COURT FILE NO.: CV-08-466
DATE: 2015-08-28
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Grand River Enterprises Six Nations Ltd.
Jerry Bradwick Montour, Kenneth Ryan
Hill, Curtis Styres and Gregory Scott Smith
Plaintiffs
– and –
The Attorney General of Canada
Defendant
B. Finlay, B. Jetten and M-A. Vermette,
Counsel for the Plaintiffs / Responding Parties
C. Brenzall, W.J. Linden and C. Mohr,
Counsel for the Defendant / Moving Party
HEARD: May 26, 27, 28, 2014 and
February 4, 5, 6, 2015
REASONS FOR DECISION
THE HONOURABLE MR. JUSTICE D.J. GORDON
[1] In this action, the plaintiffs seek a substantial damage award for misfeasance in public office, negligence, breach of aboriginal rights and breach of fiduciary duty. The defendant’s motion at this early stage in the lawsuit, seeks an order striking out the statement of claim. A statement of defence has not yet been delivered.
The Claim
[2] In their Fresh as Amended Statement of Claim, the plaintiffs seek the following relief, as set out in paragraph 1:
The Plaintiffs claim as against the Defendant:
(a) damages in the amount of $1.5 billion for:
(i) misfeasance in public office;
(ii) negligence; and
(iii) breach of the aboriginal rights and the rights protected under the Indian Act of the partners of the Grand River Enterprises partnership;
(b) equitable compensation in the amount of $1.5 billion for breach of fiduciary duty and failure to act in accordance with “the honour of the Crown” in dealings with the aboriginal Plaintiffs;
(c) a declaration that the damages suffered by the Grand River Enterprises partnership be held in trust for distribution to the members of the partnership;
(d) punitive, aggravated and exemplary damages in the amount of $5 million;
(e) pre-judgment and post-judgment interest on the above amounts calculated in accordance with the Courts of Justice Act;
(f) their costs of this action on a substantial indemnity basis; and
(g) such further and other relief as counsel may advise and this Honourable Court deems just.
The Motion
[3] The defendant’s motion is for an order, pursuant to Rules 21.01 and 25.11, Rules of Civil Procedure, for the following:
(a) An order striking out the Fresh as Amended Statement of Claim (the “Claim”) in whole or in part, without leave to amend;
(b) An order striking the claims for negligence, misfeasance in public office, aboriginal rights and breach of fiduciary duty without leave to amend;
(c) An order dismissing the action for lack of capacity or lack or jurisdiction;
(d) An order dismissing the action as an abuse of process;
(e) An order for costs of this motion; and
(f) An order for such further and other relief as counsel may advise and this Honourable Court permit.
The Parties
[4] Grand River Enterprises Six Nations Ltd. (“GRE”) was incorporated on April 29, 1996 under the laws of Canada. Its head office and manufacturing plant are located on the Six Nations of the Grand River Reserve. The company is engaged in the manufacture and sale of tobacco products. It has a license issued under the Excise Act. The license restricts manufacturing on the reserve and sale to First Nations communities.
[5] Jerry Bradwich Montour, Kenneth Ryan Hill, Curtis Styres and Gregory Scott Smith are shareholders of GRE. Each individual is aboriginal and a status Indian as defined by the Indian Act. Mr. Montour is a member of the Wahta Mohawk First Nation, while the others are members of the Six Nations of the Grand River. All four were partners in the pre-incorporation business known as Grand River Enterprises.
[6] The Attorney General of Canada (“Attorney General”) is the chief law officer of the Crown. He is liable in law for the actions and omissions of the Crown, its servants and ministers. Pursuant to the Crown Liability and Proceedings Act, proceedings against the Crown are taken in the name of the Attorney General.
Overview of Claim
[7] The Fresh as Amended Statement of Claim is a lengthy document, setting out the purported facts regarding the multitude of claims. The primary focus in this pleading pertains to “the forced incorporation” and the “failure to address the issue of contraband on the Reserve”. The allegations pertain to the conduct of numerous civil servants and ministers. For the purpose of this motion, I will attempt to summarize the facts as pleaded with reference to GRE’s factum.
[8] The Grand River Enterprises partnership was formed in 1993. All of the then partners, including the individual plaintiffs, were aboriginal. With the support of the Six Nations Band Council, the office of Ayonwehs (a War Chief of the Mohawk Nation) and the Assembly of First Nations, the partnership commenced the manufacture and sale of tobacco products that year. Sales were concluded entirely on the Reserve.
[9] In 1993 and 1994, the partners engaged in discussions with the Minister of National Revenue (“MNR”) with respect to obtaining a manufacturing license under the Excise Act. Such a license was required to purchase raw tobacco from the Ontario Flue-Cured Tobacco Growers Marketing Board.
[10] On January 27, 1994, the MNR advised the partners that the payment of excise duties and taxes was a pre-condition to the granting of a license and that the manufacture of tobacco products without a license was a contravention of the Excise Act. The plaintiffs say this representation was wrong and that the MNR knew it was wrong.
[11] In 1996, during ongoing discussions between the partners and MNR, criminal prosecution of the partnership and the partners were initiated regarding violations of the Excise Act and the Customs Act. A plea arrangement resulted in a guilty plea by one partner on two violations of the Customs Act. He paid a fine. All other charges were withdrawn.
[12] The partners resumed discussions with the MNR regarding a license in 1996, despite their position taxes and duties were not payable for on-reserve manufacture and sale of tobacco products by aboriginals. The partners did not want to face further charges under the Excise Act and Customs Act. The plaintiffs say the MNR, and her representatives, advised the partners the partnership had to incorporate in order to be considered for a license. The plaintiffs further say this advice was improper, incorporation not being required under the Excise Act, and that it was made in an effort to impose tax liability that did not otherwise exist and to deprive the aboriginal partners, and plaintiff, of their right to be free of taxation.
[13] GRE was incorporated on April 29, 1996 due to the ultimatum of the MNR, according to the plaintiffs. GRE took over the business of the partnership. All of the shareholders are aboriginal.
[14] After incorporation, GRE made application for a license to manufacture tobacco products. On April 18, 1997, Scott Smith, one of the individual plaintiffs, and several council members of the Six Nations Band, met with the Assistant Commissioner Policy and Legislation Branch of the Department of National Revenue. The terms and conditions that would be imposed on GR, if it wished to obtain a license were presented. The plaintiffs say an agreement was entered into at this meeting that if GRE obtained a license, the Government would carry out intensified enforcement under the Initiative against Contraband. The purpose is said to have been to ensure that other on-reserve manufacturers of tobacco products operated under the same rules under which the plaintiffs were being required to continue operations on the Reserve.
[15] On May 29, 1997 GRE was granted a license under the Excise Act.
[16] The plaintiffs say, had the partnership continued the business, it would have been exempt from paying taxes and duties pursuant to section 87, Indian Act, as all of the parties were aboriginal and the property was the partners’ personal property and was situated on a reserve. The plaintiffs further say the forced incorporation by the MNR resulted in the loss of that exemption.
[17] Contraband and counterfeit tobacco products has been a threat to the tobacco industry since the 1990’s. In February 1994, the Federal Government announced its Anti-Smuggling "Initiative” as part of its National Action Plan to Combat Smuggling in Canada. This was to provide for increased enforcement, along with other provisions, to combat the illicit trade in tobacco. The Initiative continued in the Government’s Comprehensive Tobacco Control Strategy, introduced in 1996.
[18] GRE had observed contraband on the Reserve since the early 2000’s. Due to a lack of enforcement, the plaintiffs say, the growth in contraband went unchecked by the Government and, in result, by late 2004 there was an abundance of high quality contraband on the Reserve. In this same period, GRE experienced a decline in sales, attributable to the widespread availability of contraband, including counterfeit versions of the GRE brands, on the Reserve.
[19] Since 2003, GRE has complained to various Ministers as to the increased availability of contraband tobacco on the Reserve. Despite paying $50 to $60 million a year in taxes and duties, GRE did not see any effort by any federal agency to combat this contraband. On August 7, 2003, the Solicitor General of Canada responded to GRE’s complaint, referring to the Initiative and ensuring compliance with Canada’s tax legislation.
