Authorson by his Litigation Guardian Majoros v. The

Attorney General of Canada*

[Indexed as: Authorson v. Canada (Attorney General)]

58 O.R. (3d) 417

[2002] O.J. No. 962

Docket Nos. C35254 and C35835

Court of Appeal for Ontario

Weiler, Austin and Goudge JJ.A.

March 13, 2002

* Application for motion to expedite the application and application for leave to appeal to the Supreme Court of Canada was granted with costs to the respondent in any event of of the cause, December 10, 2002 (McLachlin C.J.). S.C.C. File No. 29207. S.C.C. Bulletin, 2002, p. 1835.

Constitutional law -- Canadian Bill of Rights -- Enjoyment of property -- Due process -- Government administering pensions for war veterans -- Government depositing funds in consolidated revenue fund -- Government breaching fiduciary duty by failing to invest funds and by failing to pay interest -- Section 5.1(4) of Department of Veterans Affairs Act not barring claim -- Section inoperative as contrary to Bill of Rights -- Canadian Bill of Rights, R.S.C. 1985, App. III, ss. 1(a), 2(e) -- Department of Veterans Affairs Act, R.S.C. 1985, c. V-1, s. 5.1(4).

Crown -- Liability -- Breach of fiduciary duty -- Government administering pensions for war veterans -- Government depositing funds in consolidated revenue fund -- Government breaching fiduciary duty by failing to invest funds and by failing to pay interest -- Claim not barred by s. 9 of Crown Liability and Proceedings Act -- Section 5.1(4) of Department of Veterans Affairs Act not barring claim -- Section inoperative as contrary to Bill of Rights -- Canadian Bill of Rights, R.S.C. 1985, App. III, ss. 1(a), 2(e) -- Crown Liability and Proceedings Act, R.S.C. 1985, c. C-50, s. 9 -- Department of Veterans Affairs Act, R.S.C. 1985, c. V-1, s. 5.1(4).

Trusts -- Breach of trust -- Breach of fiduciary duty -- Failure to invest -- Failure to pay interest -- Government administering pensions for war veterans -- Government depositing funds in consolidated revenue fund -- Government breaching fiduciary duty by failing to invest funds and by failing to pay interest.

The Crown, under several statutes, provided a disability pension, a treatment allowance and an income supplement to war veterans. For all three kinds of funds, the governing legislation made provision for the designation of an administrator to manage the funds, and sometimes private funds, for a war veteran who was incapable of managing them. JPA, who was a disabled war veteran, was the representative plaintiff in a certified class action against the federal Crown, which, through the Department of Veterans Affairs ("DVA"), had administered the plaintiff's pension because he was incapable of doing so himself. During the years it administered the funds, the DVA neither invested them nor accrued interest on them, and JPA alleged that this was a breach of fiduciary duty. In 1990, pursuant to s. 21(2) of the Financial Administation Act, R.S.C. 1985, c. F-11, the Crown began to pay interest, and it also enacted s. 5.1(4) of the Department of Veterans Affairs Act to prohibit any claim for inter est on the funds prior to January 1, 1990. JPA sued for compensation for the Crown's alleged breach of fiduciary duty, and both he and the Crown moved for summary judgment. JPA's motion was granted by Brockenshire J., and the Crown's motion was dismissed. JPA was awarded costs on a solicitor and client basis fixed at $668,000. The Crown appealed.

Held, the appeal should be dismissed.

Austin and Goudge JJ.A. (Weiler J.A. concurring): Brockenshire J. did not err in concluding that the Superior Court of Justice had jurisdiction. JPA's claim did not arise from the acts or omission of any board, commission or other tribunal subject to judicial review under the exclusive jurisdiction of the Federal Court (Trial Division) by virtue of s. 18(1) of the Federal Court Act, R.S.C. 1985, c. F-7. The action, rather, was a claim for equitable relief against the Crown for breach of fiduciary duty.

Brockenshire J. was correct in finding that the Crown had breached its fiduciary duty to the members of the class. Once a veteran is awarded a pension, the payments are the veteran's property, and the Crown is required by statute to administer the funds for the benefit of the veteran. The legislative scheme did not set up a closed system of administrative law excluding the private law of fiduciary duty. The principles of fiduciary duty laid down and developed from Guerin v. R. took the case out of the public law realm of a "political trust". By contrast, the political trust cases involve not private funds but public funds or property held by the Crown, whose distribution is found to be the province of the political arena, not the courts. When a veteran is incapable of managing funds for himself and the Crown is directed to administer his funds for his benefit, the Crown is under a fiduciary duty to the veteran. In the circumstances of this case, the Crown undertook to do with the veteran's money what he would do for himself if he were able to. This undertaking required that the funds not sit idle but rather that the Crown grow the funds by investing them or accruing interest on them. The Crown breached its fiduciary duty by failing to invest or pay interest on the funds under its administration. Brockenshire J. was correct in finding that this claim was not barred by the Crown Liability and Proceedings Act.

While s. 5.1(4) of the Department of Veterans Affairs Act barred JPA's claim, the section infringed s. 1(a) and s. 2(e) of the Canadian Bill of Rights, and there is no act of Parliament declaring that it shall operate notwithstanding the Bill. Assuming without deciding that "due process" under the Bill is limited to matters of procedure, s. 5.1(4) must still be found inoperative because there was no evidence before the court that those whose property rights were foreclosed by the section were made aware of the intention of Parliament to pass this legislation or accorded any other process to contest the complete removal of their rights to receive interest. The appropriate remedy was to declare s. 5.1(4) inoperative insofar as it concerned the claims made in this action.

Finally, Brockenshire J. made no error in awarding solicitor and client costs and fixing the quantum as he did.

Cases referred to

Arsenault v. Canada (1995), 104 F.T.R. 28, 131 D.L.R. (4th) 105 (T.D.); Attorney General for Canada v. Hallet and Carey Ltd., [1952] A.C. 427 (P.C.); Authorson v. Canada (Attorney General) (2001), 53 O.R. (3d) 221, 84 C.R.R. (2d) 211 (S.C.J.); Berneche v. Canada (1990), 34 F.T.R. 85 (T.D.); Callie v. Canada, [1991] 2 F.C. 379, 41 F.T.R. 59, 40 E.T.R. 276 (sub nom. Callie v. R.); Chippewas of Sarnia Band v. Canada (Attorney General) (2000), 51 O.R. (3d) 641, 195 D.L.R. (4th) 135, 41 R.P.R. (3d) 1 (C.A.); Guerin v. R., [1984] 2 S.C.R. 335, 59 B.C.L.R. 301, 13 D.L.R. (4th) 321, 55 N.R. 161, [1984] 6 W.W.R. 481, 20 E.T.R. 6, 36 R.P.R. 1, revg [1983] 2 F.C. 656, 143 D.L.R. (3d) 416, 45 N.R. 181, [1983] 2 W.W.R. 686, 13 E.T.R. 245 (C.A.), [1982] 2 F.C. 385, 10 E.T.R. 61 (T.D.), supp. reasons [1982] 2 F.C. 445, 127 D.L.R. (3d) 170 (T.D.); Hodgkinson v. Simms, [1994] 3 S.C.R. 377, 97 B.C.L.R. (2d) 1, 117 D.L.R. (4th) 161, 171 N.R. 245, [1994] 9 W.W.R. 609, 16 B.L.R. (2d) 1, 22 C.C.L.T. (2d) 1, 57 C.P.R. (3d) 1, 95 D.T.C. 5135, 5 E.T.R. (2d) 1; Hogan v. R., [1975] 2 S.C.R. 574, 9 N.S.R. (2d) 145, 26 C.R.N.S. 207, 18 C.C.C. (2d) 65, 2 N.R. 343, 48 D.L.R. (3d) 427; Kinloch v. Secretary of State for India in Council (1882), 7 App. Cas. 619 (H.L.); Langille v. Canada, [1992] 2 F.C. 208, 140 N.R. 304 (C.A.) (sub nom. H. & L. Langille Enterprises, Re); M. (K.) v. M. (H.), [1992] 3 S.C.R. 6, 96 D.L.R. (4th) 289, 142 N.R. 321, 14 C.C.L.T. (2d) 1; McBain v. Lederman, [1985] 1 F.C. 856, 22 D.L.R. (4th) 119, 62 N.R. 117, 18 C.R.R. 165, 85 C.L.L.C. 17,023 (C.A.); O'Connor v. Canada (1995), 94 F.T.R. 93 (T.D.); Ocean Port Hotel Ltd. v. British Columbia (General Manager, Liquor Control and Licensing Branch), [2001] 2 S.C.R. 781, 93 B.C.L.R. (2d) 1, 204 D.L.R. (4th) 33, 274 N.R. 116, [2001] 10 W.W.R. 1; R. v. Beauregard, [1986] 2 S.C.R. 56, 30 D.L.R. (4th) 481, 70 N.R. 1, 26 C.R.R. 59 (sub nom. Beauregard v. Canada); R. v. Bryan (1999), 134 Man. R. (2d) 61, 170 D.L.R. (4th) 487, 193 W.A.C. 61, [1999] 6 W.W.R. 714, 133 C.C.C. (3d) 217 (C.A.) [Leave to appeal to S.C.C. refused (2000), 253 N.R. 194n, 145 Man. R. (2d) 320n, 218 W.A.C. 320n]; R. v. Drybones, [1970] S.C.R. 282, 10 C.R.N.S. 334, 71 W.W.R. 161, 9 D.L.R. (3d) 473, [1970] 3 C.C.C. 355; R. v. Hayden (1983), 23 Man. R. (2d) 315, 3 D.L.R. (4th) 361, [1983] 6 W.W.R. 655, 7 C.R.R. 325, 8 C.C.C. (3d) 33, 36 C.R. (3d) 187 (C.A.) [Leave to appeal to S.C.C. refused [1983] 2 S.C.R. xi]; R. v. Morgentaler, [1976] 1 S.C.R. 616, 30 C.R.N.S. 209, 4 N.R. 277, 20 C.C.C. (2d) 449, 53 D.L.R. (3d) 161; Sarvanis v. Canada (2000), 184 D.L.R. (4th) 124, 252 N.R. 131 (C.A.) [Leave to appeal to S.C.C. allowed (2000), 263 N.R. 398n, 179 F.T.R. 153n]; Singh v. Canada (Minister of Employment and Immigration), [1985] 1 S.C.R. 177, 17 D.L.R. (4th) 422, 58 N.R. 1, 14 C.R.R. 13, 12 Admin. L.R. 137; Tito v. Waddell (No. 2), [1977] 3 All E.R. 129, 121 Sol. Jo. 10 (Ch. D.); Vona v. Canada (1994), 20 O.R. (3d) 589 (Gen. Div.); Wells v. Newfoundland, [1999] 3 S.C.R. 199, 180 Nfld. & P.E.I.R. 269, 177 D.L.R. (4th) 73, 245 N.R. 275, 548 A.P.R. 269, 46 C.C.E.L. (2d) 165, 99 C.L.L.C. 210-047

Statutes referred to

An act to amend the statute law in relation to war veterans, S.C. 1990, c. 43, s. 2, 64(2)

Canadian Bill of Rights, R.S.C. 1985, App. III, Preamble, ss. 1, 2

Canadian Bill of Rights, S.C. 1960, c. 44

Canadian Charter of Rights and Freedoms

Canadian Wheat Board Act, R.S.C. 1985, c. C-24

Constitution Act, 1867, s. 91

Crown Liability and Proceedings Act, R.S.C. 1985, c. C-50, ss. 2 ("liability"), 3, 9

Department of Veterans Affairs Act, R.S.C. 1985, c. V-1, ss. 5.1(4)

Federal Court Act, R.S.C. 1985, c. F-7, s. 2(1), 18(1), (3), 18.1(3)

Financial Administration Act, R.S.C. 1985, c. F-11, s. 21(2)

Pension Act, R.S.C. 1985, c. P-6, ss. 14, 111

Pension Act, S.C. 1919, c. 43, ss. 2, 7

Pension Amendment Act, S.C. 1939, c. 32, s. 2

Pension Amendment Act, S.C. 1946, c. 62, s. 13

War Veterans Allowance Act, R.S.C. 1985, c. W-3

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, Rule 20

Authorities referred to

Hogg, P.W., and Monahan, P.J., Liability of the Crown, 3rd ed. (Toronto: Carswell, 2000)

House of Commons, Debates, 13th Parl., 2d Sess. (June 27, 1919)

House of Commons, Minutes of Proceedings and Evidence of the Standing Committee on Veterans Affairs, 30th Parl., 4th Sess., Issue No. 4 (March 15, 1979)

Report of the Auditor General of Canada to the House of Commons for the Fiscal Year ended 31 March 1986

APPEAL from a judgment of Brockenshire J. (2001), 53 O.R. (3d) 221, 84 C.R.R. (2d) 11 (S.C.J.) on a motion for summary judgment.

