Downs Construction Ltd. v. Workers’ Compensation Appeal Tribunal, 2012 BCCA 392

In Downs Construction Ltd. v. Workers’ Compensation Appeal Tribunal, the British Columbia Court of Appeal (BCCA) held that a worker who fails to obtain workers' compensation benefits for a workplace injury is not entitled to sue his/her employer for a common law breach of duty. The judgment reinforces the historic trade-off in s. 10 of the B.C. Workers' Compensation Act (BCWCA), which bars an action for an injury arising out of and in the course of employment if the worker could bring a claim under s. 10 of the BCWCA. The BCCA found the trade-off was appropriate even if there may be a lacuna in the compensation scheme under the Act.

Chiasson J.A. indicated that the trial judge and the Workers' Compensation Tribunal (WCAT) misunderstood the purpose of the 'historic trade-off' embodied in s. 10 of the BCWCA. Rather than the trade-off merely being a quid pro quo in which workers exchange tort rights for compensation under the BCWCA, the trade-off involves workers relinquishing their right to sue their employers and co-workers, along with the benefits of potentially larger damages, in exchange for prompt and guaranteed no-fault compensation, in which employees may receive compensation for workplace injuries regardless of fault. He drew on the judgment by Sopinka J in Pasiechnyk v. Saskatchewan (Workers’ Compensation Board) [1997] 2 S.C.R. 890 to emphasize the complexity of the historic trade-off, but also on commentary by the Minister during the reading of the Bill which would become the BCWCA. Chiasson J.A. noted that the Minister's comments on the need for the compensation scheme to provide sustainable benefits reflect concerns at the core of the historic trade-off. In his view, it would be contrary to legislative intent if employees are permitted to bring tort claims “notwithstanding the action of the Legislature to curb such claims because they were having an adverse financial effect on employers”.

In this case, a worker claimed compensation for, inter alia, post traumatic stress disorder pursuant to s. 5.1 of the BCWCA, and also brought a tort claim against her employer and co-worker for mental stress. The BCCA held that while the worker was not entitled to benefits through the BCWCA because she did not fit the criteria required for compensation, the injury arose out of and in the course of employment. As such, the worker was not entitled to bring a tort claim against her employer or her co-worker for the workplace injury she suffered because of the “historic trade-off” principle.

Link to Decision

Carolyn Lambert

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Stanway v. Wyeth Canada Inc., 2012 BCCA 260

The British Columbia Court of Appeal considered whether an omission can constitute a deceptive act or practice under the Business Practices and Consumer Protection Act (BPCPA). Justice Kirkpatrick established that a failure to disclose could qualify as a deceptive act or practice even in the absence of any particular communicated misrepresentation. The appeal was dismissed.

The issue arose in an appeal from a class action certification order. The appellant, Wyeth, manufactured hormone therapy products containing hormones which were associated with an increased risk of breast cancer according to a 2002 Women's Health Institute study. The respondent class consisted of women who were diagnosed with breast cancer after having taken one of the hormone therapy drugs prescribed in Canada during the 27 year class period. The respondent alleged that Wyeth had conducted "deceptive acts or practices" under s.4(1) and s.4(3)(b)(vi) of the BPCPA by failing to "accurately disclose the risks of the hormone therapy" on their product monographs and labels. In doing so, they were alleged to have engaged in a "systemic course of deceptive conduct." The defendant interpreted Chalmers (Litigation Guardian of) v. AMO Canada LTD., [2010] BCCA 560 as allowing for a failure to disclose tied to specific representations. However, the defendant contended that "any claim under the BPCPA must rest on a representation" and that an omission in itself failed to meet this requirement.

The British Columbia Court of Appeal rejected this interpretation as well as the emphasis in Blackman v. Fedex Trade Networks Transport & Brokerage, [2009] BCSC 2001 on the BPCPA's lack of terms such as "failure to disclose" which had been included in its precursor, the Trade Practice Act. Justice Kirkpatrick highlighted the overall purpose of the Act and noted that since the BPCPA was "all about consumer protection...its terms should be interpreted generously in favour of consumers." This view was also held to be consistent with s.8 of the Interpretation Act. Finally, the court interpreted the wording of a "representation...that fails to state a material fact" in s.4(3)(b)(vi) in conjunction with the expansive language of s.4(1) which allows for "an oral, written, visual, descriptive or other representation" as "anticipat[ing] that an omission can constitute a deceptive practice."