[20] GRE continued to bring to the attention of various ministers and their representatives their failure in combating the contraband problem by way of letters and meetings. On October 31, 2005, GRE wrote to the Prime Minister of Canada in this regard.
[21] The plaintiffs say that as a result of their extensive dealings and exchanges, there existed a special and direct relationship between the parties.
[22] The plaintiffs further say the Ministers have done virtually nothing to address contraband on the Reserve.
[23] As hereafter discussed, there have been other proceedings involving the parties and others. The statement of claim refers to two of those cases, namely:
(i) an application by GRE in the Ontario Superior Court of Justice in 2000 against the Attorney General of Ontario and the Attorney General of Canada seeking declaratory relief with respect to the Tobacco Tax Act and the Excise Tax Act; and
(ii) a statement of claim by GRE and members of the Six Nations of the Grand River Reserve in the Federal Court of Canada against Her Majesty the Queen (“HMTQ”) seeking declaratory relief and contesting a Notice of Assessment for the period of May 29, 1997 to November 30, 1997.
[24] These two proceedings were settled. On March 2, 2004, a Release was executed on behalf of GRE and The Six Nations of the Grand River Band. Included in the Release was a provision whereby the Releasors agreed to not pursue the forced incorporation claim in any future proceedings. The Release was not executed by the individual plaintiffs.
[25] The plaintiffs say GRE executed the Release in good faith and based on the clear agreement all parties were acting in good faith and that they would comply with their legal obligations, including that the Crown would properly implement and administer the Initiative, thereby combating contraband and not put GRE at a disadvantage.
[26] The plaintiffs further say the Crown has been and continues to be in breach of its obligations.
Prior Proceedings
[27] There have been three prior proceedings involving the parties
(i) GRE v. AGO and AGC – Ontario Superior Court of Justice
Court File No.: 00-2794
[28] The notice of application, issued December 15, 2000 sought declaratory relief on the constitutionality and application of certain provisions in the Tobacco Tax Act (Ontario) and the Excise Tax Act (Canada) and that “the people of Six Nations have an aboriginal right to manufacture, market and sell tobacco products exclusively to other Indians on First Nations communities in Ontario …”.
[29] The application was subsequently amended to add The Six Nations of the Grand Indian Band as a party applicant and adding to the above noted claim “a declaration that the people of the Six Nations of the Grand River have an aboriginal right to trade goods freely, including tobacco on a commercial scale with other First Nations communities …”.
[30] A further amendment replaced this claim with “a declaration that Allocation System and related sections of the Tobacco Tax Act that have been imposed by the Ontario Minister of Finance on Grand River Enterprises Six Nations, on reserve Indian Retailers and members of the Six Nations of the Grand River Indian Band infringe on their rights guaranteed by sections 6 (2) (b) and 15 (1) of the Canadian Charter of Rights and Freedoms”.
(ii) GRE v. HMTQ – Federal Court of Canada
Court File No.: T-498-01
[31] The statement of claim was issued on March 19, 2001 seeking comparable declaratory relief as in (i) and other claims, including contesting assessments dated May 29, 1997 to November 30, 1999. The pleading was amended to add Members of The Six Nations of the Grand River Reserve as a party plaintiff.
[32] Both of the proceedings in (i) and (ii) were settled following negotiations on behalf of the parties, on the following terms:
(a) the actions would be discontinued;
(b) AGC and HMTQ would not take any collection action with respect to the notice of assessment, pertaining to the period May 29, 1997 to November 30, 1999; and
(c) GRE would not plead in any future proceeding the circumstances leading up to the incorporation including the alleged representations by the AGC and HMTQ that such was a requirement for GRE to receive an Excise Act license.
[33] A Full and Final Release was executed on behalf of GRE and The Six Nations of the Grand River Indian Band on March 2, 2004. It was not executed by the individual plaintiffs.
[34] Both actions were discontinued on March 26, 2004.
(iv) GRE v. HMTQ – Tax Court of Canada
Court File No.: 2007-4997 (EA) G
[35] In its notice of appeal dated December 21, 2007, GRE appealed 23 assessments of excise duty under the Excise Act from September 2005 to July 2007. It requested the assessments be vacated and the amounts paid be refunded. The pleading included allegations pertaining to the aboriginal right to trade in tobacco and the exemption from taxation pursuant to section 87, Indian Act.
[36] The amended notice of appeal deleted these particular allegations. The appeal then challenged the correctness of the assessments.
[37] The appeal was dismissed by the Tax Court of Canada on December 8, 2011. A further appeal to the Federal Court of Appeal was dismissed on September 29, 2012. Leave to appeal to the Supreme Court of Canada was denied on March 28, 2013.
Issues
[38] The issues requiring determination are set out in the Attorney General’s factum as follows:
(a) whether the Claim, or parts thereof, fails to disclose a reasonable cause of action for negligence, misfeasance in public office, breach of aboriginal rights and breach of fiduciary duty pursuant to Rule 21.01(1)(b);
(b) whether the Claim, or parts thereof, is barred pursuant to section 174 of the Excise Act, 2001 and whether the Court has jurisdiction or should decline to exercise jurisdiction as the claim is a collateral attack on the jurisdiction of the Tax Court pursuant to Rule 21.01(3)(a);
(c) whether the plaintiffs lack capacity to bring the Claim, or parts thereof, and should be dismissed pursuant to Rule 21.01(3)(b); and
(d) whether the Claim is an abuse of process and should be dismissed pursuant to Rule 21.01(3)(d).
Motion to Strike
[39] This is a motion, in part, to strike out the Fresh as Amended Statement of Claim pursuant to Rule 21.01(1)(b). No evidence is admissible on such a motion. Certain principles apply, namely:
(a) the facts as pleaded are assumed to be true or are capable of being proven;
(b) the test is whether it is “plain and obvious” the claim disclosed no “reasonable” cause of action, a high threshold;
(c) if there is a “chance of success”, the plaintiff should not be driven from the judgment seat;
(d) the court should not dispose of matters of law that are not fully settled.
See: Hunt v. Carey Canada Inc., 1990 CanLII 90 (SCC), [1990] 2 S.C.R. 959; Odhavji Estate v. Woodhouse, 2003 SCC 69, [2003] 3 S.C.R. 263; and R. v. Imperial Tobacco Ltd., 2011 SCC 42, [2011] 3 S.C.R. 45.
[40] Aboriginal law is still evolving, described as “undeveloped and fluid” where obligations arising out of the relationship between the Crown and Aboriginal peoples are “largely unsettled”. The public interest in the resolution of aboriginal claims calls for a measure of flexibility not always present in ordinary commercial litigation. See: Wewaykum Indian Band v. Canada 2002 SCC 79, [2002] 4 S.C.R. 245; Lax Kw’alaams Indian Band v. Canada (Attorney General), 2011 SCC 56, [2011] 3 S.C.R. 535; and Brown v. Canada (Attorney General), 2014 ONSC 6967 (Div. Ct.).
Discussion and Analysis
A. Negligence
(i) Facts as Pleaded
[41] According to the GRE factum, the following are the pleaded facts:
(a) From 1993 to 1997, the Partnership engaged in discussions with the MNR with a view to obtaining a tobacco manufacturing license under the Excise Act (“Excise License”) – paras. 16-19, 23-27;
(b) The MNR and her representatives expressly advised the members of the Partnership that in order for the Partnership to be considered for an Excise License, it first had to incorporate – paras. 23-24;
(c) At a meeting held on April 18, 1997, there was a clear agreement that if GRE was given an Excise License on the conditions outlined by a Government representative, the Government would carry out intensified enforcement of the Initiative against Contraband, and take all measures to ensure that other on-reserve manufacturers of tobacco products were actually operating under the same rules under which the plaintiffs were required to continue operations on the Reserve – para. 27-28;
(d) GRE has on a frequent and recurring basis brought to the attention of the Ministers responsible for implementing and administering the Initiative (“Ministers”) and their representatives their failures in combating the problem of Contraband on the Reserve – paras. 38-41;
(e) Representatives of the Government responded to GRE’s complaints and attended meetings with GRE to discuss Contraband issues – paras. 38, 39 (c), (d), (g), 40, 41;
(f) The Ministers knew that GRE’s sales in Ontario were restricted to reserves, where Contraband products are most readily available, and they knew the particular vulnerability that such restriction caused to GRE – para. 45; and
(g) GRE and the Defendant executed a Full and Final Release in March 2004 (“Release”). GRE’s agreement in the Release was based on the agreement that the Government would properly implement and administer the Initiative, thereby combating Contraband on reserves and not putting GRE at a disadvantage – paras. 55, 57-58.
