Date: 20070109
Docket: T-1179-02
Citation: 2007 FC 16
Vancouver,
British Columbia, January
9, 2007
BETWEEN:
COAST DRYLAND SERVICES LTD.
Plaintiff
and
HER MAJESTY THE QUEEN IN THE RIGHT OF CANADA
AS REPRESENTED BY THE MINISTRY OF
FISHERIES AND OCEANS
AND THE DEPARTMENT OF FISHERIES AND
OCEANS
Defendants
REASONS FOR
ORDER AND ORDER
LAFRENIÈRE P.
[1]
The
Plaintiff, Coast Dryland Services Ltd. (Coast), is a company involved in the business
of coastal logging operations in the Province of British Columbia. In July 2002, Coast commenced an action
for damages against the Federal Crown Defendants (the Crown) based on allegations
of breach of contract, breach of fiduciary duty, bad faith, and denial of due
process.
[2]
After
filing a pro forma statement of defence, the Crown moved, pursuant to Rule 221(1)(a) of
the Federal Courts Rules, for an order striking out Coast’s Statement of Claim on the
grounds that the pleading fails to disclose a reasonable cause of action, and
that the crux of the claim is a challenge to an allegedly improper exercise of
ministerial power, and as such, can only be adjudicated by way of judicial
review pursuant to section 18 of the Federal Courts Act.
[3]
In the
alternative, the Crown seeks an order compelling further and better particulars
of the Statement of Claim, as well as an order striking out the Ministry of
Fisheries and Oceans and the Department of Fisheries and Oceans as Defendants.
[4]
For
the reasons that follow, I conclude that it is plain and obvious that the
Statement of Claim discloses no reasonable cause of action and should therefore
be struck out. The issue of particulars has, as a result, been rendered moot,
and need not be addressed. The style of cause should be amended by striking out the Ministry of Fisheries
and Oceans and the Department of Fisheries and Oceans as Defendants, in any
event, since they
are not sueable entities.
Facts
[5]
For
the purpose of motion to strike, the allegations in the impugned pleading must
be taken as proven. Coast has filed affidavit evidence in response to the
motion setting out a chronology of events and its view as to what occurred. Rule
221(2) provides, however, that no evidence can be heard on a motion for an
order under Rule 221(1)(a). The affidavit in question has accordingly been ignored.
[6]
The
Statement of Claim consists of 11 relatively concise paragraphs that can be neatly
summarized as follows.
[7]
Beginning
in the late 1980’s, Coast wished to develop a dryland log sorting operation
near Port McNeil on the northeast coast of Vancouver Island. The facility would
involve a sorting and storage area on land, but also a marine aspect, including
a booming ground to hold floating boomed logs, a de-watering grid, a breakwater
and a barge ram, together with foreshore development and related infrastructure.
[8]
In
order to obtain the required approvals for its plan, Coast invested a
significant amount of money and worked closely, over a number of years, with
various government agencies, including the Department of Fisheries and Oceans,
which was responsible for overseeing the environmental impact of any development on fish
habitat in tidal waters.
[9]
Coast
alleges that certain representations, promises, and assurances were made by
Crown agents lead it to believe that, so long as a plan and mitigation proposal
resulting in “no-net loss” of fisheries habitat was provided, the Crown would
approve its proposal. Coast pleads that the Crown owed both contractual and
fiduciary duties to the company to ensure that the representations were fair
and in good faith.
[10]
Paragraph
8 of the Statement of Claim, reproduced below, contains the key allegations
underpinning Coast’s claim.
8.
The Plaintiff states
that in fact it provided the evidence of a plan of mitigation that would result
in no-net loss, that it fully expected the Federal Government to honour its
bargain and approve the development of the dryland log sort and in fact on or
about January 8th, 2002 by correspondence, an employee and
representative and agent of the Federal Government, Her Majesty the Queen and
the Department of Fisheries and Oceans breached the contract by unreasonably
refusing to approve the development of the dryland log sort and by breaching
the terms of the contractual relationship by unreasonably failing to accept the
proposal for mitigation that had been clearly set out by the Plaintiff. As a
consequence of the breach of the contractual relationship by the Defendants
herein, the Plaintiff has suffered loss and damages.
