Date: 20020514
Docket: T-1967-01
Neutral Citation: 2002 FCT 558
BETWEEN:
RONALD G. MAHEU
Applicant
and
IMS HEALTH CANADA and
THE PRIVACY COMMISSIONER OF CANADA
Respondents
REASONS FOR ORDER
HARGRAVE P.
[1] There are two branches of the motion of the Respondent, IMS Health Canada ("IMS"): first, it is to strike out the Notice of Application for Judicial Review (the "Application") as an abuse of process; alternatively, it is to require the Applicant to post security for costs on the basis that he is impecunious and the proceeding frivolous and vexatious. An abusive proceeding is essentially a frivolous and vexatious proceeding: the interesting question is whether, having found that the Application is not an abuse of process, to the extent that it ought not to be struck out as plainly, obviously and beyond doubt unable to succeed, that determination is fatal to a request under Rule 416(1)(g), a Rule which provides that an impecunious plaintiff post security for costs when it appears that there is reason to believe that the action is frivolous and vexatious. There is no longer any prohibition as to an award of costs on an application for judicial review, for Rule 400 and following give the Court full discretion as to costs: see McCormick v. Canada (1999) 164 F.T.R. 155 at 157 (T.D.). Thus there is no barrier to applying Rule 416, which deals with security for costs, to the present Application, substituting applicant and respondent for plaintiff and defendant as allowed by Rule 415.
[2] The crux of this application is, as viewed by the Respondent, is that the Applicant is abusing the process of the Federal Court by seeking what is ostensibly a review of the under the Personal Information Protection and Electronic Documents Act, ch. 5, S.C. 2000 (the "Act") of the actions of IMS in collecting and disclosing information but which, according to IMS, is "a thinly veiled attempt to pursue Pharma Communication's commercial interests.". IMS submits that the Application ought to be struck out as an abuse of process of the Federal Court: I would not go so far as to strike out the proceedings, however it is an abuse attracting security for costs in favour of the Respondent, pursuant to Rule 416(1)(g).
BACKGROUND
[3] The parties, Ronald Maheu and IMS, are competitors in the business of selling information, about prescriptions written by doctors, to producers of prescription drugs.
[4] In January of this year Pharma Communications Group Inc., the Applicant's company, complained to the Privacy Commissioner of Canada, of a perceived breach of the Act, namely that IMS had sold information about the prescribing practices of physicians, without their consent. This complaint was denied by the Privacy Commissioner. The Applicant, Ronald Maheu, as president and chief executive officer of Pharma Communications Group Inc., began this proceeding 2 November 2001, alleging that the Privacy Commissioner had erred in determining that information collected and disclosed by IMS was not personal information under the Act.
[5] This Federal Court proceeding is not the only litigation between the parties. There is a commercial dispute in the Ontario courts involving an alleged breach, by Mr. Maheu, of a licensing agreement with IMS and the unauthorized use by Pharma Communications Group Inc. of an IMS database, a proceeding in which there is an injunction outstanding against Mr. Maheu prohibiting him from making mailings to doctors, a practice which IMS found objectionable, the Ontario court agreeing. This Ontario litigation has indirect bearing on this Federal Court litigation, for it supports the contention of IMS that at the root of the Federal Court litigation is a commercial matter.
[6] Without going into all of the details which IMS sets out in its affidavit material, material upon which there was no cross-examination and which is essentially unchallenged, this Federal Court proceeding has the earmarks of a commercial dispute. However, there are apparently no decided cases determining whether the scope and purpose of the Act might possibly extend to such a dispute.
[7] The additional fact, which is undisputed, is that the Applicant is an undischarged bankrupt: his application for bankruptcy shows assets of $15,000.00, a tax debt of $886,998.36 and a monthly income which, as of 31 May 2000, just covers his expenses.