John C. Spencer, William A. Knights, Peter Hajecek and Cynthia Koller, for appellant.

David G. Greenaway, Peter Sengbusch and Raymond G. Colautti, for respondent.

The judgment of the court was delivered by

AUSTIN and GOUDGE JJ.A.: --

Introduction

[1] This proceeding was certified as a class action on October 26, 1999. The respondent is the representative plaintiff for the class. Like those he represents, Mr. Authorson is a disabled war veteran whose pension was administered for him by the federal Department of Veterans Affairs (the "DVA") because he was incapable of doing so himself. The appellant, the federal Crown, acknowledges that during the years it administered these funds, the DVA neither invested them nor accrued interest on them. In this action, the respondent seeks a declaration that this shortcoming is a breach of the fiduciary duty owed by the Crown to him and the other members of the class. Ultimately, the respondent seeks compensation as well.

[2] This proceeding is being case managed by Brockenshire J. and, by agreement of the parties, has been divided into four parts. They are: liability during the lives of the veterans; liability to the veterans' estates and beneficiaries after their deaths; damages assessment regarding live veterans; and damages assessment regarding veterans' estates and their beneficiaries. These appeals deal only with the first of those parts.

[3] On September 13, 2000, following certification and partial discoveries, Brockenshire J. dismissed the appellant's challenge to the jurisdiction of the Ontario Superior Court of Justice to entertain this action. He found nothing in this case that would invoke the exclusive jurisdiction of the Federal Court of Canada.

[4] The appellant and the respondent then each proceeded with motions for summary judgment dealing with the Crown's liability to those veterans who are still alive and to deceased veterans up to the date of their deaths. The appellant's motion sought dismissal of the action. The respondent's motion sought summary judgment on a number of specific issues, before proceeding with the remaining questions in the action.

[5] On October 11, 2000 Brockenshire J. dismissed the appellant's motion and granted the respondent's motion. He issued reasons for judgment (reported at (2001), 53 O.R. (3d) 221, 84 C.R.R. (2d) 11 (S.C.J.)) declaring at pp. 255-56 O.R. that:

(a) The class members had a property interest in their pensions administered by the DVA; that the Crown was a fiduciary to the class members while their funds were being administered by the DVA; and that the Crown breached its fiduciary duty by failing to invest or pay interest on these funds.

(b) Section 9 of the Crown Liability and Proceedings Act, R.S.C. 1985, c. C-50 is not a bar to this action.

(c) Section 5.1(4) of the Department of Veterans Affairs Act, R.S.C. 1985, c. V-1 also is not a bar because it is rendered inoperative as against these claims by the Canadian Bill of Rights, S.C. 1960, c. 44.

[6] On January 10 and June 29, 2001, Brockenshire J. issued orders fixing the costs of the summary judgment motions. He awarded the respondent costs on a solicitor-client basis and fixed those costs at $668,000.

[7] Having obtained leave to appeal the dismissal of its own motion for summary judgment, the appellant appeals from the orders of September 13 and October 11, 2000, and from the orders as to costs. It argues that Brockenshire J. erred in

(a) finding that he had jurisdiction to entertain this action;

(b) finding that the Crown breached its fiduciary duty to the members of the class;

(d) finding that s. 5.1(4) of the Department of Veterans Affairs Act, R.S.C. 1985, c. V-1 did not bar this action;

(e) proceeding by way of summary judgment to grant the respondent the declarations he sought and in dismissing [the] appellant's motion for summary judgment dismissing the action; and

(f) awarding solicitor-client costs and fixing the quantum as he did.

[8] For the reasons that follow, we agree with each of the conclusions reached by Brockenshire J. We would therefore dismiss these appeals. Before turning to these issues in turn, it is helpful to provide an outline of the relevant facts.

The Facts

[9] Since the First World War, the Government of Canada has recognized an obligation to provide pensions and allowances to its war veterans who suffered harm as a consequence of their service to their country.

[10] These pensions and allowances may be described generally as being on account of disability, treatment or indigence. In some cases, for a variety of reasons, the recipients of these pensions were not capable of administering the funds they received. To meet this contingency, Parliament enacted legislation and regulations to provide for these funds to be administered on their behalf.

[11] In some cases, relatives, friends or the Public Trustee provided the administration. In others, the administration was by the federal government. The issue in these proceedings is whether the federal government is liable to the respondent for its failure to invest or pay interest on the respondent's money in the government's hands for administration.

[12] Over the years, these payments have taken a number of different forms, each one authorized by a particular piece of legislation. Three of these are at stake in this litigation.

[13] First, since 1915, the Pension Act, R.S.C. 1985, c. P-6 and its predecessor regulations and legislation (e.g., Orders in Council P.C. Nos. 289 and 867 (April 29, 1915)) have provided disability pensions to war veterans who were either physically or mentally disabled as a result of service.

[14] Second, since 1918, the Department of Veterans Affairs Act, R.S.C. 1985, c. V-1 and its predecessors (e.g., S.C. 1918, c. 42), and the regulations made thereunder, have provided for monetary allowances to veterans receiving active medical treatment.

[15] Third, since 1930, the War Veterans Allowance Act, R.S.C. 1985, c. W-3 and its predecessors (e.g., S.C. 1930, c. 48) have provided income supplements to indigent veterans who served in a theatre of war.

[16] In each case, the governing legislation or regulations established a board or agency to determine the entitlement of a war veteran to a pension or allowance and the quantum of that entitlement. Typical of these provisions is s. 2 of the Pension Amendment Act, S.C. 1939, c. 32, which was in effect when Mr. Authorson was awarded his disability pension. That section gave these and a number of related tasks to the Canadian Pension Commission (the "Pension Commission") using the following language:

. . . the Commission shall have full and unrestricted power and authority and exclusive jurisdiction to deal with and adjudicate upon all matters and questions relating to the award, increase, decrease, suspension or cancellation of any pension under this Act . . . and effect shall be given by the Department [of Veterans Affairs] and the Comptroller of the Treasury to the decisions of the Commission . . . .

[17] For all three kinds of payments (the disability pension, the treatment allowance and the income supplement), the governing legislation or regulations made provision for the designation of an administrator to manage these funds for a pensioner who was incapable of properly managing them for himself. A typical provision is s. 13 of the Pension Amendment Act, S.C. 1946, c. 62, which was in effect when Mr. Authorson's disability pension was placed under administration in 1950. It allowed the Pension Commission to designate itself or the DVA or a private citizen as the administrator. That section reads as follows:

When a pensioner appears to be incapable of expending or is not expending the pension in a proper manner or is not maintaining the members of his family to whom he owes the duty of maintenance, or, in the discretion of the Commission, when a retroactive pension is awarded or a pensioner is receiving treatment or care from the Department [of Veterans Affairs], the Commission may direct that the pension be administered for the benefit of the pensioner and/or the members of his family by the Commission or the Department or by some person selected by the Commission.

[18] Thus, where the war veteran was incapable of properly managing his pension or allowance, the responsible board or agency could designate itself or the DVA or a private citizen such as a family member to administer the pension for the benefit of the veteran. In many cases the designated administrator was the DVA.

[19] This class action is brought on behalf of those veterans whose pensions and allowances were administered for them by the DVA because they were incapable of doing it for themselves.

[20] The affidavit material filed by the appellant (particularly the affidavit of Robert Robinson, the DVA's Director of Financial Policy Planning and Systems) described what would happen in the typical situation where the DVA was named as administrator. When that happened, the DVA would receive a direction to change the name on future cheques from the pensioner to the name of the newly appointed administrator. Where the DVA was to be the administrator, the direction would name a position held by a public official within the DVA as the payee and that official would then be responsible for the administration of that pension. The cheques received by the official would be deposited in an account in the name of the Receiver General at a chartered bank. The funds thus received would be shown for accounting purposes as being in a special purpose account in the name of the veteran, held within the Consolidated Revenue Fund.

[21] The administrator would make payments out of this account as necessary to meet the financial needs of the veteran, most often after seeking permission to do so from the relevant board or agency. However, where the veteran had few such needs because, for example, he remained in hospital where his needs were largely met, there would be few payments out of the account and it would accumulate to a significant size. If the veteran recovered to the point of being capable of handling his own money, the funds held to his credit would be turned over to him and future cheques would then be paid directly to him.

[22] When an incapable veteran acquired funds from some other source such as an inheritance, those "guardianship" funds were often added to this special purpose account and were then administered in the same way. For example, Order in Council P.C. 2161 (December 18, 1924) provided as follows:

The Department of Soldiers' Civil Re-Establishment [later the DVA] is authorized to receive from any department of the Government of Canada or any Provincial Government, or any person, any properties or monies held or payable on behalf of any persons or any properties or monies held or payable on behalf of the dependents of any such persons, whenever such persons are being or have been cared for under the provisions of the Department of Soldiers' Civil Re-Establishment Act, either by medical treatment or training. Such authority shall extend to any case where the person cared for is on the strength of the Department for medical treatment or training or has died while on the strength of the Department or having completed treatment or training has been discharged therefrom.

By Order in Council P.C. 1198 (July 12, 1928), s. 5, this authority was extended to authorize the Department to hold and "dispose of such properties or moneys . . . as may be deemed expedient" or to "dispose of such properties or moneys to the estate of such person if deceased". In 1954, the Deputy Minister (of Veterans Affairs) was further explicitly authorized to pay interest on these funds.

[23] The appellant acknowledges that while the DVA administered these various funds for these war veterans, the funds were neither invested nor credited with interest. It appears that there were some 10,000 of these special purpose accounts being administered by the DVA in the 1970s and 1980s. This number has now dwindled to some 1,000. It also appears that a significant percentage of the accounts contain substantial sums, often ranging from $50,000 to $100,000. Figures like these led counsel for the respondent to estimate before Brockenshire J. that the amount of interest ultimately being claimed in this action might be in the $1 billion range.

[24] As we will describe in more detail later in these reasons, Brockenshire J. found that the material before him indicated that from the 1970s onward, group after group of federal bureaucrats looked at the "problem" of non-payment of interest on the funds being administered for veterans by the DVA. For example, in 1986 the Auditor General reported extensively on the question of "veterans' trust accounts", the DVA's failure to invest or pay interest on them and the possible exposure to legal action as a result.

