Vancouver, British Columbia, January 9, 2007
BETWEEN:
COAST DRYLAND SERVICES LTD.
Plaintiff
and
HER MAJESTY THE QUEEN IN THE RIGHT OF CANADA
AS REPRESENTED BY THE MINISTRY OF FISHERIES AND OCEANS
AND THE DEPARTMENT OF FISHERIES AND OCEANS
Defendants
REASONS FOR ORDER AND ORDER
[1] The Plaintiff, Coast Dryland Services Ltd. (Coast), is a company involved in the business of coastal logging operations in the Province of British Columbia. In July 2002, Coast commenced an action for damages against the Federal Crown Defendants (the Crown) based on allegations of breach of contract, breach of fiduciary duty, bad faith, and denial of due process.
[2] After filing a pro forma statement of defence, the Crown moved, pursuant to Rule 221(1)(a) of the Federal Courts Rules, for an order striking out Coast’s Statement of Claim on the grounds that the pleading fails to disclose a reasonable cause of action, and that the crux of the claim is a challenge to an allegedly improper exercise of ministerial power, and as such, can only be adjudicated by way of judicial review pursuant to section 18 of the Federal Courts Act.
[3] In the alternative, the Crown seeks an order compelling further and better particulars of the Statement of Claim, as well as an order striking out the Ministry of Fisheries and Oceans and the Department of Fisheries and Oceans as Defendants.
[4] For the reasons that follow, I conclude that it is plain and obvious that the Statement of Claim discloses no reasonable cause of action and should therefore be struck out. The issue of particulars has, as a result, been rendered moot, and need not be addressed. The style of cause should be amended by striking out the Ministry of Fisheries and Oceans and the Department of Fisheries and Oceans as Defendants, in any event, since they are not sueable entities.
Facts
[5] For the purpose of motion to strike, the allegations in the impugned pleading must be taken as proven. Coast has filed affidavit evidence in response to the motion setting out a chronology of events and its view as to what occurred. Rule 221(2) provides, however, that no evidence can be heard on a motion for an order under Rule 221(1)(a). The affidavit in question has accordingly been ignored.
[6] The Statement of Claim consists of 11 relatively concise paragraphs that can be neatly summarized as follows.
[7] Beginning in the late 1980’s, Coast wished to develop a dryland log sorting operation near Port McNeil on the northeast coast of Vancouver Island. The facility would involve a sorting and storage area on land, but also a marine aspect, including a booming ground to hold floating boomed logs, a de-watering grid, a breakwater and a barge ram, together with foreshore development and related infrastructure.
[8] In order to obtain the required approvals for its plan, Coast invested a significant amount of money and worked closely, over a number of years, with various government agencies, including the Department of Fisheries and Oceans, which was responsible for overseeing the environmental impact of any development on fish habitat in tidal waters.
[9] Coast alleges that certain representations, promises, and assurances were made by Crown agents lead it to believe that, so long as a plan and mitigation proposal resulting in “no-net loss” of fisheries habitat was provided, the Crown would approve its proposal. Coast pleads that the Crown owed both contractual and fiduciary duties to the company to ensure that the representations were fair and in good faith.
[10] Paragraph 8 of the Statement of Claim, reproduced below, contains the key allegations underpinning Coast’s claim.
8. The Plaintiff states that in fact it provided the evidence of a plan of mitigation that would result in no-net loss, that it fully expected the Federal Government to honour its bargain and approve the development of the dryland log sort and in fact on or about January 8th, 2002 by correspondence, an employee and representative and agent of the Federal Government, Her Majesty the Queen and the Department of Fisheries and Oceans breached the contract by unreasonably refusing to approve the development of the dryland log sort and by breaching the terms of the contractual relationship by unreasonably failing to accept the proposal for mitigation that had been clearly set out by the Plaintiff. As a consequence of the breach of the contractual relationship by the Defendants herein, the Plaintiff has suffered loss and damages.
[11] Coast claims that the Crown made an “arbitrary unwarranted determination” that the impact of the proposed log sort could not be mitigated. Coast pleads that the Crown did so in bad faith and without proper consideration to the environmental assessments and its own policies and stated intentions.