(ii) Test for Negligence
[42] Liability in negligence only results if there is a duty of care. The two part Anns Cooper test asks:
(a) is there a relationship of proximity in which a failure to take reasonable care might foreseeably cause loss or harm, thus establishing a prima facie duty of care; and
(b) if so, are there policy reasons militating against recognition of that prima facie duty of care.
See Anns v. Merton London Borough Council, [1978] A.C. 728 (H.C.); Cooper v. Hobart, 2001 SCC 79, [2001] 3 S.C.R. 537; Hill v. Hamilton Wentworth Regional Police, 2007 SCC 41; and R. v. Imperial Tobacco, 2011 SCC 42.
(iii) Positions of the Parties
(a) Defendant
[43] The position of the Attorney General is that no duty of care exists on the pleaded facts and there are compelling policy reasons against any such finding. Rather, any duty that is owed is to the public at large. Decisions as to how law enforcement resources are utilized involve complex economic, social and political considerations, all being pure matters of policy.
[44] Further, the Attorney General says that even if the statements regarding enforcement of the Initiative were made, Ministers do not direct the course of investigations and, hence, the statements do not create a duty of care. As well, failure to accomplish the goal in the Initiative of combating contraband does not constitute negligence.
[45] Reliance is placed on the decision in Weninger Farms Ltd. v. Canada (Ministry of National Revenue), 2012 ONSC 4544. In Weninger, tobacco growers claimed that the federal government knowingly and deliberately failed to enforce the provisions of the Excise Act regarding contraband tobacco, thus resulting in economic loss. The court rejected the alleged duty of care argument, concluding the legislation was aimed at the public generally and that the regime created thereunder reflected concerns for public health, safety and the public purse. The duty created by the statutory scheme was owed to citizens as a whole and not to a particular group.
[46] The Attorney General submits the contact and interactions between the parties was not sufficient to find proximity, referring to Granite Power Corp. v. Ontario, 2004 CanLII 44786 (ON CA), [2004] O.J. No. 3257 (Ont. C.A.). In Granite Power, the plaintiff’s position was that a relationship developed from meetings and other contact to discuss the impact of legislative change that resulted in establishing a duty of care. The court rejected that argument, concluding the Minister had many competing interests to weigh and balance and that the duty he owed was to the public at large.
[47] Failure to enforce the legislation, or the Initiative, the Attorney General says, cannot be subjected to a duty of care in this case, relying on the recognized concept of investigative and prosecutorial discretion. See, for example: Burgiss v. Canada (Attorney General); 2013 ONCA 16; and Collins v. Canada, 2010 FC 254.
[48] The Attorney General also submits there are residual policy reasons that militate against imposing a duty of care, namely:
(a) A private law duty would conflict with a statutory public duty, as recognized in Syl Apps Secure Treatment Centre v. B.D., 2007 SCC 38. Law enforcement agencies must be able to effectively discharge their statutory duties in the public interest and not purely for the benefit of protecting the economic interests of the plaintiffs.
(b) Recognizing a duty of care in the circumstances of this case would result in the potential for the creation of indeterminate liability. Reference was made to Imperial Tobacco, supra and Weninger Farms, supra.
(c) The impunged conduct constitutes policy decisions by government that is immune from tort liability. Public policy considerations, such as economic, social and political factors are involved in core government decisions as recognized in Imperial Tobacco, supra.
[49] The argument here is that decisions pertaining to the Initiative and combating smuggling and contraband tobacco involve a multitude of considerations and such remain pure policy decisions. Imposing a duty of care in these circumstances, it is argued, would represent an unwarranted intrusion into government policy.
(b) Plaintiffs
[50] The plaintiffs’ position is that a duty of care arose from the interactions between the parties, a “special relationship”, as addressed in Imperial Tobacco, supra, such that the case must be allowed to proceed to trial.
[51] The pleaded facts, they say, establish a special relationship of proximity in which a failure to take reasonable care would foreseeably cause loss or harm. The argument is that GRE and the Partnership were singled out by the Government as a result of the forced incorporation and the failure to properly implement and administer the Initiative.
[52] Weninger Farms is distinguishable as it involved a statutory scheme, as opposed to the specific interactions between the parties as in this case.
[53] Relying on Imperial Tobacco, supra, and Hill, supra, the position of the plaintiffs is that a duty of care to the public at large is insufficient alone to negate a duty of care to a particular member of the public, especially in circumstances where there are specific interactions between the parties. There is no conflict in duties in this case as the plaintiffs and the public at large share the same interest in diligent investigation and enforcement.
[54] The plaintiffs do not take issue with the concept of investigative and prosecutorial discretion; however, the pleaded facts, they argue, is that the Initiative has not been properly implemented and administered and that virtually nothing has been done to combat contraband on the Reserve. Again referring to Hill, the investigation of crime is one of the basic duties of government that cannot be abdicated. Discretion, it is said, may be considered with respect to the standard of care but cannot negate the existence of a duty of care.
[55] Policy reasons cannot negate the duty of care, the plaintiffs argue, particularly at the motions stage before there is an evidentiary record to examine the strengths and weaknesses of the policy arguments relied on to negate a prima facie duty of care. See: Hasket v. Equifax Canada Inc. (2003), 2003 CanLII 32896 (ON CA), 63 O.R. (3d) 577 (Ont. C.A.).
[56] In responding to the Attorney General’s argument, the plaintiffs submit:
(a) There is no conflict with a statutory duty. The discretion involved in law enforcement pertains to the standard of care, not whether a duty of care arises as discussed in Hill, supra. In this regard, the plaintiffs say the Attorney General relies only on general speculation, not a real potential for negative policy consequences as addressed in Fullowka v. Pinkerton’s of Canada, 2010 SCC 5, [2010] 1 SCR 132. The duty of care proposed by the plaintiffs here is a duty on the Government to carry out its public duties and implement its own policies with reasonable care. Imposing a duty with respect to the issue of contraband tobacco, they say, cannot lead to any real negative policy consequences.
(b) Indeterminate liability is said to be unfounded. Such is related to proximity, as discussed in Fullowka, supra. The plaintiffs argue against indeterminate liability having regard to the geographical limits, the special relationship and the Government’s agreement to properly implement and administer the Imitative. Rather, they say it is unlikely the duty of care would extend to persons other than the plaintiffs.
(c) The conduct at issue in this case is not a matter of policy, the plaintiffs argue. Creating the Initiative in 1994 was a policy decision, but implementing and administering it was not. Further, they submit, there has been no policy decision not to apply the Initiative or that the reason for the Government’s inaction is based on a policy decision. In addition, the plaintiffs plead the reliance on a failed program demonstrates a lack of good faith, thus defeating the defendant’s reliance on a policy decision.
[57] Thus, the plaintiffs’ position is that the claim in negligence ought proceed to trial.
(iv) Analysis
[58] Since Cooper, it has become increasingly difficult for plaintiffs to establish a relationship of proximity and avoid policy reasons militating against recognition of the duty of care.
[59] Assuming the facts pleaded to be true, as I must at this early stage, the discussions and interactions of the parties lead to the possibility of finding a special relationship did exist. The alleged agreement regarding the requirements to obtaining a license under the Excise Act and the enforcement of the Initiative support such a conclusion. If so, a prima facie duty of care would be established.
[60] Proximity, however, is difficult to establish having regard to the weighing of competing interests by Government and its duties to the public as a whole.
[61] Granite Power and Imperial Tobacco indicate the detail in the analysis. In this case, the interactions, in my view, are more persuasive given, in particular, the resulting agreement.
