Unloading in the evening

Unloading in the evening

Tuesday, December 17, 2019

Organized Pseudolegal Commercial Arguments. What?


If you think the title of this article is lawyer-speak or legalese, you’re right.  But the mental gymnastics required to understand the meaning of the term Organized Pseudolegal Commercial Argument (“OPCA”) pale in comparison to the effort required of Canadian judges to understand the OPCAs being advanced in cases before them.  Most often in an effort to avoid taxes or other financial obligations, OPCA litigants argue that they are a double or split person – one part being a physical human being and the other being a non-physical legal person or “juristic person”.  The physical human beings give notice to governments, creditors, and the Courts that they have relinquished and are separate from their non-physical legal persons and, therefore, are not responsible to follow government regulations, pay taxes, pay debts, etc.

In an oft-cited case called Meads v. Meads, Associate Chief Justice J.D. Rooke of the Alberta Court of Queen’s Bench took it upon himself in his reasons for decision to explore and challenge the OPCA movement, which he viewed as an abuse of Canada’s legal system.  Rooke A.C.J. explained:

This Court has developed a new awareness and understanding of a category of vexatious litigant. As we shall see, while there is often a lack of homogeneity, and some individuals or groups have no name or special identity, they (by their own admission or by descriptions given by others) often fall into the following descriptions: Detaxers; Freemen or Freemen-on-the-Land; Sovereign Men or Sovereign Citizens; Church of the Ecumenical Redemption International (CERI); Moorish Law; and other labels - there is no closed list. In the absence of a better moniker, I have collectively labelled them as Organized Pseudolegal Commercial Argument litigants [“OPCA litigants”], to functionally define them collectively for what they literally are. These persons employ a collection of techniques and arguments promoted and sold by ‘gurus’ (as hereafter defined) to disrupt court operations and to attempt to frustrate the legal rights of governments, corporations, and individuals.

Over a decade of reported cases have proven that the individual concepts advanced by OPCA litigants are invalid. What remains is to categorize these schemes and concepts, identify global defects to simplify future response to variations of identified and invalid OPCA themes, and develop court procedures and sanctions for persons who adopt and advance these vexatious litigation strategies.

One participant in this matter, the Respondent … appears to be a sophisticated and educated person, but is also an OPCA litigant. One of the purposes of these Reasons is, through this litigant, to uncover, expose, collate, and publish the tactics employed by the OPCA community, as a part of a process to eradicate the growing abuse that these litigants direct towards the justice and legal system we otherwise enjoy in Alberta and across Canada. I will respond on a point-by-point basis to the broad spectrum of OPCA schemes, concepts, and arguments advanced in this action by [the Respondent].

Meads v. Meads was decided in 2012; OPCA litigants hardly seem to have been deterred by the chastisement of Rooke A.C.J. and the consistent failure of their arguments in the years following.   In May of this year, the Court of Appeal for Ontario heard an appeal from the dismissal of an application by two individuals who maintained that various sections of the Income Tax Act, the Excise Tax Act, and the Ontario Business Corporations Act are of no force or effect because they infringe on the individuals’ rights to life, liberty and security of the person as guaranteed by Section 7 of the Canadian Charter of Rights and Freedoms.  The individuals sought repayment by the government of approximately $2.9 million in “withholdings”, $447,000 in HST, and $485,000 in accounting fees.  They also requested an award of “tort damages” of $1.925 million. 

In its reasons dismissing the appeal, the Court of Appeal summarized the OPCA relied upon by the applicants:

The appellants assert that while they are entitled to live in the geographic landmass known as Canada, they are not subject to any of the laws enacted by the Juristic Federal Unit Canada, or presumably provinces or municipalities that also enact laws, unless they consent. Arguably arbitrary designations or distinctions drawn by statutes, such as “residency,” or status as officers and directors of privately incorporated companies under provincial laws, do not apply to them without their consent. This, they say, flows from s. 7 of the Charter and also from their reading of Article 1 of the International Covenant on Civil and Political Rights, which binds the Juristic Federal Unit Canada. Consequently they are not subject to the provisions of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), the Excise Tax Act, R.S.C. 1985, c. E-15, or various other pieces of legislation such as Ontario’s Business Corporations Act, R.S.O. 1990, c. B.16.

In essence, the appellants claim the right to live in Canada, but to be free from the obligations and language of any laws they do not choose to accept. This they say is an implication of “[t]he right to choose as guaranteed by s.7 of the Charter”.

