Iverson v. Canada (Fisheries and Oceans)

2011 BCSC 1619 Iverson v. Canada (Fisheries and Oceans)

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Iverson v. Canada (Fisheries and Oceans), 2011 BCSC 1619 Date: 20111129 Docket: S077807 Registry: Vancouver Between: Lorne Nels David Iverson Plaintiff And Her Majesty the Queen in Right of Canada, as Represented by the Minister of Fisheries and Oceans, and Pacific Halibut Management Association of B.C. Defendants Before: The Honourable Madam Justice S. Griffin Reasons for Judgment In Chambers Counsel for the Plaintiff: Meldon Ellis Counsel for the Defendant Crown: Paul F. Partridge Maria Molloy Place and Date of Hearing: Vancouver, B.C. November 7, 2011 Place and Date of Judgment: Vancouver, B.C. November 29, 2011

INTRODUCTION [1] This proceeding is based on an allegation that a certain fisheries management plan instituted by the Minister of Fisheries and Oceans in relation to the west coast halibut fishery, from 2001 to 2006, was unlawful. Purportedly similar schemes in relation to fisheries on the east coast of Canada were found unlawful in 2006. [2] The plaintiff is a fisher who says his quota, and fees paid for his quota, were negatively affected by this allegedly illegal fisheries management plan. He is seeking to have the proceeding certified as a class proceeding on behalf of 436 halibut fisherman in British Columbia who held halibut fishing licenses in the years between 2001 and 2006 inclusive. [3] In summary, the allegations are that the illegal fisheries management plan involved the federal Crown withholding 10% of the total allowable catch ("TAC") for halibut, and assigning it to the Pacific Halibut Management Association of B.C. ("PHMA"). The 436 holders of halibut licenses then had to purchase their share of the 10% quota from the PHMA by paying an additional sum to the PHMA. [4] It is alleged that the PHMA and the federal Crown entered into an agreement in 2001 by which the PHMA performed various fisheries management activities. As well, the PHMA remitted sums it had collected from halibut license holders to the federal Crown to fund government fisheries management

activities. [5] The core of the plaintiff's claim is set out at paragraph 20 of the Amended Notice of Civil Claim: 20. The plaintiff says that in assigning 10% of the quota to the PHMA for resale to the plaintiff, and contracting with PHMA to either remit the funds or use them for fisheries management, the Minister: a. Appropriated a public resource that did not belong to him to finance fisheries management activities; b. Violated the provisions of the Financial Administration Act R.S.C. 1985, c. F-11, in particular sections 19 and 32; c. Levied in a tax unauthorized by parliament; d. Collected monies from the plaintiff without legislative or constitutional authority; [and] e. Converted to his ministry's use monies and/or halibut quota belonging to the plaintiff... [6] The plaintiff says that the focus of its claim is unjust enrichment as the quota taken away from fishers and the monies collected under the scheme were collected without lawful authority. The plaintiff seeks restitution of these monies as a remedy. [7] Ultimately the plaintiff will seek an order that damages be assessed in the aggregate, and that there be restitution of the monies collected in relation to PHMA's sale of the 10% quota to class members.

PRESENT APPLICATIONS [8] The plaintiff, Mr. Iverson, applies to substitute another person for the plaintiff, namely, Mr. Barry Burnell. [9] The defendant federal Crown opposes the plaintiff's application and seeks its own orders for cross-examination of the plaintiff and of the proposed substitute plaintiff.

PROCEDURAL HISTORY [10] It is relevant to know the procedural history of this proceeding. [11] The action was commenced on November 20, 2007. The Crown applied for a stay or dismissal of the proceeding on the grounds that the Federal Court has exclusive jurisdiction due to the fact that a central premise of the claim is that the fisheries management plan was illegal. [12] I heard the Crown's application on January 21 and February 13, 2009. At the hearing of the application, it became clear that there were conflicting lines of appellate authority on the question of whether or not the Federal Court had exclusive jurisdiction. After the hearing of the Crown's application in this case, the Supreme Court of Canada granted leave to appeal these relevant and conflicting appellate authorities. Mindful that the outcome of the Supreme Court of Canada appeals would largely influence the outcome of the jurisdiction in this case, I asked of the parties if they were agreeable to awaiting the outcome of those appeals to the Supreme Court of Canada, and they were. [13] This proceeding then awaited the outcome of the relevant appeals before the Supreme Court of Canada. The Supreme Court of Canada released its decisions on December 23, 2010, in the cases of Canada (Attorney General) v. Telezone Inc., 2010 SCC 62, Canada (Attorney General) v McArthur, 2010 SCC 63, Parrish & Heimbecker Ltd. v.

