SUPREME COURT OF PRINCE EDWARD ISLAND. Citation: Lank v. Government of PEI 2010 PESC 09 Date: Docket: S1-GS Registry: Charlottetown

Transcription

1 SUPREME COURT OF PRINCE EDWARD ISLAND Citation: Lank v. Government of PEI 2010 PESC 09 Date: Docket: S1-GS Registry: Charlottetown Between: Stephen Lank and Stephen Lank Enterprises Inc. Plaintiffs And: The Government of Prince Edward Island Defendant BEFORE: The Honourable Justice John K. Mitchell Appearances: David W. Hooley, Q.C., for the Plaintiffs Ruth DeMone for the Defendant Place and date of hearing - Charlottetown, Prince Edward Island January 28, 2010 Place and date of judgment - Charlottetown, Prince Edward Island February 18, 2010

2 Citation: Lank v. Government of PEI 2010 PESC 09 S1-GS Between: Stephen Lank and Stephen Lank Enterprises Inc. Plaintiffs And: The Government of Prince Edward Island Defendant Prince Edward Island Supreme Court Before: Mitchell J. Heard: January 28, 2010 Judgment: February 18, 2010 [9 pages] APPLICATION TO AMEND STATEMENT OF CLAIM - new cause of action - statute of limitations - whether amendment could be compensated for by costs for an adjournment MISFEASANCE IN PUBLIC OFFICE NEGLIGENT BREACH OF STATUTE CASES REFERRED TO: Frohlick v. Pinkerton Canada Ltd., [2008] ONCA 3; Casey v. Halton Board of Education, 1981 CarswellOnt 387; Odhavji Estate v. Woodhouse, [2003] S.C.J. No. 74; Bhadauria v. Seneca College Board of Governors (1981), 124 D.L.R. (3d) 193; Saskatchewan Wheat Pool v. Canada, [1983] 1 S.C.R. 205; Holland v. Saskatchewan, [2008] 2 S.C.R. 551; Brunswick Credit Union Federation Stabilisation Board Ltd. v. Caisse populaire de Shippagan Ltée., 1996 CarswellNB 203; Sebastian v. Saskatchewan (1978),93 DLR (3d) 154 STATUTES REFERRED TO: Statute of Limitations, R.S.P.E.I. 1988, Cap. S-7; Forest Management Act, R.S.P.E.I., 1988, Cap. F-14; Crown Proceedings Act, R.S.P.E.I 1988, Cap. C-32 David W. Hooley, Q.C., for the Plaintiffs Ruth DeMone for the Defendant

3 Mitchell J.: Introduction [1] The Applicants, Stephen Lank and Stephen Lank Enterprises Inc., commenced an action against the Government July 27, The Statement of Claim was amended May 11, Lank now seeks to further amend his Statement of Claim to add a claim for misfeasance in public office and/or negligent breach of statute. [2] Lank takes the position that the amendments are simply a re-characterization of his original Statement of Claim and the defendant suffers no prejudice that could not be compensated for by costs or an adjournment. [3] The Defendant however takes the position that the proposed amendments raise, for the first time, two new causes of action which are barred by s. 2 of the Statute of Limitations, R.S.P.E.I. 1988, Cap. S-7. That Act states that an action must be commenced within six years after the cause of action arose. The Defendant states that this fact, together with the passage of time, constitutes prejudice which cannot be compensated for by costs or an adjournment. I agree. Facts [4] The Applicant, Lank, is and was engaged in the forestry business. In the mid- 1990s three things happened that led Lank to believe that he was being unfairly singled out; his exclusion from the tender process for stumpage rights; the imposition of the forest renewal tax, which according to him, had a greater impact on him than on others; and the failure of Government to accept the high tenders for the sale of surplus Government land in Stumpage [5] Under the Forest Management Act, R.S.P.E.I., 1988, Cap. F-14, the Minister responsible could issue a permit to allow the harvest of timber (stumpage rights) from Crown lands. The permit was to be provided only for publicly tendered timber or forest products (s.11.(2)(a)). [6] Prior to 1995, Lank participated in the tendering process and was a successful bidder on some lands. The successful bids gave him a reliable, cost-effective supply of timber with which to work. In 1995, the Minister changed the process to an invited tender. In 1996, there was an election, and a new government came into office. There was no tender called for stumpage rights in In 1997 and years following, the Government followed the invited tender process. Lank was not a member of the class of people invited to tender. Lank claims he suffered a loss