[62] The forced incorporation complaint, in my view, is not a strong one. The partnership was represented by counsel and had remedies it could have then pursued. Failure to enforce the Initiative, however, is different. The interest of the plaintiffs in the enforcement of the legislation coincides with the interests of the public at large. The discretion regarding investigation and prosecution is a doubtful application, at least at this stage, as abdication, essentially as pleaded, is not the exercise of discretion.
[63] Policy considerations are a greater challenge for the plaintiffs. I am unaware of any comparable case that succeeded on this part of the test. Imperial Tobacco is demonstrative of the difficulty in success.
[64] In support of the plaintiffs is the lack of conflict with a statutory duty. I am not persuaded there is any concern for indeterminate liability as the fact situation is unique. What is at issue is enforcement of the legislation, whether as a result of the Initiative or otherwise. This is not, in my view, a matter of policy.
[65] What obviously is in dispute is the discretion to enforce versus the refusal to enforce. The latter is pleaded, in essence, which begs the question as to whether the Government can effectively amend legislation by avoidance. Presumably, the public has the same interest as the plaintiffs in the enforcement of legislation on the basis of equal treatment.
[66] While the facts as pleaded are more strong in terms of the misfeasance claim, it would be premature to dismiss the plaintiffs’ negligence claim. The plaintiffs face an uphill struggle but it is not plain and obvious the claim discloses no reasonable cause of action. Indeed, I conclude the issues raised in this claim are of such importance a trial is required.
B. Misfeasance of Public Office
[67] Much of the discussion with negligence applies to the issue of misfeasance. Additional considerations apply.
(i) Facts as Pleaded
[68] With reference to the GRE factum, the following are the pleaded facts:
As to forced incorporation,
(a) There was no legal requirement under the Excise Act mandating that an Excise License could only be granted to a corporation – paras. 23, 35;
(b) The requirement that the aboriginal plaintiffs to incorporate and pay taxes contrary to their rights to be free of taxation was knowingly imposed – para. 44;
(c) The MNR’s directive and representations to the aboriginal plaintiffs regarding an obligation to incorporate the Partnership “were deliberate and knowingly unlawful acts” that formed part of a continuing pattern of unlawful and bad faith dealing with the Partnership – paras. 25, 34;
(d) The MNR required the Partnership to incorporate the manufacturing business on the Reserve in an effort to impose tax liability that would not otherwise exist and in order to deprive the aboriginal plaintiffs of their rights as Indians to be free of taxation – paras. 24, 34;
(e) The MNR’s course of conduct was deliberate and unlawful in the exercise of her public function; she knowingly acted for an improper purpose and knowingly exceeded her authority – para. 43;
(f) the MNR knew that requiring the partners to incorporate as a pre-condition of the granting of an Excise License was likely to injure the plaintiffs – para. 34;
(g) the plaintiffs were injured by the requirement to incorporate – para. 44;
As to Contraband issue,
(h) the Ministers’ continuous course of conduct (including their failure to act) was deliberate and unlawful in the exercise of their public functions; they knowingly acted for an improper purpose and knowingly exceeded their authority – para. 43;
(i) the Ministers knew that their conduct was unlawful because they knowingly breached their duty of care to the plaintiffs – para. 44;
(j) the Ministers knowingly persisted in failing to properly implement and administer the Initiative, even though their lack of action was repeatedly pointed out to them – para. 44;
(k) the Ministers knew that their conduct and failure would likely injure the plaintiffs as a result of the plaintiffs suffering harm or losses in the form of lost profits, loss of market share and diminution of the value of their businesses’ goodwill, including the value of trademarks and other intellectual property – para. 44;
(l) the plaintiffs were injured by the Ministers’ conduct - para. 44;
As to bad faith or improper purpose;
(m) the MNR knew that the partners’ position was that they were not required to pay excise taxes and duties for tobacco products manufactured and sold on the Reserve – para. 18;
(n) the MNR wrongly represented to the partners that their manufacture of tobacco products without an Excise License would be a contravention of the Excise Act and the MNR knew that such representation was wrong – para. 17;
(o) criminal prosecutions were brought against the partners while there were ongoing discussions with the MNR – para. 19;
(p) the RCMP raided the Partnership’s business premises on the Reserve and the personal residences of the partners and seized equipment, material and personal effects and property – para. 20;
(q) the Crown also confiscated the money that the partners had paid into the Reserve’s community fund – para. 21;
(r) it was only when the discussions with the MNR resumed that the partners were advised of the alleged requirement to incorporate – para. 23;
(s) the Government has failed to require GRE’s competitors to pay excise taxes and duties – paras. 28, 38, 39 (d), 50;
(t) the Government has breached its agreement or implied undertaking to take all measures to ensure that other on-reserve manufacturers of tobacco products were operating under the same rules under which the plaintiffs were being required to continue operations on the Reserve – paras. 28, 58;
(u) starting in February 2003, GRE has on a frequent and recurring basis brought to the attention of the Ministers and their representatives their failures in combating the problem of contraband on the Reserve, and complained about the increased availability of contraband on the Reserve – paras. 36, 39;
(v) notwithstanding these communications, and while GRE was paying $50 to $60 million in a year in taxes and duties, the Ministers have done virtually nothing to address the issue of contraband on the Reserve – paras. 38, 39, 40, 41;
(w) the Ministers knew that the sales of GRE’s products in Ontario were restricted to reserves where contraband products were most readily available and knew the particular vulnerability that these restrictions on GRE’s sales markets caused to GRE – para. 45;
(x) as a consequence of the Ministers’ refusals to properly implement and administer the Initiative, GRE has been forced to compete in on-reserve sales with unlicensed contraband manufacturers on reserves that pay no taxes and duties – para. 50; and
(y) the failure to properly implement or administer the Initiative has now been admitted in the RCMP’s new Contraband Tobacco Enforcement Strategy, para. 48.
(ii) Test for Misfeasance
[69] The requisite elements of the tort of misfeasance are:
(a) public officer must have engaged in deliberate and unlawful conduct in his or her capacity as a public officer;
(b) public officer must have been aware both that his or her conduct was unlawful and that it was likely to harm the plaintiff; and
(c) the unlawful conduct caused the damages.
[70] Each essential element must be pleaded with sufficient particularity. Bold assertions of malice are insufficient. Intention is a key component of the tort, and, hence, the individuals who engaged in the alleged deliberate and unlawful conduct must be identified in the pleading.
See: Odhavji Estate v. Woodhouse, 2003 SCC 69, [2003] 3 S.C.R. 263.
(iii) Positions of the Parties
(a) Defendant
[71] The position of the Attorney General is that the plaintiffs’ claim does not disclose a reasonable cause of action as:
(i) the sole complaint with respect to the alleged forced incorporation is that they disagree with the position taken by the Minister as to their liability for excise taxes; and
(ii) the claim as it relates to the failure to enforce the law to protect the plaintiffs’ economic interests is wholly incompatible with the underlying policy basis for investigative and prosecutorial discretion.
[72] In particular, the Attorney General says the element of malice is not sufficiently pleaded as particularization as to the relevant state of mind is absent. Reference is made to the discretion of the MNR to impose conditions for an Excise License that are considered appropriate, based on his understanding of the law, and that there has been no legal determination the partners were exempt from the payment of excise taxes pursuant to section 87, Indian Act.
[73] Reference is made to Mackin v. New Brunswick, 2002 SCC 13, for the proposition damages will not be awarded “absent conduct that is clearly wrong, in bad faith or an abuse of power”. The MNR’s conduct cannot be said to be unlawful nor will it be possible to establish the subjective element of the tort.
[74] As with the claims in negligence, the Attorney General’s position is that there is no statutory duty to implement any particular law enforcement measure in any particular manner and relies on the discretion to investigate and prosecute. Likewise, reliance is placed on Weninger Farms as before.
(b) Plaintiffs
[75] The plaintiffs submit the pleaded facts meet the requisite test. These are not bald assertions but are particular facts with respect to the forced incorporation and the failure to enforce the legislation. The individual Ministers and other Crown servants are identified. Hence, they say the pleading contains sufficient particularity regarding the essential elements of both categories of misfeasance.