Canada (Agriculture and Agri-food), 2010 SCC 64, Nu-Pharm Inc. v. Canada (Attorney General), 2010 SCC 65, Canadian Food Inspection Agency v. Professional Institute of the Public Service of Canada, 2010 SCC 66, Manuge v Canada, 2010 SCC 67. [14] The outcome of the relevant Supreme Court of Canada decisions strongly weighed in favour of the conclusion that this court did have jurisdiction in the present case, and the Crown has therefore not proceeded with its application for a stay or dismissal of the action.

PRESENT APPLICATIONS [15] Now that this court's jurisdiction appears no longer in issue, the plaintiff wishes to move forward with the case. This requires first getting the pleadings in order. [16] At the time of the Crown application to stay or dismiss the proceeding, there was much discussion about the plaintiff's pleadings. It is fair to say that the hearing of the stay application brought focus to the plaintiff's pleadings, and the plaintiff conceded that he should amend his claim and seek to substitute a new plaintiff. [17] The plaintiff has now taken steps to do so, including by filing an Amended Notice of Civil Claim. This pleading adopts a new form to comply with new Rules of Court that have been enacted in the meantime. It also abandons certain aspects of the claim against the Minister that the plaintiff conceded at the time of the Crown's stay application should be abandoned. [18] At the time of the Crown application for a stay or dismissal of the claim, it was pointed out that no independent cause of action was pleaded against the PHMA. Rather, PHMA was initially joined on the basis that it was an "agent" or "partner" of Canada. The decision to join PHMA has since been revisited and the plaintiff has discontinued his claim against the defendant PHMA. [19] Lastly, the plaintiff has now brought this application seeking to substitute Mr. Burnell for Mr. Iverson as

plaintiff. [20] The reason for the plaintiff's application is that counsel for the plaintiff perceives that Mr. Iverson may have a potential conflict with the proposed class, which Mr. Burnell does not. [21] The Class Proceedings Act, R.S.B.C. 1996, c. 50 ["CPA"] provides in s. 4(1)(e)(iii) that in order for a proceeding to be certified as a class proceeding, there must be a representative plaintiff who does not have, on the common issues, an interest that is in conflict with the interests of other class members. [22] Mr. Iverson's concern about a conflict relates to the fact that he was a director of PHMA when PHMA entered into the agreement with the Ministry, which agreement is alleged to have been illegal. Potentially other class members could be critical of the steps taken by the PHMA at the instance of its directors, or of information communicated by the PHMA to members of the class. [23] Where this possible conflict might lead in terms of the issues in this lawsuit is hard to say. The Crown has not yet filed any Response to Civil Claim and so the defences of the Crown are not yet known. Nevertheless, the plaintiff Mr. Iverson considers it prudent to step aside as representative plaintiff and substitute another member of the class who was not an officer and director of the PHMA. [24] The Crown says that any conflict of interest with members of the class that Mr. Iverson

might have, would also be a conflict of interest shared by Mr. Burnell. This is because Mr. Burnell was a member of the PHMA at the time PHMA entered into the impugned agreement with the Crown. The Crown has filed evidence from which it suggests the inference can be drawn that members of the PHMA approved the PHMA entering into this allegedly illegal fisheries management plan with the Crown. [25] The Crown says that if the Court is not willing to draw the inference, on the evidence filed, that Mr. Burnell as a member of PHMA has a conflict, it ought to be permitted to cross-examine Mr. Iverson and Mr. Burnell to pursue this point. [26] There are two problems with the Crown argument. [27] First, by far the vast majority of members of the proposed class were members of the PHMA. As mentioned, the class is composed of 436 holders of halibut fishing licences. During PHMA's existence and the period of the proposed class, 80 to 90 percent of the licenses holders were members of PHMA. [28] It has yet to be seen if there is a conflict in the conduct of this action as between the majority of members of the class who were members of PHMA, and those members of the class who were not PHMA members. But if there is a conflict, this might cry out for a subclass of non-PHMA members and a separate representative plaintiff for that subclass, in accordance with s. 6 of the CPA. [29] I consider it

