Re Pritchard and Ontario Human Rights Commission et al. [Indexed as: Pritchard v. Ontario (Human Rights Commission)]

45 O.R. (3d) 97

[1999] O.J. No. 2061

Court File No. 667/98

Ontario Superior Court of Justice

Divisional Court

O'Leary, Aitken and Swinton JJ.

June 9, 1999

Human rights -- Human Rights Commission -- Complaints -- Complainant dismissed by employer -- Complainant signing full and final release in exchange for two weeks' salary in addition to statutory severance pay entitlement -- Human Rights Commission deciding not to deal with complaint of discrimination in employment -- Commission unreasonably fettering its discretion in holding that continuation of complaint in face of release constituted evidence of bad faith -- Decision quashed.

Human rights -- Human Rights Commission -- Procedure -- Reconsideration -- Human Rights Commission deciding not to deal with complaint of discrimination in employment and upholding original decision on reconsideration on ground that no new facts had been presented and circumstances had not changed -- After complainant bringing judicial review application Commission agreeing to settle matter with complainant and bringing motion for order quashing decisions -- Application for judicial review could not be determined by motion to enforce settlement -- Proposed settlement would enable Commission to give further reconsideration to its decision contrary to provision in s. 37(4) of Ontario Human Rights Code that reconsideration be final -- Commission applying wrong criteria for reconsideration in requiring that new facts be established -- Ontario Human Rights Code, R.S.O. 1990, c. H.19, s. 37(4).

P was dismissed from her employment by S Inc. with an offer of two weeks' salary in addition to her statutory severance pay entitlement, in exchange for signing a release. She accepted the offer and signed the release. She subsequently filed a complaint under the Human Rights Code, R.S.O. 1990, c. H.19 alleging that she had been the victim of sexual discrimination and sexual harassment and that her dismissal was a reprisal for pursuing an earlier sexual harassment complaint. The Ontario Human Rights Commission decided not to deal with the complaint. Section 34 of the Code confers a discretion on the Commission not to deal with a complaint where (among other circumstances) the subject-matter of the complaint is trivial, frivolous, vexatious or made in bad faith. Applying a policy contained in its Policy and Procedures Manual, the Commission determined that the pursuit of the complaint after signing a full and final release, absent evidence of duress (which it defined as excluding economic duress), was an indication of bad faith on the part of the complainant. P sought a reconsideration of the Commission's decision under s. 37 of the Code. On reconsideration, the Commission upheld its original decision on the ground that the application for reconsideration did not set forth material facts that were previously unavailable and that were pertinent to the matter; did not indicate that circumstances had changed since the original decision; and did not raise issues as to the integrity of the Commission's procedures in the matter.

P brought an application for judicial review of those two decisions. When it received notice of the application, the Commission determined that it had erred in the impugned decisions and purported to enter into a settlement with P. The Commission brought a motion before a single judge of the Divisional Court for an order quashing the decisions. S Inc. brought a motion to be added as a respondent to the application for judicial review. The motions judge granted S Inc.'s motion and refused to grant the Commission's motion, directing that the motion and the application for judicial review be heard together before a full panel of the Divisional Court.

Held, the Commission's motion should be dismissed; the application for judicial review should be granted.

While the Commission relied on rule 49.09 of the Rules of Civil Procedure (which allows a party to bring a motion to obtain judgment in terms of an accepted offer), the application for judicial review could not be determined by a motion to enforce a settlement. The proposed settlement would allow the commission to do indirectly what it could not do directly under the Code, that is, give further reconsideration to its decision under s. 37 of the Code, despite the provision in s. 37(4) that a decision on reconsideration is final. While the Commission could choose not to oppose the application for judicial review, it did not have the authority to consent to the settlement of the application.