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Sara Elcombe

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A.I. Enterprises and Schelew v. Bram Enterprises and Jamb Enterprises, 2012 NBCA 33

In this case, the New Brunswick Court of Appeal clarified the jurisprudence around the unlawful means tort. This appeal examines whether Canadian courts should adopt the narrow definition of “unlawful means” set out by the majority in OBG v. Allan [2007] UKHL 21 [“OGB”], a case which clarifies the tort in English law. Until this point, Canadian courts had adopted a broad and vague articulation which at times blurred the distinction between inducement torts and unlawful means torts. By building on the narrow definition of “unlawful means” set out by the majority in OGB, Robertson J.A. offers a general model that isolates the essential tenets of the unlawful means tort. In the proposed model, the claimant must establish the following:

1) the existence of a valid business relationship between the claimant and the third party;

2) the defendant knew or ought to have known of the relationship;

3) the defendant’s interference prevented the formation of a contract or its performance  in circumstances where there is no breach of the contract;

4) the defendant’s impugned conduct must qualify as unlawful means or as warranting exceptional treatment;

5) the unlawful means must not be directly actionable by the claimant;

6) the defendant must have intended to cause the plaintiff harm;  and

7) the defendant’s conduct must have been the proximate cause of the claimant’s loss.

This framework should also allow for the defendant to provide a defense of justification.

The issue in this case arose from a clause in a syndication agreement, which states that if the majority decides to sell the property, the minority has the right of first refusal for fifteen days, after which the majority will then have the right to seek out and sell the property to a third party. The minority shareholders did not want to sell the property and refused to exercise their right of first refusal. They proceeded to interfere with the sale of the property under the guise of the syndicate agreement. In reviewing the evidence, Robertson J.A. upheld the decision of the trial judge and found that the tort of unlawful means had been established.

The crux of the issue here was whether the independently actionable requirement should be flexible and allow for some categorical exceptions, bearing in mind that the tort is meant to fill in a gap in the law and be turned to when there is no other legal remedy for a wrong. Robertson J.A. found that the facts of the case at hand warranted exceptional treatment and, even if the requirement of not being independently actionable was not satisfied, the other independent causes of action were not sufficiently strong to support a finding of liability on their own.

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Megan Strachan

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Burrell v. Metropolitan Entertainment Group, 2011 NSCA 108

In Burrell v. Metropolitan Entertainment Group, the Nova Scotia Court of Appeal considered whether casino operators and public regulators owed either a statutory of common law duty of care to a gambling addicts.

The appellant became addicted to gambling and from between 1995 and 2003 he lost approximately $500,000 at the respondent’s casino. In 2004, at the request of the appellant, the respondent served the appellant with notice to stay away from the casino pursuant to s. 3(1) (e) of the Protection of Property Act, R.S.N.S. 1989, c. 363. This section makes it an offence to enter the premises when prohibited by notice. The notice excluding the appellant was renewed every six months.

Seeking to recover his losses prior to the 2004 notice, the appellant argued that the respondents had a duty of care to not permit him to gamble, either statutorily or at common law.  He argued that provisions in the Gaming Control Act, as well as Casino Regulations section 20(1), since repealed, which required casino operators to "implement policies and procedures" to identify and exclude gambling addicts, gave rise to such a duty.

Fichaud JA., writing for the Court, held that a casino operator did not owe a general common law duty of care to gamblers. However, once the casino undertook to exclude the appellant or if there was individually targeted promotion it created exceptional circumstances that could give rise to a duty of care. On the facts of the case, the appellant did not have a valid claim in negligence; his losses had pre-dated his exclusion from the casino, thereby lacking sufficient proximity to the duty of care owed, and even if general casino advertising to the public gave rise to a prima facie duty of care to all gamblers, the decision to allow casino gambling was a governmental policy choice, not an operational choice, and therefore did not satisfy the second stage of Anns.