[76] The plaintiffs further argue that the court should recognize that much of the supporting evidence is within the knowledge and control of the Attorney General and that there has been no document production or discovery. See: Trillium Power Wind Corp. v. Ontario (Ministry of Natural Resources) (2013), 2013 ONCA 683, 117 O.R. (3d) 721 (Ont. C.A.).
[77] The Attorney General, it is said, improperly argues his position by not following the basic rule the facts pleaded must be assumed to be true and it is irrelevant as to whether the evidence will substantiate those pleaded facts, now or at some future date, as directed by Imperial Tobacco.
(iv) Analysis
[78] On the facts as pleaded, in my view the plaintiffs’ claim is stronger on misfeasance than negligence, particularly as there is no duty of care element.
[79] As before, I do not see the forced incorporation as compelling but failure to enforce the Initiative is a different matter. There is, however, a narrow window of opportunity with respect to the forced incorporation issue in that there is no statutory support for the requirement of incorporation and the ultimate result may well be significant. Determination of the tax liability or exemption under section 87, Indian Act, is not a perquisite in my view.
[80] Malice may not be fully particularized in the pleading; however a motion to strike is not the place to assess the sufficiency of the supporting evidence. Much will depend on the testimony of witnesses and documents produced. See: Miguna v. Toronto (City) Police Services Board, 2008 ONCA 799. A misfeasance claim may be permitted to survive on a motion to strike even in cases where it might be difficult to prove. See: Driskell v. Dangerfield, [2007] M.J. No. 20 (Q.B.).
[81] The Fresh as Amended Statement of Claim contains sufficient facts and particularity with respect to misfeasance to allow the claim to proceed. Amendments may be made as further particulars are ascertained. Further, the tort of misfeasance of public office, in my view, is still developing and changing. As in Granite Power, this claim should not be struck at this stage “regardless of how difficult it may be to establish”. A trial on this issue, given the facts as pleaded, will assist in clarifying the law as it relates to misfeasance.
[82] In result, I conclude that it is not plain and obvious the claim will fail.
C. Breach of Aboriginal Rights
[83] As previously stated, aboriginal law is still evolving. This requires greater consideration at this early stage in the case.
(i) Facts as Pleaded
[84] According to the GRE factum, the following are the pleaded facts:
(a) The commercial trade of tobacco among Iroquois and with other First Nations communities is a tradition that, prior to contact with Europeans, was an integral part of the distinctive society of the Iroquois, and a central and significant part of the Iroquois’ distinctive culture. This tradition has been practised continuously since, and remains an integral part of the Iroquois’ culture – para. 32(b);
(b) The Iroquois’ aboriginal right to trade tobacco commercially has not been extinguished – para. 32(b);
(c) The requirement that the partners pay excise taxes and duties in relation to the manufacture and sale of tobacco constitutes an infringement of and unreasonable limitation on their aboriginal right to trade tobacco commercially – para. 33; and
(d) This infringement cannot be justified – para. 33.
(ii) Test for Aboriginal Rights
[85] The framework for an analysis of a claim under section 35(1), Constitution Act, 1982, was set out in R. v. Sparrow, 1990 CanLII 104 (SCC), [1990] 1 S.C.R. 1075, and reiterated in R. v. Gladstone, 1996 CanLII 160 (SCC), [1996] 2 S.C.R. 723, as follows:
(a) whether an applicant has demonstrated that he or she was acting pursuant to an aboriginal right;
(b) whether that right was extinguished prior to the enactment of section 34(1);
(c) whether that right has been infringed; and
(d) whether that infringement was justified.
[86] The first step in the analysis is to determine the precise nature of the claim being made. Only after that determination can it be decided whether the claim has been breached. The aboriginal right, as said in Gladstone, must include the actual activity engaged in.
[87] The activity must be an element of the practice, custom or tradition integral to the distinctive culture of the aboriginal group claiming the right. See: R. v. Van der Peet, 1996 CanLII 216 (SCC), [1996] 2 S.C.R. 507.
[88] Lax Kw’alaams Indian Band, supra, provides a helpful summary of the test, namely:
(i) At the characterization stage, identify the precise nature of the First Nation’s claim to an Aboriginal right based on the pleadings;
(ii) Determine whether the First Nations has proved, based on the evidence adduced at trial the existence of the pre-contact practice and that the practice was integral to the distinctive pre-contact Aboriginal society;
(iii) Determine whether the claimed modern right has a reasonable degree of continuity with the integral pre-contact practice; and
(iv) In the event an Aboriginal right to trade commercially is found to exist, the court, when delineating the right, have regard to objectives, such as the pursuit of economic and regional fairness and the recognition of the historical reliance upon, and participation in, the fishery [or other trade] by non-aboriginal groups.
(iii) Positions of the Parties
(a) Attorney General
[89] The position of the Attorney General is that the plaintiffs have not pleaded sufficient facts to sustain a cause of action. Rather, he says only bald assertions are presented without material fact.
[90] The Attorney General says the pleaded facts must establish:
(a) that the trade in tobacco comprised a central or defining element of the distinctive culture of the historic community or communities to which the partners claim to be descendants of;
(b) the identities of the particular historic communities said to have exercised the practice, custom or tradition of trading tobacco;
(c) that such communities were geographically located in Ontario at the time of contact in the early 1600’s;
(d) that such communities engaged in the trade of tobacco on a significant scale for purposes other than for sustenance or ceremonial purposes and/or that they had established extensive trade routes in this part of Ontario, or any part of present day Canada;
(e) that any assurances were given by the Crown to members of those historic communities that there existed a right to trade tobacco free of regulation or taxation, sufficient to establish that such rights were not extinguished;
(f) that the trade in tobacco pre-dated European contact; and
(g) that the trade in tobacco was practised continuously in or around the site now occupied by the Six Nations of the Grand River.
[91] The pleading as it now stands is characterized by the Attorney General as “a right to trade in tobacco on a commercial scale in the mainstream marketplace with aboriginal and non-aboriginal persons, without any form of regulation or taxation”.
[92] With reference to Mitchell v. Minister of National Revenue, 2001 SCC 33, this stated right is said to be far too broad.
[93] Given the required facts to substantiate an Aboriginal right, the Attorney General submits such is impossible in this case.
(b) Plaintiffs
[94] The plaintiffs identify the Attorney General’s complaint as being an alleged lack of particularity. The prior Demand For Particulars from the Attorney General did not address this claim. If additional particulars are required, the court may order the plaintiffs to provide them.
[95] The plaintiffs disagree with the list of material facts said by the Attorney General to be necessary. Mitchell, for example, does not attract a geographical restriction nor does it require the plaintiffs to prove that their community was geographically located in Ontario in the early 1600’s.
(iv) Analysis
[96] The only issue with respect to the claim for breach of Aboriginal rights, in my view, is the adequacy or particularity of the pleading. The remaining components of the test are evidentiary matters.
[97] I am unaware of any caselaw addressing the specificity of pleaded facts regarding an Aboriginal rights claim. In result, the threshold test is found in Rule 25.06.
[98] The pleading introduced the nature of the Aboriginal right and the claim but does not provide “a concise statement of material facts” as required. In this regard, there is merit in the Attorney General’s submission the pleading is a bald allegation.
[99] As pointed out in Lax Kw’alaams, while amendments to pleadings can be made at trial, at this stage “a defendant must be left in no doubt about precisely what is claimed”. Leave to amend is granted to the plaintiffs, on this claim, such to be served within 90 days.
[100] The pleading in its present form, in my view, is too general and requires a factual basis having regard to Gladstone and Van der Peet. However, the characterization of the potential right by the Attorney General is far too narrow. Regard must be had to the history of the Iroquois, the movement of their people out of present day New York State for a variety of reasons and the re-location of many following the American Revolution to various sites in Canada, including the Haldimand Proclamation of 1784 establishing the Six Nations of The Grand territory.