[12] Coast alleges, in the alternative, that it was denied due process by the Crown, more particularly, in being denied access to the review processes under the Canadian Environmental Assessment Act.
Analysis
[13] The issue to be determined on this motion is whether the facts, as pleaded, disclose a reasonable cause of action.
[14] There is no dispute that this Court has jurisdiction under Rule 221 to strike a statement of claim. Because dismissal of an action for failure to state a reasonable cause of action is a drastic measure, the Court is required to give a generous reading to the statement of claim, construe it in the light most favourable to the plaintiff, and be satisfied that it is plain and obvious that the plaintiff cannot succeed: Hunt v. Carey Canada Inc., [1990] 2 S.C.R. 959. Therefore, as a general rule, the Court should be very hesitant to strike out a statement of claim.
[15] Notwithstanding, a statement of claim should be struck where it contains a radical defect, or where a plaintiff is seeking relief for acts that are not proscribed under the law. Moreover, when a particular cause of action is pleaded, the claim must contain material facts satisfying all the necessary elements of the cause of action. Otherwise, the inevitable conclusion would be that such a claim discloses no reasonable cause of action: Howell v. Ontario (1998), 159 D.L.R. (4th) 566 (Ont. Div. Ct.).
[16] By way of preface, I wish to add that it proved quite difficult to ascertain the exact nature of Coast’s cause or causes of action. Although the Statement of Claim refers to four causes of action (bad faith, denial of due process, breach of fiduciary duty, and breach of contract), upon closer analysis, it became quite clear that Coast did not plead the required elements to make out a cause of action. In the end, the allegations in the Statement of Claim simply consist of sketchy facts, random elements of the four legal concepts, and bare conclusions, cobbled together in a disjointed manner.
[17] I will now consider each pleaded cause of action in turn.
Bad Faith and Denial of Due Process
[18] Coast submits that the breach of fiduciary duty is based on the bad faith conduct and the denial of due process by the Crown in circumstances where there is a relationship of trust of a fiduciary nature. Each allegation appears to be contingent on the existence of the other.
[19] The concept of bad faith, in the sense of exercising a statutory discretion in bad faith, has not been recognized as an independent tort in the Federal Court: see Bourque v. R. (1999) 162 F.T.R. 98, leave to appeal to the Supreme Court of Canada denied 278 N.R. 197. Rather, bad faith arises traditionally in the context of judicial review.
[20] Even if bad faith could constitute an actionable wrong, there is no plea of malice, ulterior motive, or improper purpose, or any other material facts to support such a cause of action. The bad faith claim cannot stand, for a bare statement of bad faith or malice is insufficient: see for example F.G.M. Holdings v. B.C. (Workers’ Compensation Bd.) (2000) 79 B.C.L.R. (3d) 271 (B.C.S.C.), at pp. 276-278.
[21] These same principles apply to the plea of denial of due process. It is not a cause of action known to law. Moreover, Coast has not pleaded any material facts in support of such a plea.
Breach of Fiduciary Duty
[22] With respect to breach of fiduciary duty, Coast alleges that the Crown entered into a contractual relationship with the Plaintiff, whereby Coast expended significant amounts of money, capital and energy, relying upon a promise by the government to exercise its discretion in favour of approving the use proposed by Coast, on the condition precedent that Coast provide a plan of mitigation. Coast submits that, by virtue of the special relationship, a fiduciary duty arose, requiring the Crown to act with utmost good faith in its dealings with the company.
[23] However, there can be no fiduciary relationship on the facts of this case in that the Minister was acting in a regulatory or administrative role. In Guerin v. Canada, [1984] 2 S.C.R. 335, Justice Dickson commented as follows regarding the concept of a fiduciary relationship:
It should be noted that fiduciary duties generally arise only with regard to obligations originating in a private law context. Public law duties, the performance of which requires the exercise of discretion, do not typically give rise to a fiduciary relationship…
[24] Coast is presumably seeking an authorization from the Minister of Fisheries and Oceans pursuant to section 35(2) of the Fisheries Act, because the activity it wishes to carry out has the potential of altering, disrupting or destroying fish habitat. In circumstances where the Minister is acting in a regulatory capacity and on the facts as pleaded, a fiduciary relationship cannot possibly arise.