December 2, 2011
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Heather Palin & Kai Sheffield
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Howalta Electrical Services Inc. v. CDI Career Development Institutes Ltd., 2011 ABCA 234

In this case, the Alberta Court of Appeal considers whether a defendant in a tort suit may seek contribution from an alleged co-defendant under the Alberta Tort-Feasors Act, when the original plaintiff is barred from bringing suit against this co-defendant for reasons which do not negate fault. The issue arises from a fire that destroyed a building occupied by the tenant. The insurance company paid out the owner of the building and brought a subrogated suit against contractors who were working in the building (defendant) and the tenant of the building (co-defendant). The contractors allegedly caused the fire through negligence, while the tenants allegedly failed to notify the landlord when the smoke/fire was discovered, in violation of the lease. The subrogated suit against the tenant was discontinued upon discovery that the tenant contributed to payment of the insurance in accordance with the lease and so the suit was barred. The contractors issued notices seeking contribution and indemnity from the tenant under the Tort-Feasors Act.

The section of the Tort-Feasors Act at issue in this appeal is s. 3(1)(c), which allows a tort-feasor to “recover contribution from any other tort-feasor who is or would, if sued, have been liable in respect of the same damage, whether as a joint tort-feasor or otherwise…” The majority opinion of the court, delivered by Côté J., interpreted the pre-condition to recovery as requiring that the co- defendant (or “other tort-feasor”) be liable to the original plaintiff. This interpretation was based on an understanding of the world “liable” as including an element of enforceability and requirement of performance. Côté J. also looked to case law, and instances where procedural bars to bringing suit against the tort- feasor directly barred indemnity claims. Finally, Côté J. noted that “this bar to indemnity claims makes the law consistent. Someone not directly liable to the plaintiff should not be liable in a suit brought by the plaintiff, and so indirectly have to pay the plaintiff on the forbidden claim. The plaintiff and the defendant claiming contribution cannot do indirectly what is forbidden directly.” The court thus allowed the appeal, dismissing the claim for contribution.

O’Ferrall J. provided separate reasons, concurring in the result. O'Ferrall J. first noted that the Act at issue was enacted for the purpose of removing the common law 'rule' preventing tort-feasors from seeking contribution from other tort-feasors. As such, interpreting the legislation so that it likewise prevents proper sharing of liability is contrary to legislative intent. Additionally, O’Ferrall J. pointed to the words “whether as a joint tort-feasor or otherwise” in the section, and concluded that the “otherwise” refers to situations when the party from whom contribution is sought is not a joint tort-feasor, but nevertheless may be liable for all or part of the same damage/ harm. Consequently, O’Ferrall J. interpreted s. 3(1)(c) as permitting contribution from the co-defendant tort-feasor provided that the co- defendant is liable to either the plaintiff or to the defendant seeking contribution, so long as harm to the plaintiff is the same. The claim for contribution was dismissed because there was no pleadings or evidence suggesting that the tenant would have been liable to the contractors.

November 15, 2011
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Rebecca Crangle
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Smith v. Inco Limited, 2011 ONCA 628

In Smith v. INCO Limited, the Ontario Court of Appeal held that nickel particles released by Inco's operations and deposited in the plaintiffs' lands that raised unproven concerns about potential health risks did not constitute actionable private nuisance, despite the potential for diminuation of property values. The Court, writing per curiam, also clarified the operation of Rylands v. Fletcher in Ontario, finding that there is no independent common law rule of strict liability for extra-hazardous activities, and holding that, for the purposes of the Rylands tort, a nickel refinery is not a "non-natural use of land." Lastly, the Court clarified, in dicta, the other elements of the Rylands tort.

This class action was originally brought under Pearson v. Inco. The trial judge found that nickel emissions from the Inco plant had contaminated the plaintiffs' private properties, adversely affecting their value. Furthermore, Inco was held liable under private nuisance and also under the Rylands v. Fletcher strict liability rule.