4 Page: 2 because his inability to tender led to less reliable, cost-effective supply of timber for him. Sale of Surplus Crown Lands [7] In October of 1996, the Minister of Transportation and Public Works advertised for tenders for the sale of several pieces of surplus Crown land. The Government Statement of Defence indicates that the tenders were marked the Department reserves the right not to accept the highest or any tender. Lank bid on several of these properties in November Lank alleges that he was the highest bidder on them all. Government admits that he was the highest bidder on most of them. On August 6, 1997, the Plaintiff received a letter from the Department of Transportation and Public Works returning his deposit and advising that they were retendering the properties. Lank bid on the properties again, but this time he bid, cumulatively, $21,490 less than he had the year before. [8] Lank was the successful bidder on these properties and successfully purchased these properties from the Government. Notwithstanding that he paid less money he claims loss, including loss of profit on the wood which would have been harvested in Forest Renewal Tax [9] In the spring of 1996, pursuant to s. 4 of the Forest Renewal Program Regulations, Government began to levy and collect a fee from forest processing companies of which Lank was one. Because Lank sold his product off island, he alleges the scheme resulted in him paying $2 per cord, while the other processing companies, none of whom sold product off Prince Edward Island, would pay only $1 per cord. He takes the position that this is unfair and discriminatory. He further takes the position that this tax is ultra vires and is not authorized by the Act. [10] It is clear from the pleadings, the partial discovery transcript filed and the letter giving notice under the Crown Proceedings Act, R.S.P.E.I 1988, Cap. C-32 that Lank felt hard done by. He felt like he was being singled out for no good reason. He went to see a lawyer. He did not seek an extension of time to make an application for judicial review. Lank wanted damages. He started this action in July 1998 seeking unspecified damages. The Government filed a Statement of Defence. Lank amended his Statement of Claim May 11, [11] Lank discovered two Government witnesses in 1999, and Lank himself was discovered September 28, Lank filed an expert report on damages in January 2004, and that expert was discovered December Lank responded to

5 Page: 3 undertakings arising from the December 2004 discoveries March 28, [12] Government then responded to Lank s expert s report, and further discoveries of Government witnesses were held in the fall of No Minister of the Crown was discovered. [13] On June 2, 2009, almost 11 years after the initial Statement of Claim was filed and served, Lank s lawyer wrote the Defendant s lawyer seeking consent to amend the pleadings. The Defendant refused. Lank s amendments add a plea of misfeasance in, and/or, abuse of public office, as well as, in the alternative, negligent breach of statute. Lank says that the amendments do not add additional facts to the Statement of Claim but are merely a re-characterization of the claim. Lank says that because the facts already pleaded form the essential underpinning of the new torts added there is no prejudice to the Defendant and that the amendment should be granted. Lank relies on Rule 1.04, 2.01 and [14] The Defendant, on the other hand, points out that the amendments constitute two new torts that are statute barred by the limitation period. By reason of the limitation period and the passage of time, the Defendant states that the amendments do cause prejudice that cannot be compensated for by costs or an adjournment. The Law [15] Rule 1.04 reads as follows: 1.04 (1) These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits. Rule 2.01: 2.01 (1) A failure to comply with these rules is an irregularity and does not render a proceeding or a step, document or order in a proceeding a nullity, and the court, (a) (b) may grant all necessary amendments or other relief, on such terms as are just, to secure the just determination of the real matters in dispute; or only where and as necessary in the interest of justice, may set aside the proceeding or a step, document or order in the proceeding in whole or in part.

