Date: 20070713
Docket: T-1325-06
Citation: 2007 FC 745
Ottawa,
Ontario, July 13, 2007
PRESENT: The Honourable Madam Justice Tremblay-Lamer
BETWEEN:
ATTORNEY
GENERAL OF CANADA
Applicant
and
JASON
WATKIN
Respondent
REASONS FOR JUDGMENT AND JUDGMENT
[1]
This
is an application for judicial review pursuant to subsection 18.1(1) of the Federal
Courts Act, R.S.C. 1985, c. F-7, of a July 4, 2006 decision of the Canadian
Human Rights Commission (the Commission) whereby it decided that the respondent
and associated complainants had standing to institute a complaint against
Health Canada, and that the matter was within its jurisdiction to decide.
BACKGROUND FACTS
[2]
Jason
Watkin (the respondent) is the President and CEO of Biomedia Laboratories Inc.
(Biomedica), a corporation.
[3]
Biomedica
is entirely owned by the Nutraceutical Medicine Company Inc. (Nutraceutical),
another corporate entity which itself has four shareholders, the respondent and
three members of his immediate family.
[4]
Biomedica
sells and markets products under the name "Recovery" destined for
both human and animal consumption.
[5]
In
February 2002, Health Canada requested that Biomedica cease and desist
advertising in relation to "Recovery" as it found this advertising to
be contravening of section 3 of the Food and Drugs Act, R.S.C. 1985, c. F-27. Through a
series of events relating to continued advertising, and in the absence of a
"New Drug Submission" by Biomedica for its "Recovery"
products, Health Canada conducted a Health Hazard Evaluation (HHE).
This in turn resulted in Health Canada's classification of
both the human and animal versions of "Recovery" as a "Class II
Health Hazard" and a "new drug" under the Food and Drugs Act,
and the associated regulations. This finding was communicated to Biomedica in
November 2002, as well as requesting the latter to cease the sale and promotion
of "Recovery" and requesting that the products be recalled from the
market.
[6]
Subsequent
to a full-page advertisement for "Recovery" in a national newspaper
on December 7, 2007 and subsequent to letters from Health Canada reiterating
its recall request, on December 20, 2002, Health Canada seized a
quantity of "Recovery". It secured the seizure on the Biomedica
premises with seizure tags and tape, and leaving them on-site. On that date,
Biomedica expressed its interest in exporting the seized goods to the United
States.
[7]
On
January 21, 2004, Health Canada conducted a monitoring visit to verify the
status of the seized goods and found that they were missing from the
location where they had been stored. There is clear evidence that Biomedica
exported the products to the United States after receiving clearance from the United
States'
Food and Drug Administration.
[8]
On
June 4, 2004, the respondent filed a human rights complaint against Health
Canada with the Commission (the complaint), alleging that Health Canada had
adversely discriminated against Biomedica in the provision of services,
contrary to section 5 of the Canadian Human Rights Act, R.S.C. 1985, c.
H-6 (the Act).
[9]
Specifically,
he claimed that Health Canada enforced the provisions of the Food and Drugs
Act in a manner that "gives preferential treatment to Asian businesses
by regulating Asian Herbal Medicines less rigorously than it regulates
non-Asian products." He submitted that for several years Health Canada has been
aware of the "situation in Vancouver's 'Chinatown' where there are
numerous products that do not follow the established regulations" but that
there has been little or no enforcement of Health Canada policies there,
despite the respondent's repeated requests and complaints. On the other hand,
the "Recovery" products have been unfairly targeted; competing
products with substantially the same ingredients and product claims were not
similarly subject to enforcement action by Health Canada.
[10]
On
December 15, 2004, the respondent amended the complaint, adding the three other
Neutraceutical shareholders (Trevor, Anna and Marlene Watkin) as complainants.
The amended complaint alleged that "Health Canada has acted against Biomedica,
and thereby against the Watkins, in such a way as to discriminate against
Biomedica, and thereby the Watkins, by giving significant preferential
treatment to Asian businesses by refusing or otherwise failing to act against
these businesses in the same manner in which it has acted against Biomedica and
therefore the Watkins." Essentially, the amended complaint alleged that
Health Canada's actions against Biomedica had a direct, adverse impact on the
four members of the Watkin family, including the respondent, by virtue of their
immediate interest in the corporation.
