PSC Industrial Services Canada Inc. v. Ontario (Ministry of the Environment), 2005 CanLII 27657 (ON CA)

COURT OF APPEAL FOR ONTARIO

FELDMAN, SIMMONS and GILLESE JJ.A.

B E T W E E N :

PSC INDUSTRIAL SERVICES CANADA INC.

R. Horst and M. Hecke, for the appellant

Plaintiff (Respondent)

• and -

HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO (AS REPRESENTED BY THE MINISTRY OF THE ENVIRONMENT)

Douglas Hodgson, Kenneth Post and Roxanne Davis, for the respondent

Defendant (Appellant)

Heard: January 31, 2005

On appeal from the order of The Honourable Mr. Justice Whitten of the Superior Court of Justice dated March 1, 2004, reported at [2004] O.J. No. 1413.

FELDMAN J.A.:

1The plaintiff’s action against the defendant is for defamation, misfeasance in public office and for violations under the Canadian Charter of Rights and Freedoms. The plaintiff is the successor to two prior plaintiff companies that were related to the current plaintiff and bore similar names. Both were the subject of reorganization proceedings under the Companies Creditor’s Arrangement Act, R.S.C. 1985, c. C–36 (“CCAA”) in which assets, including these causes of action, were assigned. The defendant moved under Rules 20 and 21 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 for orders dismissing the action as disclosing no cause of action on two bases: 1) the tort claims are personal actions that could not be assigned to the current plaintiff; and 2) the Charter claims are also personal claims that could not be assigned to the current plaintiff, and in any event, the facts as pleaded could not support the Charter claims.

2The motion judge dismissed both motions and sent the action on to trial. The Rule 21 motion was appealed to this court, while the Rule 20 motion was appealed to the Divisional Court. Following the grant of leave to appeal to the Divisional Court, the two matters were ordered to be heard together in this court, pursuant to ss. 6(2) and (3) of the Courts of Justice Act, R.S.O. 1990, c. C.43.

Background

3Philip Enterprises Inc. (“PEI”), a wholly owned subsidiary of Philip Services Corp. (“PSC”), owned certain waste management businesses in and around Hamilton and other locations in Ontario. In 1997 and 1998, PEI imported Cyanokem filtercake, a hazardous waste, from Detroit, treated it to render it non-hazardous, and sent it for disposal at two landfill locations. There was some public controversy about PEI’s actions, and in October, 1998, having mistakenly concluded that PEI was in violation of regulations under the Environmental Protection Act, R.S.O. 1990, c. E.19, the Ministry of the Environment widely publicized its conclusion in the media. The Ministry then refused to process PEI’s application to discharge landfill leachate from the landfill site and also threatened to conduct core drilling at the site. The Ministry prolonged its position with the company and with the public long after it had learned that there was no violation. Core drilling was eventually rejected by the Ministry based on an expert report.

4PEI issued a Statement of Claim in June, 1999 claiming damages for defamation, misfeasance in public office and breach of its Charter rights under ss. 7, 8, 11(d) and (g). In June, 1999, PEI sought protection under the CCAA. In October, 1999, Philip Services Inc. (“PSI”) was incorporated by a U.S. company, Philip Services Corporation, which was substantially owned by the creditors of PEI. PSI purchased the assets of PEI including this action, by way of assignment of: “all of the property, assets and undertakings of the Vendors, including all cash, goodwill, Inventories…Choses in Action…and all proceeds thereof.” Besides the assignment from PEI, PSI also claimed to have suffered its own damage as a result of the prolongation of the impugned acts of the Ministry after October 1999, and asserted the same causes of action for the damage it suffered separately.

5In September, 2003, PSI also sought protection under the CCAA and assigned its assets to the current plaintiff, PSC Industrial Services Canada Inc., also a wholly owned subsidiary of the U.S. parent, Philip Services Corporation. The assignment included choses in action including the within action, as well as the goodwill of the assignor corporation.

Issues

1. Under Rule 21, is it clear in law that the tort actions pleaded could not be assigned and prosecuted by the current plaintiff?