6 Page: 4 Rule 26.01: On motion at any stage of an action the court shall grant leave to amend a pleading on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment. [16] While Rule is mandatory, the mandatory nature of the Rule arises only if there is no prejudice that could not be compensated for by costs or an adjournment. [17] I agree with the reasoning of the Ontario Court of Appeal in Frohlick v. Pinkerton Canada Ltd., [2008] ONCA 3, wherein after reviewing the purposes behind limitation periods the Court concludes at para. 20 that it would be wrong to view Rule 26.01of the Ontario Rules of Court (which is the same as of the Prince Edward Island Rules of Court) as allowing the party to use the existence of an existing claim and nothing more to defeat the protection of a limitation period. The Ontario Court of Appeal concludes, and I agree, that where a limitation period has passed, there will arise a presumption of prejudice that cannot be compensated for by costs or an adjournment (see para. 22). The onus then falls on Lank to rebut that presumption. [18] In Frohlick, the plaintiff sued the defendant Pinkerton in 2003 in an action for wrongful dismissal. The facts alleged in the original Statement of Claim arose out of certain actions of the defendant when they sold the business to Securicor Canada Ltd. in In 2006, the Plaintiffs retained new counsel and sought to amend the Statement of Claim to include allegations of certain actions of the Defendant in 1999, which they alleged constituted constructive dismissal. [19] The Ontario Court of Appeal held in para. 24: In my view, rule does not contemplate the addition of unrelated statute-barred claims by way of amendment to an existing statement of claim. Conceptually, this should be treated no differently than the issuance of a new and separate statement of claim that advances a statute-barred claim. [20] Casey v. Halton Board of Education, 1981 CarswellOnt 387, Ont.HCJ, was a case where the court did allow an amendment after the expiration of the limitation period. In that case, all the facts with respect to the new tort alleged had been pleaded, and the Defendant was aware throughout of the case it had to meet. [21] That case at para. 17 refers to several criteria used by courts in determining whether amendments of this sort would be permitted.

7 Page: 5 Have all the facts relating to the alleged tort been pleaded before the expiry of the limitation period so that the defendant has been put on notice as to the case he must defend? Apart from the loss of the limitation defence will there be any actual prejudice to the defendant if the amendment is allowed? Finally, does the amendment really set up a new cause of action or is what is involved merely a new head of damages under the existing cause of action?... [22] I conclude then that if Lank s amendments are merely a new head of damages under an existing cause of action, that is, if all material facts were pleaded so the Defendant knew the case that was to be defended, then Lank will have met the onus of establishing no prejudice. On the other hand, should the proposed amendments set up a new claim based on facts not previously alleged, then Lank s motion must fail. This then requires an examination of the original (May 11, 1999) pleadings and proposed amendments. Original Pleadings [23] The relief sought in the original pleadings is a declaration that the tender process for stumpage rights is discriminatory, flawed and void, a declaration that s. 4 of the Forest Renewal Program Regulations is ultra vires, a return of all fees paid under the Forest Renewal Program Regulations and damages. [24] In pleading material facts, Lank alleges that the tendering process for stumpage was flawed and discriminatory in that a bona fide public tender was not held. He alleges that the tender process followed was a selective/invited tender and not a true public tender. [25] As to the Crown surplus land tendering process, Lank alleges as a fact that in 2006 he was the highest bidder, no bids were accepted and his deposit was returned. He alleges that the Government did not act fairly and that the tendering process was not equitable. He alleges that this treatment was discriminatory and that the unnecessary delays resulted in loss of profit on the wood harvest on the subject properties. Finally, he alleges that the check off fees were ultra vires and discriminatory. [26] The sum and substance of Lank s claim is that the Government breached s. 11 of the Forest Management Act and caused him damage; that by withdrawing the 1996 tender process for sale of surplus lands, they acted unfairly; and s. 4 of the Forest Management Act Regulations, Lank says, is discriminatory, unfair and in any event, ultra vires.