[11]
The
amended complaint was accepted by the Commission and its receipt was confirmed
by the applicant in a January 28, 2005 letter. In response to the complaint,
Health Canada requested that
the Commission refuse to deal with the complaint on the grounds that it lacked
jurisdiction.
[12]
An
investigator from the Commission prepared an investigator’s report in relation
to the complaint. The final version of the report, dated February 17, 2006, advised
that the matter was within the Commission’s jurisdiction and should be referred
to the Canadian Human Rights Tribunal (CHRT) for a hearing. The Commission
subsequently decided that the respondent had standing to bring the complaint
and that the matter was within its jurisdiction, pursuant to subsection 41(1)
of the Act. This decision was communicated to the applicant in a July 4, 2006
letter and the present application for judicial review was initiated soon
thereafter.
[13]
It
is worth noting that Neutraceutical commenced a civil action in British
Columbia Superior Court against Her Majesty the Queen and the Minister of
Health, seeking damages of approximately $4.5 million in relation to Health Canada’s
enforcement activities against Biomedica, arising from the same factual
situation as the present application.
ISSUES
1. Whether
the Commission has the jurisdiction to deal with the complaint against Health Canada.
2. Whether
Health Canada is a
"service provider" within the meaning of section 5 of the Act.
ANALYSIS
[14]
Subsection 41(1)
exempts the Commission from dealing with any complaint beyond its jurisdiction
or that would be more appropriately dealt with through another Act of
Parliament. According to subparagraph 44(3)(b)(ii) and paragraph 41(1)(c), the Commission
must dismiss a complaint that is beyond its jurisdiction. Subsection
40(1) specifies that any individual, or group of individuals, may bring a
complaint against any person for discriminatory actions.
[15]
A
pragmatic and functional analysis reveals that the issue pertaining to the
jurisdiction of the Commission must be reviewed on a correctness standard (United Parcel
Service of Canada v. Thibodeau, 2005 FC 608, [2005] F.C.J. No. 762 (QL); see also
Bouvier v. Canada
(Attorney General)., [1996]
F.C.J. No. 623 (T.D.) (QL); Taylor v. Canada (Attorney General), [1997] F.C.J. No. 1748 (T.D.) (QL)
at para. 8).
[16]
The
applicant submits that the Commission erred in law by failing to dismiss the
complaint pursuant to section 44 of the Act. It exceeded its jurisdiction in
deciding to deal with the respondent’s complaint against Health Canada, as it
relates to the latter’s enforcement activity against a corporate entity, not an
individual. A corporate entity does not have standing to file a complaint under
the Act, and neither can the respondent file such a complaint on its behalf.
Further, Health Canada is not a “service provider” within the meaning
of section 5 of the Act. Additionally, the Commission breached the applicant’s
right to procedural fairness and natural justice by inadequately reviewing the
complaint before rendering a decision.
[17]
The
applicant submits that the allegations in the complaint deal fundamentally with
Health Canada’s
enforcement activities against Biomedica, not the respondent or the other three
Watkin family members personally. Health Canada specifically
requested that the Commission refuse to deal with the complaint under
subsection 41(1) of the Act on the grounds that it lacked jurisdiction.
[18]
The
respondent submits that Biomedica is only an “operating name” and merely acts
as a “vehicle” for the operation of Neutraceutical, as the latter owns 100% of
Biomedica’s shares. Income received from the operation of Biomedica, a closely
held corporation, is the sole source of family income for the respondent and
three other members of his family. The issue of jurisdiction was duly
considered by the Commission following submissions by the parties, and
subsequent to the consideration of the investigator’s report, and its decision
should stand.
[19]
Further,
the respondent submits that he had standing to file the complaint by virtue of
his “sufficiently direct and immediate” interest in the discrimination alleged
on behalf of the company; the Commission’s decision in this regard is
consistent with a previous decision of the Canadian Human Rights Review
Tribunal.