In deciding that the filing of a human rights complaint shows bad faith after the complainant has signed a release, the Commission improperly fettered its discretion. The term "bad faith" normally connotes moral blameworthiness, encompassing conduct designed to mislead or pursued for an improper motive. There may be cases where an employee who has accepted a sum of money in exchange for a release of claims against an employer, including human rights claims, would be acting in bad faith in subsequently filing a human rights complaint. However, in other cases, the facts may show that the employee misunderstood the significance of the release, or received little or no consideration for it beyond statutory entitlements under employment standards legislation, or was in such serious financial need that she or he felt there was no choice but to accept the package offered. The Commission should have given consideration to all the relevant facts of this case to determine whether P acted in bad faith in the circumstances in pursuing her complaint.

Further, the Commission applied the wrong criteria for reconsideration. The power of reconsideration does not require that new facts be established.

APPLICATION for judicial review of decisions of the Ontario Human Rights Commission; MOTION for an order quashing the decisions.

Hall v. Ontario (Ministry of Community and Social Services) (1997), 1997 14528 (ON SCDC), 154 D.L.R. (4th) 696 (Ont. Div. Ct.); Ontario Human Rights Commission v. Commercial Union Assurance (1988), 1988 4589 (ON CA), 63 O.R. (2d) 112, 26 O.A.C. 387, 47 D.L.R. (4th) 477, 20 C.C.E.L. 236, 9 C.H.R.R. D/1544 (C.A.), consd Other cases referred to Consumers' Distributing Co. v. Ontario Human Rights Commission (1987), 1987 4055 (ON SC), 58 O.R. (2d) 697, 19 O.A.C. 383, 36 D.L.R. (4th) 589, 24 Admin. L.R. 1, 15 C.C.E.L. 256, 87 C.L.L.C. 17,012; Devlen v. Ontario Human Rights Commission (1998), 98 C.L.L.C. 230-008 (Ont. Div. Ct.); Jazairi v. Ontario Human Rights Commission (1997), 1997 12445 (ON SC), 146 D.L.R. (4th) 297, 97 C.L.L.C. 230-023, 43 C.R.R. (2d) D-1 (Ont. Div. Ct.) Statutes referred to Employment Standards Act, R.S.O. 1990, c. E.14 Human Rights Code, R.S.O. 1990, c. H.19, ss. 33(1), 34, 37 Judicial Review Procedure Act, R.S.O. 1990, c. J.1 Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194, Rules 38, 49, 68

Geri Sanson, for applicant. Cathy S. Pike, for Ontario Human Rights Commission. David. W. Stratas and Peigi R. Ross, for Sears.

The judgment of the court was delivered by

SWINTON J.: -- Colleen Pritchard brought an application for judicial review of two decisions of the Ontario Human Rights Commission, in which the Commission refused to proceed further with an investigation of certain aspects of her human rights complaint. Upon notice of the application being served, the Commission decided to settle the application and made an agreement with Ms. Pritchard to do so. The respondent to the complaint, Sears Canada Inc., refused to consent to the proposed order. Therefore, the Commission brought a motion before a single judge of the Divisional Court, seeking an order, on consent, to quash the decisions. Sears also brought a motion to be added as a respondent to the application for judicial review. Southey J. granted the Sears motion, but he refused to grant the Commission's motion, directing that the motion and the application for judicial review be heard together before a full panel of the Divisional Court.

The Facts

The proceedings before the Commission commenced with a complaint by Ms. Pritchard alleging that she had been the victim of sex discrimination and sexual harassment and reprisal for pursuing an earlier sexual harassment complaint, which led to her dismissal from employment by Sears in Sudbury on July 19, 1996 and Sears' refusal to rehire her for a part-time position in December 1996.

At the time of the dismissal, Ms. Pritchard was offered payment of the sums to which she was entitled under the Employment Standards Act, R.S.O. 1990, c. E.14, plus two weeks' salary in addition, or 14.56 weeks' salary, in the amount of $9,331.21, in exchange for signing a release. She was given a week to consider this offer. During that week, it appears that she contacted an employee of the Employment Standards Branch, who advised her that the release would not be binding. She also contacted a lawyer in Ottawa, who asked Sears for further time to consider the offer. The material filed on this application included a letter from the lawyer dated July 24, 1996, indicating that the lawyer had had insufficient time to assess the human rights claims which Ms. Pritchard might have. The employer agreed to an extension from Friday, July 26 to Tuesday, July 30. On July 30, Ms. Pritchard signed the release, which stated that she released Sears from any claims relating to her employment including " any claims for severance or termination pay under the Employment Standards Act or claims under the Human Rights Code". The release also stated that she had "either obtained independent legal advise or waived my right to such independent legal advise [sic]". Nevertheless, Ms. Pritchard indicated in later submissions to the Commission that the lawyer had told her that the extension granted by Sears was insufficient to allow examination of the human rights claim.

