decision was supported by  Justices McLachlin, Abella, Karakatsanis, Cote, Brown and Rowe.  The Tribunal had found that Stewart had not established prime facie discrimination.  The majority held that the issues before the Tribunal were within its purview and attracted deference.  The only questions was whether the Tribunal’s decision was reasonable.  They found that there was evidence capable of supporting the Tribunal’s conclusion that the reason for the termination was not addiction but breach of the policy.  On the facts of this case, the Tribunal concluded that Stewart had the capacity to comply with the terms of the policy and that he would have been fired whether he was an addict or a casual user.  It was therefore not unreasonable for the Tribunal to conclude that there was no prima facie discrimination.  The Tribunal had unequivocally and repeatedly stated that addiction was not a factor in the company’s decision to terminate Stewart’s employment.  It also rejected the argument that denial prevented Stewart from disclosing his addiction prior to the accident.  While Stewart may have been in denial about his addiction, he knew he should not take drugs before working, had the ability to decide not to take them as well as the capacity to disclose his drug use to his employer.  Accordingly, the majority found that denial about Stewart’s addiction was irrelevant in this case.
The Two Concurring Justices
Justices Moldaver and Wagner held that the Tribunal’s conclusion that Stewart’s direct dependency was not a factor in his termination was unreasonable.  To show prima facie discrimination, Stewart was not required to show that his termination was not caused by his drug dependency, rather he had only to show that there was a connection between the protected ground – his direct dependency – and the adverse effect.  His exercise of some control over his drug use merely reduced the extent to which his dependency contributed to his termination.  It did not eliminate it as a factor in his termination. 
The two justices found that notwithstanding these factors, the Tribunal reasonably held that the employer had met its obligation to accommodate Stewart to the point of undue hardship.  Given the employer’s safety objectives and responsibilities at the coal mine, it was crucial to deter employees from using drugs in a manner that could negatively affect their work performance and potentially lead to devastating consequences.  Subjecting Stewart to an individual assessment or imposing an unpaid suspension for a limited period as a disciplinary measure instead of imposing the serious and immediate consequence of termination of his employment would have undermined the policies deterrent effect.   
The Lone Dissenter
Justice Gascon viewed the matter much differently than did the other 8 judges.  His dissent is logical and forceful.  .  He held that although drug dependence is a protected ground of discrimination in human rights law, stigma surrounding drug dependence – like the belief that individuals suffering from it are the authors of their own misfortune or that their concerns are less credible than those people suffering from other forms of disability – sometimes impair the ability of courts and society to objectively assess the merits of their discrimination claims.  He held that the improper considerations by the Tribunal effectively excluded Stewart from the scope of human rights protections. 
Justice Gascon held that a drug policy that automatically terminates employees who use drugs prima facie discriminates against individuals burdened by drug dependence.  The legal threshold for prima facie discrimination is whether the complainant’s protected ground is a factor in the harm they suffer (this is also called “contribution”).  In this case, drug dependence was a factor in Stewart’s drug use, so the policy under which Stewart’s employment was terminated for using drugs was  prima facie discriminatory.
Justice Gascon ruled that the analysis of prima facie discrimination and, in particular, contribution, is concerned with discriminatory effect, not discriminatory intent.  Contribution addresses the relationship between an employee’s protected ground and harm, not between the ground and the intent to harm that employee.  A ground need only be at least one of the factors linked to the employees harm.  The Tribunal unreasonably held that Stewart’s addiction did not contribute to his termination based on four conceptual errors:
  1. It required Stewart to make prudent choices to avoid discrimination.  Justice Gascon commented that requiring a complainant to be prudent in avoiding discrimination amounts to a sort of contributory fault defence in discrimination cases which places a burden on complainants to avoid discrimination, rather than on employers not to discriminate; it is irreconcilable with recently recognized statutory grounds that arguably implicate a complainant’s choices that are significant to their identity; generally contradicts the court’s rejection of drawing superficial distinctions between protected grounds and contact inextricably linked to those grounds; specifically contradicts the courts rejection of the view that choice makes drug users responsible for the harms of their drug use; re-enforces stigma by blaming marginalized communities for their choices; and substitutes the proper inquiry (i.e. whether drug-dependent individuals are adversely impacted by the policy) with an improper inquiry (whether drug dependent individuals are so overwhelmingly impacted by their addictions that any discrimination that they experience is caused exclusively by their addictions);
  2. The Tribunal limited Stewart’s protections to an assurance of formal equality.  While both dependant and recreational drug users will receive similar treatment for violating the policy, only drug-dependent persons will uniquely and disproportionately struggle in complying with the terms of the policy. 
  3. The Tribunal required Stewart to prove that he was treated arbitrarily or stereotypically, importing substantive consideration into the settled and low threshold for prima facie discrimination and shifting a justificatory burden from the employer onto the complainant; and
  4. The Tribunal at all times required Stewart to prove a causal relationship between his ground and harm, a higher bar than the mere “factor” threshold repeatedly adopted by the court.  Justice Gascon held that prima facie discrimination should not be narrowly construed to preserve the enforceability of drug and alcohol policies.  Doing so imports justificatory implications into the prima facie discrimination analysis and narrows the court’s recent jurisprudence that holds that terminating an employee for a reason related to addiction is precisely what it means for that addiction to be a factor in the employee’s harm.
Justice Gascon held that under the proper test, the evidence before the Tribunal could not support its conclusion that Stewart’s drug dependence did not contribute to his termination.  His residual control over his choices merely diminished the extent to which his dependence contributed to his harm, it did not eliminate it as a factor. 
A workplace policy that accommodates employees through mechanisms which are either inaccessible by the employee due to their disability or only applicable to the employee post-termination, cannot justify prima facie discrimination.  Reasonable accommodation requires that the employer arrange the employee’s work place or duties to enable the employee to do his or her work, if it can do so without undue hardship.  In the human rights context, it is not appropriate for the employer to forego individual assessment in the interest of deterrence even in the safety-sensitive atmosphere of this particular workplace and even though that environment motivates strict drug policies.
Finally, Justice Gascon found that none of the employer’s efforts at accommodating Stewart provided him with accessible accommodation during his employment and those efforts failed to consider his individual circumstances in a dignified manner.   Accordingly, the employer could not be said to have discharged its duty to accommodate Stewart as an employee up to the point of undue hardship.  As a result, the Tribunal’s findings to the contrary were unreasonable.