2. On the facts as pleaded, do any or all of the Charter claims disclose a cause of action?

3. Under Rule 21, is it clear in law, that the Charter claims pleaded could not be assigned and prosecuted by the current plaintiff?

(1) Are the tort claims assignable?

6The leading Canadian case on the assignability of causes of action in tort is the British Columbia Court of Appeal decision in Fredrickson v. I.C.B.C., 1986 1066 (BC CA), [1986] 4 W.W.R. 504; affrmd., 1988 38 (SCC), [1988] 1 S.C.R. 1089. While recognizing the accepted general rule that causes of action in tort are not assignable, McLachlin J.A., as she then was, noted that the reason for the rule was the common law stricture against maintenance and champerty and trafficking in litigation.

7She further noted that “the exact ambit of the rule is elusive,” that the rule is subject to a number of exceptions, and that the categories of exceptions are not closed. The test to be applied is “whether the assignment can fairly be seen as prompted by a desire to advance the cause of justice rather than as intermeddling for some collateral reason”: Fleming, The Law of Torts, 6th ed. (1983) at 593 (p. 511-512).

8McLachlin J.A. identified two exceptions to the general rule. The first is a clarification that there is no bar to an assignment of the fruits of an action. The issue is whether the ability to prosecute the action is assignable.

9The second exception is where the assignee has either a pre-existing property interest in the enforcement of the claim or a legitimate commercial interest in its enforcement, such that the potential for champerty or maintenance is negatived. This exception arguably applies in this case, and was identified by the motion judge as sufficient to dismiss the Rule 21 motion. In this case, the first, second and third plaintiffs were all essentially related entities both in name and in their interest in the property and the business that were affected by the impugned actions of the Ministry. Each assignment assigned not only the action, but also the goodwill of the predecessor company. The value of that goodwill is alleged to have been affected by the impugned actions of the Ministry and therefore any recovery would help to reinstate that value and compensate for the damage suffered by the business that was transferred to the ultimate plaintiff entity.

10However, there is a caveat to the applicability of the second exception. The caveat is that an assignment where the assignee has a pre-existing property interest or a legitimate commercial interest in the enforcement of the claim will be valid unless the claim is based on a personal wrong such as assault, libel or personal injury. McLachlin J.A. observed that the apparent reason for the exclusion of personal torts is that an assignee could not have a legitimate property or commercial interest in that kind of action. (see Trendtex Trading Corp. v. Credit Suisse, [1980] Q.B. 629 at 656-7, affrmd. [1981] 3 All ER 520 (H.L.).) If that caveat is strictly applied, then the causes of action asserted in this case could not be effectively assigned to the current plaintiff.

11Dealing first with the defamation claim, the motion judge distinguished between libel of a natural person, that affects the personal reputation and can cause hurt feelings and other damage that can only be suffered by a human being, and defamation of a corporation that can only affect its business reputation, i.e. its goodwill, and where the effect is financial only. In that context, although the claims in this case are nominally personal, because their effect is a business effect only, an assignee can have the type of interest in the claim that can be assigned, if it is shown at trial that there is no champertous aspect or effect of the assignment.

12In reaching his conclusion, the motion judge acknowledged the early decision of the Supreme Court of Canada in Leonard v. Wharton, 1921 571 (SCC), [1921] 65 D.L.R. 323, where Anglin J. stated at p. 329 that he concurred “in the view taken by the Judges of the Appellate Division Court, 17 O.W.N. 127, that the assignment of the plaintiff company for the benefit of its creditors did not vest in its assignee its cause of action for damages for libel and, therefore, presented no obstacle to recovery of judgment thereupon by it.” I agree with the motion judge that this observation by Anglin J. is not a statement of law of general application that prohibits assignment of libel actions by corporations. The statement could have been based on the language of the assignment, or on the state of the law regarding assets subject to execution at that time.¹

13The motion judge dealt similarly with the cause of action for misfeasance in public office. He relied on the decision of the Manitoba Court of Appeal in Uni-Jet Industrial Pipe Ltd. v .Canada (Attorney General), 2001 MBCA 40, [2001] M.J. No 167, where Kroft J.A. said, at para. 83, that the damages suffered by a corporation that flowed from the tort of misfeasance in public office did not include “the embarrassment or humiliation that only a human being can experience. Nonetheless, Uni-Jet had a corporate reputation that was conspicuously called into question and possibly tarnished. While there is no evidence of actual lost income or corporate profit, there was certainly a risk that goodwill would be lost.”