On January 17, 1997, Ms. Pritchard filed her human rights complaint. Sears subsequently asked the Commission not to deal with the complaint pursuant to s. 34(1)(b) and (d) of the Ontario Human Rights Code, R.S.O. 1990, c. H.19. Pursuant to s. 33(1), "[s]ubject to section 34", the Commission must investigate every complaint and may try to effect a settlement. Section 34 confers a discretion on the Commission not to deal with a complaint in certain circumstances:

34(1) Where it appears to the Commission that,

(a) the complaint is one that could or should be more appropriately dealt with under an Act other than this Act;

(b) the subject-matter of the complaint is trivial, frivolous, vexatious or made in bad faith;

(c) the complaint is not within the jurisdiction of the Commission; or

(d) the facts upon which the complaint is based occurred more than six months before the complaint was filed, unless the Commission is satisfied that the delay was incurred in good faith and no substantial prejudice will result to any person affected by the delay,

the Commission may, in its discretion, decide not to deal with the complaint.

After receiving written submissions from both the complainant and the respondent, the Commission issued its decision not to deal with the complaint on January 20, 1998. Five reasons were given: the complainant was terminated from employment because of a national restructuring; she signed a full and final release when she was paid a severance package; there was no evidence of duress when she signed the release; the continuation of the complaint in the face of the release is evidence of bad faith; and the reprisal allegations dealing with the refusal to rehire should be dealt with.

Ms. Pritchard then sought a reconsideration pursuant to s. 37 of the Code. Both she and the respondent made written submissions. Pursuant to s. 37(3),

37(3) Every decision of the Commission on reconsideration together with the reasons therefor shall be recorded in writing and promptly communicated to the complainant and the person complained against and the decision shall be final.

On June 23, 1998, the Commission issued its decision to uphold the original decision for the reasons that the application for reconsideration did not set forth material facts that were previously unavailable and were pertinent to the matter; did not indicate that circumstances had changed since the original decision; and did not raise issues as to the integrity of the Commission's procedures in the matter.

These two decisions of the Commission were the subject of the application for judicial review which the Commission agreed to settle with Ms. Pritchard.

The Commission's Motion

This motion, originally brought before a single judge of the Divisional Court, sought an order incorporating the terms of the offer to settle into a judgment -- specifically, that the two decisions be quashed and the investigation of the whole complaint should continue.

The Commission conceded that it had no authority to reconsider its decision of July 23, 1998, as s. 37(4) of the Code states that a reconsideration decision is final. Therefore, it is functus. Nevertheless, the Commission argued that a litigation decision was taken: given the legal opinion that both the original decision and the reconsideration were flawed, the Commission decided not to defend the application for judicial review. Relying on rule 49.11 of the Rules of Civil Procedure, the Commission argued that one party can settle with another party in an application or action involving multiple defendants, and that is all that is being done here -- it has consented to the order sought by the applicant, even though Sears is opposed. Therefore, the Commission argued that the court should grant the motion, relying on rule 49.09, which allows a party to bring a motion to obtain judgment in terms of an accepted offer.

This application for judicial review can not be determined by a motion to enforce a settlement. The procedure for judicial review is set out in the Judicial Review Procedure Act, R.S.O. 1990, c. J.1. Proceedings under that Act are commenced by a notice of application for judicial review, the procedure for which is governed by Rule 68 of the Rules of Civil Procedure. Rule 68.02 sets out the applicable procedure, stating that Rule 38, except as provided in rule 38.01(2) and rules 68.03 to 68.06, apply to applications for judicial review to the Divisional Court. There is no reference to the settlement rules in Rule 49, nor is it appropriate to look to those rules, given the nature of an application for judicial review.