[25] Then in 1990, the appellant decided to commence the payment of interest on the special purpose accounts being administered by the DVA. It also decided to prohibit any claim for interest on such funds prior to January 1, 1990. The first of these two decisions was effected by the approval of the Minister of Finance, in the form of a letter from the Deputy Minister of Finance, to the Deputy Minister of Veterans Affairs, of the payment of interest pursuant to s. 21(2) of the Financial Administration Act, R.S.C. 1985, c. F-11. The second decision was effected by the enactment of s. 5.1(4) to the Department of Veterans Affairs Act, R.S.C. 1985, c. V-1. It reads as follows:

5.1(4) No claim shall be made after this subsection comes into force for or on account of interest on moneys held or administered by the Minister during any period prior to January 1, 1990 pursuant to subsection 41(1) of the Pension Act, subsection 15(2) of the War Veterans Allowance Act or any regulations made under section 5 of this Act.

[26] Mr. Authorson's own experience provides an example of how all this worked out in practice.

[27] He was born in Bancroft, Ontario on April 14, 1914. He enlisted in the Canadian Armed Forces on September 18, 1939. While on active military service, he became disabled from combat-related mental illness.

[28] He was initially placed in a mental hospital in England, then in St. Anne's Hospital in Sainte-Anne de Bellevue, Quebec. He was subsequently transferred to London, Ontario, first to Westminster Hospital, and finally to Victoria Hospital where he remained as a diagnosed schizophrenic. Medical records indicate that he received a pre-frontal lobotomy while he was under treatment in London. He never married or had children.

[29] In 1944, the Pension Commission determined that though his disability was pre-enlistment, it was aggravated during service in a theatre of actual war. The extent of his pensionable disability was finally determined following a medical examination in 1950 with the result that he was awarded a full pension. At the same time, the DVA was appointed to administer his pension because he was incapable of doing so himself.

[30] Over the next 40 years, Mr. Authorson received a regular pension except for the periods of time when he received a treatment allowance while receiving medical treatment. The DVA held the funds from both sources and administered these funds for him, together with the personal "guardianship" funds that he acquired during that period of time. From time to time it sought authority from the Pension Commission to release funds for Mr. Authorson's incidental expenses and his occasional holiday travels. However, up to 1990 the funds held by the DVA were not invested nor did they accrue interest.

[31] In 1991, Mr. Authorson's physician certified to the DVA that Mr. Authorson had become competent to manage his own financial affairs and the administration of his funds was terminated. The DVA returned to him the principal amount it was holding for him together with an interest payment for 1990. The DVA's financial statements show that during its administration for Mr. Authorson the DVA accumulated pension and treatment allowance funds in the amount of $117,916 and personal funds in the amount of $166,248.74. None of these funds was invested or earned interest until January 1, 1990. Thus, Mr. Authorson is representative of the class defined by the certification order in this action, namely those awarded a pension or allowance under any of the three Acts who had their funds administered by the DVA without that administrator either investing those funds or paying interest on them.

[32] The essence of the claim is that this failure is a breach of fiduciary duty by the appellant. Brockenshire J. determined that this claim succeeds. In this court, the appellant mounts various challenges to that determination, and to those we now turn.

The Jurisdiction Issue

[33] The question of whether the Federal Court has the exclusive jurisdiction to hear this case is not discussed in the motions judge's reasons because it was dealt with as a preliminary motion to stay. That motion was heard and dismissed on September 13, 2000 and reasons were delivered at that time.

[34] As it did in the court below, the appellant relies on the Federal Court Act, R.S.C. 1985, c. F-7, s. 18(1), which reads as follows:

18(1) Subject to section 28, the Trial Division has exclusive original jurisdiction

(a) to issue an injunction, writ of certiorari, writ of prohibition, writ of mandamus or writ of quo warranto, or grant declaratory relief, against any federal board, commission or other tribunal; and

(b) to hear and determine any application or other proceeding for relief in the nature of relief contemplated by paragraph (a), including any proceeding brought against the Attorney General of Canada, to obtain relief against a federal board, commission or other tribunal.

"Federal board, commission or other tribunal" is defined in s. 2(1) of the Federal Court Act as follows:

"federal board, commission or other tribunal" means any body or any person or persons having, exercising or purporting to exercise jurisdiction or powers conferred by or under an Act of Parliament or by or under an order made pursuant to a prerogative of the Crown, other than any such body constituted or established by or under a law of a province or any such person or persons appointed under or in accordance with a law of a province or under section 96 of the Constitution Act, 1867.

[35] Section 18(3) of the Federal Court Act is also relevant. It provides as follows:

(3) The remedies provided for in subsections (1) and (2) may be obtained only on an application for judicial review made under section 18.1.

[36] And finally, s. 18.1(3) reads in part as follows:

18.1(3) On an application for judicial review, the Trial Division may:

(a) order a federal board, commission or other tribunal to do any act or thing it has unlawfully failed or refused to do or has unreasonably delayed in doing; or

(b) declare invalid or unlawful, or quash, set aside or set aside and refer back for determination in accordance with such directions as it considers to be appropriate, prohibit or restrain, a decision, order, act or proceeding of a federal board, commission or other tribunal.

[37] The statement of claim begins as follows:

The Plaintiff claims:

(a) a declaration that the Department of Veterans Affairs, or alternatively Her Majesty the Queen in right of Canada, breached its, or her, fiduciary duties to the plaintiff;

(b) a declaration that the Department of Veterans Affairs, or alternatively Her Majesty the Queen in right of Canada, has breached the trust between it, or her, and the plaintiff;

(c) damages for breach of fiduciary duty and/or breach of trust equivalent to the difference between the accumulated principal amount of pension, compensation, allowance (including treatment allowance) bonus, grant, other payment or any of his money administered by the Department of Veterans Affairs (i.e. "the administered monies") for the benefit of the plaintiff and the amount which could have been realized if the plaintiff's administered monies had been invested;

(d) a declaration that the defendant holds in trust for the plaintiff, an amount equivalent to the difference between the accumulated principal amount of administered monies paid to the Department of Veteran Affairs for the benefit of the plaintiff and the amount which could have been realized if the plaintiff's administered monies had been invested;

(e) an Order requiring the Department of Veterans Affairs, or alternatively Her Majesty the Queen in right of Canada, to disgorge and/or to make restitution to the plaintiff on account of the profits, proceeds and income that it, or she, reaped as a result of the use and benefit of the plaintiff's administered monies;

(f) an accounting from the defendant of the plaintiff's administered monies received and expended together with the profits realized by the Department of Veterans Affairs, or alternatively Her Majesty the Queen in right of Canada, relating to those monies;

(g) prejudgment interest pursuant to the provisions of the Courts of Justice Act, R.S.O. 1990, Chapter C.43, and amendments thereto;

(h) costs of this action on a solicitor/client basis; and

(i) such further and other relief as this Honourable Court may deem just.

(Emphasis added)

[38] The appellant argues that because the relief sought includes claims for declarations with respect to the DVA, and because the DVA is a "federal board, commission or other tribunal", the Federal Court (Trial Division) has exclusive jurisdiction to hear the claim by virtue of s. 18(1).

[39] Brockenshire J. dismissed the Crown's motion for a stay. In doing so, he held that the action is not one for judicial review of the acts or omissions of the Pension Commission (which was abolished by statute in 1995) or of the DVA. Rather, he held that the action is a claim for equitable relief as against the Crown itself for breach of its duty, fiduciary or otherwise, to invest the money it was administering for the benefit of disabled veterans or, in the alternative, to pay interest on that money.

[40] We agree with that conclusion. The claim does not arise from the acts or omission of any board, commission or other tribunal but from the alleged neglect of the Crown itself. The claim does not seek administrative law remedies. That being the case, there can be no objection to the claim being heard in the Superior Court of Ontario.

The Fiduciary Duty Issue

[41] When the DVA is directed to administer the pension of a veteran who cannot manage his funds for himself, what is the nature of that relationship? Is it, as the appellant argues, a matter of public law that is beyond the scope of private law remedies? Or, as the respondent contends, does the administrator owe a fiduciary duty to the veteran? If the latter, does that fiduciary duty extend to the obligation to invest or accrue interest on the funds being administered? The motions judge addressed the questions by first determining that once a veteran is awarded a pension or an allowance, the resulting payments constitute property in which the veteran has a legal and/or equitable interest. This is so whether the cheques were issued to the veteran or to the administrator on his behalf.

[42] He then went on to decide that the principles laid down in Guerin v. R., [1984] 2 S.C.R. 335, 13 D.L.R. (4th) 321, applied to take this case out of the public law realm of "political trust" and to place a fiduciary duty on the Crown which is required by statute to administer the pension for the benefit of the veteran. Referring to the relevant statutory language, Brockenshire J. put his conclusion this way, at p. 234 O.R.:

These words themselves create a fiduciary obligation between the administrator and the pensioner and/or his family and dependants. I have concluded that the veterans were beneficially entitled to the pensions and allowances granted to them. I therefore find that the Crown, in undertaking to administer those funds on behalf of veterans and their dependants, became at least a fiduciary, subject to the obligations imposed upon individuals in that capacity by the law of equity.

[43] Finally, he concluded that the duty on a fiduciary administering funds for another is no different than the obligation of a trustee in the same circumstances, namely, to invest or accrue interest on those funds. He found that this obligation is not diminished by the legislation regulating the Consolidated Revenue Fund into which the DVA placed the funds under its administration.

[44] Before turning to the appellant's challenges to these findings we can dispose of two uncontroversial matters.

[45] First, the appellant does not seek to distinguish between the DVA and the Crown. Nor could it do so. The DVA is an emanation of the Crown and any fiduciary obligation that rests on it as administrator rests on the Crown of which it is a part.

[46] Second, the appellant does not seriously contest the finding of Brockenshire J. that the veteran has a property interest in the funds under administration. We agree with this conclusion. Once the veteran's entitlement to a pension is determined under the relevant legislation, the payments made to him are his. If the payment of his pension is made to an administrator to manage for his benefit, the veteran retains at least a beneficial interest in the funds under administration.

[47] Certainly the popular understanding of the situation was that pension payments were the property of the veteran. By way of example, Mr. W.F. Nickle, a Unionist (Government) member of the House of Commons Special Committee that drafted the first Pension Act, said in the House of Commons on June 27, 1919, in responding to a statement of Mr. Daniel D. McKenzie, the (Acting) Leader of the Opposition:

If a man gets his pension it is his property, and we should not follow him and insist upon his going to Sunday School, or take it from him if he gets intoxicated.

See Canada, Parliament, House of Commons, Debates, 13th Parl., 2d Sess. (June 27, 1919), at p. 4187.

[48] This popular understanding is echoed in the comments of Mr. Allan Solomon, then chairman of the Pension Commission, before the House of Commons Standing Committee on Veterans Affairs in 1979, during a discussion of the nature of funds under administration:

[George H.] Whittaker (P.C.-B.C.): That money is really his, is it not, Mr. Chairman?

Mr. Solomon: That is so.

Mr. Whittaker: That money is really his.

Mr. Solomon: It certainly is his.

Mr. Whittaker: Right. If it is his own, why should that not be given in trust to the person who is looking after him?

Mr. Solomon: It could very well be.

Mr. Whittaker: Does that happen?

Mr. Solomon: It happens very often. An application could be made.

See Canada, Parliament, House of Commons, Minutes of Proceedings and Evidence of the Standing Committee on Veterans Affairs, 30th Parl., 4th Sess., Issue No. 4 (March 15, 1979), at 4:21-22.

[49] We were advised during argument that there are statutory provisions which the Crown argues preclude funds under administration from becoming part of the veteran's estate upon his death. By agreement of the parties, the effect of these so-called "lapsing" provisions is to be adjudicated in due course before Brockenshire J. and we make no comment on this issue. Suffice it to say that while the veteran is alive, he has at least a beneficial interest in the pension funds, which are being administered for his benefit.

