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.