[25] To the extent that the claim is cast as one based on abuse of public office, misfeasance in public office, or abuse of power, that cause of action is not made out in the pleadings. Here, the Crown refers to abuse of process as discussed by Justice Newbury in Powder Mountain Resorts v. B.C. (2001) 94 B.C.L.R. (3d) (B.C.C.A.) 14 at paragraph 7:
Absent some ruling to the contrary by Supreme Court of Canada, it may, I think, now be accepted that the tort of abuse of public office will be made out in Canada where a public official is shown either to have exercised power for the specific purpose of injuring the plaintiff (i.e., to have acted in "bad faith in the sense of the exercise of public power for an improper or ulterior motive") or to have acted "unlawfully with a mind of reckless indifference to the illegality of his act" and to the probability of injury to the plaintiff. (See Lord Steyn in Three Rivers, at 8.) Thus there remains what in theory at least is a clear line between this tort on the one hand, and what on the other hand may be called negligent excess of power - i.e., an act committed without knowledge of (or subjective recklessness as to) its unlawfulness and the probable consequences for the plaintiff. The actionability of such conduct, based on "recklessness . . . used in an objective sense" was rejected by their Lordships in Three Rivers (see Lord Steyn at 9-10; Lord Hutton at 37-39; Lord Hobhouse at 44; and Lord Millett at 49), and has been rejected as well by the High Court of Australia (see Northern Territory of Australia v. Mengel (1995) 185 C.L.R. 307), and the Court of Appeal of New Zealand (see Garrett v. Attorney General [1997] 2 N.Z.L.R. 332). Perhaps the opinion of Lord Millett in Three Rivers sums up most succinctly the elements of the two branches of the tort:
. . . If the plaintiff can establish the official's subjective intention to exercise the power of his office in order to cause him injury, he does not need to establish that the official exceeded the terms of the powers conferred upon him. If, on the other hand, the plaintiff can establish that the official appreciated that he was acting in excess of the powers conferred upon him and that his conduct would cause injury to the plaintiff, the inference that he acted dishonestly or for an improper purpose will be exceedingly difficult and usually impossible to rebut. Moreover . . ., the consequences of his actions will usually be obvious enough to the official concerned, who can then be taken to have intended the damage he caused. I also agree . . . that intention includes subjective recklessness, that is to say . . . 'a conscious disregard for the interests of those who will be affected by' the exercise of the power. [Page 49 of Three Rivers]
Breach of Contract
[26] In terms of breach of contract, the essential elements of the cause of action are the existence of a contract and its wrongful breach.
[27] However, a contract can only exist when parties have entered into an agreement for some form of consideration, with an offer by one party and an acceptance by the other party. In order to establish the existence of a contract, the proponent is required to plead the terms of agreement, the consideration exchanged, and the intention to create contractual relations.
[28] Coast submits that the contract that is the subject of the breach was formed by the conduct of the parties over the course of 22 years. Rather than plead the essential elements of breach of contract, including the terms of the alleged agreement and the consideration exchanged, Coast simply states a conclusion, based on the circular reasoning that the alleged contract arose from the fiduciary duty and the fiduciary duty arose from the contract.
[29] At best, however, taking the facts as proven, but not the legal conclusions, there was an understanding, but neither a contract nor a fiduciary duty, perhaps relied upon without a good deal of thought by Coast, to the effect that a mitigation plan and proposal for the facility would receive favourable consideration by the Crown. A pre-condition to any agreement remained the approval of the Minister.
Justiciability
[30] The real issue is not whether there was a breach of contract, or a breach of some other duty, but rather whether the Minister improperly exercised his discretion. Coast’s claim is totally dependent on the legitimacy of the Minister’s decision. However, if that decision stands in law, as it must unless and until overturned, none of the allegations against the Crown are actionable. The alleged wrongful acts, as pleaded, have no independent life or status.