[50] The appellant raises three arguments in challenging the finding that the Crown as administrator has a fiduciary duty to the incapable veteran whose pension it is administering.

[51] First, the appellant says that the legislative scheme sets up a closed system of administrative law in which the relevant board or agency has exclusive jurisdiction and the courts cannot therefore apply the private law of fiduciary duty.

[52] We do not agree. The appellant's argument requires scrutiny of the wording of the relevant legislative provisions which are exemplified by s. 2 of the Pension Amendment Act, supra, which we set out once more:

[53] This administrative scheme (which is essentially replicated for each of the three kinds of payment in issue here) gives the Pension Commission the power to deal with questions relating to the award of a disability pension to a war veteran and the increase, decrease, suspension or cancellation of that pension. However, that jurisdiction is not without limits. For example, once a capable veteran receives a pension payment, the Commission has nothing to say about how the veteran spends it. Its jurisdiction under this section is limited to the powers specified in the section. The issue in this action is not related to the award, increase, decrease, suspension or cancellation of a pension. Rather, the precise issue is whether, once a pension has been awarded and paid, the DVA as administrator has a fiduciary duty to invest the veteran's funds, which it is administering for his benefit, or to accrue interest on the same.

[54] Where a veteran is incapable of managing his pension, the Commission has the additional jurisdiction to direct that the pension be administered for his benefit by the Commission itself, the DVA or some person selected by the Commission.¹ at end of document] Thus, the Commission determines the administrator. The administrator is then required to deal with the pension for the benefit of the incapable veteran. Where the DVA or a private citizen is selected, it is they, not the Commission, who must administer the pension and who have the obligation to do so for the benefit of the veteran. Once a pension is under administration, the legislation does not extend the Commission's jurisdiction to adjudicating whether or not the administrator has failed in this obligation by, for example, failing to accrue interest.

[55] Thus, the appellant is correct to say that the governing legislation stakes out an area of exclusive administrative law jurisdiction relating to veterans' pensions. It is wrong to say that that area extends to the question of whether an appointed administrator has acted improperly in failing to invest or pay interest on the funds it administered.

[56] The legislation simply does not immunize the conduct of the administrator which is challenged in this lawsuit to scrutiny by the courts and private law. The appellant does not appear to contest this conclusion where the administrator is a private citizen and there is no suggestion in the legislation that the result should be any different where the administrator is the DVA.

[57] The appellant's second argument is that if there is a trust here, it is at most a "political trust", enforceable only in Parliament; it is not a fiduciary obligation enforceable in the courts. The appellant says that where there is administration by the Crown of funds in the exclusive possession of the Crown, and where the statutory scheme does not explicitly place a fiduciary duty on the Crown, the Crown is subject only to a governmental obligation, enforceable politically, but not a private law obligation enforceable in the courts.

[58] The appellant relies on two leading English cases which, it argues, compel the result for which it contends. The first is Kinloch v. Secretary of State for India in Council (1882), 7 App. Cas. 619 (H.L.). In that case, the House of Lords determined that a royal warrant that granted booty of war to the Secretary of State for India "in trust" for the officers and men of certain armed forces did not create a trust that was enforceable in the courts.

[59] The second case is Tito v. Waddell (No. 2), [1977] 3 All E.R. 129, 121 Sol. Jo. 10 (Ch. D.). In that case, the Banaban Islanders claimed that certain royalties held by the Crown's representative, the local government commissioner, as a result of mining operations on their land, gave rise to trusts in their favour. These claims failed because the court found an insufficient relationship between the land on which the mining operations took place and the royalties to yield the conclusion that a true trust of the royalties was intended.

[60] In our view, neither of these cases dictates the result contended for by the appellant in this case. Importantly, unlike this case, in neither case could it be said that the funds held by the Crown were in any sense owned by those claiming that the Crown held the funds in trust for them. Here, the fact that each veteran had a property interest in the fund being administered on his behalf is a clear indication that this is not a political trust. By contrast, the "political trust" cases involve not private funds, but public funds or property held by the Crown, whose distribution is found to be the province of the political arena, not the courts.

[61] Nor can these cases be said to require that the express terms of "trust" or "fiduciary" appear in the relevant legislation before such an obligation will be found to bind the Crown. The seminal case of Guerin, supra, demonstrates as much. In his famous judgment in that case, Dickson J. (as he then was) found that a fiduciary obligation rested on the Crown although the statutory framework which was in part the source of that obligation, namely the Indian Act, did not explicitly say so.

[62] The "political trust" cases do however sound a proper note of caution that should be exercised before a court places a fiduciary obligation on the Crown. This is so because the Crown has many tasks to perform in the discharge of its legislative, executive, and public administration responsibilities which are governmental functions to be enforced in the political arena rather than encumbered with court-imposed remedies. Thus, the debate is about the nature of a task given to the Crown by a particular statute. Professors P.W. Hogg and P.J. Monahan, in Liability of the Crown, 3rd ed. (Toronto: Carswell, 2000), put it this way at p. 259:

What the cases show, however, is that, if the beneficiaries are to avoid the catastrophe of the political trust, the statute will have to provide a fairly clear indication that enforceable private rights are contemplated, as opposed to merely public duties. Short of express language, it is not clear what kind of indication will suffice, but the more specific the descriptions of the Crown's duties, the affected property and the class of beneficiaries, the more likely it is that a true trust will be found.

[63] In Tito, supra, at p. 221 All E.R., the court made the same point by saying that:

. . . the determination whether an instrument has created a true trust or a trust in the higher sense [namely a political trust] is a matter of construction, looking at the whole of the instrument in question, its nature and effect, and, I think, its context.

[64] In our view, while the "political trust" cases provide some helpful guidance, they do not compel the conclusion that where the Crown administers funds in its possession pursuant to a statutory scheme that does not explicitly place a fiduciary duty on it, it can be sanctioned only in Parliament, but not in the courts.

[65] The appellant's third argument is that Guerin is distinguishable from this case and should not have been relied on by the motions judge. The appellant argues that the finding in that case by Dickson J., that the Crown was subject to a fiduciary duty, turned on the special nature of Indian title in land and the sui generis relationship between the Crown and native people. Without such a relationship, the argument goes, the Crown should not be found to be a fiduciary but rather simply subject to a "political trust".

[66] This argument is central to the reasoning in Callie v. Canada, [1991] 2 F.C. 379, 40 E.T.R. 276, a case similar to this one, in which the Trial Division of the Federal Court held that in Guerin the sui generis aboriginal interest in land, and not the Indian Act, was the sole source of the fiduciary duty, and since the veteran did not have a comparable interest in the funds under administration, the wording of the Pension Act therefore was not itself enough to impose a trust in favour of the veteran whose funds were being administered by the DVA.

[67] In our view, this argument miscasts the reasoning of Dickson J. in Guerin. In relying on this argument to find no fiduciary duty on the Crown we think that the court in Callie was incorrect. Dickson J. did not find that the sole source of the Crown's fiduciary obligation is the sui generis aboriginal interest in the land in question. Rather, that fiduciary duty is created by the aboriginal right to the land (undoubtedly a sui generis right), together with the obligations placed on the Crown by the Indian Act in disposing of that land. It is the combination of the aboriginal interest in the land with the statutory obligations imposed on the Crown in dealing with that interest which render the Crown subject to the fiduciary obligation. Dickson J. put it this way at p. 376 S.C.R. of Guerin, supra:

In my view, the nature of Indian title and the framework of the statutory scheme established for disposing of Indian land places upon the Crown an equitable obligation, enforceable by the courts, to deal with the land for the benefit of the Indians. This obligation does not amount to a trust in the private law sense. It is rather a fiduciary duty. If, however, the Crown breaches this fiduciary duty it will be liable to the Indians in the same way and to the same extent as if such a trust were in effect.

[68] Moreover, there is no suggestion in Guerin that the Crown cannot be a fiduciary. The result of Guerin is to the opposite effect. At p. 385 S.C.R., Dickson J. said:

The mere fact, however, that it is the Crown which is obligated to act on the Indians' behalf does not of itself remove the Crown's obligation from the scope of the fiduciary principle.

[69] Nor is there any suggestion that the Crown can be a fiduciary only in the context of the Crown and native people. Rather, Dickson J. makes clear that it is the nature of the relationship, not the specific category of actor involved, that gives rise to the fiduciary duty. In the most famous passage in his reasons, he clearly describes the law of fiduciary duty as being of general application, reaching the Crown no less than any other party. That passage is at p. 384 S.C.R. of the judgment:

I do agree, however, that where by statute, agreement, or perhaps by unilateral undertaking, one party has an obligation to act for the benefit of another, and that obligation carries with it a discretionary power, the party thus empowered becomes a fiduciary. Equity will then supervise the relationship by holding him to the fiduciary's strict standard of conduct.

[70] Over the years since Guerin, the Supreme Court of Canada has significantly developed this area of the law. As La Forest J. described in Hodgkinson v. Simms, [1994] 3 S.C.R. 377, 16 B.L.R. (2d) 1, that development begins with Guerin and the seminal passage we have just quoted. This evolution has proceeded with no suggestion that Guerin is to be confined to its facts or to the Crown or to situations of aboriginal title. Rather, Guerin is treated as the foundation of this line of general jurisprudence.

[71] As that jurisprudence has developed, the Supreme Court of Canada has added to the factors considered in Guerin as imposing a fiduciary duty, namely, the undertaking of one party to act for the benefit of another and the discretionary power to do so. For example, in Hodgkinson, La Forest J. refers in addition to whether that discretionary power can be exercised unilaterally so as to affect the beneficiary's legal or political interests and whether one party in the particular relationship exhibits a vulnerability. These are all considerations relevant to determining whether a fiduciary relationship exists. As La Forest J. said in Hodgkinson, at p. 409 S.C.R.:

In these cases, the question to ask is whether, given all the surrounding circumstances, one party could reasonably have expected that the other party would act in the former's best interests with respect to the subject matter at issue.

[72] In our view, therefore, Guerin does not have the limited scope contended for by the appellant. It sets out principles that are relevant to this case. Brockenshire J. did not err in relying on it.

[73] Thus, in our view, the attacks mounted by the appellant on the finding that the Crown is subject to a fiduciary duty all fall short. Rather, we agree with Brockenshire J. that when the Crown through the DVA is directed to administer for the benefit of a veteran his funds, which he is incapable of managing himself, the Crown shoulders a fiduciary obligation to that veteran. The legislation that results in this administration, its nature and effect and its context make this clear. The most important considerations compelling this conclusion are as follows:

(a) The fact that it is the Crown, as administrator, that is obligated to act for the benefit of the veteran does not remove the Crown's obligation from the scope of the fiduciary principle. Guerin says as much.

(b) The funds being administered by the Crown belong to the veteran. For the most part, those funds originate in the veteran's legal entitlement to receive a government pension or allowance. In some cases, however, like that of Mr. Authorson, the funds also include moneys received by the veteran from private sources.

(c) The relevant legislation in each case requires that the veteran be incapable of properly managing his pension. It provides that the Pension Commission or its counterpart may then direct that the pension or allowance be administered by such person as it selects or by the DVA and the legislation requires that the administrator administer the pension for the benefit of the veteran.

(d) In setting up this obligation the legislative provisions make no distinction between the Crown as administrator and a private citizen as administrator. Both must administer the veteran's pension for his benefit.