[8] Turning to the Act, section 3 provides in part that the purpose of the Act is ". . . to establish . . . rules to govern the collection, use and disclosure of personal information . . .". The Act establishes a code for the protection of personal information, that is information about an identifiable individual (exclusive of name and other identifying information). It sets out the rules under which private organizations must operate when they collect, use or disclose personal information in the context of commercial activities. Here IMS makes two points: first, the Applicant is not himself a health care provider; second, IMS does not collect information about Mr. Maheu. Rather, IMS contends that Mr. Maheu is using the Act to gain a competitive advantage for his company and that, in itself, is said to constitute an abuse of the Court. I now turn to a consideration of all of this.
CONSIDERATION
[9] In controlling their own proceedings, courts have the power to prevent the abuse of their process through oppressive or vexatious proceedings: here I would refer to British Columbia Government Employees' Union v. British Columbia [1988] 2 S.C.R. 214 at 240 and to Prassad v. Canada [1989] 1 S.C.R. 560 at 568. In the former instance the Supreme Court speaks of an inherent jurisdiction of courts and in the latter of the powers of administrative tribunals as masters of their own procedures. The Federal Court of Appeal considered abuse of process Levi Strauss & Co. v. Roadrunner Apparel Inc. (1998) 221 N.R. 93 in both the context of substantive tort law dealing with the misuse or perversion a court' s process and the context of a procedural vindication by a court of its process in order to protect the court from abuse by litigants. I believe in this latter context Mr. Justice Létourneau had in mind that it is a part of the implied jurisdiction of the Federal Court to control its own process through the use of the principle of prevention of abuse as a procedural matter. It is important to keep in mind that this implied jurisdiction, to control its own process, differs from the specific jurisdiction to strike out pleadings, as abusive, under Rule 221(1)(f) and under the interconnected category of frivolous and vexatious proceedings, Rule 221(1)(c).
[10] Prevention of abuse of process involves procedures by which "the court will prevent the improper use of its machinery, and will, in a proper case, summarily prevent its machinery from being used as a means of vexation and oppression in the process of litigation . . ." (The White Book of Supreme Court Practice, Sweet & Maxwell, 1993 edition at page 332). I considered abuse of process in Margem Chartering Co. v. The "Bosca". [1997] 2 F.C. 1001 at 1013 and following: there I specifically noted that the terms "frivolous" and "vexatious" are interchangeable with the term "abuse of the process of the Court".
[11] Similarly, in British Columbia Native Women's Society v. Canada [2001] 4 F.C. 191 at 205, I observed that frivolous and vexatious pleadings and abusive pleadings are in a sense intertwined, for frivolous and vexatious pleadings include pleadings which are an abuse of process, there relying on Ashmore v. British Coal Corporation [1990] 2 Q.B. 338 (C.A.) at page 347.
[12] A vexatious action may also include an action brought for an improper purpose: see Re Lang Michener and Fabian (1987) 37 D.L.R. (4th) 685 at 691, a decision of Mr. Justice Henry of the Ontario High Court, in which he summarizes a number of cases on this point.
[13] To summarize, the concepts of frivolousness, vexatiousness and abuse are intertwined and in many instances interchangeable. Further, there are two aspects of abuse of process in our Court. One aspect is a part of the implied procedural jurisdiction by which the Court controls its own process. The other aspect derives from Federal Court Rules 221(1)(c) and 221(1)(f), dealing with frivolous, vexatious and abusive proceedings, which may be struck out when it is plain, obvious and beyond doubt that a claim or a defence, as the case may be, will not succeed.
[14] In the present instance the scope of the Act has not yet been determined. While it would appear to be an abuse, or vexatious or frivolous, to use the Act to obtain a competitive business advantage, in the absence of decided cases bearing on the scope of the Act, I am not about to strike out the present pleading for two reasons. First, while the Court does have the jurisdiction to summarily dismiss an application for judicial review, it is a remedy which can only come into play where the originating document is so clearly improper as to be bereft of any possibility of success and then only in the exceptional instance: see David Bull Laboratories (Canada) v. Pharmacia Inc. [1995] 1 F.C. 588 at 600 (F.C.A.).