The Court of Appeal reversed the trial courts ruling on both nuisance and Rylands v. Fletcher liability. To establish nuisance, the claimants had to show physical damage to their land caused by the nickel deposits. The Court held that without evidence the deposits had some detrimental effect on the land itself, rights associated with the use of the land, or the health and well-being of the occupants, the change in the chemical composition of the soil did not constitute physical damage. Public concerns about the nickel deposits that may have affected the plaintiffs' property values did not by themselves amount to actual, substantial, physical damage.

In regards to liability under Rylands v. Fletcher, the Court first clarified the juridical basis for the Rylands rule, holding that it does not arise from any broader rule of strict liability for those whose activities are extra hazardous. The Court then found that there was no liability under Rylands because the claim did not meet the "non-natural use" element of the tort; a nickel refinery that uses nickel brought in from off-site was not a "non-natural use," the Court reasoned, because it was an "ordinary or usual" use for land in a heavily industrialized part of the city. The Court stated that this was consistent with the "user appropriate" approach outlined in Tock v. St. John’s Metropolitan Area Board, a 1989 Supreme Court of Canada case.

In dicta, the Court clarified the other elements of the Rylands tort, suggesting that foreseeability by the tortfeasor of the kind of damages suffered may be an element of the tort, and also that, while the tort applies to the repeated and cumulative effects of multiple "escapes," it may not apply to "escapes" that are the intended result of the activity undertaken by the defendant.

October 7, 2011
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Diego Beltran, George Pakozdi & Kai Sheffield
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Christensen v. Calgary (City), 2011 ABCA 244

In Christensen v. Calgary (City), the Alberta Court of Appeal considered the standard of care under the Occupiers’ Liability Act, R.S.A. 2000, c. O-4 for public in-line skating paths. Berger J.A., writing for the majority, noted that there were no established standards for constructing in-line skating paths and instead stated that the question was whether the plaintiffs had established on a balance of probabilities that, but for the wrongful actions of the appellant, the respondents’ injuries would not have occurred. McDonald J.A., writing in dissent, held that the trial judge failed to articulate a standard of care and that Berger J.A. made the same error as the trial judge and effectively reversed the onus of proof.

At trial, the City of Calgary was found liable when two in-line skaters injured themselves while using a city maintained pathway on public land. The City appealed, arguing that the plaintiffs failed to lead evidence on the standard of care to which the city should be held, and that the standard of care was not articulated by the trial judge as would have been required by Fullowka v. Royal Oak Ventures Inc., a 2010 case. However, Berger J.A. distinguished Fullowka on the basis that the trial judge did not impose an absolute duty upon the city, and instead outlined steps which the city failed to take to ensure that the pathway was safe. These included consulting with the in-line skating community, reasonably considering the needs of in-line skaters, researching relevant guidelines or formulating new ones if none exist, and placing adequate signage to inform users of risks. Justice Berger deferred to the trial judge’s findings of fact that the city failed to maintain the pathway in a reasonable and safe condition for in-line skaters.

In Justice McDonald's dissenting opinion, the majority approach established a reverse onus, requiring the defendant to prove that it was not liable. In addition, he agreed with the appellants' assertion that the trial judge failed to describe a standard to which the city should be held in constructing the path. McDonald J.A held that the steps described by the trial judge amounted to "little more than a wish list and do not constitute a properly articulated standard of care." He found that the absence of established standards should not prevent the trial judge from articulating a standard of care.

August 19, 2011
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Marc Gibson, Heather Palin & Dominik Swierad
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Waterman v. IBM Canada Limited, 2011 BCCA 337

In this case, the British Columbia Court of Appeal considered the issue of the deductibility of pension benefits from an award of damages for wrongful dismissal. Mr. Waterman, upon being wrongfully dismissed from IBM, automatically began receiving pension benefits because of his age upon dismissal. Madam Justice Prowse ruled that these pension benefits should not be deducted from the damages awarded for wrongful dismissal and accordingly dismissed the appeal.