D. Breach of Fiduciary Duty
(i) Facts as Pleaded
[101] According to the GRE factum, the following are the pleaded facts:
(a) The Crown owes a fiduciary duty to the former partners as Indians – para. 49;
(b) The Crown assumed discretionary control over the ability of the aboriginal plaintiffs to earn their livelihood on the Reserve and to employ other aboriginal persons by means of an unlawful scheme by the MNR to deprive them of their rights under section 87, Indian Act – para. 49;
(c) The Crown owed the plaintiffs a fiduciary duty to ensure that they were not put at a disadvantage by other Indians manufacturing tobacco produces on reserves – para. 50;
(d) The Government agreed, or gave an implied undertaking, that, if GRE was given an Excise License on the conditions outlined by the MNR, it would carry out intensified enforcement under the Initiative against contraband and take all measures to ensure that other on-reserve manufacturers of tobacco products were operating under the same rules under which the plaintiffs were being required to continue operations on the Reserve – paras. 28, 58;
(e) The plaintiffs are vulnerable to the Government’s control as it was the Government that brought criminal prosecutions against the partners, imposed the requirement they incorporate, which subjected the plaintiffs to the payment of taxes, and was responsible for combatting contraband – paras. 19-26, 35;
(f) GRE and the partnership were singled out by the Government and, as a result of the Government’s requirement to incorporate and the Government’s failure to properly implement and administer the Initiative, the plaintiffs have been required to pay taxes and duties, contrary to their unlicensed competitors on the Reserve – paras. 28, 38, 39(d), 40 and 50;
(g) The Ministers were aware of GRE’s particular vulnerability to contraband because the sales of GRE’s products in Ontario are restricted to reserves where contraband products are most readily available – para. 45;
(h) As a consequence of the requirement to incorporate and the subsequent refusals to properly implement and administer the Initiative, the plaintiffs have been forced to compete in on-reserve sales with unlicensed contraband manufacturers on reserves which pay no taxes and duties. As a result, the plaintiffs have suffered financial losses and harm which they should not have, in view of the partners’ right to be exempt from taxation under section 87, Indian Act, and their aboriginal right to trade tobacco commercially – paras. 45, 50 and 51.
(ii) Test for Fiduciary Duty
[102] A fiduciary duty in the aboriginal context may arise in two different ways, articulated in Manitoba Metis Federation v. Canada (Attorney General), 2013 SCC 14, as follows:
(a) Did the Crown assume discretionary control over specific aboriginal interests, namely:
(i) is there a specific or cognizable aboriginal interest? and
(ii) did the Crown assume discretionary control over that interest?
(b) Was there an undertaking that gave rise to a fiduciary duty, namely:
(i) is there a defined person or class of persons that are vulnerable to a fiduciary’s control (the beneficiary or beneficiaries)? and
(ii) is there a legal or substantial practical interest of the beneficiary or beneficiaries that stands to be adversely affected by the alleged fiduciary’s exercise of discretion or control?
[103] As previously discussed, the law pertaining to aboriginal rights is still evolving. Such must be taken into account on this issue.
[104] A fiduciary relationship has long been recognized as between the Crown and aboriginal peoples; however not every aspect of the relationship gives rise to a fiduciary duty. Such a duty will only arise in relation to specific aboriginal interests. See: Wewaykum Indian Band,supra.
[105] “Honour of the Crown” is referred to in the Fresh as Amended Statement of Claim (para. 50).
[106] As discussed in Manitoba Metis, the honour of the Crown is not a cause of action in itself. Rather, it is the source of what gives rise to particular duties owed by the government during its dealings with aboriginal peoples. The basis for this principle is that the government must deal honourably and with good faith when dealing with aboriginal peoples given their unique status in Canada, having regard to the Royal Proclamation of 1763.
[107] The honour of the Crown is not engaged in every situation where the government is dealing with aboriginal peoples. Two of the recognized situations that are of interest in this case are:
(i) The honour of the Crown may give rise to a fiduciary duty when the Crown assumes discretionary control over a specific Aboriginal interest. See: Wewaykum Indian Band, supra, and Haida Nation v. British Columbia (Minister of Forests), 2004 SCC 73; and
(ii) The honour of the Crown informs the purposive interpretation of section 35, Constitution Act, 1982, and gives rise to a duty to consult when the Crown contemplates an action that will affect a claimed but as of yet unproven Aboriginal interest: See: Haida Nation, supra.
(iii) Positions of the Parties
(a) Attorney General
[108] The position of the Attorney General is that the pleading is deficient on both tests to establish a fiduciary duty.
[109] As to the assumption of discretionary control over an aboriginal interest, the submission refers to the absence of material facts and only a bald assertion of an unlawful scheme to deprive the aboriginal plaintiffs of their rights under section 87, Indian Act, and their aboriginal rights.
[110] Further, the Attorney General says the alleged right to trade tobacco commercially as an interest is insufficient to ground a fiduciary duty as the claim does not allege the Crown administered any interests in which the plaintiffs, or the band they belong to, have an interest.
[111] The Attorney General also argues that the alleged interest in a right to trade tobacco on a commercial sale free from taxation has never been recognized. He asserts the plaintiffs lack standing to claim such a right, particularly as the individual plaintiffs are members of two different collectives, Six Nations of the Grand River and Wahta Mohawk First Nation.
[112] In regards to the communal or collective interest, the Attorney General argues that section 87, Indian Act, does not apply. Rather, the statutory provision is accorded to individuals who meet the criteria. Further, the Ministers’ decision to administer and enforce the Excise Act through licensing and the Initiative are public law functions. Although section 87 is available only to Indians, the Minister’s duty with respect to all taxing statutes is said to apply the statute in accordance with the law as he or she understands it to be.
[113] Reference is made to Hester v. Canada, 2007 CanLII 52015 (ON SC), [2007] O.J. No. 4719 (Ont. S.C.J.), where a claim alleging Canada owed the plaintiff a fiduciary duty with respect to the taxation of his income, in particular to protect an alleged right to tax exemptions under section 87, was struck. In that decision, the Canada Revenue Agency was said to be carrying out its statutory duties and, in so doing, such could not give rise to a claim for breach of fiduciary duty. The Crown did not assume discretionary control.
[114] In regards to the assumption of discretionary control in this case, the Attorney General says such does not arise from the Ministers’ decisions concerning a license. The submission is that the plaintiffs were in the same position as anyone else who applies for an Excise licence. Further, the Ministers did not assume control with respect to enforcement and there can be no fiduciary duty owed to protect or prefer the commercial interests of certain tobacco manufacturers over others, or to enforce the legislation in their favour.
[115] In regards to the second test, the Attorney General submits an undertaking of responsibility to act in the best interests of a beneficiary by the Crown cannot be established in this case. Such an undertaking, it is said, will typically be lacking where what is in issue, as here, is the exercise of government power or discretion, due to the Crown’s broad responsibility to act in the public interest.
[116] The Attorney General says the plaintiffs have failed to plead any legislation or factual circumstances that could establish that the Crown undertook to act with undivided loyalty to the plaintiffs regarding the requirement to incorporate or enforcement of the Initiative
[117] As to the claim regarding intensified enforcement of the Initiative, the Attorney General submits such could not amount to an undertaking that the Crown would forsake the interests of the public in favour of those of the partners. Such, it is said, would be contrary to law.
[118] Lastly, the Attorney General argues that the interest affected must be a “specific private law interest to which the person had a pre-existing, distinct and complete legal entitlement”. Although property rights may be sufficient in some circumstances, the submission is that the plaintiffs had no such a right to an Excise license. Further, the failure to enforce claim is really a request of a right to law enforcement against competitors. Such, it is said, is not a legal or substantial practical interest to which fiduciary obligations could apply.
[119] In terms of the honour of the Crown, the Attorney General submits the pleading fails to provide any detail as to how the principle is engaged in this case. Further, the argument is that the Crown has not assumed discretionary control over a specific aboriginal interest of the plaintiffs, and hence the honour of the Crown is not engaged.
(b) Plaintiffs
[120] The position of the plaintiffs is that they have pleaded all of the necessary elements under both tests from Manitoba Metis.
