Date: 20040227
Docket: A-5-03
Citation: 2004 FCA 79
CORAM: DÉCARY J.A.
LÉTOURNEAU J.A.
EVANS J.A.
BETWEEN:
CADNET Productions Inc. A CANADIAN
INCORPORATED BUSINESS and
WILLIAM ROBERT BELL
Appellants
and
HER MAJESTY THE QUEEN
Respondent
Heard at Vancouver, British Columbia on February 25, 2004.
Judgment delivered at Vancouver, British Columbia on February 27, 2004.
REASONS FOR JUDGMENT BY: DÉCARY J.A.
CONCURRED IN BY: LÉTOURNEAU, EVANS JJ.A.
Date: 20040227
Docket: A-5-03
Citation: 2004 FCA 79
CORAM: DÉCARY J.A.
LÉTOURNEAU J.A.
EVANS J.A.
BETWEEN:
CADNET Productions Inc. A CANADIAN
INCORPORATED BUSINESS and
WILLIAM ROBERT BELL
Appellants
and
HER MAJESTY THE QUEEN
Respondent
REASONS FOR JUDGMENT
DÉCARY J.A.
[1] This is an appeal of the decision of Hansen J. (reported at (2002) 225 F.T.R. 315) dismissing the corporate appellant (CADNET)'s claim for damages for alleged illegal action (the issuance of third party demands) undertaken against it by Human Resources Development Canada (HRDC) in attempting to recover an overpayment of employment insurance benefits made to its president, the other appellant, William Bell. This is also a cross-appeal by Her Majesty the Queen of the decision of Hansen J. allowing Mr. Bell's personal claim and awarding him damages of $750.
[2] Hansen J. characterized the statement of claim, and properly so in my view, as an action for misfeasance in a public office or, it would seem, alternatively as an action in negligence.
[3] The nature of the tort of misfeasance in a public office was recently canvassed by the Supreme Court of Canada, in Odhavji Estate v. Woodhouse (2003) S.C.C. 69, a decision rendered subsequently to the decision at issue in this appeal. Speaking for the Court, Iacobucci J. stated:
¶ 22 What then are the essential ingredients of the tort, at least insofar as it is necessary to determine the issues that arise on the pleadings in this case? In Three Rivers, the House of Lords held that the tort of misfeasance in a public office can arise in one of two ways, what I shall call Category A and Category B. Category A involves conduct that is specifically intended to injure a person or class of persons. Category B involves a public officer who acts with knowledge both that she or he has no power to do the act complained of and that the act is likely to injure the plaintiff. ... It is important, however, to recall that the two categories merely represent two different ways in which a public officer can commit the tort; in each instance, the plaintiff must prove each of the tort's constituent elements. It is thus necessary to consider the elements that are common to each form of the tort.
¶ 23 In my view, there are two such elements. First, the public officer must have engaged in deliberate and unlawful conduct in his or her capacity as a public officer. Second, the public officer must have been aware both that his or her conduct was unlawful and that it was likely to harm the plaintiff. What distinguishes one form of misfeasance in a public office from the other is the manner in which the plaintiff proves each ingredient of the tort. In Category B, the plaintiff must prove the two ingredients of the tort independently of one another. In Category A, the fact that the public officer has acted for the express purpose of harming the plaintiff is sufficient to satisfy each ingredient of the tort, owing to the fact that a public officer does not have the authority to exercise his or her powers for an improper purpose, such as deliberately harming a member of the public. In each instance, the tort involves deliberate disregard of official duty coupled with knowledge that the misconduct is likely to injure the plaintiff.
¶ 24 Insofar as the nature of the misconduct is concerned, the essential question to be determined is not whether the officer has unlawfully exercised a power actually possessed, but whether the alleged misconduct is deliberate and unlawful. As Lord Hobhouse wrote in Three Rivers, supra, at p. 1269:
The relevant act (or omission, in the sense described) must be unlawful. This may arise from a straightforward breach of the relevant statutory provisions or from acting in excess of the powers granted or for an improper purpose.
