Canada: Public Values, Private Law: The Key SCC Private Law Cases In 2020

Introduction

In 2020 the Supreme Court of Canada tested the boundaries between public and private law, releasing several decisions in which the Court struggled with the role that Courts should be playing in holding parties to public standards of justice and fairness in their private dealings. What follows is a case commentary on those key decisions.

Case Commentary

2020 was an unprecedented year for private law cases at the Supreme Court of Canada. The Court began the year with the groundbreaking decision in Nevsun Resources Ltd v Araya, where a divided court debated the role of public international law norms in defining private civil remedies. It ended the year with another groundbreaking decision in C.M. Callow Inc v Zollinger, concerning the scope of the duty of honest performance, where the Court, while reaching a clear result, showed once again deep disagreements about how public norms of fairness and justice should inform how the Court thinks about private obligations.

Along the way, the Court made some radical changes, abolishing the doctrine of waiver of tort (in Atlantic Lottery Corp Inc v Babstock) and expanding the doctrine of unconscionability (in Uber Technologies Inc v Heller) in new ways that could invite greater scrutiny of standard-form contracts.

The issues debated in these cases-in many cases opening deep fault lines in the Court-are more than simply philosophical disagreements. At the level of principle and outcome, this year has shown (albeit not universally) a marked trend. A growing consensus in the Court is forming, showing an increasing willingness to resolve private disputes by applying more universal "public" norms in ways that undermine the common law's traditionally strong preference for individual autonomy and private ordering as the primary source of civil obligations.

Nevsun Resources Ltd v Araya

The Court kicked off this public-private debate, and began 2020 with a bang, releasing a decision that opened the door to a wholly new private law cause of action rooted in the violation of public international law norms taking place in another country.

In Nevsun, three Eritrean conscripts alleged that they were forced to work in a mine in which a Canadian company, Nevsun, held an indirect majority interest. In addition to forced labour, they alleged that they were subjected to violent, cruel, inhuman and degrading treatment. They claimed damages against Nevsun for breaches of customary international law norms prohibiting this treatment. They also claimed damages for domestic torts based on the same conduct, including conversion, battery, "unlawful confinement" (false imprisonment), conspiracy, and negligence. The defendant, Nevsun, moved to strike the claims, alleging that the claims disclosed no reasonable cause of action for breach of customary international law and that the act of state doctrine precluded Canadian courts from assessing the legality of sovereign acts of the Eritrean State committed in Eritrea. Nevsun's motion to strike the claims was unsuccessful before both the British Columbia Supreme Court and the British Columbia Court of Appeal.

In a sweeping decision, a majority of a deeply divided Supreme Court of Canada dismissed the appeal, allowing the claims under customary international law to proceed. Abella J. for the majority and Brown J. for the dissenting judges espoused sharply different approaches to private law, with Abella J. finding no reason why Canadian courts could not apply customary international norms by recognizing a civil claim between private parties for breach of those norms. Brown J. strongly disagreed, noting the absence of any principled foundation for the majority's reliance on public international law norms to create a private civil claim in Canada based on conduct that occurred in a foreign country. As Brown J. noted, there is no consensus capable of creating a customary international law norm granting private parties causes of action to vindicate such norms, noting the irony that the majority would allow these private claims even though Canadian courts would not recognize similar private law claims for breach of domestic statutes such as the criminal code.

Because it arose on a pleadings motion Nevsun did not create a cause of action. But the fact the majority was prepared to consider the issue at all opened up a larger debate that continued through the year about how "public" norms of justice and fairness should influence matters of private law.

Calludus and Capital Steel: A Coherent Approach to Insolvency

Tellingly, the disagreement among members of the Court was less acute in the two major insolvency decisions released this year, 9354-9186 Québec inc v Callidus Capital Corp ("Callidus") and Chandos Construction Ltd v Deloitte Restructuring Inc ("Capital Steel").

Callidus was a unanimous decision, and Capital Steel included a lone dissent by Côté J. Callidus was a CCAA case concerning the scope of a supervising judge's discretion to disqualify a creditor from voting on a plan where its vote is vitiated by an improper purpose. It also considered whether a supervising judge can approve a litigation funding arrangement as interim financing where the litigation involved a claim against the secured creditor whose vote was disqualified. Callidus was noteworthy primarily because of what it didn't decide. The issue of whether and on what grounds it was appropriate for Callidus to renounce its security and vote on its own plan of arrangement could have led the Court into a canyon that would have caused it to grapple with principles of equitable subordination. By eschewing fixed rules, both as to creditor voting and as to the appropriateness of litigation funding as interim financing, the Court preserved the wide discretion governing CCAA supervising judges to pragmatically police the good faith of stakeholders in large insolvencies.

Similarly, in Capital Steel, 2020's other major insolvency decision, a strong majority of eight judges reaffirmed the continuing relevance of the anti-deprivation rule, a principle of public policy that invalidates provisions in private agreements that remove value from a debtor's estate in the event of an insolvency. Capital Steel concerned a provision in a private agreement between a contractor and subcontractor in which the subcontractor agreed to pay the contractor an inconvenience fee of 10 per cent of the subcontract price in the event the subcontractor became bankrupt.

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