[121] Regarding the first test, the plaintiffs identify the specific aboriginal interest as the partner’s aboriginal right to trade tobacco commercially and their right under section 87, Indian Act, to be exempt from taxation. Forcing the incorporation, they say, resulted in the Crown assuming and exercising discretionary control over these interests. Further, the plaintiffs argue the test for fiduciary duty is broader than the Attorney General suggests, encompassing aboriginal interests, not just land, title, or property, including the rights as pleaded herein.
[122] Hester, the plaintiffs submit, is distinguishable as the present case does not relate to Canada Revenue Agency’s application of section 87, Indian Act; rather, it involves the actions of the MNR and his representatives deliberately depriving the partners of their section 87 rights.
[123] The plaintiffs also disagree with the Attorney General’s argument regarding the exercise of public law functions, saying such does not necessarily preclude the creation of a fiduciary relationship as stated in Wewaykum.
[124] As to the second test, the plaintiffs refer to their pleading, as previously described, commenting such addresses each of the required elements. The undertaking of the Crown to take all measures that other on-reserve manufacturers of tobacco products complied with the excise legislation is consistent with the interests of the public. Therefore, the plaintiffs say there is no real need for an express pleading that the Crown was forsaking the interests of the public. Further, they say it remains unclear how this concept is to be applied with respect to aboriginal people, having regard to the caselaw.
[125] The reference to the honour of the Crown in the Fresh as Amended Statement of Claim, according to the plaintiffs, is not to assert an independent cause of action but, rather, it speaks to how obligations that attract it must be fulfilled. The reference to the honour of the Crown informs the other causes of action pleaded, including breach of fiduciary duty, misfeasance and negligence.
(iv) Analysis
[126] Having regard to the ongoing development of aboriginal law, I am satisfied the Fresh as Amended Statement of Claim satisfactorily addresses the necessary elements for breach of fiduciary duty. Amendments may become necessary at a later date, even at trial, as the evidentiary record is developed.
[127] The plaintiffs’ argument on the second test is stronger than on the first, in my view, based on the pleaded facts. Discretionary control, with reference to the forced incorporation, is not a compelling submission as it relates to GRE. However, the position may become more clear after discoveries.
[128] The pleaded agreement regarding enforcement of the Initiative, with respect to the second test, and the other pleaded facts, gives an air of reality to the argument an undertaking was made by the Crown. It is logical and consistent with the Crown’s obligation of equal treatment and in the interests of the public to see legislation enforced with respect to all on-reserve manufacturers of tobacco products, not just some of them.
[129] Assuming the pleaded facts to be true, the partners were beneficiaries and they have suffered financial harm.
[130] The honour of the Crown principle helps to inform regarding the relationships between the parties, in general, and their negotiations, in particular. Clearly, there was consultation by the government with the partners concerning the request for an Excise license. What is not clear is how those negotiations were handled and whether such were done with utmost good faith and due diligence. There are a multitude of unanswered questions that result from existing caselaw and the pleaded facts in this case. Since this aspect of aboriginal law is still in the early stages of development, it is possible another duty may be recognized for how government deals with aboriginal people who are claiming unfair treatment.
[131] In result, I conclude it is not plain and obvious the claim for breach of fiduciary duty will fail.
E. Jurisdiction
[132] The focus of the Attorney General’s complaint with respect to jurisdiction is his characterization of the plaintiffs’ claim as for the recovery of taxes paid.
(i) Statutory Provision
[133] Section 174 of the Excise Act, 2001 provides as follows:
- Except as specifically provided under this Act, the Customs Act, the Customs Tariff or the Financial Administration Act, no person has a right to recover any money paid to Her Majesty as or on account of, or that has been taken into account by Her Majesty as, duty, interest or other amount payable under this Act.
[134] Section 12 of the Tax Court of Canada Act provides as follows:
- (1) The Court has exclusive original jurisdiction to hear and determine references and appeals to the Court on matters arising under the Air Travellers Security Charge Act, the Canada Pension Plan, the Cultural Property Export and Import Act, Part V.1 of the Customs Act, the Employment Insurance Act, the Excise Act, 2001, Part IX of the Excise Tax Act, the Income Tax Act, the Old Age Security Act, the Petroleum and Gas Revenue Tax Act and the Softwood Lumber Products Export Charge Act, 2006 when references or appeals to the Court are provided for in those Acts.
(ii) Positions of the Parties
(a) Attorney General
[135] The Attorney General argues a lack of jurisdiction for the plaintiffs’ claim for two reasons:
(i) the plaintiffs’ claim is clearly to recover taxes and duties paid but are barred from so doing pursuant to section 174, Excise Act; and
(ii) the plaintiffs’ claim is a collateral attack on the tax assessments already addressed by the Tax Court of Canada.
[136] Although the claim is drafted as a tort action, the Attorney General says it is clearly a disguised claim for a refund of taxes wrongfully assessed. Merchant Law Group v. Canada (Revenue Agency), 2010 FCA 184, prohibits such a claim.
[137] The Tax Court of Canada has exclusive jurisdiction to deal with tax related claims and, hence, the Attorney General submits this court does not. See: Reference Re: Goods and Services Tax, 1992 CanLII 69 (SCC), [1992] 2 S.C.R. 445; Canada v. Addison and Leyen Ltd., 2007 SCC 33; and Sorbara v. Canada (Attorney General) (2008), 2008 CanLII 61246 (ON SC), 93 O.R. (3d) 241 (Ont. S.C.J.), aff’d (2009), 2009 ONCA 506, 98 O.R. (3d) 673 (Ont.C.A.).
(b) Plaintiffs
[138] The plaintiffs dispute the characterization of their claim as described by the Attorney General and, as well, say he also ignores a large part of it. Their claim, it is said, is for damages and equitable compensation and are unrelated to the taxes paid by GRE, particularly with reference to the contraband issue and the failure of the Ministers to properly implement and administer the Initiative.
[139] The plaintiffs do not challenge the validity of the assessments against GRE. Rather, they say their damage claim relates to the wrongful conduct of the MNR with respect to the forced incorporation and of the Ministers failure to implement and administer the Initiative.
[140] Given the nature of their claims, the plaintiffs submit the Tax Court of Canada lacks jurisdiction. See, for example: Main Rehabilitation Co. v. Canada (2004), 2004 FCA 403, 247 D.L.R. (4th) 597 (F.C.A.); and Lougheed v. Canada, [2008] TCJ No. 480. This court only, they argue, has jurisdiction. See: Canada (Attorney General) v. Telezone Inc., 2010 SCC 62, [2010] 3 S.C.R. 585.
[141] The plaintiffs disagree with the description of collateral attack for the same reasons. Further, and with reference to Telezone, they say a collateral attack argument is a matter for defence, not jurisdiction.
(iii) Analysis
[142] The plaintiffs claim is drafted in tort. The factual basis, in my view, necessitates a discussion and consideration of the tax assessment of GRE. Indeed, having regard to the allegation the government failed to implement and administer the Initiative, should the plaintiffs succeed on liability the measure of damages may take into account the amount of taxes paid. After all, the other on-reserve unlicensed tobacco manufacturers pay no taxes.
[143] Further, the tax assessment pertains to GRE, not the partnership. The argument of the Attorney General does not apply to their claim.
[144] Accordingly, I reject the assertion only the Tax Court of Canada has jurisdiction. Having regard to the principles enunciated in Telezone and the claims as pleaded, I conclude this court has jurisdiction.
F. Capacity
[145] The Attorney General challenges the capacity of GRE and the individual plaintiffs to pursue the claims asserted in this action.
(i) Statutory Provision
[146] Section 87 of the Indian Act provides as follows:
- (1) Notwithstanding any other Act of Parliament or any Act of the legislature of a province, but subject to section 83 and section 5 of the First Nations Fiscal Management Act, the following property is exempt from taxation:
(a) the interest of an Indian or band in reserve lands or surrendered lands; and
(b) the personal property of an Indian or a band situated on a reserve.
[147] Sections 2 (3) and 7 (1) of the Business Names Act provides as follows:
(3) No persons associated in partnership shall carry on business or identify themselves to the public unless the firm name of the partnership is registered by all of the partners.