[11]
Coast
claims that the Crown made an “arbitrary unwarranted determination” that the
impact of the proposed log sort could not be mitigated. Coast pleads that the
Crown did so in bad faith and without proper consideration to the environmental
assessments and its own policies and stated intentions.
[12]
Coast
alleges, in the alternative, that it was denied due process by the Crown, more
particularly, in being denied access to the review processes under the Canadian
Environmental Assessment Act.
Analysis
[13]
The
issue to be determined on this motion is whether the facts, as pleaded,
disclose a reasonable cause of action.
[14]
There
is no dispute that this Court has jurisdiction under Rule 221 to strike a
statement of claim. Because dismissal of an action for failure to state a
reasonable cause of action is a drastic measure, the Court is required to give
a generous reading to the statement of claim, construe it in the light most
favourable to the plaintiff, and be satisfied that it is plain and obvious that
the plaintiff cannot succeed: Hunt v. Carey Canada Inc., [1990] 2 S.C.R.
959. Therefore, as a general rule, the Court should be very hesitant to strike
out a statement of claim.
[15]
Notwithstanding,
a statement of claim should be struck where it contains a radical defect, or
where a plaintiff is seeking relief for acts that are not proscribed under the
law. Moreover, when a particular cause of action is pleaded, the claim must
contain material facts satisfying all the necessary elements of the cause of
action. Otherwise, the inevitable conclusion would be that such a claim
discloses no reasonable cause of action: Howell v. Ontario (1998), 159
D.L.R. (4th) 566 (Ont. Div. Ct.).
[16]
By
way of preface, I wish to add that it proved quite difficult to ascertain the exact nature of Coast’s cause
or causes of action. Although the Statement of Claim refers to four causes of
action (bad faith, denial of due process, breach of fiduciary duty, and breach
of contract), upon closer analysis, it became quite clear that Coast did not
plead the required elements to make out a cause of action. In the end, the
allegations in the Statement of Claim simply consist of sketchy facts, random elements
of the four legal concepts, and bare conclusions, cobbled together in a
disjointed manner.
[17]
I
will now consider each pleaded cause of action in turn.
Bad Faith and
Denial of Due Process
[18]
Coast
submits that the breach of fiduciary duty is based on the bad faith conduct and
the denial of due process by the Crown in circumstances where there is a
relationship of trust of a fiduciary nature. Each allegation appears to be
contingent on the existence of the other.
[19]
The
concept of bad faith, in the sense of exercising a statutory discretion in bad
faith, has not been recognized as an independent tort in the Federal Court: see
Bourque v. R. (1999) 162 F.T.R. 98, leave to appeal to the Supreme Court
of Canada denied 278 N.R. 197. Rather, bad faith arises traditionally in the
context of judicial review.
[20]
Even
if bad faith could constitute an actionable wrong, there is no plea of malice,
ulterior motive, or improper purpose, or any other material facts to support
such a cause of action. The bad faith claim cannot stand, for a bare statement
of bad faith or malice is insufficient: see for example F.G.M. Holdings v.
B.C. (Workers’ Compensation Bd.) (2000) 79 B.C.L.R. (3d) 271 (B.C.S.C.), at
pp. 276-278.
[21]
These
same principles apply to the plea of denial of due process. It is not a cause
of action known to law. Moreover, Coast has not pleaded any material facts in support
of such a plea.
Breach of
Fiduciary Duty
[22]
With
respect to breach of fiduciary duty, Coast alleges that the Crown entered into
a contractual relationship with the Plaintiff, whereby Coast expended
significant amounts of money, capital and energy, relying upon a promise by the
government to exercise its discretion in favour of approving the use proposed
by Coast, on the condition precedent that Coast provide a plan of mitigation.
Coast submits that, by virtue of the special relationship, a fiduciary duty
arose, requiring the Crown to act with utmost good faith in its dealings with
the company.
[23]
However,
there can be no fiduciary relationship on the facts of this case in that the
Minister was acting in a regulatory or administrative role. In Guerin v.