[15] The second reason why the present Application ought not to be struck out is that serious issues of law should not be determined on a summary motion unless they are so absolutely futile as to warrant being struck out: see Hodgson v. Ermineskin Indian Band, an unreported 10 September 1999 decision upheld (2001) 267 N.R. 143 (F.C.A.) at paragraph 14, there referring to Vulcan Equipment Co. Ltd. v. Coats Co. Inc. [1982] 2 F.C. 77 (F.C.A.) at 78, leave to appeal to the Supreme Court of Canada refused (1982) 63 C.P.R. (2d) 261n.
[16] Counsel for Mr. Maheu submits that, having found the proceeding not one which should be struck out as abusive, frivolous or vexatious, the issue of security for costs, pursuant to Rule 416(1)(g) is foreclosed. This provision is as follows:
416. (1) Where security available -- Where, on the motion of a defendant, it appears to the Court that . . .
(g) there is reason to believe that the action is frivolous and vexatious and the plaintiff would have insufficient assets in Canada available to pay the costs of the defendant, if ordered to do so, . . .
the Court may order the plaintiff to give security for the defendant's costs.
[17] An answer to this suggestion, that a denial of a motion to strike out for abuse forecloses any remedy for security for costs on the basis that the proceeding is frivolous and vexatious, is that Rule 416(1)(g) would virtually never come into play in the context of an action, for the action would be struck first. Similarly, it might be difficult to find an application for the rule even in judicial review. Therefore, on the basis that those who drafted the Rule meant it to have application, the standard of frivolousness and vexatiousness leading to costs must be a lower standard than that required to strike out a proceeding.
[18] A second and more reasoned approach to this submission that security for costs has been foreclosed lies in the necessary elements of Rule 416(1)(g). The elements are first, that it must appear to the Court that there is reason to believe that the action is frivolous and vexatious and second, that the plaintiff is without Canadian assets to pay costs. This wording, an appearance of vexatiousness or frivolousness, is very different from the absolute standard of frivolousness and vexatiousness which the Court has used in applying Rule 221 on an application to strike out.
[19] In the present instance the material appears to indicate that there is reason to believe that the proceeding is frivolous and vexatious in the sense that it is not fair and honest to use the process of the Court in order to extend the Act for what is very arguably an improper purpose, that of obtaining a commercial advantage. Here I would refer, by analogy, to Re Bankruptcies of Down (2000) 189 D.L.R. (4th) 709 (B.C.S.C.), a decision of Chief Justice Brenner in which he noted that a Canadian court would not permit the Bankruptcy and Insolvency Act ("BIA") to be used for an improper or collateral purpose:
A Canadian court will not permit the BIA to be used for an improper purpose. An improper purpose is one that is contrary to the purpose for which the legislation was enacted by Parliament. Where a party is found to be using the BIA for an improper purpose the petition for a receiving order will be dismissed. (pages 715-716).
This concept is not limited to bankruptcy proceedings, for they are like any other proceedings where legislation may not be threatened or used to achieve a collateral or improper purpose:
There is ample authority for the general proposition that bankruptcy proceedings, like any other proceedings, may not be threatened or used to achieve a collateral purpose or advantage for the petitioner rather than for the purpose for which such proceedings are intended . . . (Re Fengar Investments Corporation (1993) 17 C.B.R. (3d) 167 at 188, Ontario General Division, emphasis added).
[20] Continuing this analysis by way of analogy, I also refer to Re Laserworks Computer Services Inc. (1998) 6 C.B.R. (4th) 69, in which Mr. Justice of Appeal Freeman, in writing for the court, observed that the threshold of substantial injustice, which would invoke remedial action from a court, is established when the Bankruptcy and Insolvency Act is used for an improper purpose: "An improper purpose is any purpose collateral to the purpose for which the bankruptcy and insolvency legislation was enacted by Parliament." (page 85). In Laserworks at a meeting of creditors, a competitor of the debtor cast proxy votes obtained from unsecured creditors of the bankruptcy, thus defeating the proposal. This was held to be an objective ". . . so abusive of the purpose of the legislation as to engage the supervisory jurisdiction of the courts . . ." (pages 87-88).
