Developer’s damages claim overturned despite illegal acts of Provincial government: British Columbia v Greengen Holdings Ltd.

The BC Court of Appeal^[1] has reversed the lower court decision in British Columbia v Greengen Holdings Ltd. (previously reported on here).^[2] 

In Greengen, the lower court had awarded $10m against the provincial government for misfeasance in public office, a rare tort allowing claimants to seek damages from government for unlawful conduct. Claims in misfeasance rarely succeed. The lower court decision, which arguably widened the scope of the tort, had provided a roadmap for developers whose applications were improperly denied to seek damages. 

The BCCA reversed the finding on a narrow and fact specific causation basis.  However, the BCCA did not interfere with or reverse the rest of the lower court’s decision.  As such the case remains useful precedent for parties seeking damages for improperly made government decisions, particularly in the development and environmental permit sphere.

Below, we set out the key takeaways.

Background

The underlying facts are set out in full in our previous post.  In short, between 2003 and 2009, Greengen Holdings Ltd.^[3] planned to develop a run of river hydro-electric project at Fries Creek, near Squamish.  It submitted applications for (i) land tenure over Crown land and (ii) a water license, both necessary for the project, in 2006.

Despite being told that its land tenure application would be granted, in November 2008 Greengen’s principal received a phone call from two assistant deputy ministers who advised that both applications were denied, with formal decisions following in 2009. After an FOI request, Greengen discovered that this volte face was due to the government’s desire to appease Squamish First Nation, who had threatened to sue. Greengen’s position was that the decisions were made unlawfully, in that they were made by the deputy ministers, not the statutory decision makers.

Failure to prove causation

Unusually, B.C.’s appeal was based on a factual analysis. The lower court had found that after the November 2008 phone call, the deputy minister had (improperly) persuaded the statutory decision maker in respect of the grant of land tenure to reverse his decision.

However, in respect of the grant of a water licence, the statutory decision maker’s evidence was that she had not made a decision in 2008, was unaware of the phone call, and made her decision in August 2009 (to deny the license) freely and based on a range of factors. There was no adverse credibility finding against her.  The BCCA determined that Greengen could not show that it would have obtained the water licence, which was necessary for the project to proceed, and rejected the idea that the decision was “tainted” by the telephone call.  On that basis, Greengen could not prove that the government had caused it any loss.

What developers and project proponents should take from this case

1. Case remains good precedent. While the BCCA overturned the result, it did not comment negatively on the analysis of the law of misfeasance. As we previously commented, Greengen is in line with a growing trend of ‘Category B’ cases,^[4] where misfeasance does not require proof of an intention to harm the plaintiff. Greengen also provided useful plaintiff-friendly law on the interaction of limitation law and FOI requests, the use of inference, as well as the interaction between aboriginal consultation and rights owed to private parties. These parts of the trial decision remain good law and will be useful to parties pursuing these claims.

2. Injustice without remedy? The BCCA recognized the injustice that the government had acted unlawfully, knowing that it would harm the Plaintiff, but that the Plaintiff was left without a remedy.^[5] The Court justified this on pure causation and evidential grounds. However, it is unsatisfying that government employees should be, in effect, allowed to act unlawfully without any consequence. This leaves a lacuna in the law which needs to be addressed.

This is especially the case on the facts of Greengen, where the relevant information showing the unlawful conduct was only obtained by FOI, and so a judicial review (which was commenced and ultimately abandoned) would have been ineffective.

3. A hard look at causation. Our previous post highlighted that the lower court had been willing to make significant inferences in finding for the plaintiff, because of the lack of evidence on key interactions between government employees and decision makers. This included, in effect, considering that the water licence decision was ‘tainted’ by the November 2008 phone call, and therefore made improperly.

The BCCA did not explicitly reject the use of inference (and in fact declined to comment on this part of the government’s appeal). However, the court emphasized the need for “clear proof” of the causation element of the tort. The result presents an ongoing difficulty for plaintiff counsel in similar cases, who often face opaque interdepartmental government processes and undocumented communications.

4. Rejection of contingency analysis. The trial judge (somewhat neatly) had addressed the difficulties of this case by reducing the award from the $56m sought to approximately $10m, in order to account for the possibilities that the project might have not proceeded. A further reduction of the award might have been an appropriate way in which to address the injustice in this instance without overly compensating the plaintiff. However, the BCCA’s decision rejected this pathway.

5. More aggressive cross examination. One potential effect of the appeal decision is that plaintiffs will be encouraged to more aggressively challenge defence witnesses, who will naturally be defensive and may seek to ‘backstop’ the government’s position. For example, here, the decision maker’s critical evidence - given some 14 years later - was that she was unaware of the November 2008 call and made her decision independently (although there was evidence to the contrary).

Counsel pursuing these cases will need to rigorously challenge this defence evidence, seeking smoking gun evidence and / or adverse credibility findings against government witnesses.

This development is somewhat against the trend in ‘Category B’ cases, which are focused on illegality and recklessness towards a plaintiff, and do not require proof of intention or animosity.^[6] This result may lead to more pointed discovery and aggressive cross-examination of government witnesses, an unhelpful development in the law.

Conclusion

The decisions in Greengen remain significant precedent for future claims in the tort of misfeasance in public office. The BCCA decision is a reminder that these claims are complex, both legally and because of the lack of evidence of internal government processes and communications.

For developers and project proponents alike, these claims remain a ‘hail mary’ remedy, and are dependent on obtaining critical evidence. Clients may be best advised to exhaust other more timely options, including negotiation, injunctive relief and judicial review, in the hopes of rescuing a project, rather than seek damages after the fact.

[1] “BCCA”