...
¶ 25 Canadian courts also have made a deliberate unlawful act a focal point of the inquiry. In Alberta (Minister of Public Works, Supply and Services) v. Nilsson (1999), 70 Alta. L.R. (3d) 267, 1999 ABQB 440, at paras. 108, the Court of Queen's Bench stated that the essential question to be determined is whether there has been deliberate misconduct on the part of a public official. Deliberate misconduct, on this view, consists of: i) an intentional illegal act; and ii) an intent to harm an individual or class of individuals. See also Uni-Jet Industrial Pipe Ltd. v. Canada (Attorney General) (2001), 156 Man. R. (2d) 14, 2001 MBCA 40, in which Kroft J.A. adopted the same test. In Powder Mountain Resorts, supra, Newbury J.A. described the tort in similar terms, at paras. 7:
... it may, I think, now be accepted that the tort of abuse of public office will be made out in Canada where a public official is shown either to have exercised power for the specific purpose of injuring the plaintiff (i.e., to have acted in "bad faith in the sense of the exercise of public power for an improper or ulterior motive") or to have acted "unlawfully with a mind of reckless indifference to the illegality of his act" and to the probability of injury to the plaintiff. (See Lord Steyn in Three Rivers, at [1231]. Thus there remains what in theory at least is a clear line between this tort on the one hand, and what on the other hand may be called negligent excess of power -- i.e., an act committed without knowledge of (or subjective recklessness as to) its unlawfulness and the probable consequences for the plaintiff.
Under this view, the ambit of the tort is limited not by the requirement that the defendant must have been engaged in a particular type of unlawful conduct, but by the requirement that the unlawful conduct must have been deliberate and the defendant must have been aware that the unlawful conduct was likely to harm the plaintiff.
¶ 26 As is often the case, there are a number of phrases that might be used to describe the essence of the tort. In Garret, supra, Blanchard J. stated, at p. 350, that "[t]he purpose behind the imposition of this form of tortious liability is to prevent the deliberate injuring of members of the public by deliberate disregard of official duty". In Three Rivers, supra, Lord Steyn stated, at p. 1230, that "[t]he rationale of the tort is that in a legal system based on the rule of law executive or administrative power 'may be exercised only for the public good' and not for ulterior and improper purposes". As each passage makes clear, misfeasance in a public office is not directed at a public officer who inadvertently or negligently fails adequately to discharge the obligations of his or her office: see Three Rivers, at p. 1273, per Lord Millett. Nor is the tort directed at a public officer who fails adequately to discharge the obligations of the office as a consequence of budgetary constraints or other factors beyond his or her control. A public officer who cannot adequately discharge his or her duties because of budgetary constraints has not deliberately disregarded his or her official duties. The tort is not directed at a public officer who is unable to discharge his or her obligations because of factors beyond his or her control but, rather, at a public officer who could have discharged his or her public obligations, yet wilfully chose to do otherwise. (my emphasis)
[4] The evidence discloses that collection agents working at HRDC are each assigned every year some 1,300 or so accounts that have to be updated every three months. Every week they each get a list of 75 to 100 accounts that are said to be priorities (proceedings, vol. 2, p. 211, 212). The issuance by Ms. Hamilton of the first third party demand resulted from a training problem (A.B. vol 2, p. 334). The issuance by Mr. Brown of the second third party demand was "the first error that [he] ever made like that" (proceedings, vol. 2, p. 254). There is no evidence in the record that HRDC or its agents engaged in deliberate and unlawful conduct in their capacity as public officers or must have been aware both that their conduct was unlawful and that it was likely to harm the appellants. Quite to the contrary, there is clear evidence that the two demands were issued because of the agents' mistaken but honest belief that since Mr. Bell was "doing business as" CADNET, he and CADNET were one and the same.