[31] The Federal Court of Appeal has directed that the real basis for the cause of action must be examined in determining whether it is a collateral attack on a decision which should more properly be dealt with under section 18 of the Federal Courts Act. More recently, in Her Majesty the Queen v. Grenier, 2005 FCA 348, Mr. Justice Létourneau confirmed that a party who wishes to attack a decision of a federal institution does not have the option of proceeding by judicial review or by way of an action; the party must proceed by judicial review. At paragraph 20 of its reasons, the Court of Appeal affirmed the Court's previous decision in Tremblay v. Canada, 2004 FCA 172:
For the reasons expressed below, I think the conclusion our colleague Madam Justice Desjardins arrived at, in Tremblay, supra, is the right one in that it is the conclusion sought by Parliament and mandated by the Federal Courts Act. She held that a litigant who seeks to impugn a federal agency’s decision is not free to choose between a judicial review proceeding and an action for damages; he must proceed by judicial review in order to have the decision invalidated.
[32] In Grenier, the Court of Appeal has held that collateral attacks on administrative decisions cannot be allowed. Where the decision remains valid, that in "itself forecloses a finding of negligence".
[33] As the Statement of Claim is currently drafted, Coast cannot avoid the finding that all of its heads of action, even if properly pleaded, are an indirect attack on the validity of the process and the decision itself. If a want of material facts were the only defect, this could have been rectified by means of particulars. However, the defects in the Statement of Claim are more basic in that there is neither a cause of action that is recognized at law, nor a remedy under the Canadian Environmental Assessment Act: the appropriate remedy is by way of judicial review.
[34] I must, notwithstanding, consider whether the Statement of Claim might be saved by an amendment, for it ought not to be struck out if there is a scintilla of a legitimate cause of action. In this instance, the Statement of Claim is so broad and so general that no amendment would seem to be of any assistance. This is all the more so in that Coast has been unable to particularize, in any meaningful way, any of the broad assertions. Thus, taking the Statement of Claim and the particulars, such as they are, there is not a scintilla of a possibility of Coast raising a reasonable cause of action. The Statement of Claim is therefore struck out, without leave to amend.
[35] Counsel for the Crown acknowledges the seriousness of denying a remedy by striking out a proceeding and advises that the Crown would not oppose a motion to facilitate conversion of this action into a judicial review proceeding. The motion will therefore be granted, without prejudice to Coast’s right to bring a motion within 30 days for an extension of time to commence an application for judicial review.
[36] The Crown was ultimately successful in having the entire Statement of Claim struck. In the circumstances, the Crown is entitled to its costs of the motion as against Coast.
ORDER
THIS COURT ORDERS that:
1. The style of cause is amended by striking out the Ministry of Fisheries and Oceans and the Department of Fisheries and Oceans as Defendants.
2. The Statement of Claim is struck out without leave to amend, and without prejudice to the Plaintiff’s right to bring a motion, within 30 days of the date of this Order, for an extension of time to commence an application for judicial review.
3. Cost of the motion shall be paid by the Plaintiff to the Defendant Her Majesty the Queen in Right of Canada.
“Roger R. Lafrenière”
Prothonotary
FEDERAL COURT
SOLICITORS OF RECORD
DOCKET: T-1179-02
STYLE OF CAUSE: Coast Dryland Services Ltd. v. HMTQ
PLACE OF HEARING: Vancouver, British Columbia
DATE OF HEARING: March 30, 2006
REASONS FOR ORDER: LAFRENIÈRE P.
APPEARANCES:
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Mr. Robert Bush
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Ms. Susanne Pereira
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SOLICITORS OF RECORD:
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Mr. Robert Bush Muir Sinclare Bush & Company 200 - 575 Tenth street Courtenay, BC V9N 1P9
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Ms. Susanne Pereira Department of Justice Business & Regulatory Law 900 – 840 Howe Street Vancouver, BC V6Z 2S9
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