In a civil proceeding of the type contemplated by Rule 49, when one party settles, another party will have the option of proceeding with its case. Here, the proposed settlement by the Commission and the applicant would end the proceeding for judicial review, even though Sears, another party to the proceeding and the respondent to the complaint, is opposed. Sears had participated in the earlier proceedings under ss. 34 and 37, and had been successful in having the scope of the human rights investigation curtailed. The proposed settlement would allow the Commission to do indirectly what it could not do directly under the Code -- namely, to give a further reconsideration to its decision despite the terms of s. 37(4), which made the reconsideration decision final. While the Commission could choose not to oppose the application for judicial review, it did not have the authority to consent to the settlement of the application. Therefore, the motion for an order to quash the decisions is dismissed.

The Application for Judicial Review

The Commission gave reasons for its two decisions, which have been referred to. In addition, the court in these proceedings had before it a letter from counsel for the Commission to the applicant explaining why the Commission felt that it had erred in its earlier determinations and would not defend the decisions.

The Commission's determination whether to decline to proceed with an investigation under s. 34 or to recommend the appointment of a board of inquiry under s. 36 has been held to be an administrative decision, subject to judicial review on a standard of reasonableness: Jazairi v. Ontario Human Rights Commission (1997), 1997 12445 (ON SC), 146 D.L.R. (4th) 297 at pp. 304-05, 97 C.L.L.C. 230-023 (Ont. Div. Ct.); Devlen v. Ontario Human Rights Commission (unreported, Ont. Div. Ct., January 9, 1998), at p. 14 [reported 98 C.L.L.C. 230-008]. Counsel for the applicant argued that the correct standard for review is correctness. In this case, we need not determine the appropriate standard of review, given our decision that the Commission improperly fettered its discretion in its initial s. 34 decision because of its interpretation of "bad faith", while in its reconsideration under s. 37, it erred in adopting an unduly narrow view of its own jurisdiction.

An important factor in the Commission's original decision under s. 34 was the release signed by Ms. Pritchard. Having found that there was a release signed and no evidence of duress, the Commission then exercised its discretion to decline to proceed further with part of the investigation, stating that "[t]he continuation of this complaint as to the termination in the face of the release is evidence of bad faith on the part of the complainant". This decision was consistent with the policy which it had enunciated in its Policy and Procedures Manual, which was included in the respondent's materials:

The presence of a full and final release executed by the complainant will virtually always be evidence of bad faith in bringing a human rights complaint. The only exception will be if there is evidence of duress in the signing of the release. . . . It should be noted, however, that duress is a very high standard to be met as laid down by the Courts. Duress does not include so-called "economic duress" . . . (p. 12).

In deciding that the filing of a human rights complaint shows bad faith after the complainant has signed a release, absent evidence of duress that is defined to exclude economic duress, the Commission improperly fettered its discretion. The term "bad faith" normally connotes moral blameworthiness on the part of the person accused, encompassing conduct designed to mislead or pursued for an improper motive. Its use in s. 34(1) (b) suggests that this is the intended meaning in the Code, for a complainant can be denied access to the investigative procedure only if the complaint is vexatious, trivial or brought in bad faith. The terms "bad faith" and "vexatiousness" both indicate that the complainant has acted improperly in pursuing the complaint.

Undoubtedly, in some cases, an employee who has accepted a sum of money in exchange for a release of claims against a former employer, including human rights claims, would be acting in bad faith in subsequently turning around and filing a human rights complaint. However, in other cases, the facts may show that the employee misunderstood the significance of the release, or received little or no consideration for it beyond statutory entitlements under employment standards legislation, or was in such serious financial need that she or he felt there was no choice but to accept the package offered. To take the approach that there is bad faith whenever a human rights complaint is brought after signing a release risks ignoring the context within which a particular complainant has signed the release and denying access to the investigative procedure under the Human Rights Code without assessing the complainant's individual moral blameworthiness in pursuing the complaint.