8 Page: Amendments [27] The thrust of the proposed amendments are contained in paras. 13 and 14 which read as follows: 13. The Plaintiffs state that the Government proceeded with the restricted/selective tendered process either knowing, or being willfully blind, to the fact that this was contrary to law (i.e., section 11 of the Forest Management Act) (and either knowingly, or being willfully blind, to the fact that this would cause harm to the Plaintiffs in a manner that amounted to misfeasance in or abuse of public office. The Plaintiffs state that the Government s unlawful actions caused reasonably foreseeable damages to the Plaintiffs, including but not limited to loss of profit and loss of business reputation. 14. Alternatively, the Plaintiffs state that the Government owed a duty of care towards the Plaintiffs and acted negligently in breaching section 11 of the Forest Management Act, and that the Government s negligent breach of its statute and failure to act fairly towards the Plaintiffs caused reasonably foreseeable damages to the Plaintiffs, including but not limited to loss of profit and loss of business reputation. Tort of Misfeasance of Public Office [28] Paragraph 13 adds a tort of misfeasance of public office, an old but rare cause of action. The elements of that tort are firstly, that the public officer must have engaged in deliberate and unlawful conduct in his/her capacity as a public officer, and secondly, the public officer must have been aware both that his/her conduct was unlawful and that it was likely to harm the plaintiff (see Odhavji Estate v. Woodhouse, [2003] S.C.J. No. 74, at para. 23). [29] In Odhavji Estate v. Woodhouse, Iacobuci, J., stated at para. 28 as follows:...the requirement that the defendant must have been aware that his or her conduct was unlawful reflects the well-established principle that misfeasance in a public office requires an element of "bad faith" or "dishonesty". In a democracy, public officers must retain the authority to make decisions that, where appropriate, are adverse to the interests of certain citizens. Knowledge of harm is thus an insufficient basis on which to conclude that the defendant has acted in bad faith or dishonestly. A public officer may

9 Page: 7 in good faith make a decision that she or he knows to be adverse to interests of certain members of the public. In order for the conduct to fall within the scope of the tort, the officer must deliberately engage in conduct that he or she knows to be inconsistent with the obligations of the office. [30] Addition of this cause of action is not a simple recharacterization of the existing pleadings. Nowhere in the original pleadings, the notice under the Crown Proceedings Act, nor the discovery evidence of Mr. Lank which was filed on the motion is there an allegation that any of the several ministers that have been involved over the years have acted deliberately and unlawfully or that they were aware that they were acting unlawfully and likely to cause harm to Lank. There is not a sniff of the dishonesty or bad faith which is required to support this cause of action. It is clear that Mr. Lank feels he is being singled out, and in fact, Lank places great emphasis on the word discrimination and the allegation that he has been discriminated against. That, in and of itself, does not support the bald claim of misfeasance in public office. [31] Firstly, there is no independent tort of discrimination (see Bhadauria v. Seneca College Board of Governors (1981), 124 D.L.R. (3d) 193 (SCC)). Furthermore, all laws discriminate to some degree in the sense that laws differentiate between people or classes of people. For example, criminal laws against theft treat thieves differently than honest people. Likewise, municipal by-laws treat property holders of land in one zone differently than those who own land in a different zone. There is nothing wrong with this differential treatment. As Iacobucci says, public officers must retain the authority to make decisions that, where appropriate, are adverse to certain of its citizens (Odhavji Estate v. Woodhouse, para. 28). [32] There are simply no material facts in the amended pleadings which would support the claim of misfeasance in public office. Lank argues that now is not the time to be concerned with sufficiency of pleadings. He argues that the amendment should be allowed, and if the defendant feels that the pleadings, as amended, are insufficient, then the defendant can apply to strike. He would, of course, be very pleased to provide what he calls particulars should such a motion be made. [33] The rules of pleadings require that pleadings contain a material statement of facts on which the party relies for his or her claim (Rule 25.06(1)). Furthermore, where intent is alleged, the pleadings shall contain full particulars (Rule 25.06(8)). The material facts or particulars to support this cause of action requires more than a bald statement such as that contained in para. 13 of the proposed amendments. [34] When a party comes to court seeking to amend pleadings, surely it is hardly