Mr. Waterman, at the age of 65, was dismissed without cause and notice from IBM. Upon termination, he began receiving pension benefits from IBM’s defined benefit pension plan (which was wholly funded by IBM). He sued IBM for wrongful dismissal and was awarded damages. IBM argued that the pension benefits should be deducted from the damage award, as disability benefits were in Sylvester v. British Columbia, but the trial judge came to the opposite conclusion. The Court of Appeal concurred, distinguishing this case from Sylvester because of the nature of the benefits. The Court noted that disability benefits and pension benefits have historically been distinguished: pension benefits are not substitute for wages but a benefit earned by being an employee for a specified period of time. It is also clear from the contractual relationship between the parties that they did not consider the pension to be a substitute for salary. Madam Justice Prowse therefore came to the conclusion that pension benefits should not be deducted from an award of damages and dismissed the appeal.

August 2, 2011
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Sam Golder & Dominik Swierad

Neumann v. Canada (Attorney General), 2011 BCCA 313

In Neumann v. Attorney General, Madam Justice Ryan accepted without finding that the tort of negligent investigation, a tort of relatively recent origin in Hill v. Hamilton-Wentworth, applies to tax investigators carrying out a search even though she did not find that there was a breach of duty in the immediate case. Canada's appeal was allowed setting aside the awarded damages of $1.3 million.

Mr. Neumann is a businessman who carried out dealings with Ms. B, a party the Canada Revenue Agency (CRA) was  investigating. His workplace was also his place of residence. One morning, CRA agents arrived at Mr. Neumann's house, unannounced, armed with a warrant to search and seize documents related to Ms. B. Following the search, Mr. Neumann, a former victim of East Germany's oppressive regime, suffered from post-traumatic stress disorder related to the investigation.

Justice Ryan ultimately found that there was no evidence that the CRA was negligent in seeking and executing the search warrant in this case. While there may have been less invasive search alternatives available to the CRA, Justice Ryan did not find that those would have been legitimate options for a reasonable investigator.

July 6, 2011
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Leonard Elias

Agribrands Purina Canada Inc. v. Kasamekas, 2011 ONCA 460

In Agribrands Purina Canada Inc. v. Kasamekas, Goudge J.A. ruled that
breach of contract does not qualify as "unlawful conduct" necessary for the
tort of unlawful conduct conspiracy, and deceitful actions are sufficient
grounds for punitive damages.


Following a series of agreements, Purina supplied feed to two distributors
in the same area, violating its exclusivity agreement with one of the
distributors.  The trial judge found Purina liable for the tort of unlawful
conduct conspiracy. In an attempt to define what qualified as "unlawful
conduct," the trial judge applied jurisprudence relating to the tort of
intentional interference with economic relations, under which conduct making
the defendant liable can include conduct prohibited by law, contract,
convention, or understanding. The Court disagreed with this analysis,
holding that for an action to constitute "unlawful conduct" for the tort of
intentional interference, the conduct must be actionable; it must be wrong
in law. Breach of contract, convention, or understanding, on the other hand,
are not "unlawful" for purposes of unlawful conduct conspiracy. Goudge J.A.
also noted that the two torts have evolved separately and judges should
avoid ignoring the different historical paths torts have travelled in an
attempt to create a "unified theory of economic torts."


This case also deals with the matter of punitive damages. The Court
disagreed with the trial court's reason for allowing punitive damages that
breach of contract should be discouraged. Instead, they allowed
the punitive damages by finding that Agribrands Purina's deceitful action of
supplying a competitor with merchandise when it had expressly said it would
not do so constituted a marked departure from ordinary standards of decency
and an "independently actionable" claim.

June 20, 2011
http://www.ontariocourts.on.ca/decisions/2011/2011ONCA0460.htm

Leonard Elias & Dominik Swierad

Hussack v. Chilliwack School District No. 33, 2011 BCCA 258

In Hussack v. Chilliwack School District No. 33, the Court partially allowed the appeal by a school board regarding damages awarded to a student for breach of duty of care. The case could be significant in that it clarified how the doctrine of novus actus interveniens is applied and confirmed that the appropriate test is foreseeability of subsequent conduct rather than unreasonableness.