No doubt to the disappointment of OPCA litigants everywhere, the Court of Appeal concluded that: “At least as long as they continue to live in Canada, to reside here, the appellants are subject to federal and provincial laws that apply to residents of Canada, including the Income Tax Act.”  However, this decision and the many similar decisions that preceded it will likely do little to deter OPCA litigants from pushing on with the fight to live in Canada free of the burdens of law and government.

Monday, December 16, 2019

CER: A new acronym, but much the same old NEB for landowners


The Federal Government’s Bill C-69, legislation “to modernize” the National Energy Board and the Canadian Environmental Assessment Agency, was passed by Parliament and received Royal Assent in June, 2019.  The new Canadian Energy Regulator Act, which replaces the National Energy Board Act, came into force on August 28, 2019.  With that, the 60-year old National Energy Board (“NEB”) is no more; Canada’s energy regulator will now be known as the “Canadian Energy Regulator” or “CER”.  While much of the controversy about Bill C-69 has involved conflict between proponents and opponents of the oil and gas industry in the Western Provinces, the new CER and CER Act do have relevance for any Ontario landowner affected by federally-regulated pipelines or electricity transmission corridors.

In general, an energy project falls under federal regulation when it crosses provincial or international boundaries.  Enbridge’s Line 9 Pipeline might be the best known example of a federally-regulated pipeline in Ontario – it was originally constructed in the 1970s to carry oil received from Western Canada at Sarnia onto Montreal in the east.  Later the flow was reversed to carry oil from east to west.  In 2011, Enbridge applied to the NEB for permission to re-reverse a portion of Line 9 – Line 9A.  In 2012, Enbridge applied to re-reverse the balance of Line 9 – Line 9B – and to increase the capacity of the overall line.  The NEB approved both projects.

For any future federally-regulated pipeline or electricity transmission project planned for Ontario (think, TransCanada’s recent Energy East proposal), the CER will now be the body to receive and consider the project application.  From the perspective of landowners affected by proposed new projects, there is not likely to be much if any difference between dealing with the NEB and dealing with the CER.  Landowners whose lands are required for a project will still be able to apply to intervene in project application hearings in hopes of having some influence on the location and construction of projects.  It does not appear that the hearing processes for project approvals will change for landowners under the new legislation.

What has changed is the process for seeking compensation arising from federally-regulated pipeline projects.  The CER Act, like the NEB Act, provides that:

A company must, in the exercise of the powers granted by this Act or a Special Act, do as little damage as possible, and must make full compensation in the manner provided in this Act and in a Special Act to all persons interested, for all damage sustained by them by reason of the exercise of those powers.

Historically, compensation for damages suffered as a result of federally-regulated pipeline projects was addressed under the Railway Act.  A landowner could apply to have a County Court judge sit as arbitrator to determine the compensation to be paid for land rights acquired for a pipeline, or damages and losses sustained during and after construction of the pipeline.  More recently under the NEB Act, a claimant would need to apply to the Minister of Natural Resources for Canada to appoint an ad hoc (case-specific) Arbitration Committee to decide on compensation.  Under the new CER Act, the CER’s own Commission will hear compensation arbitration cases.  The Commission, currently composed of six commissioners, is the same quasi-judicial body that will hold hearings and make decisions on project applications for the CER. 

It remains to be seen what effect this transfer of responsibility for compensation to the CER Commission itself will have on landowner compensation cases.  Previously, the members of the NEB would make decisions on the approval of projects, and would grant Right of Entry Orders (expropriation) to lands where necessary, but would not deal with the issue of compensation.  Now, the Commissioners will be hearing claims for compensation as well.  Although compensation cases will still be handled separately from project approvals and Right of Entry applications, it may be that the experience of the Commissioners in compensation arbitrations will carry over into their dealings with pipeline landowners in project applications and Right of Entry applications, and vice versa.  The Commissioners may gain a better understanding than the members of the NEB had as to whether project impacts on landowners being considered at the project approval stage should be addressed through additional project mitigation measures or can adequately addressed through compensation. 