(e) The exclusive jurisdiction which the legislation gives to the Pension Commission deals with the award, increase, decrease, suspension or cancellation of the veteran's pension. The legislation also gives the Pension Commission jurisdiction to direct an administration of the veteran's funds. Neither jurisdiction extends to the issue at stake here, namely a determination of whether the Crown as administrator has acted for the benefit of the veteran or not. Because it does not touch the question in issue here, this administrative law structure does not insulate the Crown from the application of the fiduciary principle.

(f) The recent decision of Ocean Port Hotel Ltd. v. British Columbia (General Manager, Liquor Control and Licensing Branch), [2001] 2 S.C.R. 781, 204 D.L.R. (4th) 33, 93 B.C.L.R. (2d) 1, is of no assistance to the appellant. Unlike that case, this is not one where it is sought to apply a common law rule in the face of a clear statutory direction. There is nothing in the legislative provisions relevant to this case that clearly directs that the administrator not accrue interest on the funds it is administering. The common law fiduciary obligation is not being applied to override a clear statutory direction.

(g) The nature of the relationship between the administrator and the veteran carries hallmarks that clearly bring it within the fiduciary principle. By statute, the administrator has the obligation to act for the benefit of the veteran in administering his pension. The statute does not spell out how that is to be done but leaves it to the discretion of the administrator. In this relationship, the veteran exhibits the vulnerability that comes with being adjudged incapable of managing his pension for himself. He is dependent on the administrator to do so for his benefit. In the language of La Forest J., quoted above, given all the surrounding circumstances, the veteran reasonably could have expected that the administrator would act in his best interests while administering his pension. These characteristics of the relationship between the administrator and the veteran resonate as strongly where the administrator is the Crown as where the administrator is a private citizen and the appellant does not seriously contest that the latter falls within the scope of the fiduciary principle.

(h) When it is directed to administer a veteran's pension the essential nature of the task undertaken by the Crown is clear. It must act for the benefit of the veteran in managing his funds because the veteran is incapable of doing so himself. This is quintessentially the kind of act, whether done by Crown or citizen, which courts have regulated using the law of fiduciary duty. This task simply cannot be said to be a governmental action or obligation to be regulated by Parliament or perhaps by public law. As administrator, the Crown must respond to only one imperative, that is to act for the benefit of the veteran. This is demanded by the legislation. The Crown as administrator cannot be moved by other policy considerations. It is not choosing between public policy alternatives and cannot be said to be discharging a governmental function or public duty. Rather, it is undertaking a precisely defined duty to a particular veteran, as the result of an individualized determination of incapacity. The essential nature of the task undertaken by the Crown as administrator is thus indicative of a private right, enforceable by the veteran, as opposed to the performance of a public duty by the Crown.

[74] For these reasons, we conclude that Brockenshire J. was correct in finding that the Crown is a fiduciary to those veterans whose funds are being administered by the DVA.

[75] While this fiduciary relationship is trust-like, in that there is a fund and a veteran who is owed a specific obligation by the Crown in connection with it, we need not go on to determine whether the Crown can properly be described as a trustee. As Dickson J. said in Guerin, supra, at p. 386 S.C.R., the law of trusts is a highly developed and specialized branch of the law. Whether this relationship of administrator and veteran meets that standard is unnecessary to determine if Brockenshire J. was correct in finding that the Crown's fiduciary obligation encompasses a duty to invest the funds under its administration or to accrue interest on them. To that question we now turn.

[76] Hodgkinson, supra, at pp. 412-13 S.C.R., makes clear that the precise range of duties which the law places on a fiduciary depends very much on the precise circumstances of the particular relationship. Where an individual has taken on the responsibility of acting for another so as to become a fiduciary, the court will require that he act consistently with his undertaking. This insures that those who may be vulnerable and who have come to reasonably expect that the fiduciary will act in their best interests in a certain respect will not have their expectations dashed. In the words of La Forest J. in M. (K.) v. M. (H.), [1992] 3 S.C.R. 6 at p. 63, 96 D.L.R. (4th) 289, equity will impose on a fiduciary a range of obligations coordinate with his undertaking.

[77] In the circumstances of this case, the Crown as administrator is directed to manage the veteran's fund for his benefit since he is incapable of doing so himself. The Crown thus undertakes to do with his money what he would do for himself if he were able to. That surely requires that the funds not sit idle but rather that the Crown grow the funds by investing them or accruing interest on them. Such an obligation is coordinate with the undertaking of the Crown to administer the funds for the veteran's benefit. It is also consistent with the trust-like nature of this fiduciary relationship, as we have described it. The appellant concedes that the obligation to invest or pay interest on the funds held in trust for another is fundamental to the law governing trustees. In the particular circumstances of this fiduciary relationship, the result should be no different.

[78] Moreover, we can find nothing in the legislation governing the Consolidated Revenue Fund that would prevent the fiduciary duty on the Crown as administrator from encompassing the obligation to accrue interest on the funds it administers.

[79] The Crown accounted for the funds it administered by crediting them to a special purpose account held in the name of each veteran within the Consolidated Revenue Fund. From 1951 onwards, the Financial Administration Act explicitly allowed the payment of interest in respect of monies held in any special purpose account in the Consolidated Revenue Fund. Prior to that, in the first half of the 20th century, although not numerous, there were clearly examples of cases where, by order in council, interest was allowed on funds held on deposit in the Consolidated Revenue Fund for a special purpose. Finally, from the very beginning, the legislative scheme relating specifically to the payment of treatment allowances authorized the payment of interest on them while being administered for the veteran by the DVA (see Order in Council P.C. 2301 (November 21, 1919)).

[80] Hence, there is nothing in the legislative framework providing for these payments and their administration that would undercut the reasonable expectation of the incapacitated veteran that the Crown, in administering his funds in his best interests, would accrue interest on them. In our view, to have the effect of curtailing the Crown's fiduciary duty short of this obligation the legislation would have to clearly indicate that there was no such obligation. This is consistent with the fundamental principle articulated by Major J. in Wells v. Newfoundland, [1999] 3 S.C.R. 199 at p. 218, 177 D.L.R. (4th) 73:

In a nation governed by the rule of law, we assume that the government will honour its obligations unless it explicitly exercises its power not to. In the absence of a clear express intent to abrogate rights and obligations -- rights of the highest importance to the individual -- those rights remain in force. To argue the opposite is to say that the government is bound only by its whim, not its word.

[81] In summary, we find that Brockenshire J. was correct in declaring both that the Crown had a fiduciary obligation to those veterans whose funds were administered by the DVA and that it breached that obligation by failing to invest or pay interest on the funds under its administration.

The Crown Liability and Proceedings Act Issue

[82] The Crown argued below that s. 9 of the Crown Liability and Proceedings Act, R.S.C. 1985, c. 50, as amended ("CLPA"), barred this action. "Liability" is defined in s. 2 for the purposes of Part I of the CLPA (Liability) as meaning:

(a) in the Province of Quebec, extracontractual civil liability, and

(b) in any other province, liability in tort.

S.C. 2001, c. 4, s. 34(2).

[83] Part I of the CLPA includes ss. 3 and 9, which read as follows:

3. The Crown is liable for the damages for which, if it were a person, it would be liable

(a) in the Province of Quebec, in respect of

(i) the damage caused by the fault of a servant of the Crown, or

(ii) the damage resulting from the act of a thing in the custody of or owned by the Crown or by the fault of the Crown as custodian or owner; and

(b) in any other province, in respect of

(i) a tort committed by a servant of the Crown, or

(ii) a breach of duty attaching to the ownership, occupation, possession or control of property.

. . . . .

9. No proceedings lie against the Crown or a servant of the Crown in respect of a claim if a pension or compensation has been paid or is payable out of the Consolidated Revenue Fund or out of any funds administered by an agency of the Crown in respect of the death, injury, damage or loss in respect of which the claim is made.

R.S.C., c. C-38, s. 4.

[84] The motions judge stated the Crown's position as follows, at p. 236 O.R.:

It is the position of the Crown that this section [s. 9] bars this action as all of the members of the class would be persons to or on behalf of whom, a pension or compensation had been paid out of the consolidated revenue fund.

[85] In the court below, the Crown relied on four cases -- Langille v. Canada, [1992] 2 F.C. 208, 140 N.R. 304 (C.A.); Vona v. Canada (1994), 20 O.R. (3d) 589 (Gen. Div.); Sarvanis v. Canada (2000), 184 D.L.R. (4th) 124, 252 N.R. 131 (C.A.); and Arsenault v. Canada (1995), 131 D.L.R. (4th) 105, 104 F.T.R. 28 (F.C.T.D.).

[86] Brockenshire J. dealt with those cases in the following language, at pp. 236-37 O.R.:

In Langille, the plaintiffs' diseased cattle were destroyed by Crown agents per a statute and compensation was paid. The plaintiffs sued, claiming the compensation covered the value of the cows, but the delays by the agents in getting the payment to them caused them to go bankrupt, and claimed damages therefor. Mr. Justice Stone in the Federal Court of Appeal struck out the claim for general damages in the statement of claim on the basis that the words "in respect of" in s. 9 are words of very broad import, compensation was earlier paid in respect of "damage or loss" resulting from the destruction of the animals and the purported claim in action was in respect of the same "damage or loss".

Vona was also a case where a herd had been destroyed and compensation paid. Here too, the payment was delayed and the plaintiffs allege they lost a restaurant as a result. Madam Justice MacDonald of this court applied the reasoning of Mr. Justice Stone in Langille and struck the claim. The Ontario Court of Appeal dismissed an appeal from that decision.

Sarvanis was a claim by an inmate in a federal penitentiary for injuries suffered while working there. The inmate claimed for and received disability benefits under the Canada Pension Plan (CPP), which benefits are paid out of the consolidated revenue fund. The Federal Court of Appeal noted that in the CPP claim the prisoner had identified the cause of his injury as the accident, and concluded the pension had been paid out in respect of the injury sustained so that a further action was barred.

In Arseneault, the plaintiff sued the Crown and three military doctors for alleged malpractice in performing back surgery on him while he was in the armed forces. The Federal Court declined jurisdiction in the personal action against the three doctors and found the claim against the Crown was barred as he had claimed and received a pension which was directly connected to his back problem and his military service.

[87] Brockenshire J. concluded his reasons on this point as follows, at p. 237 O.R.:

In my view the words of the section are self-explanatory. No proceedings lie if the pension or compensation has been or is payable in respect of the death, injury, damage or loss in respect to which the claim is made. Here, the pension or compensation had been paid in respect of mental or physical disability arising while in military service. That pension or allowance was in each case "in pay". The present claim has nothing whatever to do with the original reasons for granting the pension or allowance. The present claim has to do with the alleged breach of fiduciary obligation in managing that money while a veteran was incapable of doing so personally. I find that the claims herein are not barred by s. 9 of the Crown Liability and Proceedings Act.

[88] The appellant took the same position in this court as it did below. It argued that, combined with the Pension Act, S.C. 1919, c. 43, the Pension Commission had sole jurisdiction to adjudicate on claims for the payment of interest, and that this action is an impermissible collateral attack on that jurisdiction. Accordingly, the appellant argued, s. 9 of the CLPA bars the action. This argument is based upon ss. 2 and 7 of the Pension Act of 1919. They read as follows:

2 () "pension" means pension on account of the death or disability of a member of the forces and includes addition to pension, temporary pension, additional payment, final payment or any other payment made by the Commission to or in respect of any member of the forces.

. . . . .

7 Subject to the provisions of this Act and of any regulation made under the provisions of this Act, the Commission shall have full power and authority and exclusive jurisdiction to deal with all matters pertaining to pensions, to consider all applications for pensions, and to award, refuse, cancel, pay and administer pensions, and from its decision there shall be no appeal except as provided in section eighteen of this Act. . . .

(Emphasis added)

[89] The respondent's response to this defence can be put briefly:

(a) Statutes which encroach upon citizens' rights should be construed strictly. Attorney General for Canada v. Hallett and Carey Ltd., [1952] A.C. 427 at p. 450 (P.C.) per Radcliffe L.J.

(b) So construed, s. 9 of the CLPA has no application to claims for breach of fiduciary and/or trust obligations and the damages sought in respect thereto.

[90] The respondent argues that by its very wording, s. 9 only applies where compensation has been paid out of the Consolidated Revenue Fund or out of administered funds -- and that no such compensation has been paid for interest. The claims being advanced are not "in respect of a claim" involving "a pension or compensation that has been paid or payable out of Consolidated Revenue Funds" or "out of administered funds". The respondent's claim is for breach of a fiduciary obligation arising out of the fact that the Crown failed to invest the funds under administration in a reasonable manner. The claim is also based upon the fact that the Crown, as "trustee or fiduciary", itself benefited from the use of these funds without compensation.

[91] We agree with the reasoning of Brockenshire J. in this regard. As he said: "The present claim has nothing whatever to do with the original reasons for granting the pension or allowance. [It] has to do with the alleged breach of fiduciary obligation in managing that money while a veteran was incapable of doing so personally".

[92] The appellant also relies on O'Connor v. Canada (1995), 94 F.T.R. 93 (F.C.T.D.). While a member of the Canadian Armed Forces, O'Connor suffered a herniated disc while on duty and then was further injured as a result of the negligence of the military doctor treating that condition. O'Connor left the military and sued the Crown in the Federal Court for damages arising from the doctor's negligence. The Crown moved to dismiss the action upon the ground that, because his injury had been suffered while on military service, O'Connor would be entitled to a pension and by virtue of a ss. 111 and 14 of the Pension Act, R.S.C. 1985, c. P-6, the Pension Commission has exclusive jurisdiction to determine whether or not O'Connor was so entitled. Those sections read as follows:

111. No action or other proceeding lies against Her Majesty or against any officer, servant or agent of Her Majesty in respect of any injury or disease or aggravation thereof resulting in disability or death in any case where a pension is or may be awarded under this Act or any other Act in respect of the disability or death, R.S., c. 22 (2nd Supp.), s. 28.

14. Subject to this Act and any regulations, the Commission has full and unrestricted power and authority and exclusive jurisdiction to deal with and adjudicate on all matters and questions relating to the award, increase, decrease, suspension or cancellation of any pension or other payment under this Act and to the recovery of any overpayment that may have been made, and effect shall be given by the Department and the Receiver General to the decisions of the Commission, R.S., c. P-7, s. 5, 1976-77, c. 28, s. 34.

[93] The trial judge, Nadon J., accepted the Crown's argument and dismissed the action. In his reasons, he relied on the decision of DubÈ J. in Berneche v. Canada (1990), 34 F.T.R. 85 at p. 87 (F.C.T.D.), as follows:

In short, Parliament has drafted the Pension Act so that it stands as an all-embracing code to dispose of all valid claims for injuries sustained in the military service. The Act also provides a fully comprehensive appeal system for determining the eligibility and the quantum of disability pensions. It follows that the last section of the Act, s. 111, prescribes that no action or other proceeding lies against the Queen in respect of any injury or disease or aggravation thereof, in any case where a pension is or may be awarded under this Act.

[94] Accepting for the purposes of argument the correctness of the decision in O'Connor, it is our view that it does not assist the appellant. In O'Connor, as in Berneche, the issue was whether the claimant was entitled to a pension. We agree with the statement in the reasons in Berneche [at p. 87 F.T.R. ] that the Pension Act:

. . . stands as an all-embracing code to dispose of all valid claims for injuries sustained in the military service.

(Emphasis added)

[95] The injury complained of in the instant action was not "sustained in the military service". It was sustained by reason of government action or inaction. Accordingly, the subject matter of this action was not and is not a matter falling within the jurisdiction of the Pension Commission. Section 9 of the CLPA therefore has no application to this action.

The Issue of Section 5.1(4) of the Department of Veterans Affairs Act, S.C. 1990, c. 43, s. 2

[96] In addition to its other responses to the plaintiff's claim, the appellant raises the defence of an express statutory bar for the period up to January 1, 1990. As we have said, by [An act to amend the statute law in relation to war veterans] S.C. 1990, c. 43, s. 2, the Department of Veterans Affairs Act (the "Act") was amended by adding the following:

[97] This amending Act was assented to on December 17, 1990. Section 64 of this [amending] Act deals with the coming into force of its constituent parts. Section 64(2) provides that s. 5.1(4) shall be deemed to have come into force on October 12, 1990. None of the other parts of the Act of 1990 has ever been declared as coming into force.

[98] Section 5.1(4) purports to prohibit the bringing of this action. The prohibition did not come out of the blue. It had a gestation period of at least 20 years and the admissibility of some of the material before the court in that regard was attacked by the appellant both here and below. A review of the evidence is accordingly appropriate.

[99] The judgment appealed from is the product of a motion for summary judgment. The material before the court was not, as in the trial process, the testimony of live witnesses together with documents identified by them or admitted by the parties. Instead, the material before the court consisted of the affidavits of seven persons, the transcript of the cross-examination of one of the deponents and the documents exhibited to those affidavits and cross-examination. Of the seven persons, two deposed on behalf of the plaintiff but virtually all of the documents exhibited to all affidavits were from the productions of the appellant, so that essentially everything that was before the motions judge came from government sources.

[100] One of the concerns of the appellant below was with respect to the admissibility of some of that material and the weight to be given to that which was admissible. The motions judge recognized this concern and said in his reasons, at p. 240 O.R., that:

I certainly do not take the statements of bureaucrats recorded in that context as admissions of liability binding on the Crown.

[101] It appears that part of his difficulty, which this court shares, is the lack of particularity on the part of the appellant in making this argument. Counsel for the appellant expresses concern about the process but identifies no particular documents as being objectionable and, perhaps more significant, tenders no contradictory evidence.

[102] The motions judge summarized the material before him on the subject of the enactment of s. 5.1(4), at pp. 240-44 O.R., as follows:

The material indicates that from the 1970's forward group after group of bureaucrats looked at the "problem" of non-payment of interest and potential liability therefor. While we do not know from the materials gathered to date just who the people were at these various meetings, and while they certainly have not been subjected to cross-examination to test what they had to say, the repetition over and over by one bureaucrat after another and one study group after another that there was a problem and there could be liability for it gives credence to the view that the senior levels of the DVA must have felt there was a problem, and that there was a potential of liability arising from it.

In 1985, the Auditor General's Report, which is acknowledged to be a public document, noted that:

at the 31st of March 1985, more than $53,000,000 was being held in trust on behalf of veterans. We found that there were inadequacies in the controls over veterans trust accounts by the department and the Canadian Pension Commission and in the policy guidance to those responsible for administering these trust accounts for veterans . . .

In 1986 the Auditor General returned to the question of "veterans trust accounts" and commented extensively on these accounts and their administration. A few quotes from this document are germane to the issues here:

Para. 13.43 -- The duty to invest funds. One of the most basic duties of the trustee is to invest trust funds. He or she must use prudence in selecting good investments and ensuring they are suitable, given the terms of the trust and the interest of the true beneficiaries. The department does not invest or pay interest on money held in any trust account. Where veterans have raised the matter of receiving interest, they have been told by department officials that such arrangements are not possible.

Para. 13.44 -- As a trustee, the department has a responsibility to invest funds in approved instruments and to account to the beneficiary regularly. The department is vulnerable to legal action by veterans to recover the difference between the amounts accumulated in the trust accounts and what would have been produced if the money had been properly invested. Given the amounts involved and the length of time that many of these accounts have been in existence, this liability could be large.

Para. 13.45 -- Conflict of interest and Duty - Crown self-dealing in trust funds. While there does not appear to be a conflict of interest problem with staff employed by the department, the Crown as trustee, may be viewed as being in a position where its interest and duty conflict. Technical self-dealing arises with respect to the Crown's failure to invest or pay interest on money held in trust accounts in the consolidated revenue fund.

Para. 13.46 -- Implications. The department and the commissioner recognize that a trust relationship exists with their administered account clients. However neither has met the minimum obligations of the situation. Recipients whose affairs have been administered by the department, have, at best, had the benefit of its good intentions. However they have been deprived of the investment value of their funds.

These statements by an independent public body also do not constitute admissions binding on the Crown. The opinions expressed are untested, and are not binding on me.

However, predictably that report resulted in a flurry of memorandums, studies, task forces, etc. At Tab 111 of the moving party's motion record there is a copy of a letter from Pierre P. Sicard, the Deputy Minister of [the] DVA to Mr. F. Iacobucci, Deputy Minister of Justice (as he then was) advising that at the suggestion of Mr. Paul Tellier, Clerk of the Privy Council, he is being invited to designate a senior official to participate in a working group directed to find an acceptable solution of the problem of the non-payment of interest. That working group would include representatives from [the] DVA, Finance, Treasury Board, Comptroller General and Justice. At Tab 114 is found a document headed "Trust Analysis" and further headed "Secret" apparently dated January 17, 1987, not bearing the name of any author but containing at para. 9.5, headed "Interior Departmental", the following:

Concerns have been raised by Privy Council Office, Treasury Board, Finance and Office of the Comptroller General as to the potential liability of the Crown and on-going costs for payment of interest on portfolio trusts and the potential impact of such an initiative on trust relationships across the federal sector, estimated to be in excess of $1 billion.

This document and this paragraph is perhaps indicative of the state of mind within the various government departments at that time.

The 1986 Auditor General's report commented at paras. 13.35 and 13.36 that:

. . . no training and [sic] trust administration is provided . . . knowledge of this area is not a basic requirement for a councilor's job and is not even included in the job description . . . neither councilors nor employees dealing with the financial administration of trusts have any real knowledge of the responsibilities associated with trust accounting; further, there are no procedural guides and policies. The result is that persons who have no knowledge of the trustee's duties administer trusts as they see fit with virtually no formal guidance.

My reading of many pages of comments by one bureaucrat to another on "the problem", leads me to feel that for many of them, "law" meant only federal statutes and regulations. Indeed one of them, in a report, described "equity" as "mysterious".

In November of 1986, the DVA issued a directive that no new administrations (called in the document "trust relationships") were to be accepted without the approval of the Assistant Deputy Minister, after exhausting all other options.

At Tab 83 there is a letter from David Broadbent, the Deputy Minister of [the] DVA to Mr. Stanley H. Hartt, Deputy Minister of the Department of Finance, speaking of the work being done in his department to clean up the administering of funds but saying further:

the work we are doing did not seem to be getting far in eliminating the risk of litigation over failure to pay interest on accounts for which arguably we had the responsibility of a trustee.

He goes on to say that he is setting up a small task force to, among other things, develop options for the consideration by Cabinet in September 1988.

At Tab 122, is a document entitled "Trust Review Project Option Papers" dated March 15, 1988. This document generally recommends a new system but at p. 30 indicates the options in relation "to interest oweable prior to new system". Five options are listed.

1. Let courts settle each case if and when it arises.

2. Keep quiet. Settle case out of court if and when it arises.

3. Devise standard settlement formula, to be used in lieu of old liability, if client agrees.

4. Devise standard settlement formula, to replace old liability, whether client chooses or not (ex post facto).

5. Eliminate old liability (ex post facto).

Since the Deputy Minister had requested a study of available options, it is reasonable to assume that he got that option paper. It is also reasonable to assume that those options were part of the context in which the 1990 legislation was drafted. We do not know what materials were presented or discussed by Cabinet, and we probably will not know because of the s. 39 privilege on Privy Council documents in the Canada Evidence Act, R.S.C. 1985, c. C-5.