[21] From all of this IMS, which alleges that the Act is being subverted for a commercial advantage, submits that the situation falls clearly within Rule 416(1)(g), for it need only show that "it appears" that "there is reason to believe" that this Application "is frivolous and vexatious". From a plain reading of the rule, it is apparent that IMS need not show, in absolute terms, that Mr. Maheu's Application is in fact frivolous and vexatious. This is a very different standard than that required to strike out a pleading. Indeed, this is the approach taken in Ontario, where there is a parallel rule that is very close to our Rule 416(1)(g):
56.01(1) The Court, on motion by the defendant or respondent in a proceeding, may make such order for security for costs as is just where it appears that,
(e) there is good reason to believe that the action or application is frivolous and vexatious and that the plaintiff or applicant has insufficient assets in Ontario to pay the costs of the defendant or respondent.
The only substantial difference is that, in Ontario, there must be "good reason", not merely "reason" to believe the proceeding is frivolous and vexatious. This Ontario provision as to security for costs was considered in Hallum v. Canadian Memorial Chiropractic College (1989) 70 O.R. (2d) 119. Mr. Justice Doherty observed that the defendant, in seeking security for costs ". . . only had to show that it appeared that there was good reason to believe that the action was frivolous or vexatious. It was not required to show that the action was in fact frivolous." (page 123).
[22] In the present instance, it objectively appears that there is reason to believe that the Applicant is using the Act for a collateral and improper purpose, rather than for the purpose set out in section 3 of the Act. As I have indicated the Act is designed to regulate the collection, use and disclosure of personal information generated in commercial activities. Here the Applicant's own personal information is not at issue in any way.
[23] In the present instance IMS has succeed in establishing reason to believe that the Application is frivolous and vexatious, a lower standard than that required to strike out a pleading, but a clearly sufficient standard from which to apply for security for costs.
[24] As to the ability to pay costs, if ordered, the onus is upon IMS to establish a prima facie case that Mr. Maheu has insufficient assets with which to pay costs, if required. The onus, or more aptly, as I pointed out Early Recovery Resources Inc. v. Gulf Log Salvage Co-op Association, an unreported decision of 24 May 2001 in File T-588-00, a requirement, that ". . . the Plaintiff balance the evidence and thereby show that indeed it has appropriate exigible assets by which to satisfy an order as to costs." (paragraph 2) then shifts to the Applicant. In this instance the Respondent, IMS, has established the prima facie case through the production, in evidence, of the material in the matter of the bankruptcy of Mr. Maheu. This has not been balanced by any evidence from Mr. Maheu.
CONCLUSION
[25] The Respondent, IMS, has clearly established that it appears that there is reason to believe both that the proceeding is frivolous and vexatious and that Mr. Maheu would have insufficient assets in Canada available to pay the costs of the Respondent. Thus it is appropriate to order security for costs.
[26] The draft bill of costs prepared by IMS, assuming a three-day trial in Toronto, totals just over $19,000.00. On the one hand, the draft bill of costs is conservatively drafted, with the possibility of actual costs running to more. On the other hand, many proceedings have resolved short of trial. Thus it is often more appropriate to make an interim order as to costs, with liberty to apply. In this instance there will be an interim order for security for costs, to be given by 28 June 2002, in the amount of $12,000.00.
(Sgd.) "John A. Hargrave"
Prothonotary
Vancouver, British Columbia
14 May 2002
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-1967-01
STYLE OF CAUSE: Ronald G. Maheu v. IMS Health Canada et al.
PLACE OF HEARING: Vancouver, British Columbia
DATE OF HEARING: May 6, 2002
REASONS FOR ORDER: HARGRAVE P.
DATED: May 14, 2002
APPEARANCES:
Mr. Paul Bigioni FOR APPLICANT
Mr. T. Murray Rankin, Q.C. FOR RESPONDENT,
Mr. Christopher Jones IMS HEALTH CANADA
Mr. Steve Welchner FOR RESPONDENT,
PRIVACY COMMISSIONER OF CANADA
SOLICITORS OF RECORD:
Bigioni FOR APPLICANT
Markham, Ontario
Arvay Finlay FOR RESPONDENT,
Victoria, British Columbia IMS HEALTH CANADA
Nelligen O'Brien Payne LLP FOR RESPONDENT,
Ottawa, ON PRIVACY COMMISSIONER OF CANADA