ALBERTA LAW REPORTS Sixth Series Reports of Selected Cases from the Courts of Alberta and Appeals

VOLUME 31 (Cited 31 Alta. L.R. (6th))

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[Indexed as: Shefsky v. California Gold Mining Inc.] Martin Shefsky and 2350183 Ontario Inc., Appellants (Applicants) and California Gold Mining Inc., Michael Churchill, Kevin Cinq-Mars, Patrick Cronin, R.W. Tomlinson Limited, John Doe #1-50, and ABC Corporation #1-50, Respondents (Respondents) Alberta Court of Appeal Docket: Edmonton Appeal 1503-0001-AC 2016 ABCA 103 Peter Costigan, Frans Slatter, Frederica Schutz JJ.A. Heard: February 5, 2016 Judgment: April 14, 2016 Business associations –––– Specific matters of corporate organization — Shareholders — Shareholders’ remedies — Relief from oppression — Mis- cellaneous –––– CGM Inc. was public mineral exploration corporation — Ap- pellants, MS and holding company, alleged respondents breached MS’s reasonable expectations he would control CGM Inc. if he raised $5M — MS and holding company claimed respondents engaged in oppressive conduct including secret placement of shares that diluted MS’s voting power and refusing to allow MS to appoint third member to board when initial nominee refused position — Chambers judge determined MS had reasonable expectation Term Sheet would be honoured but not reasonable expectation he had sufficient shareholder support for control — He dismissed oppression motion — MS and holding company appealed — Appeal dismissed — Chambers judge did not err in failing to find that loss of opportunity to gain control of CGMI was reasonable expectation violated by secret private placement — Expectation based on loss of opportunity, without proof that opportunity more than merely speculative, insufficient to ground oppression — MS failed to identify personal interest that was violated — Not sufficient to allege shareholders generally have expectation that directors generally will not act oppressively — In any event, chambers judge did not find that secret private placement was below market value nor was there any eviden- 2 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

tiary foundation for that assertion — Chambers judge accepted evidence that CGM Inc. had to raise additional funds — Timing, source and pricing of financing was solely matter of business judgment entitled to substantial deference — There was no evidence directors did not act in best interests of corporation, despite that so acting may not have coincided with MS’s personal interests — Chambers judge found MS had not attempted to exercise his right to appoint third director — Any expectation to control composition of board past date of annual meeting was inconsistent with corporation’s public statements, statutory disclosure obligations and basic rights of shareholders to choose board of publicly-traded company — MS’s reasonable expectation to appoint third director arose not out of MS’s capacity as shareholder but rather as potential financier — MS possessed legal entitlement to acquire shares but did not have right to enjoin further share placements — MS and holding company’s claims were contractual in nature and fell outside legal and jurisdictional boundaries of oppression remedy — Chambers judge found MS and holding company did not meet burden of showing they suffered oppression, unfair prejudice or unfair disregard — No evidence MS’s expectation he could appoint third director was violated in manner that was oppressive, unfairly prejudicial or that unfairly disregarded protected interests. Business associations –––– Specific matters of corporate organization — Shareholders — Shareholders’ remedies — Relief from oppression — Op- pressive conduct — Dealings with shares –––– Appellants, MS and holding company, alleged respondents breached MS’s reasonable expectations he would control public company if he raised $5M and engaged in oppressive conduct including secret placement of shares that diluted MS’s voting power and refusing to allow MS to appoint third member to five-member board when initial nominee refused position — