Civil Liability in Canada
No Tip, No Iceberg
Bruce Feldthusen
It would be ambitious, if not presumptuous, to attempt in one short chapter to isolate all
Canadian tort liability rules with a significant market impact. The focus here, following
a few comments about general trends, will be on a number of specific topics most of which
have proven controversial in the United States. Even so, readers must be forgiving if the
analysis is not quite as exhaustive as they might have liked. It appears, based on this
review of the situation, that the threat of an American-style litigation explosion in
Canada is not very serious.
Most of the issues discussed in this chapter fall under provincial jurisdiction in Canada,
and concern almost exclusively judge-made common law. Tort law is judge-made common law
everywhere in Canada, except in Quebec where it is codified in the Civil Code of Quebec.1
With the exception of the various statutory no-fault automobile insurance plans, there
have been virtually no major Canadian legislative interventions. Nor, in contrast to the
American situation, has there yet been much pressure for legislative tort reform. This
probably reflects both a lesser need for reform, and weaker interest group lobbying by
consumer, professional, and bar associations.
The Americanization of Canadian law
It will become apparent that there exist both similarities and significant differences
between United States and Canadian tort law. Doctrine aside, there are also substantial
differences between the legal cultures of the two countries that are reflected in the
civil justice systems. For example, in the United States there is more civil litigation,
more cases are decided by juries, and compensatory damage awards tend to be much higher.
These differences should be carefully noted but, more importantly, not too much should be
made of them.
Increasingly, and soon, tort law in Canada will come to resemble more closely tort law in
the United States for two reasons. First, tort reform in the United States is inevitable,
and some reforms may move United States doctrine toward the more conservative Canadian
rules. Second, the Americanization of Canadian doctrine is also inevitable. We have seen
it in all our corporate and commercial legislation. We have borrowed heavily from American
experience in drafting and interpreting our Charter of Rights and Freedoms. Electronic
access to American legal materials is already as good or better than electronic access to
Canadian sources. United States tort precedents now appear frequently and prominently in
Canadian appellate court opinions. Given the geographical and commercial similarities
between the countries, some sort of convergence is both understandable and desirable. It
is, of course, a different question as to precisely where we should converge.
The growth of negligence law:
prima facie duty of care
The number and types of situations that may culminate in tort liability in Canada has
increased dramatically this century, particularly over the past thirty years. Most
innovation in Canadian tort law has occurred in negligence, specifically through the
recognition of new duties of care.2 Formally speaking, whether the defendant owes a duty
of care to the plaintiff is a question of law for the judge alone. Careless conduct in the
absence of a recognized duty of care is not actionable. The judge decides whether the
facts pleaded support a legitimate legal claim. The judge is the legal gatekeeper.
It is axiomatic that a duty of care exists with respect to any allegation of foreseeable
direct injury to person or property. Until approximately twenty years ago, if the
defendant's alleged wrongdoing fell outside that paradigm, the law would recognize only
special limited duties of care, if any duty at all. For example, the duties governing
claims based on the defendant's negligent failure to act for the plaintiff's benefit, or
claims for pure financial loss, were few and narrowly defined. This is no longer true.
The British House of Lords, which functions as Britain's Supreme Court, made a decision in
Anns v. London Borough of Merton that signified an important new approach.
British precedent is not binding on Canadian courts the way decisions by our own Supreme
Court are, but because of the similarity in our legal traditions it can be extremely
influential. In Anns, the House of Lords adopted a two-stage test for recognition of a
duty of care. The first stage was decidedly pro-plaintiff. It recognized a prima facie
duty based on simple proximity or foreseeable harm to a foreseeable plaintiff. At the
second stage, the defendant had the onus of establishing a reason why a duty should be
negatived or limited.3 Since then, many restrictive precedents have been overruled, and
many new duties of care recognized. Defendants rarely succeed under branch two of the Anns
test. In fact, courts rarely refer to it at all.4
Ironically, there was eventually a backlash against this pro-plaintiff trend in England
even as it was spreading to Canada. In Murphy v. Brentwood District Council, the
House of Lords overruled itself, and put Anns aside in favour of the restrictive approach
to negligence law that had traditionally prevailed.5 The immediate consequence of Murphy
was effectively to immunize municipal governments from liability for failing to have
discovered construction defects in premises the municipality was empowered to inspect.
More restrictive rules soon emerged in other areas outside the physical damage paradigm.
For example, it is now much more difficult to recover for nervous shock or pure economic
loss in England than in Canada. This is tort reform English style.
As judicial conservatism began to dominate in the House of Lords, judicial nationalism
seemed to take hold in the Supreme Court of Canada. Again and again, the Supreme Court
expressed its preference for Anns over Murphy as the Canadian law of
duty of care. It became difficult to imagine how any Canadian defendant could have a
negligence claim dismissed on a preliminary motion,6 provided the plaintiff had been
prudent enough to utter the magic word "proximity" in the pleadings.7 This is
not the first time in Canadian history that an attempt to differentiate ourselves from the
English has made us more like the Americans.
Legal liability is probably the most cumbersome, time-consuming, expensive mechanism a
modern state could design to shift losses from one party to another. In automobile
accident cases, for example, the transaction costs associated with litigation are so high
that it is estimated that less than one half of every dollar spent on liability insurance
ever gets to the successful plaintiff. In contrast, with no-fault worker's compensation
schemes it is estimated that approximately 90 cents of ever funding dollar gets to a
claimant. Accordingly, one would have thought that there would be a presumption against
liability unless a compelling case for liability were made. The first stage in Anns does
exactly the opposite, establishing a presumption of legal obligation whenever the
defendant's act or omission creates a foreseeable risk of any sort to a foreseeable
plaintiff. Such "double foreseeability" alone offers no meaningful justification
for recognizing legal liability. Nor does it assume any more explanatory power if duty is
justified on the basis of the vacuous term "proximity" as courts that follow Anns
often tend to do. The first stage in Anns is no threshold at all. Virtually anything can
meet the elastic concept of foreseeability. One rarely finds a Canadian court considering
limiting or denying a duty of care anymore, let alone actually doing so.8
One of the consequences of this is that Canadian judges rarely perform a legal gatekeeper
function in negligence anymore. Virtually any coherent allegation of actionable negligence
can now proceed to the trier of fact for resolution. More negligence suits get filed than
would otherwise, and a wider range of negligence duties emerges. Whether this is a good or
bad thing in efficiency terms depends on a more specific analysis of the new duties than
is possible here. There are, however, a few consequences for a rationally based market
economy.
Legal rules, however rationally crafted, assume relatively less importance in a tort
system that abandons the responsibility to define legal duty. The human quirks and biases
of lawyers, judges, and jurors become more important. The definition of legal fault is not
determined by social science, moral philosophy, or otherwise, by an intellectual judicial
elite. Rather it emerges on an ad hoc basis, from case to case. Certainty in the law,
always suspect, decreases further. Outcome prediction is better based on behavioural
sciences than on doctrinal legal training. One suspects that concern for impecunious
injury victims frequently supersedes the application of rational accident deterrence in
the application of the standard of reasonable care.
Just how serious is this? Let us keep a sense of perspective. I once estimated that
Canadian negligence law may actually address as few as 0.05 percent of all serious
disability claims in the country. Tort law deals primarily with accidental injury.9
Canadian tort law lags behind American law in making doctrinal and procedural changes that
allow it to address effectively illness caused, for example, by dangerous products such as
tobacco,10 industrial and agricultural chemicals,11 pharmaceuticals,12 and so on. Only 10
percent of serious disability is caused by the types of accidents-automobile accidents,
sports accidents, household slips and falls, for example-with which the Canadian tort
system typically deals. Of that 10 percent, approximately half is dealt with on a no-fault
basis through workers compensation or no-fault automobile insurance plans. Most of the
remaining accidents are regarded by the victim as unavoidable or as the victim's own
fault. The victims rarely consult a lawyer, let alone sue. Whether we follow Anns
or Murphy suddenly seems insignificant.
In the commercial sphere, one cannot make the same educated guess about the market impact.
New duties in misre-presentation13 and products liability14 have greatly expanded recovery
for pure economic loss. Some of this results in entirely new liability. However, many of
the new cases simply shift liability from where it had previously been allocated by
contract to another party in the commercial chain. This seems, prima facie,
wasteful. There is also considerable uncertainty about the scope of liability for
relational economic loss that is also unnecessarily wasteful.15
Products liability
The most important change ever to affect product liability law in Canada will be the
emergence of class action claims in three provinces, and eventually, one supposes,
elsewhere.16 This subject is given full treatment by S. Gordon McKee elsewhere in this
volume. The main doctrinal difference relevant to the current discussion is that Canada
never adopted the doctrine of strict liability for defective products that exists across
the United States in various forms. Strict liability in American law is outlined in
S402A(1) Restatement of Torts, Second as follows:
(1) One who sells any product in a defective condition unreasonably
dangerous to the user or consumer or to his property is subject to liability for physical
harm thereby caused to the ultimate user or consumer, or to his property, if
(a) the seller is engaged in the business of selling such a product, and
(b) it is expected to and does reach the user or consumer without
substantial change in the condition in which it is sold.
In contrast, products liability in Canada is governed by basic negligence law in tort.
That means that in addition to proving what the Restatement requires, the Canadian
plaintiff must also prove that the defect in the product came about by negligence on the
part of the defendant. The Canadian law is fault-based, whereas the United States law is
"strict" liability for defect; that is, American manufacturers are responsible
for preventing defects, not simply for taking all reasonable steps to prevent them.
In theory, if the two regimes were accurate and free of transaction costs, they would
provide precisely the same safety incentives to the manufacturer. A defendant will always
prevent an accident if prevention costs are lower than liability costs, and allow it if
the reverse is true. This is so in negligence or strict liability. What differs is who
pays for the so-called "unavoidable" accidents; that is, accidents that are
cheaper to experience than to prevent.17 With strict liability, the manufacturer pays;
with negligence, the victim pays because it is not negligent for the manufacturer to
refuse to spend more on prevention than the projected accident cost.
In practice, strict liability might be superior. Arguably, manufacturer negligence is
difficult to prove. The full social losses experienced by all victims and those who depend
upon them may be under-compensated in a negligence regime. Strict liability may be, in
effect, a duplicitous way of bringing a more accurate estimate of the cost of avoidable
accidents home to manufacturers. Transaction costs are lower when a major element in the
case, negligence, is eliminated. Strict liability also does a better job of internalizing
the cost of product-defect accidents by having sellers incorporate anticipated accident
costs into price. Consumers are poorly positioned to estimate these costs when purchasing.
One must also consider whether the difference between the two standards actually affects
the outcome of litigation as much as it might first appear. Keep in mind that statutory
sales law, substantially similar in Canada and the United States, lies in the background
to provide relief against the immediate seller. In negligence, we employ a doctrine in
Canadian law called res ipsa loquitur (the thing speaks for itself) that permits the jury
to infer negligence from the accident itself, which in practice brings us close to strict
liability. There are few cases in Canadian law reports where the plaintiff has succeeded
on all the elements of the action including proof of defect, but lost on the issue of
negligence.
Although it may be more difficult to succeed in a products liability suit in Canada than
in the United States, this has little to do with negligence versus strict liability or any
other doctrinal difference. There have been a number of high profile cases in which
Canadian plaintiffs have failed to prove the defendant's product was defective, although
courts in the United States have held otherwise. For example, in Stiles v. Beckett18 a
British Columbia Supreme Court trial judge dismissed an action against Honda because the
plaintiff had failed to prove the all-terrain vehicle (ATV) was defective. Many decisions
in the United States had held the opposite. In another, Privest Properties Ltd. v.
W.R. Grace & Co. of Canada Ltd.,19 a British Columbia Supreme Court judge
dismissed the first asbestos property damage case tried in Canada. The court held that the
plaintiffs had failed to prove that a fire retardant spray was a health hazard to building
occupants. In so doing, the judge disagreed explicitly with approximately one dozen
successful suits against the American parent company in the United States.20 Perhaps the
real distinction was that the Canadian actions were tried by a judge without a jury.
Whatever its other merits or drawbacks, strict liability serves as a mandatory insurance
scheme for unavoidable product-defect accidents, and this is a strange category of injury
to be singled out for a separate insurance regime. Liability regimes, whether predicated
on fault or not, are notoriously expensive compared to first party schemes. Strict
liability is not an efficient insurance scheme for unavoidable product defect accidents
compared to many other options. However, if the state wants to have a mandatory insurance
scheme for unavoidable product defect accidents, and is unwilling to provide
state-sponsored cover, or to require by law that victims obtain their own private cover,
then it has no option but to implement strict liability.
Another issue that deserves attention is the manufacturer's duty to warn of dangers
related to the use and misuse of the product. Canadian courts recently have held that a
manufacturer does not have a duty to warn the consumer of known or obvious dangers. In the
Ontario case, the Court of Appeal employed this principle to overturn a jury verdict of
liability.21 The Ontario Court relied on decisions from the United States in support of
its holding, whereas a similar decision in British Columbia was proclaimed as a departure
from American law.22 It would appear again that doctrinal differences do not amount to
much, but that judges may have more control than juries in Canada.
Also on the subject of duty to warn, reference should be made to the Supreme Court of
Canada's decision in Hollis v. Dow Corning Corp.23 For one thing, the court was very
demanding about what warnings were required with a personal health product such as breast
implants. For another, the court held that the manufacturer's failure to warn the
patient's doctor would culminate in liability even if there was evidence that the doctor
would not have passed the warning on to the patient had it been given. The plaintiff's
lawyer thought the decision would have major repercussions in the health product area, at
least.
The court's holding that Dow's risk warnings were inadequate, its restriction of the
"learned intermediary" defence, and its refusal to impose strict causation
requirements on plaintiffs, could help the cases of tens of thousands of women who are
involved in silicone breast implant class actions in Canada, Mr. McKinlay [the plaintiff's
lawyer] predicted. He added that the principles adopted on the duty to warn and causation
issues in the case apply to medical products liability cases-such as the HIV-tainted blood
cases-as well as to other types of products liability cases. 24
Malpractice
There seems to be a good deal less malpractice litigation in Canada, and malpractice
insurance premiums are lower than in the United States. Once again, the explanation
probably lies elsewhere than in doctrine. Professional malpractice law in Canada is basic
negligence law. The professional is held to the standard of competence of the reasonable
practitioner in a similar reference group; the reasonable sole practitioner, the
reasonable heart surgeon, and so on.
Medical malpractice law is interesting, although not necessarily typical.25 There have
been some noteworthy decisions in the Supreme Court of Canada. In Reibl v. Hughes26
the Court adopted the American concept of informed consent. In Snell v. Farrell,27
many thought the court had relaxed somewhat the strict burden of causation, otherwise an
often fatal hurdle in a malpractice claim. In Norberg v. Wynrib,28 a physician
was held liable for trading a patient drugs for sexual favours. The decision seemed to
redefine the defence of consent by vitiating apparent consent obtained in a "power
dependent" relationship. It also suggested the possibility of proceeding against
doctors for breach of fiduciary duty, a more open-ended, pro-plaintiff action than
negligence. With each decision, concerns were expressed that the floodgates of malpractice
litigation had been opened. This has not happened.
One reason is that it remains expensive and uncertain to mount such a claim. One lawyer
suggests that disbursements in the range of $100,000 are not unusual. It has been
estimated that 80 percent of all claims fail. One of the main reasons why this is so is
the Canadian Medical Protective Association, an organization that, among other things,
co-ordinates all legal work on behalf of the profession.29 Its members claim that it
litigates to uphold the principles of the profession. Others wonder if the principle is to
eliminate malpractice suits as a viable option for patients. Regardless, the results are
impressive.
The real problem with medical malpractice litigation-and perhaps with other malpractice
litigation-is the transaction cost: the expense of the process overshadows any possible
efficiency gains from the outcome. Rightly or wrongly, from a fault perspective, it
delivers little compensation to most who suffer losses at the hands of the profession. For
this reason, supplementary no-fault insurance has been suggested for medical injury.30
The other professions that ought particularly to be mentioned are the auditors,
accountants, and related financial professions. Liability for negligent professional
financial advice is well-established in Canadian law,31 and generally the rules for
negligent misrepresentation are substantially similar in Canada and the United States.32
The potential for ruinous liability exists, given the enormous losses that may follow from
the slightest of negligence. One doctrinal concern is whether the adviser's exposure
should be limited to losses suffered in the very transaction for which the advice was
offered, or should be broader.33 There exists considerable divergence of opinion in Canada
and in the United States as to which option would be more efficient.34
Another concern is whether it is appropriate to hold auditors jointly and severally liable
with other defendants, some of whom may be guilty of fraud that the auditor negligently
failed to detect.35 Joint and several liability means that once two or more co-defendants
are found liable, the plaintiff may recover the full damages awarded from any of them.
Each co-defendant is liable to make good the full loss to the successful plaintiff,
notwithstanding how the responsibility may be apportioned among the defendants. It assumes
tremendous practical significance when only one of the several defendants is solvent or
insured. For example, a municipality may be held only 10 percent liable in comparison to
the primary tortfeasor but, nevertheless, end up paying 100 percent of the damages, if the
primary tortfeasor is bankrupt or otherwise unavailable to pay its share. This doctrine is
under attack in several Canadian contexts, including municipal liability to which I now
turn.
Municipal liability
Public authorities, including municipal governments, are immune from negligence liability
when they exercise statutory discretion to make policy decisions.36 They are not immune
for operational negligence in implementing these policy decisions. The dividing line
between policy and operational is broad and ambiguous, however, and it is generally agreed
that the Supreme Court of Canada recognizes less immunity than courts elsewhere in the
Commonwealth.37 Municipal governments seem to be sued more frequently than other public
authorities. Other than limited immunity, there are no unique liability rules for
municipal governments. But there are some applications of standard rules that have caused
concern.
First, Canada, unlike England but like many American states, holds builders and
manufacturers liable for dangerous defects in buildings and products, whether or not the
defect manifests itself in an accident.38 Controversial in its own right,39 liability for
dangerous defects has proven especially onerous for municipalities. They are frequently
held liable for failing to have detected defective construction when exercising their
statutory powers of inspection. Typically, the builder is insolvent, in which case by
virtue of joint and several liability,40 municipalities become liable for the full cost of
repair or reconstruction. The situation here is analogous to that with respect to products
liability described above. If mandatory insolvent builder insurance is deemed necessary,
there are more efficient ways of providing it than by municipal liability,41 especially if
standard deterrence theory is suspect in the public sector.
Joint and several liability is always a concern for any well-funded defendant.
Municipalities often find themselves jointly and severally liable in situations other than
those involving defective construction. Occupier's liability is the branch of tort law
that governs the responsibility of those who occupy land toward other persons who come on
to the land. Joint and several occupier's liability is a major concern for municipalities
with large land holdings, especially park and recreation lands. A plaintiff who is able to
have even the slightest liability apportioned to a municipality may be able to collect the
entire judgement from the municipality.
Another area of concern is illustrated by the Supreme Court of Canada's decision in Tock
v. St. John Metropolitan Area Board.42 The court held that the municipality was
liable in nuisance to a homeowner whose basement was flooded when a sewer backed up. The
municipality was not negligent, but liability in nuisance is not predicated on fault. The
court held, based on the permissive legislation authorizing municipal sewer construction
(a common form of legislation), that the municipality was to be judged on exactly the same
principles that would apply to private parties. Given that few private citizens
voluntarily construct city-wide sewage systems, the analogy seems somewhat flawed.
In these days of financial crises in municipal budgets, liability costs are onerous.
Lobbying to increase immunity, to limit joint and several liability, and to address the
Tock exposure is underway. Legislative responses are rumoured to be in preparation, and
indeed in some form they are inevitable.
Punitive damages
Punitive damages have not historically been significant in Canada. Prior to 1988, the
largest reported punitive damage award in Canada was $50,000; most punitive awards were
much smaller and, moreover, punitive damages were rarely awarded at all.43 Between 1985
and 1995, however, there were more than 150 reported punitive damage awards, at least 16
of which were in excess of $50,000.44 These 16 include an award of approximately
$4,800,000 as an accounting for wrongful profits,45 $1,000,000 as punishment for breach of
an insurer's duty of good faith,46 and $800,000 in a defamation action discussed below.47
Punitive damage awards are also routine in sexual battery suits, one of the fastest
growing areas of liability in the country, and are sometimes awarded when the sexual
battery defendant has been punished already in the criminal courts.48 The largest punitive
award was $15,000,000 in an infringement of patent action when the defendant continued to
market the product in issue after a preliminary injunction prohibiting same had been
issued.49 The size of the award was determined with reference to the considerable wealth
of the corporate defendant. The defendant's wealth is a recognized consideration for
punitive damages in Canadian law, although it has never been emphasized quite so clearly
before.50 The award was overturned on appeal, but not because of any concern about the
amount of the award.51
Punitive damages are available in any tort action involving advertent wrongdoing where the
defendant's conduct may be described as: "harsh, vindictive, reprehensible, and
malicious."52 This is not dissimilar to the threshold employed in most American
states. There are two differences, however, that make Canadian punitive awards smaller and
less common. First, the plaintiff must be the victim of the conduct deserving of
punishment. For example, if one wished to punish a fast-food chain for marketing
dangerously hot coffee, punitive damages would have to be quantified on a case-by-case
basis, proportioned to the wrong done to each individual plaintiff; not awarded all in one
suit in an amount large enough to punish the entire practice.53 Class actions may have a
major impact on the application of this rule. Second, the rationale is punishment, not
deterrence. For example, I know of no Canadian decision to take the probability of the
defendant's escaping detection of future wrongdoing into account when quantifying the
punitive award, which does happen in the United States.
Although punitive awards are becoming more common and larger in Canada, I do not foresee
anything approaching a crisis. On the contrary, they may well enhance efficiency
considerably through effective deterrence of systematic wrongdoing, if courts were to
begin to embrace a deterrence rationale. Also, more thought should be given to the
advantages of selective quasi-privatization of criminal law through the use of punitive
damages in areas where criminal law has proven ineffective. Sexual battery may be just
such an area.
Defamation
The law of defamation is well beyond my area of expertise. However, it should be mentioned
because it is the one obvious area in which Canadian law is more pro-plaintiff than the
law in the United States. The Supreme Court of Canada recently upheld a jury verdict in
defamation for $300,000 general damages, $500,000 aggravated damages, and $800,000
punitive damages to a plaintiff defamed in his capacity as a Crown Attorney.54 Sounding
very much like a court in the United States, the Supreme Court praised the unique
abilities of a jury to quantify these damages, and expressed a strong reluctance to
interfere. It held that the cap on general damages applied in personal injury cases did
not apply in defamation.55 It also declined expressly to adopt the reasoning of the United
States Supreme Court in New York Times Co. v. Sullivan. There, Brennan J. held that public
officials could only collect damages for statements concerning their fitness for office in
circumstances where they could demonstrate that the defamatory statement was made
"with knowledge that it was false or with reckless disregard of whether it was false
or not." 56
This example appears to confirm the general proposition that rules should be avoided that
encourage large amounts of litigation, and thus discourage any activity that might trigger
it-in this case, rules that create the substantial possibility of enormous payoffs. In my
opinion, defamation law in Canada has an undesirable impact in the market of ideas and
information. Libel chill is a real concern, especially for those engaged in political and
social criticism. The deterrent impact of defamation law is not always signalled by an
actual proliferation of lawsuits. The threat of litigation is sufficient in many cases.
For example, there have been several high-profile examples of women complaining about
sexism generally in the institutions where they work. They have not named individuals, nor
given specific examples. They have been met with suits in defamation initiated by groups
of men with whom they work. This is a very effective way to silence protest, even if
success in court is not certain.
Insurance law
As noted above, in particular contexts liability regimes have such high transaction costs
that they ought to be our last choice, if insurance is the primary goal. Fundamental tort
reform includes the possibility of eliminating tort altogether in discrete areas where
other insurance schemes are thought superior.57
No-fault automobile insurance
If victim compensation is the only goal, the transaction costs associated with
auto-accident liability are wasteful. Of course, no-fault schemes are not perfect either.
Victims may need to hire lawyers to secure the benefits to which they are entitled under
first party no-fault. False claims are possibly more likely when litigation is by-passed.
Nevertheless, no-fault remains far superior at putting premium dollars into the hands of
legitimate accident victims. Every province in Canada has no-fault automobile insurance to
some extent or another. Quebec and British Columbia, for example, have state-operated
plans. Quebec alone in Canada has a pure (no residual tort liability) no-fault plan.
Ontario's plan regulates no-fault cover provided by private insurers. It is a threshold
plan, with access to tort allowed if the claim passes a statutory threshold. The plan
changes with each new government.
Title insurance
It was noted at the outset that the partial Americanization of Canadian law was likely.
The Americanization of Canadian business is inevitable. Title insurance companies based in
the United States are aggressively seeking access to Canadian markets.58 At present, in
Ontario, for example, title insurance is only available after a lawyer has certified
title. In other words, title insurance is effected through the lawyers' errors and
omissions policy. (Title insurance is insurance against the possibility, given the
frequently imperfect nature of real estate records, that creditors will turn out to have
claims against a property that were undetected prior to the purchase.) Part of the fee for
legal services is a component for title insurance. The title insurance companies believe
they can offer a fully insured real estate transaction for much less than a lawyer would
charge. I am not competent to judge whether consumers would lose out on other benefits of
the legal service as lawyers claim, or whether rational consumers would want to purchase
those benefits. But I can predict that the issue will prove to be a nasty one within the
profession. The livelihood of much of the real estate bar is threatened directly by title
insurance, and at a time where there seems to be underemployment in the profession
generally. On the other hand, it may appeal to members of other segments of the bar who
believe their errors and omissions premiums are subsidizing high-risk real estate
practice.
The collateral source rule
The prevalent common law "collateral source" rule allows the plaintiff to
recover in full from the tortfeasor, notwithstanding that the victim has already been, or
will be, compensated for precisely the same losses by other sources such as employment
benefits, private or government insurance. There are many statutory modifications to this
rule, and a few tentative attempts to limit it at common law. Nevertheless, it remains the
general common law rule.59 Collateral sources may then recover the excess compensation
received by the victim through a process known as subrogation. In practice, the typical
lawsuit is waged by one or more insurers who cover the victim against another insurer who
provides liability insurance to the defendant. By this process, society allows one company
that has already spread the loss through underwriting to employ the high cost liability
scheme to shift it to another company that will do the same thing. It is highly doubtful
whether the deterrence incentives so obtained justify either double recovery when the
collateral source finds it too expensive to pursue its right of subrogation, or the
squandering of money due to redistribution of losses from one insurance pool to another
when it does subrogate.
Conclusion
One certainly ought to be concerned about the question, "Are we seeing the tip of the
iceberg in Canada?" given some of the horror stories that result from the question
"What is going on in the United States?" My conclusion is that there is no real
cause for concern in Canada about what is happening here, and indeed that concerns about
importing American practice are largely misplaced because the general situation there is
not nearly as bad as it may appear.60 Moreover, most of the different patterns or outcomes
that exist between the United States and Canada seem to have little to do with legal
doctrine. Doctrine matters less than we think.
If one were to identify a single source of inefficiency in this area, it would be the
liability system itself. It is too slow and expensive. It is necessary in some contexts to
promote basic justice, and in others for deterrence. But on the whole, we need less of it,
especially less negligence and strict liability. It is also the case that the openly
pro-plaintiff bias in negligence law has generated more expensive liability than is really
necessary, and considerable uncertainty. The practical consequences of this are probably
more pronounced in commercial tort law than in personal injury law.
So, it is there that the attention of scholars, practitioners and reformers should be
concentrated.
Acknowledgments
The author would like to thank the Faculty of Law and the Financial Aid Office of the
University of Western Ontario for making it possible to engage the excellent research
services of Stephanie Ross, Law III.
Notes
1 Thus references to Canadian tort law are to the law outside
Quebec, although many similarities exist.
2 The duty of care in negligence law is the definition of the
tortious obligation: e.g., the duty to take reasonable care to avoid causing personal
injury; the duty to protect a child from harm; and so on. Indeed, one could argue that
many significant changes to what was once governed exclusively by contract law have been
achieved through new duties of care dealing with economic loss in tort. See generally B.
Feldthusen, Economic Negligence (3d ed.), Toronto: Carswell, 1994.
3 [1977] 2 All E.R. 492 (H.L.) [hereinafter Anns].
4 I can think of only two recent Supreme Court of Canada decisions
to have explicitly referred to the second branch of the Anns test. The cases were
equally noteworthy because the Court actually held that no duty of care existed. See
D'Amato v. Badger, [1996] S.C.J. No. 84 (QL) and Hercules Managements Ltd. v.
Ernest and Young [1997] S.C.J. No. 51 (QL). Whether they are harbingers of change, or
merely specific responses to particular questions, remains to be seen. See generally, R.
Kostal, "Liability For The Sale Of Alcohol: Stewart v. Pettie" (1996)
75 Can. Bar Rev. 169 at 175.
5 [1990] 3 W.L.R. 414 (H.L.).
6 It is often important for a defendant to have a case dismissed
on a preliminary motion to a judge alone on the ground that the law does not recognize the
duty of care that is the foundation of the plaintiff's claim. The idea is to have the
judge dismiss the case before it is even tried because the facts alleged do not constitute
a recognized legal wrong even if they did occur. Otherwise, the case may eventually go to
a jury, and many defendants suspect juries of being pro-plaintiff and anti-corporate
defendant.
7 See e.g., CNR v. Norsk Pacific Steamship Co.,[1992] 1
S.C.R. 1021, 91 D.L.R. (4th) 289; Winnipeg Condominium Corp. #36 v. Bird Construction
Co., [1995] 1 S.C.R. 85.
8 See supra note 5.
9 B. Feldthusen, If This Is Torts, Negligence Must Be Dead, in K.
Cooper-Stephenson and E. Gibson (eds.), Tort Theory, Toronto: Captus Press, 1993:
394.
10 See e.g., Brad Daisley, The Tug-of-War over Tobacco, The Lawyers
Weekly (23 August 1991).
11 See J. Cassels, The Uncertain Promise of Law: Lessons From Bophal
(1991) 29 Osgoode Hall L.J. 1.
12 See e.g., Monique Conrod, Undercompensation for Drug Injuries Common,
Prof. Says." The Lawyers Weekly (13 January 1995).
13 See the discussion in the section "Malpractice," below.
14 See the rule in Bird Construction, discussed in the section
"Municipal Liability," below.
15 B. Feldthusen and J. Palmer, Winnipeg Condominium Corp. #36 v.
Bird Construction Co.: Who Needs Contract Anymore? (1995) 25 Can. Bar Rev. 143.
16 The provinces are Quebec, British Columbia, and Ontario.
17 R. Posner, Economic Analysis Of Law (4th ed.), Toronto:
Little, Brown, 1992: 137-9.
18 [1996] B.C.L.R. (3d) 144 (B.C. C.A.).
19 (1995), 128 D.L.R. (4th) 577 (B.C. S.C).
20 See Howard Burshtein, Plaintiffs Failed to Prove Fire Retardant Spray
Was Health Hazard: B.C. Negligence Claim against Asbestos Product Fails," The
Lawyers Weekly (8 December 1995).
21 Deshane v. Deere & Co.(1993), 15 O.R. (3d) 225, 106
D.L.R. (4th) 385 (C.A.), leave to ref'd. (1994), 110 D.L.R. (4th) vii (S.C.C.).
22 Stiles v. Beckett, supra note 17. See Teresa M.
Dufort, ATV Ruling Suggests How Our Courts Will Approach Products Liability Cases. The
Lawyers Weekly (16 April 1993).
23 [1995] 4 S.C.R. 634.
24 Cristin Schmitz, Heavy Burden Imposed on Manufacturers to Warn
about Risk: S.C.C. Dismisses Breast Implant Appeal, The Lawyers Weekly (12
January 1996).
25 See generally, Brad Daisley, Time, Money, Good Claim Are Key to
Malpractice Suit, The Lawyers Weekly (21 July 1995), quoting Maris McMillan.
26 [1982] S.C.R. 880.
27 [1990] 2 S.C.R. 320.
28 (1992), 12 C.C.L.T. (2d) 1 (S.C.C.).
29 Supra note 16.
30 J.R.S. Prichard, Liability and Compensation in Health Care
(Toronto: University of Toronto Press, 1991).
31 Canada follows the leading English decision, Hedley Byrne v.
Heller, [1964] A.C. 562 (H.L.). See especially Haig v. Bamford (1976), 72
D.L.R. (3d) 68 (S.C.C.). See generally, B. Feldthusen, Economic Negligence, supra
note 2, chap. 2. I am also indebted to a paper prepared by Tom Heintzman, "Auditor's
Liability," presented at the Court of Appeal for Ontario Annual Seminar, May 10,
1996.
32 Generally, liability in this area is premised on much the same
principles expressed in S 552 of the Restatement of Torts (Second).
33 In Haig v. Bamford, ibid., the court spoke of liability to a
limited class. Contrast the leading English authority Caparo Industries Plc. v.
Dickman, [1990] 1 All E.R. 568 (H.L.). Recently, the courts in Canada have taken a
restrictive view, similar to the English. See Hercules Management, supra note 5.
34 Feldthusen, Economic Negligence, supra note 2, at 124.
35 See Heintzman, supra note 30.
36 The leading authority is Anns v. London Borough of Merton, supra
note 3. In Canada, see especially Kamloops v. Nielsen, [1984] 2 S.C.R. 2, and Just
v. British Columbia, [1989] 2 S.C.R. 1228.
37 See generally, B. Feldthusen, Economic Negligence, supra
note 2, Chapter 6; Justice J. Sopinka, "The Liability of Public Authorities: Drawing
The Line" (1993) 1 Tort L. Rev. 123. In two decisions subsequent to Just, Brown
v. British Columbia (1994) 20 Admin. L.R. (2d) 1 (S.C.C.) and Swinamer v. Nova
Scotia (1994) 20 Admin. L.R. (2d) 39 (S.C.C.), the court appeared to withdraw
somewhat from the broad scope of liability contemplated in Just.
38 Winnipeg Condominium Corp. #36 v. Bird Construction Co., supra
note 6. Negligence liability for non-dangerous defects was left open, but seems unlikely.
39 B. Feldthusen and J. Palmer, supra note 14.
40 See the discussion in the section "Malpractice," above.
41 See the discussion in the section "Products Liability," above.
42 [1989] 2 S.C.R. 1181.
43 B. Feldthusen and N. Vidmar, "Exemplary damage Claims in Ontario: An
Empirical Profile" (1990) 16 Can. Bus. L.J. 262.
44I base this on a survey provided to the audience by Mr. Ian Binnie
during a presentation on this topic at the Court of Appeal for Ontario Annual Seminar, May
10, 1996.
45 Claiborne Industries v. National Bank of Canada (1989), 69 O.R.
(2d) 65 (C.A.).
46 Whiten v. Pilot Insurance Co. (1996), 132 D.L.R. (4th) 568
(Ont. Gen. Div.).
47 Hill v. Church of Scientology of Toronto, [1995] 2 S.C.R.
1130.
48 See A.(B.) v. I.(J.), [1991] 5 W.W.R. 748 (Alta. Q.B.); B.(P.) v.
B.(W.) (1992), 11 O.R. (3d) 161 (Gen. Div.); P.C.P. v. Da Costa, [1992] B.C.J.
No. 2303 (QL)(B.C. S.C.); S.C. v. R.L.L. (1993), 133 N.B.R. (2d) 332 (Q.B.); and Q.(S.M.)
v. Hodgins (1991), 36 R.F.L. (3d) 159 (Ont. Gen. Div.).
49 Lubrizol Corp. v. Imperial Oil (1994), 84 F.T.R. 197 (T.D.).
50 It was also a significant factor in the award in Whiten, supra
note 44.
51 (1996), 67 C.P.R. (3d) 1 (F.C.A.). The matter was returned to trial
to consider whether the conduct truly met the threshold for punitive damages.
52 Vorvis v. Insurance Corporation of British Columbia, [1989] 1
S.C.R. 1085.
53 See B. Feldthusen, "Punitive Damages In Canada: Can the Coffee
Ever Be Too Hot" (1995) 17 Loyola of L.A. International & Comparative L.J. 793.
54 Hill v. Church of Scientology of Toronto, supra note 45.
55 Personal injury general damages are capped at $100,000 in 1978
dollars, or approximately $250,000 today. See Andrews v. Grand & Toy (Alta.) Ltd.,
[1978] 2 S.C.R. 229.
56 376 U.S. 254, 280 (1964).
57 I do not mean to suggest that tort is or ought to be only, or even
mainly, an insurance scheme. Proper evaluation must take other goals, notably corrective
justice and deterrence, into account.
58 See Bob Aaron, Title Insurance Poses Threat to Ont. Registry System, The
Lawyers Weekly (1 December 1995); Title Insurance Is Changing Real Estate Practice:
Bar, Insurers Are Lining Up to Do Battle, The Lawyers Weekly (5 July 1996).
59 See Ratych v. Bloomer (1990), 3 C.C.L.T. (2d) 1 (S.C.C.);
and Cunningham v. Wheeler, [1994] 1 S.C.R. 359.
60 See Ontario Law Reform Commission, Report on Exemplary Damages
(Toronto, 1990).
Table of cases
A.(B.) v. I.(J.), [1991] 5 W.W.R. 748 (Alta. Q.B.).
Andrews v. Grand & Toy (Alta.) Ltd., [1978] 2 S.C.R. 229.
Anns v. London Borough of Merton, [1977] 2 All E.R. 492 (H.L.).
B.(P.) v. B.(W.) (1992), 11 O.R. (3d) 161 (Gen. Div.).
Brown v. British Columbia (1994) 20 Admin. L.R. (2d) 1 (S.C.C.).
Caparo Industries Plc. v. Dickman, [1990] 1 All E.R. 568 (H.L.).
Claiborne Industries v. National Bank of Canada (1989), 69 O.R. (2d) 65 (C.A.).
C.N.R. v. Norsk Pacific Steamship Co., [1992] 1 S.C.R. 1021.
D'Amato v. Badger, [1996] S.C.J. No. 84 (QL).
Deshane v. Deere & Co. (1993), 15 O.R. (3d) 225 (C.A.).
Haig v. Bamford (1976), 72 D.L.R. (3d) 68 (S.C.C.).
Hedley Byrne v. Heller, [1964] A.C. 562 (H.L.).
Hercules Managements Ltd. v. Ernest and Young [1997] S.C.J. No. 51 (QL)
Hill v. Church of Scientology of Toronto, [1995] 2 S.C.R. 1130.
Hollis v. Dow Corning, [1995] 4 S.C.R. 634.
Just v. British Columbia, [1989] 2 S.C.R. 1228.
Kamploops v. Nielsen, [1984] 2 S.C.R. 2.
Lubrizol Corp. v. Imperial Oil (1994), 84 F.T.R. 197 (T.D.), rev'd (1996), 67
C.P.R. (3d) 1 (F.C.A.).
Murphy v. Brentwood District Council, [1990] 3 W.L.R. 414 (H.L.).
New York Times Co. v. Sullivan, 376 U.S. 254, 280 (1964).
Norberg v. Wynrib (1992), 12 C.C.L.T. (2d) 1 (S.C.C.).
P.C.P. v. DaCosta, [1992] B.C.J. No. 2303 (QL)(S.C.).
Privest Properties Ltd. v. W.R. Grace & Co. of Canada Ltd. (1995), 128 D.L.R.
(4th) 577 (B.C. S.C.).
Q.(S.M.) v. Hodgins (1991), 36 R.F.L. (3d) 159 (Ont. Gen. Div.).
Ratych v. Bloomer (1990), 3 C.C.L.T. (2d) 1 (S.C.C.).
Reibl v. Hughes, [1982] S.C.R. 880.
S.C. v. R.L.L. (1993), 133 N.B.R. (2d) 332 (Q.B.).
Snell v. Farrell, [1990] 2 S.C.R. 320.
Stiles v. Beckett, [1996] B.C.L.R. (3d) 144 (C.A.).
Swinamer v. Nova Scotia (1994), 20 Admin. L.R. (2d) 39 (S.C.C.).
Tock v. St. John Metropolitan Area Board, [1989] 2 S.C.R. 1181.
Vorvis v. Insurance Corporation of British Columbia, [1989] 1 S.C.R. 1085.
Whiten v. Pilot Insurance Co. (1996), 132 D.L.R. (4th) 568 (Ont. Gen. Div.).
Winnipeg Condominium Corp. #36 v. Bird Construction Co., [1995] 1 S.C.R. 85.
Selected references
Aaron, B. Title Insurance Poses Threat to Ont. Registry System, The Lawyers Weekly (1
December 1995).
--- Title Insurance Is Changing Real Estate Practice: Bar, Insurers Are Lining Up to Do
Battle, The Lawyers Weekly (5 July 1996).
Brown, C. No-Fault Automobile Insurance in Canada. Toronto: Carswell, 1988.
Burshtein, H. Plaintiffs Failed to Prove Fire Retardant Spray Was Health Hazard: B.C.
Negligence Claim against Asbestos Product Fails, The Lawyers Weekly (8 December
1995).
Cassels, J. The Uncertain Promise of Law: Lessons from Bophal (1991) 29 Osgoode Hall L.J.
1
Conrod, M. Undercompensation for Drug Injuries Common, Prof. Says, The Lawyers Weekly (13
January 1995).
Daisley, B. The Tug-of-War over Tobacco, The Lawyers Weekly (23 August 1991).
--- Time, Money, Good Claim Are Key to Malpractice Suit, The Lawyers Weekly (21
July 1995).
Dufort, T.M. ATV Ruling Suggests How Our Courts Will Approach Products Liability Cases, The
Lawyers Weekly (16 April 1993).
Feldthusen, B. Economic Negligence (3rd ed.). Toronto: Carswell, 1994.
--- If This Is Torts, Negligence Must Be Dead. In K. Cooper-Stephenson and E. Gibson
(eds.), Tort Theory (Toronto: Captus Press, 1993).
--- Punitive Damages in Canada: Can the Coffee Ever Be too Hot (1995), Loyola of L.A.
International and Comparative L.J. 793.
Feldthusen, B. and Palmer, J. Winnipeg Condominium Corp. #36 v. Bird Construction Co.:
Who Needs Contract Anymore? (1995) 25 Can. Bar Rev. 143.
Feldthusen, B. and Vidmar, N. Exemplary Damage Claims in Ontario: An Empirical Profile:
(1990) 16 Can. Bus. L.J. 262.
Heintzman, T. Auditors Liability (paper presented at Court of Appeal for Ontario Annual
Seminar, 1996).
Kostal, R. Liability For the Sale of Alcohol: Stewart v. Pettie (1996) 75 Can.
Bar Rev. 169.
Prichard, J.R.S. Liability and Compensation in Health Care. Toronto: University
of Toronto Press, 1991.
Schmitz, C. Heavy Burden Imposed on Manufacturers to Warn About Risk: S.C.C. Dismisses
Breast Implant Appeal, The Lawyers Weekly (12 January 1996).
Sopinka, J. The Liability of Public Authorities: Drawing the Line, (1993) 1 Tort L.R. 123.
Civil Justice Reform in Ontario
Charles Harnick
A litigation explosion in Ontario
Whether or not Canada is inheriting America's litigious legacy, there can be no question
that Ontario has already experienced a litigation explosion. In the past decade, more than
1.8 million civil cases were filed in Ontario courts. Ontario courts hear almost one-third
of the country's civil suits, the most of any jurisdiction in Canada (though, since it
accounts for well over one-third of Canada's population and of its GDP, this figure is if
anything lower than one might expect). And, whatever one may say about its fundamental
causes and cures, this explosion presents an immediate problem for which immediate
solutions must be found. As things stand, parties can wait up to five years before their
case is heard. That has led to exorbitant costs to litigants. Delays and high costs are a
recipe for disaster for those who need our courts to settle their disputes.
Our challenge as administrators of the system is to deal with the consequences of the
explosion that has already occurred and prevent such things from happening again. We must
improve the justice system and develop a more accessible, affordable and efficient civil
justice system for all Ontarians.
The need for such a system is obvious. Businesses, investors and individuals-those who
create jobs and prosperity-need a civil justice system that works with them, not against
them. When looking for places to invest their capital and create jobs, corporations need
to know that they will be able to settle their commercial disputes with reasonable costs
and minimal inconvenience. Entrepreneurs and risk takers value doing business in locations
that can deliver swift and effective justice. Quick resolution of disputes is in
everyone's best interest. It is good for business, individuals and the province's economy.
It is clear that, whatever the underlying benefits or costs of various types of litigation
under various legal rules, a system that does not deal expeditiously with those cases that
do arise is failing the community.
Current problems
As a former civil litigator, I have experienced at first hand the problems in the civil
justice system. Let me outline them. In a nutshell, Ontario's civil justice system
undermines our competitiveness with slow, costly, inefficient and outdated services.
The system is slow
We know the system is slow, because the average civil case takes five years to settle.
Even after all of the preparation is done and the case is ready to go to trial, it can
take a year-and-a-half to get into court. The toll this takes on a company, its employees
and individual litigants is enormous. Employees and managers spend their time in meetings
preparing for trial, rather than on the shop floor ensuring the success and survival of
the business. Their time is better spent producing goods and services rather than giving
depositions. Goods and services add to our economic growth. Depositions do not.
The system is costly
We know the system is costly because on average, a typical litigant in a civil action that
goes to trial spends about $38,000 just in lawyer's fees to recover $55,000. I personally
have seen the financial drain that the civil justice system imposes upon businesses and
individuals. It is not a pretty sight.
The system is inefficient
We know the system is inefficient because 96 percent of civil actions settle before they
go to trial. In all but a small minority of cases, then, it is in the perceived interest
of neither party to have the case run the gamut of the court process. However, the civil
justice system fails adequately to reflect that fact in the way cases are handled. The
system is geared to bring cases to trial, as opposed to developing mechanisms to help
parties settle at an earlier stage of the process.
The system is outdated
It is no secret that our justice system is outdated. In an era where computers and the
Internet dominate our culture, our civil justice system still operates in the quill and
paper era of the nineteenth century. It is paper driven to the point that we spend more
than $8 million per year storing legal briefs that few people ever read.
Solutions
Our civil justice system has been taken for granted. It is a labour intensive system that
lacks technology. This must end. It is time to adopt the tools of the twenty-first
century, because we have missed the twentieth.
There have been many studies about the civil justice system. One of those is the Civil
Justice Review, which has now issued two reports on how to improve the justice system. The
Civil Justice Review is important because it included representation from the public,
lawyers, judges and ministry officials. The parties involved set aside their vested
interests and have proposed a number of practical, results-oriented solutions to improve
our civil courts. I am a strong proponent of their work and have begun implementing their
recommendations.
Clearing the backlog
The first step we have taken is to eliminate the backlogs in our civil courts. The backlog
of civil cases in Ontario awaiting disposition has been steadily increasing for decades. A
year ago it was five times larger than it was in 1975. We have eliminated the backlogs by
blitzing specific areas and finding quicker and less costly ways of resolving cases. Now,
thanks to the work of judges and lawyers, that delay has been all but wiped out. Lawyers,
in particular, have provided thousands of voluntary hours tackling court lists and
conducting pre-trial conferences.
Case management
We are building on these gains by implementing key recommendations contained in the Civil
Justice Review, which will avoid renewed backlogs. One of the first steps we are taking is
expanding case management across the province to ensure cases are heard quickly. Case
management puts responsibility for the progress of a case in the hands of judges, rather
than lawyers acting for the opposing parties. Case management rules set strict deadlines
to which lawyers must adhere. Penalties are in place for those who fail to meet the
deadlines. The experience of pilot projects in Ontario and extensive experience in other
jurisdictions show that case management reduces delay in civil courts and reduces costs to
litigants. By the start of next year, we will have case management in place for 100
percent of the civil cases in Ottawa and from 25 to 50 percent of the cases in Toronto.
To ensure that case management succeeds, we are bringing back the Office of the Master.
The new Case Management Master will provide the necessary support to judges for the
expansion of civil case management. By employing a team approach, we will move lawsuits
through the system quickly and affordably.
Alternative dispute resolution
We will also expand the use of mediation in the civil process because we know it works.
The ADR pilot project in Toronto showed that as many as 40 percent of cases can be settled
by mediation before they reach the discovery stage. That suggests enormous savings in time
and costs and less emotional turmoil for litigants. I am committed to implementing
mandatory referral to mediation in non-family, civil disputes. While the details must
still be worked out, I believe the best way to employ mediation would be through a system
where private sector mediators are available to mediate cases. Cases where mediation fails
or is inappropriate will be able to continue down the traditional court path.
Simpler rules for small cases
We have also instituted simpler rules for cases involving less than $25,000. The Rules
eliminate the need for the costly discovery process. We are now considering if these
simplified rules should be extended to cases involving as much as $50,000. The alternative
is to increase monetary caps at the Small Claim Courts, where parties do not need to hire
lawyers to represent themselves.
We know that the justice system can operate without the complicated process of discovery.
Labour tribunals, for example, have been operating effectively for years without the use
of discoveries. They have been successful in resolving disputes where often much more than
$25,000 is at stake.
New technology
Changing the way we handle cases is only one part of our strategy to improve the civil
justice system. Another key component involves introducing new technology to our court
system. As suggested by the Civil Justice Review, the efficient use of information
technology must play a key role in reforming the civil justice system. The process is
under way. We have provided the software necessary to Toronto and Ottawa to support case
management.
We have also been experimenting with electronic filing of lawsuits. This system will allow
parties to file documents with the courts electronically and will eliminate many of the
line-ups that plague the courts in Toronto. A pilot will begin in Toronto in August 1997
in which filing statements of claim and defence will be done electronically: approximately
100 firms of all sizes will participate in the project, which will be evaluated after six
months. Electronic filing will revolutionize the administration of justice. It will
improve the efficiency of our courts by linking them directly to law offices. Why should
the courts be a repository for documents that can be held by parties? But this is a very
modest first step; much larger changes are in the works.
In August 1996, the ministry of the Attorney General and the ministry of the Solicitor
General and Correctional Services issued a joint request for proposals on the development
of technological solutions to integrate the sharing of information among authorized users
in the justice system. This project is intended to provide tools for all parts of the
justice system-including police, prosecutors, civil and criminal courts, Ontario Board of
Parole, correctional institutions, and probation and parole services-to support the
efficient delivery of justice services. Obviously, this is a costly exercise and one that
is difficult to undertake when you have an accumulated debt of almost $100 billion and a
deficit of almost $9 billion. We believe, however, that we can achieve our goal of
modernizing the justice system by developing technological solutions with the private
sector. The private sector partner would be paid out of the efficiencies new business
processes and enabling technology will bring to the justice system. The savings are
enormous. By working with twenty-first century technology and processes, we will truly be
able to do better for less.
Conclusion: long-term prospects
In conclusion, I am confident that we have taken the necessary steps to deal with the
explosion in litigation that has already occurred in Ontario. But looking further ahead,
my view from the inside is that it is safe to say that Ontario-and Canada-will not
experience the litigation frenzy currently underway south of the border.
I believe that for a couple of reasons. First, we already have the best deterrent to
excessive litigiousness that can exist in a civilized justice system-our
"loser-pays" system. When the losing party pays a portion of the legal fees to
the winner, it deters pointless or malicious litigation.
Second, we already have class action legislation and limited contingency fees, but in a
form that does not lend itself to frivolous actions. Access to funding for class action
litigation is minimal. The funding pool is $500,000. Certainly thus far there has not been
an explosion of this type of litigation in Ontario.1
I think that we are well on our way to bringing administration and management of the
current volume of cases in this province properly under control. The changes I have
outlined will improve the administration of justice and provide greater access to the
justice system for a much larger number of Ontarians. It will improve the climate for
investment and provide businesses with timely resolution of their disputes.
Adapting to these changes will present challenges to some parts of the profession and I
have no wish to minimize or belittle the difficulties some will face.
But with hard work, creative thinking, and commitment on the part of our justice system
partners, I am confident that we can build a more responsive, accessible, affordable and
efficient civil justice system-a system that meets the needs of individuals and one that
encourages companies to consider Ontario as a place to invest.
Note
1 See also the chapter by S. Gordon McKee, this volume, for a more
thorough discussion of class action legislation and prospects in Canada.
Is Canada Inheriting America's Litigious Legacy?
Roy McMurtry
Cause for concern
The subject of whether Canada is inheriting America's litigious legacy, or for that matter
developing one independently, is most important. My area of expertise is Ontario so my
presentation tries to give a brief overview in relation to the many challenges facing the
civil justice system in an Ontario context. However, many discussions with my fellow chief
justices would suggest that the challenges are remarkably similar in the most populous
provinces of Canada.
The distressing reality is that the civil justice system in Ontario has in recent years
increasingly failed to provide a dispute resolution system that operates in a timely and
affordable way for the majority of our fellow citizens. The malaise is deep and so it is
immensely important that we take a hard collective look at its problems and potential
solutions.
Just another social program
Having served as the attorney general for Ontario for a decade, I have been long aware of
the lack of a broadly based political constituency for the civil justice system.
Responsible people have traditionally supported the concept of an effective, accessible
justice system in the abstract, but for the majority it was somebody else's problem and
they have given little thought or effort to making the system work. Most people do not
expect ever to be in a courtroom, and until they or someone close to them gets caught up
in the process of civil litigation, it is clearly not something they think about very
much. The result is that the constituency most interested in the civil justice system, at
least until recently, has very seldom appeared to extend very far beyond the ranks of the
legal profession and the judiciary. The unfortunate perception of a relatively small,
special-interest group in support of the civil justice system for their own purposes has
had, and still has, profound implications for attorneys general in their struggles to
adequately fund the justice system in an age of shrinking government resources.
While lip service is paid by governments to the importance of the justice system, when it
actually comes to allocating funds, however, their priorities are elsewhere. There is
certainly no mystery about this reality, as every citizen is affected by the quality of
health, education, social services, highways and so on, but does not expect to get caught
up in the justice system.
There is also often an attitude within government that the justice system is just another
social service program. Coupled with this is the additional fact that many within
government see the justice system as rather an exclusive club of lawyers and judges that
has traditionally shunned efficiencies as incompatible with justice.
The message that chief justices must continuously bring to government, therefore, is that
the justice system is not just one more "social service" program, but it is
rather a foundation stone upon which a civil and caring society is built. Too often the
justice system is taken for granted, but if it deteriorates, we all suffer.
How to improve the system
The necessity of adequate resources is therefore a fundamental issue that must be
addressed if there is to be meaningful reform of the civil justice system.
Personnel
One common element of every recent study of court systems in Canada is the shared
recognition of the need for a cadre of professional court administrators and an effective
management structure. In my view any discussion of civil justice reform should include a
recognition of this need. This is not to suggest that such persons do not already serve
the justice system, but the experience in Ontario and elsewhere has been decidedly mixed.
Effective courts administration also requires a technological infrastructure to bring the
court systems into the twentieth century, preferably before we enter the twenty-first
century. It is not an exaggeration to state that many of our court offices have not
progressed beyond the pen and quill methods of the nineteenth century. Many documents have
to be laboriously recorded by hand before being stuffed into files which lack adequate
storage and are frequently lost. In Toronto a law firm process clerk may have to wait for
hours to be served in some of the court offices.
In my experience, an effective administration of the court system involves both science
and art, and we should not overemphasize technology. While a technological infrastructure
will go a long way towards the development of more effective courts administration,
trained and experienced court administrators are essential.
A court services agency
I am in total support of the concept of a court services agency, described elsewhere in
this volume by Ontario's Attorney General, as this has the potential to provide a
combination of a more professional administration and a greater accountability to the
public.
Case management
A major part of the solution is effective case management. The cost of civil litigation is
directly related to the period of time during which a dispute is being litigated. Pilot
projects in Toronto and elsewhere have demonstrated that case management by judges can
halve the average time taken for the resolution of a civil dispute.
Case management is a relatively new initiative in Canada and it simply means earlier
judicial intervention. It was initially resisted by many judges in Canada who saw their
role as restricted to trying cases in the court room rather than helping them get there in
a timely fashion. However, the concept of case management is now accepted by the
judiciary, who endorsed the first report of the Ontario justice review that said:
It must operate under the model of caseflow management, a
time and event management system which facilitates early resolution of cases, reduces
delays and back-logs and lowers the cost of litigation. Caseflow management shifts the
overall management of cases through time parameters from the bar . . . where it has
traditionally been . . . to the judiciary, streamlines the process, permits the
introduction of ADR techniques, and creates an environment where judges, administrators,
and quasi-judicial officials can work together to integrate the various elements of the
system into a co-ordinated whole.
As Attorney General Charles Harnick states in Civil Justice Reform in Ontario (this
volume), he too is strongly in support of case management and the other important
recommendations of the civil justice review, including of course the currently very
popular concept of alternate dispute resolution (ADR). My preference is for a form of
court-annexed ADR if the ordinary litigant is going to be able to have a more timely and
affordable resolution of civil disputes.
The case for improving the system
Making the court system work better enhances not only justice today but also opportunity
tomorrow. Very simply, too much litigation and litigation that moves too slowly divert
energy and imagination away from wealth creation into useless or downright harmful
activities. The experiences described by other contributors to this book have focused on
the deleterious effects of the litigation explosion in the United States in the context of
large corporations, but everyone recognizes the vital role of the small business community
in relation to a healthy economy and small businesses are much less able to bear the costs
of interminable litigation. Indeed, there are thousands of small business people in
particular in Ontario who believe that they are effectively shut out of the court system
because of the cost.
However, the reduction of the cost of litigation that can be accomplished by following the
recommendations of the Ontario civil justice review does do have some significant
financial implications for a government that is committed to deficit reduction. The
current government jargon is that everyone who spends public funds must make a business
case for their expenditure. And the business case for civil justice is very simple.
Society simply cannot function without a system that allows people to have their disputes
resolved and determined in an orderly and effective fashion. The alternative is civil
chaos and perhaps even violence. A stable civil justice system is also a critical
underpinning for business and commerce, domestic and international.
The cost of civil justice in Ontario is more than recovered in court fees. Under the
present budgetary process, the ministries of the Attorney General in Ontario and other
provinces do not receive credit for the revenues that are produced in the administration
of the courts. This policy must be changed if there is to be a meaningful dialogue among
those involved in the administration of justice as to what improvements can be made
available on the basis of some cost recovery.
But in any case the social gain from effective and efficient dispute resolution is far
greater than court fees alone would suggest. The business case for civil justice would
emphasizes not only its lack of direct cost to the provincial treasury, but also its
central role in protecting our economic infrastructure and the gains we derive from it.
Recent experience in other countries, including parts of the former Soviet Union, shows
that the disintegration of the legal system cripples the economy. No one, foreigner or
even resident, will invest much in a country or a province that lacks the basic capacity
to resolve commercial disputes in a timely, effective, and predictable fashion.
Conversely, recent experience shows that effective court systems, such as the British
commercial court, attract business and stimulate the economy.
Unfortunately our provincial and federal governments lack the capacity to analyze and to
measure court and judicial workload, effectiveness, and productivity in a way that makes
possible the development of a solid business case for civil justice. We do not even have
court statistical systems that produce meaningful workload indicators. This again
underlines the importance of a specialized court services agency.
Conclusion: not just another social program
In conclusion, this description by the Ontario law reform commission in 1973 of the role
of the courts in our system of government is equally apt today.
The basic function of a court system in a civilized
society is the impartial adjudication of disputes without resort to violence. As part of
the institutional framework for the peaceful settlement of conflicting interests, the
courts of law stand at the pivotal point of the scales of justice, ready to apply the rule
of law to the issue between the parties coming before them. Thus, they represent the
substitution of the authoritative power of reason, knowledge, wisdom and experience for
the naked power of force.
It is my hope that all Canadians will realize the importance of focusing governments'
attention upon the vital importance of the civil justice system to an orderly, civil, and
prosperous society.
Canadian Economic Regulation
Balancing Efficiency and Fair Process
Konrad von Finckenstein
A balance of efficiency and fairness
It is my contention that the future development of Canadian regulatory regimes should
proceed in precisely the direction that we have been going over the last 15 to 20
years-right down the middle of the road between the political and economic objective of
regulatory efficiency on the one hand and the legal protection of fairness and natural
justice on the other-what Americans usually refer to as "due process of law."
Coming as they do from one who is fundamentally a commercial and trade lawyer, my remarks
are focused on the impact of American legal trends as they pertain to economic regulation
under Canadian federal law.
Canadian federal law has achieved quite a good balance between regulatory efficiency and
due process. Regulation of any kind, whether in aid of economic, social, environmental, or
cultural objectives, imposes costs on both regulator and regulatee. The cost to regulated
industries is tied up in a host of things, including outlays for accommodating regulatory
processes, delays in obtaining regulatory approvals for business ventures, and the cost of
licence fees. Obviously regulatory efficiency is desirable to keep those costs down to the
lowest feasible level without undermining the integrity of the regulatory process. And
Canada has seen remarkable progress in terms of efficiency. Ten or fifteen years ago, it
was not unusual for public hearings by the Canadian Radio-television and
Telecommunications Commission (CRTC) into rates increases for telephone companies to last
6 weeks, even 8 or 10 weeks in some instances. Today, with increased competition, there is
a substantially diminished need for rate regulation to begin with and what regulatory
approval still is required for telephone rates now typically takes 5 to 8 days.
At the same time, our legal system-principally our system of administrative law-has
imposed substantive and procedural fairness on ministers, public servants, and
administrative tribunals in respect of the regulatory functions they perform. Because of
forward-looking decisions of the Supreme Court of Canada in the late 1970s and 1980s,
administrative decision-making has been demystified, allowing the rules of natural justice
and procedural fairness to apply to virtually all decisions made by public authorities in
Canada. There are also particular statutory regimes that enhance both regulatory
efficiency and due process in specific areas. By focusing on four significant examples, I
hope to demonstrate that, whether by accident or design or both, we have fashioned a
pretty good regulatory system that serves our needs well. It is a system that we should
continually try to perfect, but that is not in need of a radical overhaul. The components
contributing to the balance in our regulatory system come from British, European, and
American legal and regulatory influences that we have had the good sense to adopt and
adapt to suit our own particular political and economic needs.
Four examples of good balance
The four examples used to support this thesis are drawn from diverse areas of commercial
and economic activity and responsibility. They are (1) the regulation of broadcasting by
the CRTC; (2) the government procurement review system; (3) competition regulation falling
under the director of Investigation and Research; and, (4) the supervision of trustees in
bankruptcy by the superintendent of Bankruptcy. These examples are chosen because, in
addition to being relevant and representative, they also fall within the business
portfolio of the department of Justice for which I am responsible and are, therefore,
instances about which I have some knowledge.
Broadcasting regulation
Broadcasting regulation is an appropriate place to start because the Canadian
Radio-television and Telecommunications Commission (CRTC) is probably the best known of
Canada's federal regulatory agencies. Its mandate takes it into some of the most
contentious areas of Canadian public policy and public interest: economic regulation of
telecommunications, related social and cultural matters, as well as the economic
regulation of broadcasting itself. Since 98 percent of Canadian households have telephone
service, 99 percent have television and 75 percent subscribe to cable, its decisions are
directly felt by virtually all members of Canadian society.
Like its American counterpart, the Federal Communications Commission (FCC), the CRTC wears
two hats-a telecommunications hat and a broadcasting hat. Unlike the FCC, however, the
CRTC's hats have fundamentally different shapes. Its telecommunications regulatory mandate
has essentially shifted from strict economic rate-of-return regulation of
telecommunications carriers to regulation of competition among service providers. On the
broadcasting side, however, its mandate has remained essentially unchanged: licensing and
regulation of broadcasting undertakings to achieve social, cultural, and political
objectives defined in the statutory broadcasting policy enunciated by Parliament. Because
the overwhelming number of the actual players within the Canadian broadcasting system are
private entities pursuing commercial interests, the CRTC cannot help being controversial
in many of the decisions it issues. My concern here is not with specific high-profile CRTC
decisions but rather, with the routine operations of the regulatory system itself.
The heart and soul of CRTC broadcasting regulation is the process of public hearings, not
only in relation to the issuance and renewal or amendment of broadcasting licences, but
also in relation to regulation-making. For example, recently the CRTC held public hearings
on proposed new regulations for cable. As the name implies, it is a public and transparent
process with fairly strict and straight-forward rules governing how it is to be conducted.
There is no concern that I am aware of as to the sufficiency of due process regarding the
CRTC's broadcasting licensing powers-the public hearing model and administrative tribunal
status of the CRTC assure plenty of due process there. It is an independent body whose
members having security of tenure. The CRTC jealously guards its independence, which is
exactly what it should do. To preserve that independence while ensuring that it fulfils
its legitimate mandate, Parliament created two extraordinary legal means to ensure that
the CRTC would implement the statutory objectives for broadcasting that Parliament itself
had set out in s.3 of the Broadcasting Act.
On one hand, it gave Cabinet, acting through the legal fiction of the Governor in Council,
the power to issue "policy directions" to the CRTC subject to the caveat that
such directions must be on broad policy matters of general application, and made sure that
the process of giving policy directions would be transparent by requiring that, before a
direction is given, the CRTC be consulted and that the direction be tabled in Parliament,
where it may be debated. The second thing that Parliament did was to give the Cabinet the
authority to review licensing decisions issued by the CRTC in the light of whether or not
any such decision derogates from the attainment of the broadcasting policy set out in the
Broadcasting Act.
An unwritten principle governing these extraordinary powers is that they be used
sparingly, which has, in fact, been the case. In the 5 years since the power of policy
direction has been in place, only one "policy direction" has been issued, that
dealing with Direct-to-Home satellite television broadcasting. And out of the thousands of
licensing decisions made annually, fewer than a handful, typically not even a dozen, have
been set aside or referred back for reconsideration by Cabinet in any given year. So, when
you factor in the quality or survival rate of the CRTC's decisions and the Governor in
Council (Cabinet)'s praiseworthy self-restraint respecting its extraordinary powers, this
is an excellent example of a truly Canadian regulatory solution to balancing regulatory
efficiency and due process. It balances the due process of the American model, which lacks
a mechanism for direct input of policy implementation, with the direct input of some
European models that lack the transparency and due process inherent in our model, even
though they have transformed their broadcasting systems from exclusive state-run systems
into mixed systems with public and private components.
Government procurement
The current regime regarding government procurement is quite new. It was only in 1989 as
part of the Canada / United States Free Trade Agreement that Canada adopted a government
procurement review system by an independent adjudicative entity. Unlike the American
system, however, in which there are several procurement review boards, each functioning
separately and, to all intents and purposes, as courts of first instance, Parliament took
the more economical route of adopting one-stop shopping at the Canadian International
Trade Tribunal (CITT).
The process put in place for government procurement encompasses the usual requirements for
contracts above a certain dollar level to be granted by public tendering, followed by
objective evaluation of bids received in accordance with neutral, published criteria.
Potential suppliers of goods and services to the government have recourse to the CITT by
virtue of the North American Free Trade Agreement (NAFTA), the World Trade Organization
(WTO) Agreement and the interprovincial Agreement on Internal Trade, all of which set out
standards that have to be observed in the tendering process. If someone who unsuccessfully
tendered a bid to supply the federal government with goods or services is dissatisfied
with the decision that was made, they may ask the CITT to review the tender, and the
CITT's potential remedies include the award of a contract if the complaint is filed within
10 days of the decision it concerns. In fact, even before a contract is awarded, a
potential supplier can file a complaint to the CITT on a variety of grounds including, for
example, unfair or unreasonable technical specifications or exclusion from the tender
process itself.
Once a complaint has been received, the CITT receives submissions from all parties and
conducts its own investigation, which may include the holding of a public hearing. The
investigation, in any case, is conducted in an open and transparent manner. At the end of
this process, if the CITT believes that the complaint is valid, it will issue a
recommendation to the relevant government institution. If the complaint is upheld, the
CITT can recommend that the contract award be cancelled and retendering take place, or
that the award be upheld but that some other remedy be implemented. In disposing of a
complaint, the CITT can award bid preparation costs and/or costs associated with the
bringing of the complaint itself. In addition, unlike its American counterparts, the CITT
can award compensation for such injuries as loss of profits.
The decision of the CITT is only a recommendation. It does not bind the Crown. However,
the government institution is admonished to implement the recommendation "to the
extent possible" and, though it can choose to ignore the recommendation, the general
scheme of procurement review envisaged by Parliament makes it clear that the CITT's
recommendations are to be implemented except under exceptional circumstances.
If the complaining contractor is a foreign contractor there may be international trade law
consequences and, in that case, the procuring entity can choose between judicial or
political accountability. Not surprisingly, they have mostly chosen the former. However,
the latter is an escape valve available to avoid implementing an unreasonable or patently
impracticable decision. Again we have a balance between fairness and efficiency or, in
this case, practicality.
Competition
The third example, competition law, is obviously vital to the operation of a healthy
economy. Different countries take different approaches to ensuring and enforcing fair
competition, with no one model necessarily better than another and no single model
inherently suitable to all states and all economies. But it is important to have one that
is suitable to one's own situation, and that is well designed.
The American anti-trust model contains per se offences and also allows the awarding of
triple damages to injured parties. It has become a major cost factor for business and a
significant source of complaint. A major source of trouble under this regime is that
although the government can and does bring anti-trust suits against companies engaged in
price fixing, predatory pricing, or other anti-competitive practices, treble damages are
available to private litigants.
Perhaps the American system is appropriate for a domestic market that is equivalent in
size to a continental economy. It is doubtful, however, whether the full American
treble-damage model would be suitable or beneficial to Canada. And I hold this view
notwithstanding the fact that a similar, albeit more limited, private remedy is available
in Canada. For here in Canada, with a smaller marketplace and historically greater
reliance on public authority to enforce public law, we have created a director of
Investigation and Research as the central figure in competition regulation.
The director of Investigation and Research is appointed by the Governor in Council and
while he is a member of the department of Industry's executive, he is totally independent
in terms of his enforcement activities. All complaints of anti-competitive practices must
go through him. He investigates independently and is the only person that can (a) make a
recommendation to the Attorney General for prosecutions in respect of criminal
anti-competitive conduct, such as price fixing or (b) decide to take companies before the
Competition Tribunal for civilly reviewable competitive conduct, such as mergers that will
lessen competition.
For most practical purposes, by taking the initiative for commencing criminal prosecutions
and civil proceedings for competition violations out of the hands of private parties, we
have protected Canadian businesses from the constant threat of litigation that is possible
under American law. This balance between public and private interest is reinforced by the
fact that the director of Investigation and Research is not vested with enormous,
unrestrained powers. He cannot himself prosecute. He can only investigate and make
recommendations to the Attorney General. Nor can he simply ignore complaints. He must
inquire when so requested by six persons no matter who they are, as well as when directed
to do so by the Minister. As a result, Canada has a vigorous competition enforcement model
without the tremendous cost and delays involved in the United States. Here again Canada
has a struck a good and unique balance.
Bankruptcy
Under our system, in the event of a bankruptcy a trustee is appointed by the official
receiver, a court officer, to administer the estate of an insolvent person or company
whether for the purpose of rehabilitation or liquidation. A trustee has heavy fiduciary
responsibilities and may have administration of significant assets. Judicial intervention
to superintend the functioning of a trustee is limited and, in some measure, depends upon
the trustee himself seeking judicial authorization pertaining to acts of administration of
estates under his care. Accordingly, the essence of our entire regime is to select
trustees who are themselves trustworthy and who will do the job required of them in a
professional and dispassionate manner.
It is therefore on the initial selection of trustees that our regulatory system
concentrates. The key player in all of this is the superintendent of Bankruptcy. His
functions are to license trustees, to set professional standards and to discipline
trustees where required. The superintendent, as an Order-in-Council appointee with
specific statutory functions, enjoys, as does the director in Canada's anti-trust system,
considerable independence. However, he or she is also a member of the department of
Industry and reports to an assistant deputy minister of the Department.
As for the system of supervision, where there is reason to believe, whether because of
complaints about a trustee or because of the results of a cyclical or special audit, that
discipline may be required, the responsible deputy superintendent will investigate. He
will prepare a report of her or his findings and make recommendations respecting an
appropriate disciplinary measure. The report and recommendations are forwarded to the
superintendent and to the trustee. Before the superintendent exercises the disciplinary
power, the deputy superintendent will normally discuss the report and recommendations with
the trustee in an effort to reach an agreed resolution of the discipline issue.
If the negotiated settlement procedure fails, the matter reverts to the superintendent for
decision. However, the superintendent cannot exercise the discipline power without first
giving the trustee an opportunity to be heard. This of course means a full open hearing in
which the trustee has the right to be heard, the right to call his own evidence, and to
contest the evidence against him.
In current practice, a hearing by the superintendent would usually be conducted by an
independent neutral third party-again in the current practice, usually a retired member of
the judiciary-to whom the superintendent delegates his disciplinary powers under the
authority of the statute. This delegation includes the power to impose whatever
disciplinary measures are required, including the suspension or revocation of licence. It
should be noted, however, that it is the superintendent who is formally vested by statute
with the power to decide to investigate, commence disciplinary proceedings and impose
disciplinary measures.
It goes without saying that disciplinary decisions must be based on the evidence before
the superintendent or his delegate and that discipline decisions, being decisions of a
federal board, commission or other tribunal, are subject to judicial review in the Federal
Court.
This role of the superintendent as licensor, trainer, standard setter, investigator and
disciplinarian would probably be anathema in the United States. On the other hand, a
disciplinary process involving a hearing would not be regarded as standard in Europe. Thus
once again we have a uniquely Canadian solution that is effective and flexible and not too
cumbersome or costly.
Conclusion: staying the course
These four representative examples demonstrate our achievement in attaining this sort of
balance between procedural fairness and efficient operation in a wide range of regulatory
areas. We have studied precedents in other countries and evolved a unique Canadian
regulatory and/or legal product that is both efficient and fair. Our own concept of due
process has evolved, relying on our common law connections to natural justice. We have
superimposed our regime of substantive and procedural fairness on regulatory structures
that are, in some cases, borrowed directly from our American neighbours. It was the United
States that created the independent regulatory tribunal which we slowly adopted, along
with open, transparent regulatory process. We have, however, tried, and for the most part
successfully I trust, to avoid an overemphasis on cumbersome and costly regulatory process
and the rigour of technical compliance with it, as well as the general tendency of
litigiousness, all of which gets in the way of efficient, fair, and user-friendly
regulation. At the same time, we retained, to the greatest extent possible, the
flexibility and discretion that is characteristic of European regulatory and
administrative models without picking up their lack of transparency and over-deference to
state authority. It is my view that we have struck a pretty good balance.
The system is not perfect, however. Its evolution has not stopped, nor should it, and
there are several areas that can be improved. For example, many observers have suggested
that the Canadian regime dealing with import and export permits could be tightened up
somewhat, to reduce ministerial discretion in the issuance of permits. They suggest the
government should establish more statutory or regulatory criteria for the awarding of
permits, or adopt an auction procedure for their allocation, or, as a further alternative,
establish a review procedure of the decision to award a permit.
In the view of many critics, there is also lots of work to be done to eliminate undue and
unnecessary divisions of responsibility within the Canadian system. For example, it has
been observed that the responsibility for adjudicating disputes on the classification,
valuation or duties payable for imported goods rests with the CITT, while the authority to
determine the taxability or the amount of tax payable on such goods rests with the Tax
Court of Canada.
It also sometimes seems that every single tribunal at the federal level in Canada has its
own procedure. Tribunals are also differently constituted, have different terms of
appointment, and different lengths of tenure. There is little doubt that a lot of
efficiencies could be gained through standardization, so it would be very useful to have a
comprehensive act covering the makeup of tribunals and their procedures that would apply
across the board unless some special regime were set up in the legislation pertaining to a
particular tribunal. That is not by any means a radical idea. The United States has had
such legislation for a long time, as has Ontario, and it seems to work.
In conclusion, Canadians can be justifiably proud of our achievements in building a
regulatory system that is both efficient and fair by borrowing precedents from other
jurisdictions and adapting them to fit our needs as we think necessary. The proper course
for the future, therefore, is to continue to improve our system without radically changing
it. We are on the right course, and should stay on it.
An Environmental Right to Sue
Mark Mattson
In 1994, the federal government initiated consultation on the proposed amendments to the
Canadian Environmental Protection Act (CEPA) by setting up the House of Commons Standing
Committee on Environment and Sustainable Development. The standing committee reported back
to the government in 1995 in a document entitled It's about Our Health! One of the many
recommendations from that report proposed a CEPA amendment to expand the citizen's right
to sue. Unfortunately, while the proposed amendment is directed toward improving
enforcement of Canadian environmental laws, it falls short of achieving meaningful
progress.
Proposed amendment
The federal government proposes to broaden the right of citizens to sue by removing the
current provision that limits standing to parties who suffered loss or damage as a result
of a violation of the Canadian Environmental Protection Act (CEPA). The proposed amendment
may enable a citizen to initiate a civil action against a party who has violated CEPA
where the violation resulted in significant harm to the environment. The civil action is
subject to the condition that the citizen makes an application for a government
investigation under section 108 of CEPA, and, subsequently, a court determines that the
minister took an unreasonable amount of time in responding or that the minister's response
was unreasonable. While the government has still not finalized a position on the remedies
that will be available to the plaintiff, it is studying the safeguards, rights, and
remedies in the current Ontario Environmental Bill of Rights as potential provisions in
CEPA and has decided against a provision to allow plaintiffs to receive a portion of the
fine or damage awards.
The need for amendment
As noted in the introduction of the Canadian Environmental Protection Act
"Enforcement and Compliance Policy," a benchmark for good legislation is that it
can be effectively enforced. Enforcement must be fair, nationally consistent, and
predictable. Also, those who administer legislation and those who comply with it need to
understand how enforcement will be carried out. CEPA falls well short of this benchmark on
enforcement.
Currently, the federal government employs only 7 full-time environmental investigators. By
comparison, Ontario's investigative and enforcement branch has approximately 60 full-time
investigators. Federal investigators initiated only three prosecutions under CEPA from
April 1993 to March 1994. Most investigations are dropped due to a lack of time and
resources. The standing committee on Environment and Sustainable Development found the
record of Environment Canada in enforcing its laws to be disappointing and uneven. It
noted that it is highly questionable whether good environmental citizens are being treated
fairly.
The lack of federal resources devoted to enforcing environmental laws has resulted in an
uneven approach to regulation and investigations. Accordingly, this has eroded the faith
of business and public interests groups in the ability of government to enforce consistent
environmental standards in Canada.
In light of the failure of the federal government to enforce CEPA effectively, the
proposed amendment to CEPA that provides an opportunity for citizens to force the federal
government to enforce the law is well intentioned.
Flaws
(1) Although the need to create a right to sue is a
direct result of the current lack of enforcement of federal environmental laws, the
amendment is drafted so as to further exacerbate the burden on federal investigators and
create an even more ad hoc basis for enforcement of CEPA provisions.
The requirements that parties file a complaint under section 108 of CEPA, and that a court
determine that the minister took an unreasonable time in responding or that the response
was unreasonable, will place unnecessary additional burdens on federal investigators. This
will make an already bad situation worse. Investigators will be forced to follow up on all
public complaints and may be forced to defend any lack of action in court. This will pit
the public against federal investigators and will consume investigators' time responding
to public complaints.
The benchmark for good legislation-that it must be effectively enforced in a fair,
nationally consistent, and predictable manner and that those who administer legislation
and those who comply with it need to understand how enforcement will be carried out-will
not be achieved through the proposed amendment.
(2) The remedies available to citizens initiating a
civil suit have still not been drafted. The standing committee recommended that the court
be empowered to order an injunction against the defendants or order the defendant to take
remedial action, order the parties to negotiate a restoration plan, order the defendant to
pay damages into the special environmental fund to be established under CEPA, and order
partial or full recovery of the plaintiffs costs. These remedies are patterned after the
remedies in the Ontario Environmental Bill of Rights.
The government also rejected the notion that a civil suit be a means to seek redress for
damages arising from activities that are authorized under the CEPA because, it argued, a
common law right to bring suits to seek damages already exists.
Obviously, the remedies available under the civil right are essential to the overall
effectiveness of the amendment. It is unfortunate that the government has left this
crucial issue unresolved. The decision to rule out a remedy that addresses damages arising
from activities authorized under the CEPA is unfortunate. The government's reliance on the
common law right for damages fails to address the plaintiff's difficult task in convincing
a court that a defendant who is abiding by CEPA should pay damages.
(3) The standing committee recommended that the
traditional rules of tort liability be amended with respect to civil suits brought under
CEPA. The recommendation is that the federal government be encouraged to provide in CEPA a
civil remedy for the creation of environmental risk, where measure of damages would be
proportional to the increased risk caused by the defendant, and in which, once a plaintiff
had presented a prima facie case demonstrating that the defendant had caused the
environmental risk complained of, the onus would be placed on the defendant to disprove
causation of injury to the plaintiff. Currently, the plaintiff must prove on the balance
of probabilities that the defendant caused the environmental harm. The government is still
reviewing these proposals.
The suggestions from the standing committee stem from the difficult nature of proving that
toxic substances caused the specified harm in the complaint. While it can be shown that
the toxic substances have contributed to the environmental harm, it is difficult to prove
that it caused some specific forms of harm such as health impacts. The government must
respond to this very important issue.
(4) The standing committee recommended to government
that in addition to the right to sue, the amendments to CEPA include strengthening the
ability of the public to prosecute polluters. Currently, a citizen who initiates a private
prosecution cannot remain a party to the prosecution if the attorney general assumes
control of the case.
The government rejected the standing committee recommendation. It responded that the
current law already allows for private prosecutions and that the Criminal Code of Canada
allows the attorney general to assume control of the prosecution or stay it. The
government rejected the notion of allowing citizens to remain parties to the action if the
attorney general assumes control of the case as it would fetter the discretion of the
attorney general. A recent example of an attorney general assuming control of a private
prosecution and staying the proceeding is currently under appeal in British Columbia. That
case involves a private prosecution initiated by Sierra Legal Defence Fund against the
Greater Vancouver Regional District for sewage overflows.
(5) The government rejected a fine-splitting provision
that would encourage public participation in enforcing CEPA through civil suits and
private prosecutions. The suggestion to provide the plaintiff or prosecutor with half the
fine awarded by the court as an incentive to protect community resources was also rejected
by the standing committee. A precedent for the fine-splitting provision is found in the
federal Fisheries Act which justifies the penalty as a method to encourage public
participation in the protection of community interests.
The stated reason for rejecting fine splitting was that citizens should not be motivated
by the prospect of receiving a share of the monetary penalty but should be motivated by
simply the protection of the environment. Unfortunately, the standing committee and the
government are wrong in believing that a fine-splitting provision would change the
motivation of the group carrying out the prosecution. The standing committee and the
government are wrong in rejecting the fine-splitting provisions due to preconceived
notions about other parties' motivations. This sort of moral judgement is misdirected and
fails to recognize the enormous resources needed to initiate a law suit or that
prosecutions will not always result in fines or cost awards sufficient to compensate for
expenses incurred. A fine-splitting provision would provide a small incentive to public
interest groups to offset the significant financial burdens of initiating civil suits and
private prosecutions that protect community interests.
Conclusions
The government proposes to amend CEPA in order to expand the right to initiate a civil
suit. It does this by expanding the standing provisions. Further, the government has
promised to continue to study changes to the remedies available in CEPA in order to
provide safeguards, rights, and remedies such as those in the Ontario Environmental Bill
of Rights.
The proposed amendment to broaden the right of the public to have access to the courts in
order to enforce environmental laws fails to make all the significant changes required to
make the amendment effective. This failure stems from the government's inability to
recognize itself as the major impediment to the enforcement of CEPA. The federal
government is the problem. It is government intervention that stands in the way of a
public right to protect community resources. Specifically, the government rejected
amendments of CEPA that would have granted the public an independent right to enforce CEPA
provisions through civil suits and private prosecutions. All civil suits and prosecutions
arising out of CEPA remain subject to government control, and in the case of prosecutions,
can be prevented from continuing. The government should not prevent the public from
pursuing its own remedies.
In the final analysis, the government holds out the promise that the new amendments to
CEPA will provide opportunities for zealous and conscientious interests to prod government
action and seek legal solutions to remedy environmental harm to community interests.
Unfortunately, the amendments may do nothing more than further the administrative burden
on federal investigators, who already have too few resources to enforce the Canadian
Environmental Protection Act.
Will We Be Back in Five Years?
The Report of the Canadian Bar Association Task Force
Seymour B. Trachimovsky
The Canadian Bar Association Task Force
The Canadian Bar Association (CBA) recently released the Task Force Report in respect of
the Systems of Civil Justice (the Report). The Task Force, of which I was a member, was
charged to inquire into the state of the civil justice system on a national basis and to
develop strategies and mechanisms to facilitate modernization of the justice system so
that it is better able to meet current and future needs of Canadians. Our Task Force made
some 50 recommendations in this regard and I am pleased to say that the Report has
generally been greeted with applause from all corners of the legal profession: judges,
academics, practitioners, and legal journalists. This is gratifying and at least mildly
surprising since the report in some respects calls for fundamental change in the way in
which legal services are delivered today by the profession. Change is not typically
greeted with an ovation from the very people who are being called upon to make the
transformation.
The ideal pursued by the Task Force, as expressed in our mandate, was a justice system
that is "more efficient, accessible, accountable, fair, and able to deliver timely
results in a cost effective manner." Our focus, in brief, was cost and delay.
Although it is often assumed that dealing with the one is equivalent to dealing with the
other, that is not invariably the case and, indeed, it is my suspicion that the
implementation of our recommendations will meliorate the latter more readily than it will
the former. Some personal reflections on the Report's recommendations and on some of the
commentary it has precipitated will clarify the reasons for that suspicion.
Recommendations of the task force
Procedural costs
The Report calls for the introduction of a variety of procedural measures intended to
encourage settlement of lawsuits prior to trial, measures which it recommended be made
mandatory as a condition for proceeding to a full trial. Some skeptics have argued that
these procedures will impose additional costs on litigants without any return. That is a
valid criticism in that for a minority of cases that cannot be settled through the
additional mechanisms we recommend, the cost of litigation may in fact increase. But
overall the cost of litigation should be reduced because most cases, it is hoped, will be
settled sooner. Our emphasis has been on settlement, on providing the parties with as much
opportunity and incentive as possible to resolve their differences privately before a
dispute gets out of control. Indeed, if our recommendations are implemented, the pursuit
of settlement will become an obligation for the parties and for their counsel. Whether an
opportunity or an obligation, the failure to settle at an early stage may give rise to
additional costs. But even here it will depend upon which of the recommended tracks is
selected to resolve the dispute.
As a consequence, the Report puts a premium on reasonable conduct. Parties who act
reasonably will benefit from the new approaches. Regrettably, every lawyer has seen
unreasonable conduct on both sides of the table-from his own client or his opponent's
client. I was impressed, in the course of our discussions and deliberations, that as
lawyers we were prepared to accept exclusive responsibility for the many flaws of the
system. While that is an honourable gesture, it is not entirely correct for as often as
not it is in fact the obdurate client who causes litigation to be protracted and wasteful.
Under certain kinds of legal rules, as other contributors to this volume have noted, there
can be a considerable incentive for a party to act unreasonably and I believe that this
problem is at the core of the explosive growth of litigation, a matter to which I will
return later in this paper.
The pursuit of perfect justice
A comment that came up repeatedly in Task Force consultations (delivered with considerable
passion in some cases I might add) is that the reforms we were likely to
recommend-Alternative Dispute Resolution (ADR), expedited procedures, and so on-would
somehow impair the quality of justice delivered by the system. To the fundamentalists who
make this point, a pristine legal process is an overarching goal. Everything must be
subordinated to the ultimate delivery of a 100 percent immaculate judicial decision.
Related to this is a second argument against private arbitration emanating from some
quarters, specifically that private decisions do not enter the public domain of
jurisprudence to become part of the legal canon.
The second argument is not in my view justified. It depends for its integrity on the
existence on some kind of public right-beyond merely a public interest-in the resolution
of private disputes and that right clearly does not exist. There are numerous arguments
against this position ranging from the fiscal to the philosophical but space precludes a
discussion of them.
Returning to the first point, I think it is trite to say that perfect justice is an
unattainable goal. So what? say fundamentalists, it is the highest ideal of our legal
system and one, therefore, that we must pursue unrelentingly even if we can never reach
it. But, as the expression goes, "the best is the enemy of the good." The
zealous pursuit of some ideal on theoretical grounds can easily become counter-productive.
Thus, it is the myriad procedural safeguards we have built into our system that are the
playing field of obstructionist parties and their counsel and so actually move us away
from perfect justice. The more we have constructed procedures to achieve that goal, the
more it has receded.
An important though far from everyday example is that every lawyer is aware of a number of
issues in his or her practice area that are in need of authoritative resolution,
preferably by our Supreme Court. Most of these issues will never appear on the docket of
the Supreme Court because it is overwhelmed with a great number of appeals as of right in
certain criminal cases, appeals that have the effect of preempting civil matters. Thus
overzealousness with respect to criminal procedure so obstructs civil procedure that on
balance we have less rather than more justice. This is an issue touched upon by our Task
Force only in passing but I think is one that will merit a great deal of future scrutiny.
There is almost nothing, save perhaps constitutional references at the request of
Government, that should go as of right to our Supreme Court with its limited docket of 100
to 125 appeals heard annually.
Change in legal culture
Another major recommendation of the Task Force Report is, in effect, a call for a change
in legal culture, from an adversarial profession eager to do battle in the court room to
one that views the court room as a last resort. Remedies requiring cultural change are
generally dubious because in many cases they are empty and impracticable, even a sign that
things are probably hopeless. Further, given that the particular subject is litigation, it
must be remembered that disputes are inherently adversarial and always will be.
Fortunately, there is nevertheless some reason to be optimistic-the image of the
"Rambo lawyer", at least in Canada, is exaggerated. Most of the litigation bar
is already disposed to achieve out of court settlement and it is often the client, not his
counsel, who is implacable.
Such optimism, however, must be tempered by developments outside the jurisdiction of the
Task Force moving the profession in precisely the opposite direction, particularly the
probability of expanded private rights of action under a variety of statutes.
Judicial oversight of case management
Implementation of the Task Force recommendations would invest the Courts with considerably
more authority to influence the course of an action than has traditionally been the case.
This could be a parlous course but it is unavoidable given the slow pace at which cases
move and the consequent enormous backlog.
The basic problem is that there is too little accountability in our system for the pace at
which an action proceeds through the court. The consequences are scandalous. There are few
features of the American civil justice system that most sensible people would want
transferred to Canada, (e.g., limited cost indemnification, punitive damages, extensive
discoveries, widespread jury trials, elected judiciary); however, if nothing else,
Americans move a case through the system much more rapidly than we are able to and it
starts with a strong case management system with close judicial oversight. Because this
gives judges further dramatic powers to influence the outcome of cases, an important point
is that the quality of the judiciary, ever a crucial variable, will become more so and the
selection process a more critical matter if such a system is implemented.
Resources
Last but hardly least among the Task Force recommendations are those made concerning the
matter of resources. A number of judges we spoke to limned a bleak portrait of the modern
court house suffocating under the weight of a century-old infrastructure. There is
probably ample truth in that picture. And it is also true that some capital expenditures
today would reap a substantial social return. The reality, however, is that the system of
justice must compete for public funds against innumerable other socially necessary,
desirable, or at least popular activities such as health care, education, and welfare, to
name but a few. The trauma recently confronting these programs is front and centre on the
6 o'clock news every day.
It is also important to note the apparently obvious but frequently overlooked point that
the enactment of new statutes on a regular basis to appease one or another segment of the
electorate or the promulgation of various regulations further increases the burden on the
courts. You cannot pass laws without exerting pressure of some sort on the justice system,
and legislatures ought to devote much more attention than they do to ensuring that
sufficient additional resources are provided to cope with the additional stress on the
courts.
However, before any specific recommendation can be made for the allocation of additional
resources to the system of justice or, indeed, to law enforcement generally, it is time to
take stock of present resources and to assess whether they are being used wisely. In the
absence of data, unfortunately, we are left to speculate, so the first thing we need here
is more and better data.
Conclusion: the task force next time
One much larger phenomenon, beyond the scope of the Task Force, also requires serious
consideration. I believe firmly, all things being equal, that the road map we have drawn
in the Report will lead, for reasonable parties, to a better justice system-more effective
and more efficient. The caveat, of course, is the "all things being equal" and
here there is less reason to be optimistic. At the CBA Conference last August, one
concerned observer queried whether we would be back in five years to try again. My view is
that we are indeed likely to be back.
A tidal wave of arcane law
It is one thing to muzzle the pit-bull litigator, and our recommendations would help
achieve that. But it is quite another to stand in the way of a tidal wave of new law and
regulation and a concurrent trend in favour of actively encouraging litigation as an
instrument of social change. Here I would like to cite Professor Richard A. Epstein of the
University of Chicago in his recent brilliant and ambitious work, Simple Rules for a
Complex World:
Although there are isolated instances of the contraction
of legal claims, the general trend is quite in the opposite direction: more law. Our
aspirations for what a legal system can do to improve social circumstances is simply too
high. We try to solve more and more problems through legal intervention, and fewer through
voluntary accommodation and informal practices. A kind of Gresham's law has set in, for
the increased dependence on lawyers and legal proceedings renders the informal modes of
doing business less effective. Any individual case may well present appealing reasons for
some new statutory intervention (the adoption of family leave legislation is one recent
battle), but the combined or cumulative effect of countless legal innovations tends to be
ignored in the ceaseless quest to adopt any single innovation. What appears noble in the
individual case turns out to be dubious in the aggregate. By degrees, therefore, our
extensive level of social ambition leads us to a very complex set of legal rules, one
which only lawyers can understand and navigate, and then at very stiff fees. The virtue of
simplicity, around which this book is organized, is never deprecated, but it does suffer
from insufficient respect and appreciation. By degrees we find that private and public
actors all must resort to the use of lawyers, or to administrators steeped in the law, in
order to solve their particular problems.1
In defining complexity, Professor Epstein refers to an analysis of the subject by Peter
Schuck, who has organized the field by reference to four distinct variables that he
regards as the markers of a complex set of legal rules: density, technicality,
differentiation, and indeterminacy or uncertainty. Dense legal rules are numerous and
cover in minute detail all aspects of a given transaction: who may participate, what forms
must be used, what terms are allowed, what approvals must be obtained. Technical rules are
those that require a certain level of expertise to understand and apply. Differentiation
refers to the number of different sources of law that could be brought to bear in a given
situation, often in an overlapping or inconsistent fashion. Schuck's last test stresses
the level of uncertainty that is generated in the effort to apply a given rule. In
essence, a question that necessarily has a yes or no answer-is the defendant liable to the
plaintiff-is not governed by some simple on/off switch but by a massive, costly, and
uncertain inquiry.
Professor Epstein adds his own crucial addition-pervasiveness-to Schuck's analysis:
For my purposes at least, a complex rule is one that, in
addition to meeting Schuck's criteria, has pervasive application across routine social
activities, and is not directed solely to the dangerous activities of people who live at
the margins of society. Legal complexity is not merely a simple measure of the inherent or
formal properties of legal rules. It is also a function of how deeply they cut into the
fabric of ordinary life.2
I was struck, not long after reading the above, by the following discussion of trademark
law in a recent issue of the American publication, Of Counsel:
It's quite a challenge to advise clients in such a murky
legal climate. Oftentimes, there's just no telling what an outcome will be, (trade mark
lawyer) Bridges says. "My client looks to me to articulate risks as clearly as
possible. However, trademark law is totally subjective. I often tell clients that I am
absolutely sure that the outcome is uncertain" . . . Because trademark law is not
cut-and-dry, the potential for litigation is high, (trade mark lawyer) Bridges says.
"Most of my clients wind up in litigation [in] areas where the law is unclear. The
cases that get fought, and get fought with a lot of money, are [the ones] where both
parties think [it] can go their way."
Virtually every legal practitioner will recognize that what Mr. Bridges has to say about
trademark law can apply just as well to his or her field of expertise. Mark these words:
"the potential for litigation is high." Superimpose on this the philosophy that
argues for more opportunities for public litigation, prosecution and so on in more and
more areas, and there is less reason for optimism than the more mundane aspects of the
Task Force report would suggest.
If we create more law, more uncertainty, more opportunity and incentive to litigate, then
we will certainly see you again in 5 years for another Task Force Report.
Notes
1 Richard A. Epstein, Simple Rules for a Complex World, Cambridge,
MA: Harvard University Press, 1995: 14.
2 Ibid.: 29.