[5] That type of conduct falls precisely within the category described by Iacobucci J. at para. 26 as being beyond the ambit of the tort of misfeasance in a public office, i.e. "a public officer who inadvertently or negligently fails adequately to discharge the obligation of his or her office". The fact that the Trial Judge formulated the misfeasance test in a way that may not be entirely consistent with the more recent formulation of the legal test by the Supreme Court of Canada, is therefore of no consequence in the circumstances of this case.
[6] While the Trial Judge did not make an explicit finding that the third party demands had been negligently issued, it is implicit in her reasons that this was her conclusion. Counsel for the respondent does not dispute that implicit finding. He argues, rather, that in so far as CADNET's claim is concerned, the Trial Judge found that CADNET has failed to establish general or special damages and that her finding ought not to be disturbed. I agree. There simply was no evidence adduced on behalf of CADNET which could form a concrete basis for the award of any damages.
[7] In so far as Mr. Bell's claim is concerned, counsel argues that neither causation nor damages were established. He submits that the Crown could not have reasonably foreseen that the issuance of the demands against CADNET would result in the freezing of CADNET's banking account and cause damages of a personal nature to Mr. Bell. Counsel submits also that in any event Mr. Bell could not, as a shareholder, sue for a wrong done to the corporation.
[8] In the unique circumstances of this case, it is not easy to apply the general rules of corporate law, under which an individual cannot sue for consequential damages to himself that results from damage inflicted on a corporation in which he holds shares. The closeness of the relationship between CADNET and Mr. Bell in so far as the third party demands are concerned and the confusion generated at HRDC with respect to that very relationship are such that it may be said that HRDC through its own actions owed a duty of care to both CADNET and Mr. Bell and that Mr. Bell suffered damages of a general nature which were distinct from those allegedly suffered by CADNET. The situation, here, is akin to the one described by the British Columbia Court of Appeal in McGauley v. British Columbia, (1989) 39 B.C.L.R. (2d) 223, at p. 236, in the following words:
For a shareholder to obtain a personal right of action there must be relations between him and the tortfeasor independent of those which the shareholder derives through his interest in the corporate assets and business.
[9] In the end, I would dismiss both the appeals by Mr. Bell and CADNET, and the cross-appeal against Mr. Bell. I would order CADNET and Mr. Bell to pay the costs of the appeal, which I would assess at $2,500 and I would order the respondent to reimburse Mr. Bell the reasonable expenses he incurred in resisting the cross-appeal and which I would assess at $500.
[10] Since the costs in the (then) Trial Division of the Federal Court have not yet been assessed, this Court is not now in a position to rule on the issue of costs in the Trial Division. Counsel for the respondent has filed his written submissions on costs in the Trial Division a year ago, but the appellants have failed to file submissions in reply and, inexplicably, nothing further has been done. In the circumstances, the Court invited Mr. Bell, at the hearing, to promptly file in the Trial Division his submissions in reply on the issue of costs. Mr. Bell undertook to do it and I would expect the costs issue to be dealt with diligently thereafter in the Trial Division.
[11] Since security has been given for costs in this Court, the respondent is at liberty to take advantage immediately of that security with respect to any costs granted to Her in this judgment and in any other order made by this Court which pertains to this appeal and cross-appeal.
(Sgd.) "Robert Décary"
J.A.
"I agree" (Sgd.) "Gilles Létourneau"
J.A.
"I agree" (Sgd.) "John M. Evans"
J.A.
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: A-5-03
(APPEAL FROM AN ORDER OF THE FEDERAL COURT DATED DECEMBER 9, 2002, NO. T-2316-00)
STYLE OF CAUSE: Cadnet Productions Inc., and
others v
Her Majesty the Queen
PLACE OF HEARING: Vancouver, BC
DATE OF HEARING: February 25, 2004
REASONS FOR JUDGMENT: DÉCARY J.A.
CONCURRED IN BY: LÉTOURNEAU, EVANS JJ.A.
DATED: February 27, 2004
APPEARANCES:
|
William R. Bell (self-represented)
|
FOR THE APPELLANTS
|
|
Edward Burnet
|
FOR THE RESPONDENT
|
SOLICITOR OF RECORD:
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