On January 13, 2017, the Supreme Court of Canada (SCC) released its decision in Ernst v. Alberta Energy Regulator. As BLG noted in our blog post discussing the SCC's decision to hear the Ernst case, leave to appeal was granted on a narrow but important constitutional issue. The Plaintiff, Jessica Ernst, claimed that the Energy Resources Conservation Board (the Board) had violated her rights under Canadian Charter of Rights and Freedoms (the Charter), and sought damages as a remedy pursuant to Section 24 of the Charter. The Alberta Court of Appeal (ABCA) had struck the Charter claim on the basis that, even if a Charter breach was proven, the Board was immune to damages for a Charter breach by virtue of a statutory immunity clause. In a split decision, the SCC ultimately upheld the ABCA decision to strike Ms. Ernst's Charter claim, but did so on grounds which differed from the reasoning adopted by the ABCA. The decision is notable for the energy industry because while it does not immediately alter the status quo with respect to the Board's broad immunity from damages claims, it leaves the law in this area surprisingly unsettled.
Background
As discussed in more detail in our previous blog post about the ABCA's decision in Ernst, Ms. Ernst's claim is based on her allegation that she suffered damages as a result of a coal bed methane shallow drilling program that was approved by the Board. Ms. Ernst claimed damages against the Board on two grounds: (i) negligent administration of a regulatory regime; and (ii) breach of Ms. Ernst's Charter right to freedom of expression.
The negligence claim was struck by the ABCA on the basis that the Board did not owe a duty of care to Ms. Ernst, and in any event, her claim was barred by Section 43 of the Energy Resources Conservation Act, (the ERCA), which stated, in part, that "No action...may be brought against the Board...in respect of any act or thing done purportedly in pursuance of this Act..." (Section 43). This aspect of the ABCA's decision was not appealed, and as we recently noted in our blog post regarding Goodhart v Alberta Energy Regulator, the ABCA's decision in Ernst has been held to apply with equal force to negligence claims against the Board's successor, the Alberta Energy Regulator (AER).
The Charter claim was rooted in Ms. Ernst's vocal public criticism of the Board. Ms. Ernst alleged that in order to punish her for her criticism, the Board informed her that Board staff would avoid all contact with her until such time as she agreed to stop raising concerns through the media or public. Ms. Ernst alleged that this decision violated her right to freedom of expression under Section 2(b) of the Charter. The Court of Queen's Bench found that this novel Charter claim was not so unsustainable that it could be struck out summarily, but found that it was barred by Section 43. On appeal to the ABCA, Ms. Ernst explicitly argued that she was not challenging the constitutionality of Section 43, but rather was arguing that this section did not apply to bar Charter claims. This argument was rejected by the ABCA, which held that Section 43 did apply to bar Ms. Ernst' claim for Charter damages.
Ms. Ernst appealed to the SCC, arguing for the first time that Section 43 clearly barred her claim for Charter damages, and as such, was unconstitutional. As noted in our blog post about the SCC decision to grant leave to appeal, it was anticipated that Ernst would have broad implications for many regulatory and administrative tribunals by providing guidance regarding the interplay between statutory immunity provisions and claims for Charter damages.
The Decision
There was a tight three-way split (4:1:4) of the nine-member SCC panel in this case. The first opinion, authored by Justice Cromwell, with Justices Karakatsanis, Wagner and Gascon concurring, adopted Ms. Ernst's position that it was plain and obvious that Section 43 barred a claim for Charter damages. Justice Cromwell held the implication of this position was that to avoid the striking of her claim on the basis of Section 43, Ms. Ernst had a burden to provide "an adequate factual basis" to permit a finding that Section 43 was unconstitutional. Because Ms. Ernst had not met this evidentiary burden, the immunity clause applied. Ms. Ernst's claim was correctly struck.
This finding was seemingly sufficient to dispose of the appeal, but Justice Cromwell went on to find that Charter damages could never be an appropriate and just remedy for Charter breaches by the Board. This finding was due to both the appropriateness of judicial review as an alternative, more effective remedy, and the numerous policy rationales for statutory and common law immunity from civil suits granted to many quasi-judicial bodies and administrative agencies (discussed in more detail in our blog post on the ABCA decision in Ernst). Respecting the latter, Justice Cromwell found that "opening the Board to damages claims will distract it from its statutory duties, potentially have a chilling effect on its decision making, compromise its impartiality, and open up new and undesirable modes of collateral attack on its decisions" (at paragraph 55). Justice Cromwell held that case-by-case determinations of Charter damages are not necessary, because to effectively achieve its policy objectives, immunity must be granted for any and all claims of damages. Interestingly, this finding was influenced by, but did not turn on, the presence of a statutory immunity clause. Justice Cromwell noted at paragraph 50:
"Of course these sorts of statutory provisions cannot override constitutional rights, but the policy reasons on which they are based can and should be taken into account by a reviewing court."