14The motion judge then concluded at para. 63:

This analysis of the damage experienced by a corporate plaintiff is identical to that experienced by a defamed corporation. The loss to a corporation in instances of intentional tort, whether it be defamation, misfeasance in public office, or interference with economic relations, will always be economic loss, as opposed to a personal loss, as previously described. With a corporate plaintiff these torts could not be personal, and as such, there is no prohibition against their assignment per se, but the assignment will be scrutinized using the principles of Fredrickson to determine the presence of prohibited champerty and maintenance.

15On the basis of this analysis, the motion judge concluded that the causes of action in this case belonging to the plaintiff corporations were not necessarily personal in the prohibited sense, and that it should be left to trial to determine whether the current plaintiff assignee had the requisite interest in the causes of action to show that the assignment was not champertous and fell within the exception to the general rule. I agree.

16In oral argument on the appeal, the appellant submitted that there was no consideration paid for the causes of action in the assignment, and therefore any recovery by the current plaintiff will be a windfall and tainted by champerty or maintenance. This issue was not specifically dealt with by the motion judge, but is subsumed by his referral of the entire issue to be determined at the trial

(2) Do the facts as pleaded support the Charter claims?

17The respondents assert Charter claims under ss. 7, 8, and 11 of the Charter. The Supreme Court of Canada has consistently held that corporations cannot assert s. 7 rights. In Irwin Toy v. Quebec, 1989 87 (SCC), [1989] 1 S.C.R. 927, the Supreme Court explained why at pp. 1002 – 1004:

In order to put forward a s. 7 argument in a case of this kind where the officers of the corporation are not named as parties to the proceedings, the corporation would have to urge that its own life, liberty or security of the person was being deprived in a manner not in accordance with the principles of fundamental justice. In our opinion, a corporation cannot avail itself of the protection offered by s. 7 of the Charter. First, we would have to conceive of a manner in which a corporation could be deprived of its "life, liberty or security of the person". We have already noted that it is nonsensical to speak of a corporation being put in jail. To say that bankruptcy and winding up proceedings engage s. 7 would stretch the meaning of the right to life beyond recognition. The only remaining argument is that corporations are protected against deprivations of some sort of "economic liberty".

There are several reasons why we are of the view that this argument cannot succeed. It is useful to reproduce s. 7, which reads as follows:

7. Everyone has the right to life, liberty and security of the person and the right not to be deprived thereof except in accordance with the principles of fundamental justice.

What is immediately striking about this section is the inclusion of "security of the person" as opposed to "property". This stands in contrast to the classic liberal formulation, adopted, for example, in the Fifth and Fourteenth Amendments in the American Bill of Rights, which provide that no person shall be deprived "of life, liberty or property, without due process of law". The intentional exclusion of property from s. 7, and the substitution therefor of "security of the person" has, in our estimation, a dual effect. First, it leads to a general inference that economic rights as generally encompassed by the term "property" are not within the perimeters of the s. 7 guarantee. This is not to declare, however, that no right with an economic component can fall within "security of the person". Lower courts have found that the rubric of "economic rights" embraces a broad spectrum of interests, ranging from such rights, included in various international covenants, as rights to social security, equal pay for equal work, adequate food, clothing and shelter, to traditional property -- contract rights. To exclude all of these at this early moment in the history of Charter interpretation seems to us to be precipitous. We do not, at this moment, choose to pronounce upon whether those economic rights fundamental to human life or survival are to be treated as though they are of the same ilk as corporate-commercial economic rights. In so stating, we find the second effect of the inclusion of "security of the person" to be that a corporation's economic rights find no constitutional protection in that section.