10 Page: 8 asking too much that the amended pleadings comply with the basic rules of pleading. A bald claim is insufficient. Claims must be supported by material facts. If Lank were to amend to include those specific material allegations and particulars, he would in fact be pleading new facts to support a new cause of action which is statutebarred. That of course would cause prejudice to the defendant which would not be cured by costs or an amendment. Negligent Breach of Statute [35] Clause 14 contains a claim that the Government negligently breached s. 11 of the Forest Management Act. This amendment seems to be a reaction to Saskatchewan Wheat Pool v. Canada, [1983] 1 S.C.R. 205 (S.C.C.) decided approximately four years after the original pleadings. In that case, the Supreme Court of Canada refused to recognize a nominate tort of statutory breach. Instead, the court ruled that civil consequences for statutory breaches should be subsumed in the law of negligence, and that proof of statutory breach may be evidence of negligence. [36] This amendment fails on two grounds. First, the thrust of Lank s position really amounts to no more than this; he disagrees with Government s interpretation of s. 11 of the Act. That, and no more, is insufficient. One cannot sue the Government and claim damages, as Mr. Lank has, simply because one disagrees with the Government s interpretation of law, provided of course, that that interpretation was made honestly and in good faith (Brunswick Credit Union Federation Stabilisation Board Ltd. v. Caisse populaire de Shippagan Ltée., 1996 CarswellNB 203; Sebastian v. Saskatchewan (1978),93 DLR (3d) 154 (Sask.C.A.)). Secondly, while proof of statutory breach may be evidence of negligence, it does not follow that negligent breach of statute is a cause of action in and of itself. That issue has been put to rest by the Supreme Court of Canada in Holland v. Saskatchewan, [2008] 2 S.C.R. 551 (S.C.C.). [37] In that case, the plaintiff represented a group of farmers who refused to register in a particular agricultural program because they objected to the wording of an indemnification or release clause in the registration form. As a result their herd status was downgraded, thereby reducing the market price of their produce and diminishing their ability to sell. The farmers, quite properly, applied for judicial review and established that the indemnification and release clauses had been invalidly included in the registration form and obtained a declaration that the Government s action of reducing the herd certification status was unlawful. Despite the court s ruling, the Government took no steps to reinstate the farmers certification or to compensate them for revenue lost. The farmers therefore commenced an action against the minister claiming damages for, amongst other things, the tort of negligent breach of statute. The fault alleged was described by the Saskatchewan Court of Appeal as

11 Page: 9 failing to act in accordance with the authorizing acts and regulations (see para. 7). The Statement of Claim stated that the Government and its employees were under a duty of care to the Class... to ensure those Acts and Regulations were administered in accordance with the law and not to operate in breach of them. [38] The Supreme Court of Canada held in paras. 8 and 9 of that case that the law does not recognize an action against a government authority for negligent breach of statutory duty by acting outside or contrary to the law. Mere breach of statutory duty does not constitute negligence. The proper remedy for breach of statutory duty by public authority traditionally viewed is judicial review for invalidity. In this case, Lank opted not to apply for judicial review or an extension of time to file for judicial review in [39] If, as Lank alleges, clause 14 is merely a recharacterization, then it is a recharacterization from the non-tort of statutory breach (Saskatchewan Wheat Pool v. Canada) to the non-tort of negligent breach of statutory duty (Holland v. Saskatchewan). [40] This amendment, sought some 11 years after the initial pleadings, is not one which can be remedied by costs and/or an adjournment. Even if the cause of action was a valid one, it would require the addition of material facts to support a claim of negligence as those material facts are not contained in the original pleadings. That would mean new facts to support a new cause of action which is statute barred. That is something which cannot be compensated for by costs or an adjournment. [41] The application is dismissed with costs to the Defendant. If the parties cannot agree on costs, then the Defendant may file a bill of costs with this Court 30 days hence. The Plaintiff may file a reply 15 days thereafter. J. February 18, 2010.