The potential for injustice flowing from this interpretation is shown by a review of the facts of this case. Ms. Pritchard submitted evidence that she had been told by an employee of the Employment Standards Branch that a release would not affect her legal rights. She then consulted counsel, but she was not accorded the time requested by counsel to study the release in light of her particular situation. After signing the release, she did not receive, in return, a significant amount of money beyond her employment standards entitlement. The additional amount received was two weeks' salary, although the quantum beyond the statutory minimum was not clearly spelled out in the documentation provided to her.

There is no indication in the reasons of the Commission that this evidence was given consideration. Rather, the Commission's reasons emphasize the fact of the signed release and the lack of duress. Moreover, the case analysis provided to Commissioners stated that economic duress does not constitute duress under the law.

The Human Rights Commission has an important statutory mandate to protect human rights. In another context, the Divisional Court has held that the Commission is not bound to give approval to a settlement between an employer and a complainant, even when reached without duress, because of the Commission's broad statutory mandate to protect human rights: Consumers' Distributing Co. v. Ontario Human Rights Commission (1987), 1987 4055 (ON SC), 58 O.R. (2d) 697 at pp. 701-02, 24 Admin. L.R. 1 at pp. 8-9. Given that statutory mandate and the normal meaning of "bad faith", the Commission improperly fettered its discretion here in interpreting "bad faith" in s. 34 to encompass all situations where a complainant has signed a release without duress, as defined to exclude economic duress. The Commission should have given consideration to all the relevant facts of this case to determine whether Ms. Pritchard acted in bad faith in the circumstances in pursuing her complaint.

The Commission made a further error in its reconsideration decision, because it applied the wrong criteria for reconsideration. Section 37(1) requires the party seeking reconsideration to set out the material facts upon which he or she relies. The Commission indicated that it refused the reconsideration because no new facts were presented, nor had circumstances changed, nor was there any question raised about the integrity of the Commission's process. The Commission purports to follow the test in Ontario Human Rights Commission v. Commercial Union Assurance (1988), 1988 4589 (ON CA), 63 O.R. (2d) 112, 9 C.H.R.R. D/1544 (C.A.). However, it has erred in its interpretation of that decision, which states that the power of reconsideration does not require that new facts be established. The Court of Appeal went on to state that the power is an important mechanism to correct errors or allow readjustment, even if circumstances remain unchanged. In Hall v. Ontario (Ministry of Community and Social Services) (unrepo rted, December 17, 1997) [reported 1997 14528 (ON SCDC), 154 D.L.R. (4th) 696], the Divisional Court applied Commercial Union, stating that the Commission has an unfettered power to reverse a decision under s. 37, and had adopted an erroneous statement of law in its reconsideration report there when it required new facts. That same restrictive approach is evident in the reconsideration report in this ease, and the reasons of the Commission indicate that it erroneously took a narrow view of its power to reconsider here.

Therefore, there are grounds to quash both the initial decision under s. 34 and the reconsideration decision under s. 37. Sears argued that the decisions of the Commission, even if made in error, should not be quashed, because the matter cannot be referred back to the Commission for a fair determination of the s. 34 issue, given that the Commission, in the letter from counsel of November 13, 1998, has already indicated its view of the matter -- namely, that it erred and the investigation of the full complaint should proceed.

We see no reason not to quash the decisions of the Commission and refer the matter back for proper consideration under s. 34 of the Code. The Commission did, indeed, err in the approach it took to the determination of bad faith, and the complainant is entitled to have the matter determined in accordance with the statutory requirements. The Commission's acknowledgement of errors in its earlier decisions is not a sufficient reason to refuse to quash those decisions. Moreover, the determination under s. 34 is an administrative decision. The effect of a decision by the Commission that it should proceed with a full investigation will not affect the ultimate determination of the merits of the complaint against Sears.

For these reasons, the application for judicial review is granted, and the two decisions of the Ontario Human Rights Commission are set aside, and the matter is referred back for a determination under s. 34 of the Code. If the parties wish to address costs, they may make written submissions within 30 days.

Motion dismissed; application allowed.