Canada, [1984] 2 S.C.R. 335, Justice Dickson commented as follows regarding
the concept of a fiduciary relationship:
It should be noted that fiduciary duties
generally arise only with regard to obligations originating in a private law
context. Public law duties, the performance of which requires the exercise of
discretion, do not typically give rise to a fiduciary relationship…
[24]
Coast
is presumably seeking an authorization from the Minister of Fisheries and
Oceans pursuant to section 35(2) of the Fisheries Act, because the
activity it wishes to carry out has the potential of altering, disrupting or destroying
fish habitat. In circumstances where the Minister is acting in a regulatory
capacity and on the facts as pleaded, a fiduciary relationship cannot possibly
arise.
[25]
To
the extent that the claim is cast as one based on abuse of public office,
misfeasance in public office, or abuse of power, that cause of action is not
made out in the pleadings. Here, the Crown refers to abuse of process as
discussed by Justice Newbury in Powder Mountain Resorts v.
B.C.
(2001) 94 B.C.L.R. (3d) (B.C.C.A.) 14 at paragraph 7:
Absent some ruling to the contrary by Supreme Court of
Canada, 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 8.) 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. The actionability of such conduct, based on "recklessness . . .
used in an objective sense" was rejected by their Lordships in Three
Rivers (see Lord Steyn at 9-10; Lord Hutton at 37-39; Lord Hobhouse at 44;
and Lord Millett at 49), and has been rejected as well by the High Court of
Australia (see Northern Territory of Australia v. Mengel (1995) 185
C.L.R. 307), and the Court of Appeal of New Zealand (see Garrett v. Attorney
General [1997] 2 N.Z.L.R. 332). Perhaps the opinion of Lord Millett in Three
Rivers sums up most succinctly the elements of the two branches of the
tort:
. . . If the plaintiff can
establish the official's subjective intention to exercise the power of his
office in order to cause him injury, he does not need to establish that the
official exceeded the terms of the powers conferred upon him. If, on the other
hand, the plaintiff can establish that the official appreciated that he was
acting in excess of the powers conferred upon him and that his conduct would
cause injury to the plaintiff, the inference that he acted dishonestly or for
an improper purpose will be exceedingly difficult and usually impossible to rebut.
Moreover . . ., the consequences of his actions will usually be obvious enough
to the official concerned, who can then be taken to have intended the damage he
caused. I also agree . . . that intention includes subjective recklessness,
that is to say . . . 'a conscious disregard for the interests of those who will
be affected by' the exercise of the power. [Page 49 of Three Rivers]
Breach
of Contract
[26]
In
terms of breach of contract, the essential elements of the cause of action are
the existence of a contract and its wrongful breach.
[27]
However,
a contract can only exist when parties have entered into an agreement for some
form of consideration, with an offer by one party and an acceptance by the
other party. In order to establish the existence of a contract, the proponent
is required to plead the terms of agreement, the consideration exchanged, and
the intention to create contractual relations.
[28]
Coast
submits that the contract that is the subject of the breach was formed by the
conduct of the parties over the course of 22 years. Rather than plead the
essential elements of breach of contract, including the terms of the alleged
agreement and the consideration exchanged, Coast simply states a conclusion,
based on the circular reasoning that the alleged contract arose from the
fiduciary duty and the fiduciary duty arose from the contract.
[29]
At
best, however, taking the facts as proven, but not the legal conclusions, there
was an understanding, but neither a contract nor a fiduciary duty, perhaps
relied upon without a good deal of thought by Coast, to the effect that a
mitigation plan and proposal for the facility would receive favourable
consideration by the Crown. A pre-condition to any agreement remained the
approval of the Minister.
Justiciability
[30]
The
real issue is not whether there was a breach of contract, or a breach of some other
duty, but rather whether the Minister improperly exercised his discretion. Coast’s
claim is totally dependent on the legitimacy of the Minister’s decision.
However, if that decision stands in law, as it must unless and until overturned,
none of the allegations against the Crown are actionable. The alleged wrongful
acts, as pleaded, have no independent life or status.
[31]
The
Federal Court of Appeal has directed that the real basis for the cause of
action must be examined in determining whether it is a collateral attack on a
decision which should more properly be dealt with under section 18 of the Federal
Courts Act. More recently, in Her Majesty the Queen v. Grenier, 2005
FCA 348, Mr. Justice Létourneau confirmed that a party who wishes to attack a
decision of a federal institution does not have the option of proceeding by
judicial review or by way of an action; the party must proceed by judicial
review. At paragraph 20 of its reasons, the Court of Appeal affirmed the
Court's previous decision in Tremblay v. Canada, 2004 FCA 172:
For the reasons expressed below, I think
the conclusion our colleague Madam Justice Desjardins arrived at, in Tremblay,
supra, is the right one in that it is the conclusion sought by Parliament
and mandated by the Federal Courts Act. She held that a litigant who
seeks to impugn a federal agency’s decision is not free to choose between a
judicial review proceeding and an action for damages; he must proceed by judicial
review in order to have the decision invalidated.
[32]
In
Grenier, the Court of Appeal has held that collateral attacks on
administrative decisions cannot be allowed. Where the decision remains valid,
that in "itself forecloses a finding of negligence".
[33]
As
the Statement of Claim is currently drafted, Coast cannot avoid the finding
that all of its heads of action, even if properly pleaded, are an indirect
attack on the validity of the process and the decision itself. If a want of
material facts were the only defect, this could have been rectified by means of
particulars. However, the defects in the Statement of Claim are more basic in
that there is neither a cause of action that is recognized at law, nor a remedy
under the Canadian Environmental Assessment Act: the appropriate remedy
is by way of judicial review.
[34]
I
must, notwithstanding, consider whether the Statement of Claim might be saved
by an amendment, for it ought not to be struck out if there is a scintilla of a
legitimate cause of action. In this instance, the Statement of Claim is so
broad and so general that no amendment would seem to be of any assistance. This
is all the more so in that Coast has been unable to particularize, in any
meaningful way, any of the broad assertions. Thus, taking the Statement of Claim
and the particulars, such as they are, there is not a scintilla of a
possibility of Coast raising a reasonable cause of action. The Statement of Claim
is therefore struck out, without leave to amend.
[35]
Counsel
for the Crown acknowledges the seriousness of denying a remedy by striking out
a proceeding and advises that the Crown would not oppose a motion to facilitate
conversion of this action into a judicial review proceeding. The motion will therefore
be granted, without prejudice to Coast’s right to bring a motion within 30 days
for an extension of time to commence an application for judicial review.
[36]
The
Crown was ultimately successful in having the entire Statement of Claim struck.
In the circumstances, the Crown is entitled to its costs of the motion as
against Coast.
ORDER
THIS COURT ORDERS that:
1. The style of
cause is amended by striking out
the Ministry of Fisheries and Oceans and the Department of Fisheries and Oceans
as Defendants.
2. The Statement
of Claim is struck out without leave to amend, and without prejudice to the
Plaintiff’s right to bring a motion, within 30 days of the date of this Order, for
an extension of time to commence an application for judicial review.
3. Cost of the
motion shall be paid by the Plaintiff to the Defendant Her Majesty the Queen in
Right of Canada.
“Roger R. Lafrenière”
FEDERAL COURT
SOLICITORS OF RECORD
DOCKET: T-1179-02
STYLE OF CAUSE: Coast
Dryland Services Ltd. v. HMTQ
PLACE OF
HEARING: Vancouver, British Columbia
DATE OF
HEARING: March
30, 2006
REASONS FOR ORDER: LAFRENIÈRE
P.
DATED: January
9, 2007
APPEARANCES:
|
Mr. Robert
Bush
|
FOR THE PLAINTIFF
|
|
Ms. Susanne
Pereira
|
FOR THE DEFENDANTS
|
SOLICITORS
OF RECORD:
|
Mr. Robert
Bush
Muir Sinclare
Bush & Company
200 - 575 Tenth street
Courtenay, BC V9N 1P9
|
FOR THE PLAINTIFF
|
|
Ms. Susanne
Pereira
Department of
Justice
Business &
Regulatory Law
900 – 840 Howe Street
Vancouver, BC V6Z 2S9
|
FOR THE DEFENDANTS
|
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