[20]
The respondent submits
that the Commission was justified in assuming jurisdiction over the matter, and
its decision is consistent with the decisions of the Canadian Human Rights
Tribunal in Bader v. Canada (National Health and Welfare), [1996] C.H.R.D. No. 1 (Bader 1996; the initial Tribunal) as
affirmed by Bader
v. Canada (National Health and Welfare), [1998] C.H.R.D. No. 1 (Bader
1998; the Review Tribunal).
[21]
In
reaching a finding of discrimination in Bader 1996, above, the initial
Tribunal had to address the issue of whether or not the complainant, Mr. Bader,
was entitled to claim relief where the impact of the alleged discriminatory
practice was on a corporation in which he and his wife were the directors and
the only shareholders.
The initial Tribunal concluded that it did have the jurisdiction to deal with
the complaint. In reviewing that decision, the Review Tribunal in Bader 1998,
above, concluded that the initial Tribunal had not erred in finding that the
discriminatory enforcement had a “sufficiently direct and immediate impact” on the
complainant, entitling him to claim relief under the Act.
[22]
The
Review Tribunal in Bader 1998, above at paragraph 30, also concluded
with regard to the argument that the company had no status to complain under
the Act, that:
(…) there is an identity of interest
here, and from the perspective of standing, it is not possible to distinguish
between the actions directed against the Complainant and the actions directed
against the company. In the present case, the interests of Mr. Bader and his
company have merged and the substantive wrong is the same in either instance.
[23]
I
respectfully
disagree with the conclusions of the initial Tribunal and Review Tribunal in
both of the Bader decisions
cited
above. I also distinguish Canada
(Secretary of State for External Affairs) v. Menghani, [1994] 2 F.C.
102, [1993] F.C.J. No. 1287 (T.D.) (QL) and Singh
(Re) (C.A.), [1989] 1 F.C. 430, [1988] F.C.J. No.
414 (C.A.) (QL), relied upon by the respondent, as they deal with
allegations of discrimination against individual human beings and do not
support the proposition that a shareholder (or shareholders) of a corporation
may advance a human rights complaint on behalf of that corporate entity.
[24]
The Act
expressly refers to “individuals” and “persons”, implicitly drawing a
distinction between the two. For instance, sections 2 and 5 of the Act are
clear that it applies to “any individual” subject to discrimination. Subsection
40(1) of the Act specifically states that any “individual” or “group of
individuals” may file a complaint. In contrast, that subsection as well as
subsection 40(3) provides the Commission with the discretion to initiate a
complaint where a “person” engages in discriminatory behaviour. Thus, the legislator
expressed its intent that while both a human and non-human “person” may engage in
a discriminatory practice, only a human “individual” may be the victim of such
a practice within the ambit of the Act.
[25]
Whereas
s.35 of the Interpretation Act, R.S., c. I-21, defines the word “person”
to include a corporation, it is clear that if Parliament had intended to extend
the protection of the human rights legislation at issue to a corporate entity,
it would have used the word “person” instead of “individual”.
[26]
This
interpretation is clearly bolstered by sections 2 and 3 which list the prohibited grounds of
discrimination under the Act as race, national or ethnic origin, colour,
religion, age, sex, sexual orientation, marital status, family status,
disability and conviction for which a pardon has been granted. These are all
characteristics applicable only to human individuals and clearly are not
applicable to corporate “persons”.
[27]
Furthermore,
while recognizing that the interpretation of section 15 of the Charter
does not necessarily mirror that of the Act, it nevertheless provides useful
guidance. This Court has consistently held that a corporation is not an
“individual” for the purposes of section 15 of the Charter, Olympia
Interiors Ltd. v. Canada, [1999] F.C.J. No. 643 (T.D.) (QL) at para. 105; aff’d (1999) F.C.J. No. 1474 (C.A.)
(QL); Jose Pereira E. Hijos, S.A.
v. Canada (Attorney General), [1996] F.C.J.
No. 1669 (T.D.) (QL)
at para. 46). I see no reason to deviate from this approach in relation to the
interpretation of the Act, as in the present matter.
[28]
In
my opinion, it is clear that the Act was intended to protect individual human
beings, and not corporate entities, from discrimination. The Commission did not
have the jurisdiction to deal with a complaint alleging discriminatory
practices against a corporation such as Biomedica.