I conclude that in addition to the admissible public documents, the various documents above referred to, are admissible as constitutional evidence of the context in which this legislation may have been prepared. I find the correspondence at the Deputy Minister level to be much more important in that regard than the musings of unnamed lower level bureaucrats. I, however, conclude that none of these documents is of very much assistance in dealing with the ultimate issue.

I conclude, however, that what was said when the Bill containing s. 5.1(4) was introduced in the house, as reported in Hansard, is helpful. Perhaps even more helpful is what was not said. On second reading of the Bill, on November 8, 1990, the Minister spoke of the Bill as having three key elements. On the second element he said:

For decades veterans' affairs has followed ordinary banking practices with regard to administered accounts. The assumption has been that the accounts were like checking accounts. A service was received and the costs of this service was provided through waiving interest on the account.

Well times have changed. Financial institutions pay interest on virtually every type of account and Bill C-87 will permit veterans' affairs to fall into line with modern practice. With the passage of this legislation, veterans' affairs will pay interest on administered accounts effective January 1, 1990. The interest this year will amount to approximately $3.5 million. That Mr. Speaker, is the type of change I had in mind when I said we want veterans and their dependants to receive 1990's service and treatment.

No mention was made that in fact the authority had existed for many, many years to pay interest but had not been used. No mention was made at all of s. 5.1(4), except by a general statement that the Bill contained a number of "housekeeping measures".

I was provided with only an excerpt of Hansard. It contains no explanation of the need for s. 5.1(4) -- that is, there is no statement that, for instance, it would be impossible to locate the old records on past interest claims going back many years, or that the government, in carefully balancing its financial priorities, had concluded that it was better to spend its limited resources on pressing needs than hold them in reserve against a contingent liability. I was simply not shown any explanation at all. An extensive search of further Hansard reports does not show any mention of s. 5.1(4). If there was a policy explanation, it would have been up to the Crown, in putting its best foot forward on this motion, to have produced it, or evidence of it. Absent that and in the context of past history, the public documents and the concerns indicated among the bureaucrats, I can only conclude that the purpose of this section is to try [to] do what it says it is going to do and no more -- to prevent claims being made for or on account of interest on moneys held or administered by the Minister during any period before January 1, 1990.

[103] In the result, none of the evidence tendered below was rejected. That evidence clearly supports the findings of fact of the motions judge. The attack on the evidence was renewed in this court but without particularity and without leave being sought to introduce any contradictory evidence.

[104] It should be repeated at this point that the payment of interest on the account balances of disabled veterans from January 1, 1990, forward was not made pursuant to the 1990 amendments to the Department of Veterans Affairs Act but, rather, pursuant to a letter of authorization dated December 18, 1990, from the Deputy Minister of the Department of Finance, on behalf of the Minister of Finance, to the Deputy Minister of the DVA.

[105] After concluding, very briefly, that the Canadian Charter of Rights and Freedoms provided no relief against s. 5.1(4), Brockenshire J. turned to the Canadian Bill of Rights, R.S.C. 1985, App. III, and in particular to that part of the Preamble and ss. 1 and 2 which read as follows:

. . . a Bill of Rights which shall reflect the respect of Parliament for its constitutional authority and which shall ensure the protection of these rights and freedoms in Canada;

. . . . .

1. It is hereby recognized and declared that in Canada there have existed and shall continue to exist without discrimination . . . the following human rights and fundamental freedoms, namely,

(a) the right of the individual to life, liberty, security of the person and enjoyment of property, and the right not to be deprived thereof except by due process of law;

. . . . .

2. Every law of Canada shall, unless it is expressly declared by an Act of the Parliament of Canada that it shall operate notwithstanding the Canadian Bill of Rights, be so construed and applied as not to abrogate, abridge or infringe or to authorize the abrogation, abridgement or infringement of any of the rights or freedoms herein recognized and declared, and in particular, no law of Canada shall be construed or applied so as to

. . . . .

(e) deprive a person of the right to a fair hearing in accordance with the principles of fundamental justice for the determination of his rights and obligations;

(Emphasis added)

[106] After an extensive review of the jurisprudence, the motions judge summarized the status and principles of the Bill, at pp. 254-55 O.R., as follows:

1. The Bill of Rights is still in full force, but because it relates only to federal legislation, and only empowers a court to declare a statutory provision to be inoperative in a particular factual situation, it has had a limited effect.

2. The Bill of Rights can protect rights that existed (or were declared by it to exist) when it was passed, but it does not create new rights.

3. Impugned legislation will be looked at in a general way to see if it was in pursuit of a valid federal legislative objective, and if so found, the courts will then look to see if the alleged discrimination or other breach is necessarily incidental to such objective, and if so found, may decline to declare the legislation inoperative. However, inequality before the courts will be looked at more stringently.

4. The right to a fair hearing in accordance with the principles of fundamental justice is a free-standing right, not qualified by the due process concept.

(Emphasis in original)

Relating those principles to this case, I conclude that the Bill of Rights provides an effective remedy in this case. The general right to property is specifically recognized in s. 1(a) of the Bill of Rights. The right to require a trustee or fiduciary to invest funds on hand, and/or pay interest, has existed since the 1700s. The omnibus Bill was certainly passed in pursuit of a valid federal legislative objective, but the Bill as a whole is not impugned -- just s. 5.1(4). That subsection does not, on its face, have anything to do with improving the benefits, or the benefit system, of veterans -- on its face, the only objective is to block legitimate potential claims by veterans. The Crown was well aware of those potential claims, both from its own studies and from the blunt reports of the Auditor General. No evidence at all of any higher purpose for this pernicious subsection, buried in the Bill, that could come even close to objectives of general good for veterans, or for the country, as a whole, has been put before this court, nor has any indication been given that s. 5.1(4) was necessary for, or even related to, the objectives of the Bill.

I appreciate the difficulty with the vague words "due process", and the great concern Laskin J. had over the American experience with those words. However, one thing is very clear to me -- "due process" cannot mean "no process".

It is also clear to me that any beneficiary of any trust, or trust-like relationship in Canada, would be entitled to bring his or her trustee or fiduciary before the courts of Canada, so that a fair hearing could be held on any allegation of breach of trust or obligation. The outright denial of that right to the disabled veterans in this class is a denial of fundamental justice, and a clear breach of s. 2(e) of the Bill of Rights, calling for remedial action by this court.

I declare that s. 5.1(4) of the Department of Veterans Affairs Act is inoperative in barring the claims raised by the plaintiff class in this action.

[107] The arguments raised by the appellant on the appeal with respect to the Bill do not appear to be substantially different from those raised below. They may be stated briefly as follows:

(a) the Bill of Rights is a simple statute, not a constitutional document;

(b) whatever its legislative status, it has been eclipsed by the Charter;

(c) the meetings leading up to the adoption of the Charter and the jurisprudence since make it very clear that the Charter was not intended to protect property rights;

(d) whatever the influence of the Bill may have been before the adoption of the Charter, that influence has been much diminished since;

(e) s. 2 of the Bill has not been interpreted as requiring an express declaration that subsequent legislation is to apply notwithstanding that it may conflict with the Bill;

(f) due process of law in s. 1(a) of the Bill means procedural due process, not substantive due process; and

(g) enactment of legislation dealing with a head falling within s. 91 of the Constitution Act, 1867, constitutes due process with the meaning of s. 1(a) of the Bill.

[108] It can be fairly said that the enthusiasm and support of the courts of Canada for the Bill has waxed and waned over the years since its passage. Cases can be cited to support each of the propositions set out above. The Bill of Rights, however, remains in place. In R. v. Drybones, [1970] S.C.R. 282, 9 D.L.R. (3d) 473 and Singh v. Canada (Minister of Employment and Immigration), [1985] 1 S.C.R. 177, 17 D.L.R. (4th) 422, the Supreme Court of Canada relied upon the Bill to declare inoperative portions of the Indian Act and the Immigration Act respectively.

[109] The Federal Court of Appeal relied upon the Bill to declare inoperative provisions of the Canadian Human Rights Act in McBain v. Lederman, [1985] 1 F.C. 856, 22 D.L.R. (4th) 119, and the Manitoba Court of Appeal relied upon the Bill in declaring inoperative a portion of the Indian Act in R. v. Hayden (1983), 3 D.L.R. (4th) 361, 8 C.C.C. (3d) 33 (Man. C.A.). McBain was not appealed further. Leave to appeal in Hayden was refused by the Supreme Court of Canada: [1983] 2 S.C.R. xi.

[110] The Bill has been described as a "a half-way house between a purely common law regime and a constitutional one; it may aptly be described as a quasi-constitutional instrument": Hogan v. R., [1975] 2 S.C.R. 574 at p. 597, 48 D.L.R. (3d) 427, per Laskin J.

[111] The appellant concedes that what is protected by the "due process of law" provision of the Bill are rights which existed in 1960, at the time of the enactment of the Bill. It is the position of the respondent that his right to the payment of interest preceded that date.

[112] Many of the cases referred to by counsel discuss the question whether the "due process" of s. 1(a) of the Bill is limited to procedural matters or includes substantive matters. In R. v. Morgentaler, [1976] 1 S.C.R. 616, 53 D.L.R. (3d) 161, Laskin C.J. commented on this at p. 633 S.C.R.:

I am not, however, prepared to say, in this early period of the elaboration of the impact of the Canadian Bill of Rights upon federal legislation, that the prescriptions of s. 1(a) must be rigidly confined to procedural matters. There is often an interaction of means and ends, and it may be that there can be a proper invocation of due process of law in respect of federal legislation as improperly abridging a person's right to life, liberty, security and enjoyment of property. Such a reservation is not, however, called for in the present case.

[113] In our view it is not necessary to decide that issue in the instant case because, as the motions judge noted towards the end of his reasons dealing with the Bill, "due process" cannot mean "no process". Putting it another way, assuming without deciding that "due process" is limited to matters of procedure, s. 5.1(4) must still be found inoperative because there is no evidence before the court that those whose property rights were foreclosed by that section were made aware of the intention of Parliament to pass this legislation or accorded any other process to contest the complete removal of their right to receive interest. Such evidence as there is tends to suggest that the government characterized the proposed changes as being benevolent rather than otherwise.

[114] Counsel for the appellant relies heavily on the decision of the Manitoba Court of Appeal in R. v. Bryan (1999), 170 D.L.R. (4th) 487, 133 C.C.C. (3d) 217 (Man. C.A.). Bryan was prosecuted for violating the Customs Act in that he exported grain from Canada without first getting an export permit as required by the Canadian Wheat Board Act. Bryan argued first that the requirement was ultra vires the federal government because the law dealt with property and civil rights. In the alternative, Bryan argued that the requirement of a permit was rendered inoperative by s. 1(a) of the Bill because it purported to deprive him, without due process of law, of a property right, namely, the right to export grain. The Manitoba Court of Appeal found that the legislation dealt with trade and commerce and, hence, was intra vires the federal government. In dealing with the Bill, Scott C.J.M., after referring inter alia to Hogan and Drybo nes said, at pp. 497-98 D.L.R.:

Since the Bill of Rights is not a true constitutional document, there is no mandate to set aside the will of Parliament through judicial review. Section 1(a) of the Canadian Bill of Rights, which protects property rights through a "due process" clause, was not replicated in the Charter, and the right to "enjoyment of property" is not a constitutionally protected, fundamental part of the Canadian society. See, for example, R. v. Appleby (No. 2) (1976), 76 D.L.R. (3d) 110, 35 C.C.C. (2d) 94 (N.B.C.A.). Furthermore, in contrast to the Charter of Rights and Freedoms, the due process provision of s. 1(a) of the Bill of Rights is procedural as opposed to substantive. See Curr v. The Queen, [1972] S.C.R. 889, 26 D.L.R. (3d) 603, 7 C.C.C. (2d) 181, and Smith, Klein [sic] & French v. Attorney General of Canada, [1986] 1 F.C. 274 at pages 302-4, 24 D.L.R. (4th) 321, affirmed [1987] 2 F.C. 359, 34 D.L.R. (4th) 584 (C.A.), leave to appeal to the Supreme Court dismissed (1987), 27 C.R.R. 286n, 42 D.L.R. (4th) viii. As Professor W. S. Tarnopolsky (as he then was) described the matter:

. . . it is clear that whatever right one has to "enjoyment of property" is modified by the last clause, i.e., "the right not to be deprived thereof except by due process of law." Therefore, as long as it does not exceed its legislative jurisdiction, and as long as it observes "due process of law," Parliament can interfere with "the right of the individual to enjoyment of property." [The Canadian Bill of Rights, 2nd rev. ed., McClelland and Stewart Limited, 1975, p. 221.]