In the second opinion, Justice Abella agreed with Justice Cromwell that, on its face, the immunity clause barred a Charter damages claim. Justice Abella then emphasized that Ms. Ernst had failed at the lower court levels to give notice of a constitutional challenge to the Attorney General of Alberta, as required by Section 24 of the Judicature Act, and had in fact denied that such a challenge was being made. Justice Abella noted that the required notice of a constitutional challenge is more than a formality, as it is imperative that any court considering the constitutionality of a statutory provision hear evidence and argument justifying the provision from the government which enacted it. In Justice Abella's view, Ms. Ernst's failure to properly raise the constitutional challenge meant that it would be procedurally improper for the SCC to consider whether Section 43 was constitutional. Because Section 43's constitutionality had not been successfully challenged, it applied to strike Ms. Ernst's Charter damages claim. Justice Abella also found that, on the facts of this case, the only appropriate remedy was judicial review of the Board's decision to cease communicating with Ms. Ernst.
The third and dissenting opinion, authored by Chief Justice McLachlin and Justices Moldaver and Brown, with Justice Côté concurring, would have set aside the order striking Ms. Ernst's Charter damages claim and returned the claim to the Alberta Court of Queen's Bench for consideration at first instance. This result was based on the dissenting Justices' opinion that it was not plain and obvious that the punitive conduct alleged by Ms. Ernst would be caught by the language of Section 43, which only covered acts "done purportedly in pursuance of" the ERCA. As it was arguable that allegedly punitive acts were not authorized by the ERCA, Ms. Ernst should be granted an opportunity to show that the Board's decision to avoid all contact with her was not protected by Section 43. It was only after a court had determined that the Board's conduct was protected by Section 43 that the issue of Section 43's constitutional validity could arise. It is noteworthy that the dissenting Justices' findings in respect of the effect of Section 43 on Ms. Ernst's Charter damages claim directly contradicted the positions taken by both the Board and Ms. Ernst herself. This aspect of the dissenting opinion attracted particular criticism from Justice Cromwell, largely on the basis that it would be unfair to decide the case on the basis of an issue that was not raised during the hearing.
The dissenting Justices strongly argued against Justice Cromwell's finding that Charter damages could never be an appropriate and just remedy for a Charter breach by the Board. Common law and statutory immunity granted to state actors is always qualified by exceptions, such as where there is evidence of bad faith or abuse of power. If Ms. Ernst's allegations of punitive conduct were true – which was to be presumed for the purposes of an application to strike – there was no compelling policy rationale to immunize the Board from such serious misconduct. The dissenting Justices also found that it was not plain and obvious that judicial review would be an effective alternative remedy to Charter damages, particularly with respect to vindicating Ms. Ernst's rights and deterring future breaches by the Board. In the result, it was not plain and obvious that Charter damages could not be an appropriate and just remedy for Ms. Ernst's claims.
Implications
In the long term, the strong dissent and lack of a true majority decision raise more questions than answers with respect to the interplay between Charter damages and regulatory decision-making. Most notably, the decision leaves open the possibility that, in different factual and procedural circumstances, a Charter damages claim against an administrative or quasi-judicial body might be successful at the SCC. In any such claim, the Ernst decision would at least seem to make it clear that the presence of a statutory immunity clause will not be determinative of the result, but rather will simply be a key factor to be considered.
Until such a claim is successfully brought at the SCC, the immediate implication of the decision for the energy industry is that lower courts remain likely to protect the AER and other administrative and quasi-judicial bodies from actions for damages, regardless of whether such actions are brought pursuant to the Charter or the common law. Courts, especially in Alberta, remain likely to find that the only appropriate means of challenging a decision made by an administrative and quasi-judicial body such as the AER is an application for judicial review. So, for the time being it is business as usual. In these uncertain times, any certainty for industry is welcome.
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