Devon Hussack, a student within the Chilliwack School District, suffered a concussion as a result of an incident during a field hockey game at the school. He subsequently developed a psychiatric disorder that manifested itself in difficulties that he believed were physical in nature. Devon was parented solely by his overprotective father who interfered with his son’s medical treatment and school attendance.

Justice Bennett did not find error in the trial judge’s conclusion that the hockey incident represented cause in fact and law in spite of contributing factors. Bennett J.A. then analysed the issue of novus actus interveniens to address the school board’s argument that Mr. Hussack’s conduct amounted to a new intervening act which broke the chain of causation. The trial judge had found that Mr. Hussack’s actions were foreseeable and did not, therefore, represent a new act. The school board argued that reasonableness rather than foreseeability was the appropriate test and cited a series of cases that applied novus actus interveniens to unreasonable subsequent actions by family members. Bennett J.A. rejected the argument and characterized the "family cases" as dealing with "unusual" circumstances, rather than creating new law. She affirmed foreseeability as the appropriate test and deferred to the train judge’s conclusion on the facts that Mr. Hussack’s conduct did not represent a new act.

June 7, 2011
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Radostina Pavlova & Dominik Swierad

Wellington v. Ontario, 2011 ONCA 274

In Wellington v. Ontario, the Ontario Court of Appeal explored the issue of whether the families of victims of crime committed by police officers have the right to sue the Special Investigation Unit ("SIU") for negligent investigation. The court held that there is no private law duty of care owed by the SIU to the family of the victim and that any duty owed by the SIU was owed to the public as a whole, and that nothing in the relevant legislation or the relationship between the parties was sufficient to establish a private law duty of care.

The victim was a 15-year-old boy named Duane who was allegedly pursued by two police officers without legal justification. When Duane attempted to drive away, one of the officers, allegedly without legal justification, began shooting at Duane and fatally wounded him. Duane’s mother and sister sued the SIU for negligent investigation and sought general and punitive damages, claiming that the SIU did not conduct a competent investigation by failing to properly interview the officers, allowing the officers to keep their firearms, and closing the investigation before receiving the pathologist’s report.

In this case, the court held, relying on the Cooper-Anns Test, that it was plain and obvious that there was no prima facie duty of care. The court relied on precedent in concluding that a duty of care is excluded in claims of negligence against public authorities where there is no possibility of a duty of care outlined in the statute governing that public authority. Also, the case law does not support a duty of care by a police chief or SIU to the families of victims. Since the Police Services Act sets out the duty of the SIU as only a public duty, there is no possibility for the SIU to have a private law duty and be liable to the victim’s family in negligence.

April 8, 2011
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Pedram Moussavi
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Charlie v. Canada Safeway Limited, 2011 BCCA 202

In Charlie v. Canada Safeway Ltd., the British Columbia Court of Appeal stated that there is a single standard of care for occupiers under the Occupiers’ Liability Act. This standard requires that the occupier [defendant] take reasonable care in all the circumstances that a person [the plaintiff] will be reasonably safe in using the premises.

In Charlie, the plaintiff was injured by slipping on exposed water while on the defendant’s premises, a supermarket. The court held that the type of hazard is a relevant factor in determining whether a defendant has exercised reasonable care, but it does not increase or lower the standard of care required of that defendant. Groberman J.A., writing for the court, rejected the argument that there are different standards of care in "due diligence" cases and "unsafe conditions" cases. He held that a water hazard, though difficult to prove, does not require the higher evidentiary standard of certainty, and that the evidence must only establish the presence or absence of water on the balance of probabilities.

The Court upheld the summary judgment dismissing the plaintiff’s claim.

April 7, 2011
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Liam Oster
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Paulsson v. Cooper, 2011 ONCA 150

The Court of Appeal for Ontario considered whether Ontario is the appropriate jurisdiction to hear a multijurisdictional defamation case. It identified two factors that should not be considered at the jurisdictional stage.