(1) A person carrying on business in contravention of subsection 2 (1), (2) or (3) or subsection 4 (4) or (6) is not capable of maintaining a proceeding in a court in Ontario in connection with that business except with leave of the court.
(ii) Positions of the Parties
(a) Attorney General
[148] As section 87, Indian Act, applies to “an Indian or a Band, the Attorney General submits GRE has no standing to assert a claim for exemption from taxes. Further, the individual plaintiffs have no cause of action relating to the alleged forced incorporation as it was only GRE that has paid taxes and duties.
[149] In addition, the Attorney General argues the individual plaintiffs have no standing as the action was not commenced in the name of the partnership as required by the Business Names Act. Not all of the partners or shareholders are named as plaintiffs in the Fresh as Amended Statement of Claim, another defect in regards to standing he submits.
(b) Plaintiffs
[150] The plaintiffs do not take issue with respect to the Attorney General’s submission regarding GRE and section 87, Indian Act. Rather, they say no such allegation for exemption from taxation is advanced by GRE. Their position is that the forced incorporation has caused damages to the partners because GRE is not exempt.
[151] As to the partnership, reference was made to Rule 8.01, Rules of Civil Procedure, that provides that a proceeding “may” be commenced in the name of the partnership. Indeed, the plaintiffs say a plaintiff may commence a proceeding in the name of the partnership or the names of the individual partners, but not both. See: Canadian Imperial Bank of Commerce v. Deloitte & Touche (2003), 2003 CanLII 38170 (ON SCDC), 172 OAC 59 (Ont. S.C.J. – Div. Ct.).
(iii) Analysis
[152] On my reading of the Fresh as Amended Statement of Claim, claims are presented by both GRE and the partnership. The focus, in terms of damages, is with respect to the partnership. However, GRE is a necessary party, particularly having regard to the allegation of the government’s failure to properly implement and administer the Initiative. GRE is also the business entity since incorporation.
[153] The only problem in terms of standing is with the individual plaintiffs. They correctly assert the action may be commenced by either the partnership or the partners, the longstanding practice in terms of Rule 8.01.
[154] Assuming the partnership is not registered under the Business Names Act, the action can only be commenced by the partners. I interpret this to mean all of the partners. As a result of a prior Demand for Particulars, the plaintiffs reported the names of the ten original partners who formed the partnership in 1993 and the seven who continue in that capacity. Six of those partners are shareholders in GRE. Only four are named as plaintiffs.
[155] Accordingly, I conclude the pleading is defective. As the claim is presented on behalf of the partners or the partnership, all of the partners must be named parties. Leave, therefore, is granted to the plaintiffs to amend their pleading to add the remaining partners as plaintiffs. Such shall be served within ninety days.
G. Abuse of Process
[156] This issue involves consideration of the prior proceedings involving the parties as previously described.
(i) Position of the Parties
(a) Attorney General
[157] The Attorney General relies on the principle of abuse of process as it pertains to the “relitigation of issues that have been previously decided in an appropriate forum”, the principles being restated in British Columbia (Worker’s Compensation Board) v. Figliola, 2011 SCC 52.
[158] In this regard, reference was made to the forced incorporation issue that has been or should have litigated previously.
[159] In addition, the Attorney General submits the alleged “unlawful” denial of a manufacturer’s license by the MNR in 1994, that had been requested by the partnership, could have been judicially reviewed pursuant to section 18.1, Federal Courts Act.
[160] The Attorney General identifies three prior proceedings in which the forced incorporation issue was raised, now referring to the proceedings as “serial litigation” aimed at recovering taxes paid by GRE. As the claims were either abandoned or settled, and given the Release, further attempts to litigate this issue is said to be an abuse of process.
[161] The Release, dated March 2, 2004 specifically addressed the forced incorporation claim and, hence, the Attorney General argues such is a bar to any further proceedings.
[162] The Attorney submits the plaintiffs’ action is statute barred by virtue of the two year limitation period in section 4, Limitations Act, 2002. The plaintiffs, he says, have waited eleven years from the alleged forced incorporation in 1996 to commence this action.
(b) Plaintiffs
[163] The plaintiffs respond to the allegation of serial litigation by saying the issues raised in this action have never been determined by a court or tribunal. Hence, the concerns about relitigation, identified in Figliola, are not present in this case.
[164] The suggestions of judicial review in 1994 should be rejected, the plaintiffs argue, on the basis of Telezone, previously discussed.
[165] The plaintiffs submit the Release is a matter of defence and cannot be determined on this motion, relying on Benson v. Canada National Railway, [2003] M.J. No. 317 (Man. C.A.). Further, the plaintiffs say they have pleaded the Release in the Fresh as Amended Statement of Claim, alleging it is null and void given the breach by the Crown of its agreement to properly implement and administer the Initiative. The pleaded facts, they say, must be assumed to be true on this motion.
[166] The limitation issue is a matter of defence and, here, it is not one of the “rarest of cases” that ought be determined on this motion, as a statement of defence has not been delivered and there is no evidentiary foundation. See: Metropolitan Toronto Condominium Corp. No. 1352 v. Newport Beach Development Inc. (2012), 113 O.R. (3d) (Ont. C.A.).
[167] The plaintiffs also rely on sections 2 (1) (e), (f) and 2 (2), Limitations Act, 2002, that say the prescribed limitations period does not apply to proceedings based on aboriginal rights and equitable claims by aboriginal peoples against the Crown.
(ii) Analysis
[168] Some, but not all, of the issues in this case were raised in prior proceedings, at least to some extent. No final decision was issued by either a court or tribunal. Accordingly, issue estoppel or cause of action estoppel does not apply. See: Danyluk v. Ainsworth Technologies Inc., 2001 SCC 44.
[169] The doctrine of abuse of process, however, is more flexible. It is a discretionary remedy that engages the inherent power of the court to control its own procedures where it would be manifestly unfair to a party or bring the administration of justice into disrepute. See: Toronto (City) v. C.U.P.E. Local 79, 2003 SCC 63, [2003] 3 S.C.R. 77.
[170] As action will only be dismissed pursuant to Rule 21.01 in the “clearest of cases”. See: Temilini v. Ontario Provincial Police Commissioner (1990), 1990 CanLII 7000 (ON CA), 73 O.R. (2d) 664 (Ont. C.A.).
[171] The rule against collateral attack prohibits a party from challenging a decision indirectly, instead of taking appropriate measures by way of appeal of judicial review. See: Figliola, supra.
[172] I am not persuaded the action should be dismissed as an abuse of process. Indeed, I conclude the issues raised in this action need to be judicially determined for the development of aboriginal law in general and for these parties in particular.
[173] The refusal to grant a license to the partnership could have been judicially reviewed. However, the claims in this proceeding go much further, including misfeasance and breach of fiduciary duty in relation to the forced incorporation.
[174] On its face, the Release would appear to be binding and bar this action. However, the plaintiffs have already pleaded the Release as part of their case, saying it is null and void as the government has breached its agreement. A decision must be made on the merits.
[175] The matters raised by the Attorney General on this issue may well be raised as a defence. But I conclude it would be premature and inappropriate to make a determination on this motion.
Summary
[176] For the foregoing reasons, leave is granted to the plaintiffs to amend the Fresh as Amended Statement of Claim with respect to the claim of breach of aboriginal rights and to add all of the partners as plaintiffs. The amended pleading is to be served within ninety days. The motion of the Attorney General is otherwise dismissed.
[177] If the parties are unable to resolve the issue of costs, counsel shall deliver brief written submissions to my chambers in Cayuga within 45 days.
D.J. Gordon J.
Released: August 28, 2015
COURT FILE NO.: CV-08-466
DATE: 2015-08-28
BETWEEN:
Grand River Enterprises Six Nations Ltd.
Jerry Bradwick Montour, Kenneth Ryan
Hill, Curtis Styres and Gregory Scott Smith
Plaintiffs
– and –
The Attorney General of Canada
Defendant
REASONS FOR DECISION
D.J. Gordon J.
Released: August 28, 2015