[29]
The
allegations in the Respondent’s complaint fundamentally deal with Health Canada’s actions against
Biomedica. The amendments made to the complaint, to the effect that actions
taken against Biomedica in effect have a direct impact on the respondent and
the three other shareholders of Neutraceutical, do not alter the fact that the
enforcement actions by Health Canada were directed against the corporate entity of Biomedica and
not the respondent. Indeed, this element is undisputed by the parties and
recognized by the Commission.
[30]
It
is trite law that a corporation is a separate legal entity, distinct from its
shareholders and its directors. Only a corporation can bring a claim for a
wrong done to it; a shareholder in a corporation cannot assert a personal cause
of action for damages sustained by the corporation in which she or he holds
shares. I adopt the following summary of the relevant principles as articulated
by the Ontario Court of Appeal in Meditrust Healthcare
Inc. v. Shoppers DrugMart, [2002] O.J. No. 3891 (C.A.) at paragraphs 12,
13:
12 The
rule in Foss v. Harbottle provides simply that a shareholder of a
corporation - even a controlling shareholder or the sole shareholder - does not
have a personal cause of action for a wrong done to the corporation. The rule
respects a basic principle of corporate law: a corporation has a legal
existence separate from that of its shareholders. See Salomon v. Salomon,
[1897] A.C. 22, 66 L.J. Ch. 35
(H.L.). A shareholder cannot be sued for the liabilities of the corporation
and, equally, a shareholder cannot sue for the losses suffered by the
corporation.
13 The rule in Foss
v. Harbottle also avoids multiple lawsuits. Indeed, without the rule, a
shareholder would always be able to sue for harm to the corporation because any
harm to the corporation indirectly harms the shareholders.
[31]
While
Foss v. Harbottle was decided over 160 years ago, its continuing
validity in Canada was affirmed by the Supreme Court of Canada in Hercules
Managements Ltd. v. Ernst & Young, [1997] 2 S.C.R. 165.
[32]
Accordingly,
the respondent lacks standing in his capacity as a shareholder of Nutraceutical
to bring a complaint under the Act regarding the alleged discrimination by
Health Canada against Biomedica. The respondent
and Biomedica are separate legal entities, and from a legal standpoint the
complaint at issue does not personally involve the respondent.
[33]
In
choosing to structure his business affairs through the creation of two
incorporated entities, Biomedica and Neutraceutical, the respondent obtained a
variety of benefits, not the least of which was limited liability. As stated by
the Ontario Court of Appeal in Meditrust, above, at paragraph 31, in so
doing one “…must
take not only the benefits of that structure, but also the burdens.”
[34]
It
is only in exceptional cases that a court may disregard separate corporate
entities for the benefit of innocent third parties, “piercing the corporate
veil" when the corporate structure has been used by the corporation's
principals as a sham or to perpetrate a fraud (Meditrust, above, at
para. 31; 642947 Ontario Ltd. v. Fleischer et al. (2001), 56 O.R. (3d)
417 (C.A.). The present matter clearly does not fall under such an exception.
The respondent (and possibly the three other members of the Watkin family cited
in the amended complaint) created a structure in which to operate the business
through the creation of two corporations. The respondent cannot accept the benefits of
operating through these corporate entities and simultaneously seek to “pierce
the corporate veil” for the purposes of pursuing a human rights complaint.
[35]
I
conclude that the respondent lacked the standing necessary to bring a complaint
under section 5 of the Act. Further, the Commission did not have the
jurisdiction to consider a complaint where the “victim” was a corporate
“person” and not an “individual”. In failing to dismiss the complaint, the
Commission erred in law by exceeding its jurisdiction. Accordingly, it is
unnecessary to deal with the issue of whether or not Health Canada is a “service provider”
within the meaning of section 5 of the Act, or whether the applicant’s
procedural fairness rights were breached by the Commission.
[36]
For these reasons, the application
for judicial review of the decision is granted. The decision of the Commission
is set aside. The respondent's complaint against Health Canada under section 41 of the
CHRA is dismissed with costs.
JUDGMENT
THIS COURT
ORDERS that the application for judicial review is
granted, the Commission’s decision is set aside, and the respondent's
complaint against Health Canada under section 41 of the
Act is dismissed with costs.
“Danièle
Tremblay-Lamer”
Email this Content