That is, read as a whole, it appears to us that this section was intended to confer protection on a singularly human level. A plain, common sense reading of the phrase "Everyone has the right to life, liberty and security of the person" serves to underline the human element involved; only human beings can enjoy these rights. "Everyone" then, must be read in light of the rest of the section and defined to exclude corporations and other artificial entities incapable of enjoying life, liberty or security of the person, and include only human beings. In this regard, the case of R. v. Big M Drug Mart Ltd., supra, is of no application. There are no penal proceedings pending in the case at hand, so the principle articulated in Big M Drug Mart is not involved. [Emphasis in original.]

18Most recently in R. v. Mills, 1999 637 (SCC), [1999] 3 S.C.R. 668, the court wrote at para. 87:

… s. 8 applies to corporations whereas s. 7 does not: Hunter v. Southam, 1984 33 (SCC), [1984] 2 S.C.R. 145; Irwin Toy Ltd. v. Quebec (Attorney General), 1989 87 (SCC), [1989] 1 S.C.R. 927.

19The reference to the case of R. v. Big M Drug Mart Ltd, 1985 69 (SCC), [1985] 1 S.C.R. 295 is the principle that where a corporation is charged with an offence, the corporation may challenge the constitutional validity of the offence section on the basis that it contravenes s. 7 of the Charter. In the case at bar, the respondent asserts that the Ministry effectively convicted it and its predecessors of regulatory offences without ever charging them. However, the remedy that is sought here is under s. 24(1) for compensation, not a declaration of invalidity. Other cases where a corporation has been charged with an offence have allowed a corporation a remedy for breach of its Charter right to full disclosure, which in R. v. Stinchcombe 1991 45 (SCC), [1991] 3 S.C.R. 326 was identified as a s. 7 right: R v. 974649 Ontario Inc., 2001 SCC 81, [2001] 3 S.C.R. 575. In my view this case is distinguishable from cases where a corporation has been charged with an offence and asserts Charter rights in that context. This case seeks compensation for alleged wrongs in a purely economic context. In my view, this case is governed by Irwin Toy. The plaintiff corporation cannot assert a s. 7 right.

20A corporation can avail itself of s. 11 of the Charter, when it is charged with an offence: R. v. CIP Inc., 1992 95 (SCC), [1992] 1 S.C.R. 843 at 859. That is, it can avail itself of that section’s protection where an information is sworn or an indictment is laid: R. v. Kalanj, 1989 63 (SCC), [1989] 1 S.C.R. 1594 at 1607-8. Again in this case, the respondent was not charged with any offence.

21A corporation may also assert s. 8 rights: Hunter v. Southam, supra; R. v. Mills, supra. The claim in this case is that the Ministry’s threats to conduct core drilling amounted to unconstitutional threats to conduct an unlawful search. The response is that any such search would be a lawful search because the Ministry had the right and authority to conduct such sampling under both the Environmental Protection Act and under the express terms of the plaintiff’s provisional certificate of approval under the Act.²

22The respondent pleads that because the Ministry appointed an investigator, the Ministry was not entitled to then use its inspection powers under the Act, but required a search warrant which could not have been obtained, because the Ministry had concluded that the plaintiff’s predecessors did not breach the regulations or the Act. R. v. Inco Ltd. 2001 8548 (ON CA), [2001] O.J. No. 2098 at para. 29; R. v. Jarvis, 2002 SCC 73, [2002] 3 S.C.R. 757 at para. 88.

23The motion judge allowed this claim to proceed as a novel claim that should not be struck on a motion for summary judgment. There are, however, several legal problems with this claim. The first is that there was no search but only the threat of a search that was never carried out. It is at best unclear whether a compensatory remedy under s. 24(1) could be available for a threatened Charter breach that never materialized. Second, although the respondent claims a breach of Charter rights, the nature of the claim is for compensation for defamation caused by the ongoing threat to conduct core drilling and the publicity surrounding that threat. In those terms, the claim is not one that engages the critical protections of fundamental rights under the Charter, but is rather a second formulation of a claim for damages for defamation of the corporate reputation of the various successive corporate entities involved with the waste management operation i.e. it is a claim for breach of economic or property rights rather than personal rights. Third, the respondent has a diminished expectation of privacy in its landfill site, as this is a highly regulated industry and the Environmental Protection Act and the provisional certificate allow the Ministry to conduct searches of the site: 143471 Canada Inc. v. Quebec (Attorney General), 1994 89 (SCC), [1994] 2 S.C.R. 339 at paras. 75-78.