The Commission’s responsibility for pipeline landowner compensation may also make the process more accessible for landowners.  Under the NEB Act, landowners had to write to the Minister of Natural Resources for Canada and request that an arbitration committee be formed to determine compensation.  An arbitration committee would then be created to hear the specific case, assuming the Minister agreed that the landowner’s claim for compensation was covered by the NEB Act.  The CER Commission will be a more permanent and consistent body, perhaps with a new standardized application process and publicly-accessible decisions.  Access to decisions made by the Pipeline Arbitration Committees under the NEB Act has been severely restricted, meaning that landowners have had limited ability to rely upon past compensation decisions in their dealings with pipeline companies.  With a new process and enhanced access to past decisions, landowners would be in a better position to contest pipeline compensation through arbitration where necessary.

Tuesday, December 10, 2019

Reversing the regretted farm transfer and other uses of the resulting trust


Most often (but not always) with the best of intentions, a parent may transfer part of his or her ownership interest in a farm property to a child for little or no consideration.  In some cases, the parent intends to gift the ownership interest outright with the understanding that the child will be the true owner of the interest going forward.  In other cases, the transfer might be in connection with a plan to operate the farm with the child, who will contribute labour to the operation going forward in repayment to the parent.  Often the parent makes the transfer in contemplation of an estate plan or farm succession plan; for instance, a parent may add a child on title to a property as a joint tenant so as to avoid payment of probate tax in the future on the death of the parent, at which time the parent’s ownership interest will pass automatically to the child. 

Unfortunately, life after a gratuitous transfer of ownership can fall far below the expectations of the parent.  Parent and child may not get along as joint operators of a farm.  A child may turn out to be an unexpected prodigal.  Whatever the reason, parents sometimes come to regret having transferred the ownership interest and look for ways to reverse the transfer.  In certain circumstances, the law will allow the parent, the transferor, to recover ownership from the child, the transferee, on the basis of a “resulting trust”.

Canadian law presumes that the transfer of ownership results from a fair bargain, not a gift.  If a transfer is made without proper consideration in return (i.e. a gratuitous transfer), the law normally presumes a resulting trust in favour of the transferor.  The transferee is presumed to be holding legal title in trust for the transferor’s benefit – the transferee may be registered as legal owner of a certain interest on title to a property, but the transferor remains the beneficial owner of that interest, which is to be returned to the transferor on demand.  The presumption is rebuttable by the transferee, who may show on a balance of probabilities that the transferor had an intention to gift the ownership interest outright.  The transferee might also show that the transfer was not in fact gratuitous at all – that there was an exchange of consideration and a “fair bargain”.

If persuaded that a transfer of ownership was gratuitous, and that the transferor did not intend to make a gift, the Court may make an order setting aside the original transfer and restoring full legal ownership to the transferor.  Although the presumption of resulting trust is a legal tool of general application, the Court’s analysis is heavily fact-driven, and the outcome of each case will depend on its particular circumstances. 

Ontario’s Court of Appeal has found that the resulting trust continues to apply where assets are held within a corporation, and the transferee receives shares in the corporation without proper consideration; the focus of the analysis should be on the substance of the transaction, not the form.  The transferee’s interest in the assets as a shareholder in the corporation would be subject to the presumption of resulting trust, rebuttable by showing that there was an intention to gift the interest in the assets to the transferee.  Where the resulting trust is found to apply, the Court could order that legal ownership of the shares be restored to the transferor.

A resulting trust can also be presumed in situations where two parties acquire property jointly, but only one of the parties puts up the consideration paid in the transaction.  Depending on the circumstances, the party who paid the consideration may be entitled to the beneficial ownership of the entire property while the other non-contributing owner holds his or her legal ownership interest in trust for the other.

Claims based on a resulting trust argument sometimes arise in the context of estate proceedings, after the transferor parent has passed away.  As noted above, a surviving joint tenant will become the full owner of a jointly owned property where the other joint tenant dies; the jointly owned property does not become part of the estate of the deceased available for distribution to beneficiaries under a will or otherwise.  Those beneficiaries may argue that a jointly held property should nevertheless form part of the estate of a deceased parent on account of a resulting trust. 

Similarly, in bankruptcy proceedings, creditors of a bankrupt may argue that a certain property legally owned by another party forms part of the bankrupt’s estate (for purposes of satisfying the bankrupt’s debts) by way of a resulting trust.  And the opposite situation can occur as well, with creditors of an alleged beneficial owner of a property arguing against the inclusion of the property in the estate of the bankrupt legal owner so as to keep it out of the hands of the bankrupt’s creditors.