There is no suggestion that the Act and Regulations thereunder were not validly enacted by Parliament and the Governor in Council respectively. This, in my opinion, constitutes due process for the purposes of s. 1(a) of the Canadian Bill of Rights. There is no constitutional dimension to the question before us and, in any event, no breach of s. 1(a) of the Bill of Rights.

[115] No mention is made of Singh, McBain or Hayden, the latter having been decided by the same court 16 years earlier. If simple enactment by Parliament constitutes "due process" for the purpose of s. 1(a) of the Bill, then the decisions in Drybones, Singh, McBain and Hayden become very difficult, if not impossible, to explain.

[116] In marked contrast to the view of Scott C.J.M. is the view of Wilson J. in the Supreme Court of Canada in Singh. Although Wilson J. ultimately rested her decision on the Charter, speaking for herself, Dickson C.J. and Lamer J., she commented on the Bill, at p. 185 S.C.R., as follows:

In the written submission presented in December 1984 counsel considered whether the procedures for the adjudication of refugee status claims violated the Canadian Bill of Rights, in particular s. 2(e). There can be no doubt that this statute continues in full force and effect and that the rights conferred in it are expressly preserved by s. 26 of the Charter.

[117] Also in Singh, Beetz J. speaking for himself, Estey and McIntyre JJ. said, at p. 224 S.C.R.:

Section 26 of the Canadian Charter of Rights and Freedoms should be kept in mind. It provides:

26. The guarantee in this Charter of certain rights and freedoms shall not be construed as denying the existence of any other rights or freedoms that exist in Canada.

Thus, the Canadian Bill of Rights retains all its force and effect, together with the various provincial charters of rights. Because these constitutional or quasi-constitutional instruments are drafted differently, they are susceptible of producing cumulative effects for the better protection of rights and freedoms. But this beneficial result will be lost if these instruments fall into neglect. It is particularly so where they contain provisions not to be found in the Canadian Charter of Rights and Freedoms and almost tailor-made for certain factual situations such as those in the case at bar.

[118] Brockenshire J. in the instant case commented on Bryan, at p. 252 O.R., as follows:

The blunt statement that the enactment of a statute constitutes due process appears, with respect, to be contrary to Drybones and to Singh v. Canada (Minister of Employment and Immigration), [1985] 1 S.C.R. 177. However, it can perhaps be understood when related back to the factual situation that this particular Act was passed by Parliament under its clear mandate under the British North America Act re trade and commerce, with the provision re exporting being an essential part of the legislative scheme. In that light, the decision could be seen as fitting within the particular comments on the Indian Act in Lavell, supra, and the general comments of Dickson C.J. at para. 67 of the Quicklaw version of R. v. Beauregard, [1986] 2 S.C.R. 56, 26 C.R.R. 59.

[119] The motions judge went on to deal with Singh in some detail. For our part, we would add that the result in Bryan would seem to have been dictated by the fact that the Canadian Wheat Board Act, R.S.C. 1985, c. C-24, and the regulations made under it do not simply purport to abolish a property right. The Board was set up to manage and control sales of grain grown in Canada. A necessary part of such control is the management of exports and hence the development of a permit system. The Act and the regulations under it provide a procedure for the management of exports. In the result, the vendor of grain gets paid for his grain. His property right is not simply abolished. The procedure set up by Act and regulations provides the "due process" required by s. 1(a) of the Bill. There is no similar or analogous procedure provided by the Department of Veterans Affairs Act or otherwise in the instant case. There is no "due process" whatsoever.

[120] The reference of the motions judge to the comments of Dickson C.J., in Beauregard v. Canada, [1986] 2 S.C.R. 56 at p. 90, 30 D.L.R. (4th) 481, was to the following passage:

This short history of "equality before the law" under s. 1(b) of the Canadian Bill of Rights demonstrates that a majority of the Court was never prepared to review impugned legislation according to an exacting standard which would demand of Parliament the most carefully tailored, finely crafted legislation. On the contrary, a majority of the Court was consistently prepared to look in a general way to whether the legislation was in pursuit of a valid federal legislative objective. This approach was followed in cases involving legislative distinctions on the basis of race, sex and age, and in cases involving profoundly important interests of the person asserting the equality right. The passages which I have quoted from these cases indicate that the Court was concerned with the merely statutory status of the Canadian Bill of Rights and the declaratory nature of the rights it conferred. I believe the day has passed when it might have been appropriate to re-evaluate those concerns and to reassess the direction this Court has taken in interpreting that document.

[121] Judging by Dickson C.J.'s endorsement of the reasons of Wilson J. in Singh, supra, at p. 185 S.C.R., referred to above, the opinion expressed by him in Beauregard appears to be limited to "equality before the law" and not to extend to the preservation of property rights under s. 1(a) or to s. 2(e) of the Bill, the right to a fair hearing which was in issue in Singh.

[122] Putting it another way, while Dickson C.J. expressed doubt about the support of the Supreme Court of Canada for "equality before the law" under the Bill, he seems to have been much more firm in his support of the right to a fair hearing (under the Bill) as can be seen in Singh. In any event, as Brockenshire J. might have put it, no hearing can hardly be described as a "fair hearing".

[123] In Beauregard, Dickson C.J. commented that in considering legislation attacked under the Bill, the Supreme Court of Canada was never prepared to review that legislation closely. Rather, the court looked at the impugned legislation in a general way to see whether it was in pursuit of a valid federal objective. Applying that standard, the motions judge was unable to conclude that s. 5.1(4) was enacted for any valid federal objective. Nor are we.

[124] To conclude, we find that s. 5.1(4) of the Department of Veterans Affairs Act infringes s. 1(a) and s. 2(e) of the Bill of Rights and that there is no act of Parliament declaring that it shall operate notwithstanding that Bill. The appropriate remedy in the circumstances is to declare s. 5.1(4) inoperative insofar as concerns the claims made in this action and we so declare. Having done so, there is no need for us to determine whether this section also violates the Canadian Charter of Rights and Freedoms.

The Summary Judgment Issue

[125] The appellant argues that this matter should not have proceeded by way of summary judgment. We wish to stress again that the appellant and respondent both brought motions for summary judgment before Brockenshire J. The appellant argued in this court, as it did before the motions judge, that the statutory benefits at issue did not give rise to a fiduciary duty on the part of the Crown. In its motion for summary judgment, the appellant also sought dismissal of the plaintiff's action on the basis of the statutory bars and jurisdictional arguments that it raised in the court below and in this court. These issues were fully argued in the court below and in this court.

[126] The appellant contends before this court, as it did before the motions judge, that it had not been given adequate time to compile the complete evidentiary record that it required to argue the two motions. The appellant indicated that it would have produced additional documents, compiled a legislative history and prepared evidence pertaining to the history of the DVA and veterans' benefits. The appellant also argued that Brockenshire J. unfairly denied the Crown the opportunity to complete the record when he refused to grant an adjournment in respect of the plaintiff's summary judgment motion.

[127] We disagree with the assertions that Brockenshire J. granted summary judgment on the basis of an incomplete evidentiary record or that the Crown was in any way prejudiced by the decision to deny an adjournment. Both parties in the court below relied on the productions made by the Crown, up to the date of the hearing of the motions, in September 2000. All of the material on which Brockenshire J. decided the motions was properly before him and virtually all of that material was based on evidence that had been tendered by the Crown. Significantly, the appellant tendered no fresh evidence on the appeal, let alone any evidence that would contradict anything on which the motions judge relied or that would give rise to a genuine issue of fact for trial.

[128] The issues before Brockenshire J. involved questions of statutory interpretation, equity, the Canadian Bill of Rights and the Canadian Charter of Rights and Freedoms. They were issues of law, argued within a substantially agreed-upon factual matrix. As in Chippewas of Sarnia Band v. Canada (Attorney General) (2000), 51 O.R. (3d) 641 at pp. 657-58, 195 D.L.R. (4th) 135 (C.A.), the appellant participated fully in the summary judgment proceedings. Although it unsuccessfully sought an adjournment to file further material, the appellant ultimately did not take the position before Brockenshire J. that, having regard to the voluminous record placed before him and the issues of law raised by that material, it was not appropriate to deal with the matter under Rule 20 [Rules of Civil Procedure, R.R.O. 1990, Reg. 194]. The appellant cannot now argue that it was denied an opportunity to "put its best foot forward", whether as moving party or as respondent.

[129] Accordingly, we would dismiss this ground of appeal.

The Costs Issue

[130] Having determined that the respondent was entirely successful, that the government's actions towards the veterans could be classified as "reprehensible", and that this was a situation where the government as trustee/fiduciary had to be sued in order to bring a response, Brockenshire J. ordered the appellant to pay solicitor-client costs, which he fixed at $668,000. The appellant argues that an award of solicitor and client costs was not appropriate in this case. We would not give effect to this argument.

[131] Among other things, the appellant has been aware for years of the risk it was running. For example, in the Report of the Auditor General of Canada to the House of Commons for the Fiscal Year ended 31 March 1986, at paras. 13.24, 13.26, 13.27 and 13.43, Kenneth M. Dye, F.C.A., stated that the then recent landmark decision in Guerin clarified the obligations of the Crown in fiduciary situations such as the trust funds being administered by the DVA on behalf of veterans who were incapable of managing their own affairs. Mr. Dye reported that:

The trustee must insure that funds are invested in suitable instruments to earn a return for the beneficiary.

Despite this clear duty he noted that:

The Department does not invest or pay interest on money held in any trust account.

[132] It was entirely within the motions judge's discretion to make the costs determination which he did. In all the circumstances, we would not interfere with his decision.

Conclusion

[133] For these reasons, we agree with the conclusions and dispositions that the motions judge made on each of the issues in appeal. In particular, we agree that the Crown was a fiduciary to the class members while their funds were being administered by the DVA and that the Crown breached its fiduciary duty by failing to invest or pay interest on these funds. In addition, s. 9 of the CLPA is not a bar to this action. Nor is s. 5.1(4) of the Department of Veterans Affairs Act a bar because it is rendered inoperative as against these claims by the Canadian Bill of Rights.

[134] Accordingly, we would dismiss the appeals from the dismissal of the appellant's motion for summary judgment and from the judgment in favour of the respondent. The respondent is entitled to his costs of the appeals. We invite counsel to address this issue by letter within 30 days of the release of these reasons. Counsel may address the questions of the appropriate scale, the quantum of costs and whether these costs should be fixed by this court or assessed.

Order accordingly.

Notes

Note 1: Since 1995, this function has been assumed by the Minister of Veterans Affairs: S.C. 1995, c. 18, c. 59.