The defendants published an allegedly defamatory book review about the plaintiff’s book. The author of the book review is a resident of Australia while the Association responsible for its publication is a resident of the United States. The plaintiff book author is an Ontario resident. The plaintiff alleges to have suffered damage in reduced sales and difficulty securing an academic position. Of the 3528 reviews sold, only 81 were sold in Ontario. The respondents brought a motion for an order to set aside service ex juris or, in the alternative, to stay the action on the basis that there is no real and substantial connection between the subject matter of the proceeding and Ontario, or that Ontario is not a convenient forum for hearing the proceeding. The motion judge granted the motion for a stay of the action in Ontario holding that Ontario cannot assume jurisdiction or alternatively, that Ontario is not a convenient forum.

The plaintiff appealed. The Court of Appeal applied the new test from Van Breda. In a libel claim, the tort is committed where publication takes place. This is the place of communication to the third person, where the defamatory words are read, heard, or downloaded. Under the Van Breda analysis, the commission of a tort in Ontario is a recognized presumptive connecting factor that prima facie entitles the plaintiff to bring an action in Ontario.

The court identified two factors that should not be considered at the jurisdictional stage of an action for defamation. First, there is no requirement to show that the distribution in Ontario is more than minimal. Second, the court should not require evidence of the damage to the plaintiff’s reputation; it should only consider the reasonable foreseeability of harm to the plaintiff’s reputation. Both of these factors should be considered when assessing the merits of the defamation claim.

The court set aside the stay order and substituted an order that Ontario has jurisdiction over the plaintiff’s action.

February 28, 2011
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Julia Wilkes
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Ault v. Canada (Attorney General), 2011 ONCA 147

The Court of Appeal for Ontario considered the liability of a former employer/pension plan administrator and the consulting actuary/new employer in a failed public to private pension transfer which was disallowed by the Canada Revenue Agency ("CRA").

The plaintiffs were former public employees who accepted a deal crafted by Mr. Sylvain Parent, an actuary and principal of Welton Parent Inc. and Loba, and the federal government specifically the Treasury Secretariat Board ("TBS"). The plaintiffs were told that if they resigned from their federal employment, their public pensions could be transferred to private ones by means of a reciprocal transfer agreement. TBS communicated its concern about whether the plan complied with tax laws to the CRA. The CRA sent letters to TBS and Welton Parent/Loba which set out the risks that the money from the federal pension would not be transferred to the Loba Plan. Eventually, the CRA disallowed the Loba Plan. The plaintiffs sued their former employer for the difference between the benefits they would have received had they stayed in the public service until retirement and what they did receive under the failed scheme. TBS added Mr. Parent, Loba, and Welton Parent as third parties.

At trial, the judge held the government liable in negligent misrepresentation and the Loba Parties liable in negligent misrepresentation and for breach of fiduciary duty. The judge held that the fiduciary duty came into existence only after the plaintiffs became Loba Plan members.

TBS appealed on a number of grounds including that the trial judge erred in finding that TBS owed the plaintiffs a duty of care. TBS submitted that there is no established duty of care at common law for an employer to provide information about the viability of a prospective new employer’s pension plan. The court held that the plaintiffs’ “longstanding and current status as employees” in the federal public service grounds the duty of care – not their potential new employment with a different employer. TBS created an apparatus to convert pensions to approved employers and had a duty to the plaintiffs when it held out the Loba Plan as meeting the approval requirements. Additionally, it is well established that a pension plan administrator owes a duty of care to the members of the pension plan. TBS owed a duty of care and was held liable for failing to disclose its concern about the tax legitimacy of the proposed scheme.

The court agreed with TBS that the fiduciary duty owed by the actuary to the plaintiffs came into existence earlier than was determined by the trial judge. On all of the evidence, it was clear that the elements of a fiduciary relationship including trust, reliance, vulnerability, and confidence were present when the plaintiffs first consulted the actuary. The breach of fiduciary duty occurred before they became plan members. This conclusion was relevant to the court’s reapportionment of damages as between the defendants.

February 28, 2011
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Julia Wilkes
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