(3) Is the s. 8 Charter claim assignable?

24Finally, the Charter right claimed by the current plaintiff to a s. 24(1) remedy has been assigned to it by the predecessor corporate plaintiffs. Section 24(1) of the Charter provides:

24(1) Anyone whose rights or freedoms, as guaranteed by this Charter, have been infringed or denied may apply to a court of competent jurisdiction to obtain such remedy as the court considers appropriate and just in the circumstances.

25In R. v. Rahey, 1987 52 (SCC), [1987] 1 S.C.R. 588 at 619, Wilson J. stated that “an application for relief under s. 24(1) can only be made by a person whose right…has been infringed.

This is clear from the opening words of s. 24(1).” Following this principle, several cases have denied Charter claims asserted by one person either on behalf of another or asserting another’s rights. For example, in Stinson Estate v. British Columbia (1999), 1999 BCCA 761, 182 D.L.R. (4d) 407 (B.C.C.A.), and in Hislop v. Canada, 2004 43774 (ON CA), [2004] O.J. No. 4815 (C.A.), the courts held that the estate of a person cannot assert the person’s section 15 claim seeking to strike down discriminatory legislation that denied monetary rights to the person.

26There is no basis for distinguishing this case from the ruling in Rahey. Without the assignment issue, the s. 8 claim is a very tenuous one. However, on the assignment issue, the claim cannot be pursued by the current plaintiff and on that basis, must be dismissed.

CONCLUSION

27I would therefore dismiss the appeal in respect of the tort claims and allow the appeal with respect to the claims under ss. 7, 8 and s. 11 of the Charter.

28Both sides have claimed over $60,000 in fees on the partial indemnity scale. Success was divided. As the action will now be proceeding, the issues on the motion and appeal involve whether the causes of action pleaded can succeed in law and those matters will turn on evidence at trial, this is a case where the costs of this motion and appeal should follow the event. I would therefore fix the amount of the costs of the appeal at $20,000, but make those costs payable in the cause of the action

Signed: “K. Feldman J.A.”

“I agree Janet Simmons J.A.”

“I agree Eileen E. Gillese J.A.”

RELEASED: “KNF” August 9, 2005

27. (1) No person shall use, operate, establish, alter, enlarge or extend,

(a) a waste management system; or

(b) a waste disposal site,

unless a certificate of approval or provisional certificate of approval therefor has been issued by the Director and except in accordance with any conditions set out in such certificate.

156. (1) For the administration of this Act or the regulations, a provincial officer may, without a warrant or court order, at any reasonable time and with any reasonable assistance, make inspections, including,

(b) entering any place in which the provincial officer reasonably believes can be found anything that is governed or regulated under this Act or anything the dealing with which is governed or regulated under this Act;

(2) During an inspection under subsection (1), the provincial officer may,

(a) make necessary excavations; . . .

(c) take samples for analysis;

(d) conduct tests or take measurements;

Under paragraph 6 of the plaintiff’s provisional certificate of approval, Ministry officials are authorized to:

(a) carry out any and all inspections authorized by the [Environmental Protection Act](https://www.canlii.org/en/on/laws/stat/rso-1990-c-e19/latest/rso-1990-c-e19.html), R.S.O. 1990, the Ontrio Water Resources Act, R.S.0. 1990, or the Pesticides Act, R.S.O. 1990, as amended from time to time, of any place to which this Certificate relates, and without resticting the generality of the foregoing, to:

(iv) sample and monitor, at reasonable times, for the purposes of assuring compliance with the conditions of this Certificate.