Apr 19, 2017

Claim allowed to proceed for policy allegedly adopted for improper purpose

Castrillo v. Workplace Safety and Insurance Board, 2017 ONCA 121 (CanLII)

Facts: C is the plaintiff in a proposed class action brought on behalf of injured workers alleged to have been denied the full benefits to which they were entitled under the Workplace Safety and Insurance Act, 1997. The statement of claim pleads misfeasance in public office, bad faith and negligence.

C sustained a shoulder injury in a work-related accident. He applied for and received the economic loss benefits to which he was entitled under the Act. He also qualified for a non-economic loss (“NEL”) award because he was found to have suffered a permanent impairment leaving him with less than a full range of motion in his shoulder. The Board determined that C was entitled to a NEL lump sum award, but then reduced the award by 50% because of a “pre-existing condition”, namely osteoarthritis in the injured shoulder.

C appealed on the basis that the Board was wrong to reduce the award, as his pre-existing osteoarthritis was asymptomatic before the work-related injury and had never affected his shoulder’s functionality. In other words, it was a pre-existing condition but not a pre-existing impairment. C’s appeal was allowed and the full amount of the NEL award was restored.

C later learned a number of other injured workers had had their NEL awards reduced by the Board on the basis of pre-existing conditions that were not true impairments, many of which were reversed on appeal. He discovered the reductions were due to the implementation of an internal Board document which adopted a broader interpretation of the term “pre-existing impairment” to include asymptomatic pre-existing conditions, which had previously been excluded.

He commenced the proposed class proceeding. The Board brought a motion to strike the statement of claim on the basis that it disclosed no reasonable cause of action. The Board relied in part on a strong privative clause in s 118 of the Act. The motion judge struck the claim and C appealed.

Decision: Appeal allowed.

A claim will only be struck where it is plain and obvious that it has no reasonable prospect of success.

A pleading of misfeasance in public office must alleged facts capable of establishing that: (1) the public official engaged in unlawful conduct in the exercise of public functions and (2) the public official was aware that the conduct in question was unlawful and was likely to injure the plaintiff.

The pleading alleges that the Board is a public body and its employees were public office holders. The Board is directly and vicariously liable for the bad faith acts and omissions of its employees. The pleading further alleges that the Board’s decision to reduce NEL awards was the result of a “secret policy” to “aggressively reduce legitimate NEL awards”. The pleading claims that the new approach in the “secret policy” was done “without legal authority” and was “illegal as being contrary to” the Act and its regulations. The pleading states that the Board’s actions were motivated by a desire to reduce costs, that the Board knew it was acting illegality and that its actions would harm C and the class, and that its actions were therefore malicious. In effect, the pleading asserts that reducing costs was an improper purpose of the change in policy.

The Board conceded that it owes a general public law duty to the public and to workers to act in good faith, but it challenged the adequacy of the pleading of bad faith. That challenge falls short for two reasons: (1) many of the specific facts supporting the allegation are within the Board’s knowledge; and (2) C relies in fact on known facts that are based in the legislation, the regulations, the policies and the documents. The Board also asserted that the only improper purpose alleged in the claim is “an attempt to cut costs”, but s 1 of the Act expressly obliges the Board to accomplish its purposes “in a financially responsible and accountable manner”. The Board argued these words permit the Board to reduce benefits to injured workers in order to save money. The Court rejected that argument as invalid on a pleadings motion.

The Board also argued that the claim was a collateral attack on the Board’s decision regarding C’s entitlement. However, the pleading is not linked to the specific circumstances of C’s complaint; it challenges the legality of the Board’s actions across a category of benefits and a class of persons. This is not a collateral attack.

The Court also rejected the Board’s argument that the claim is barred by the robust privative clause in s 118 of the Act. In the Crevier case the Supreme Court confirmed that a privative clause cannot completely insulate a statutory tribunal from court review. Although Crevier concerned a tribunal exercising an adjudicative function, the logic applies equally to agencies like the Board that do more that adjudicate, but also make policy and regulate. The legislature cannot completely oust the jurisdiction of the Superior Court to consider an allegation of misfeasance in public officer related to the use of statutory power for an improper purpose.

Bad faith is not a free-standing cause of action. However, C was granted leave to amend the claim to better tie the bad faith allegation to the claim of misfeasance in public office, if so advised.

The claim of negligence was sufficiently pleaded. The privative clause in s 118 of the Act does not lead to the conclusion that the claim has no reasonable prospect of success. Indeed, s 179 of the Act supports the argument that the Board is open to a negligence suit in the proper circumstances. It provides that the Board may be vicariously liability for the actionable acts and omissions of certain people undertaken in good faith

Commentary: This decision is a sombre caution to administrative agencies that, even if they are protected by a strong privative clause, actions they take for an improper purpose may give rise to civil liability for negligence and misfeasance in public office. While the action is only at the pleadings stage and no findings of liability have been made the Court was satisfied on the facts alleged in the claim, the relevant legislation, and the Crevier principle that C had pleaded a reasonable cause of action against the Board.

Administrative agencies should take note of this case and its potential consequences. Decisions – including policy relating to matters within an agency’s mandate – taken for an improper purpose and without legal authority are not merely susceptible to judicial review under administrative law principles; they may also give rise to costly civil actions.


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