premature to make a determination on the implications of a potential conflict between the PHMA members of the class and the non-PHMA members of the class. Certainly the members of the class who were PHMA members, which is the vast majority of the class, would not have a conflict with Mr. Burnell on the grounds that he was a PHMA member. Conceivably, there is a potential that those class members could have a conflict with Mr. Iverson who was a director of PHMA, and it is understandable that the plaintiff wishes to substitute another representative plaintiff at an early stage of the proceeding to avoid this potential. [30] Second, in this case I consider the appropriate time to consider whether or not the plaintiff is a suitable representative plaintiff is during the plaintiff's application for certification of the proceeding as a class proceeding. While the Crown urges the court to make this determination now, in my view it is premature to do so before the close of pleadings and before this court has before it a fuller canvassing of the relevant facts and submissions with respect to the proposed common issues. [31] The Crown has not filed any defence yet, and so it is difficult to determine at this stage of the proceeding that a member of the PHMA would have a conflict with other members of the class, because the issues in the lawsuit have not yet been joined. [32] I appreciate

the Crown's submission that the Court has discretion to make orders pre-certification that relate to the conduct of the proceeding and even the suitability of the representative plaintiff pursuant to s. 12 of the CPA, as held in Sandu v. Household Realty Corporation Limited, 2011 BCSC 897. However, in that case the representative plaintiff was not represented by counsel, posing special difficulties in the context of a class proceeding. That is not the situation here, where the plaintiff and proposed substitute plaintiff are represented by counsel. [33] I do not consider it an efficient way of proceeding in this case to make the determination of the suitability of the representative plaintiff a pre-condition to the substitution of the plaintiff. This would be determining the certification requirements in slices, rather than in one hearing. Not only does this have the potential to be unfair, as decisions could be made without the benefit of knowing the full context of the certification proposal, it will add steps to the litigation process in a case which has already had a delayed procedural history. In this case I consider it far more efficient to allow the plaintiff's application for substitution now, so that the plaintiff can get on with moving the case forward. [34] Rule 6-2(7)(b) of the Supreme Court Civil Rules, B.C. Reg. 168/2009 permits the adding or substituting of a

party if: (i) that person ought to have been joined as a party, or (ii) that person's participation in the proceeding is necessary to ensure that all matters in the proceeding may be effectually adjudicated on... [35] If Mr. Iverson steps aside, as he wishes to do because of his concern about the potential for conflict arising out of his role as a director of PHMA, it is necessary to have another representative plaintiff in order for this proceeding to continue. Mr. Burnell is willing to serve as a substitute representative plaintiff. As such, I find that the test under Rule 6-2(7)(b) for adding or substituting a party, is met. [36] I grant the plaintiff's application to substitute Mr. Burnell for the plaintiff, and for leave to the plaintiff to amend its Notice of Civil Claim and style of proceeding accordingly. I dismiss the Crown's application to cross-examine Mr. Iverson and Mr. Burnell. [37] The plaintiff also seeks an order requiring the defendant to file its Response to Civil Claim within 21 days. The parties did not address this in their submissions and so I am reluctant to make such an order and will consider this aspect of the application adjourned. Hopefully the parties can work this out between them. However, I note that the Crown is already subject to the Rules of Court, subject to any agreement between the parties or court order. [38] Lastly, the plaintiff seeks the costs of this application, pursuant to s. 37 of the CPA. That section makes it clear that costs of interlocutory proceedings in this kind of action are the exception, rather than the rule. I am not persuaded that exceptional circumstances exist to support such an order at this stage. "S.A. Griffin, J." The Honourable Madam Justice Susan A. Griffin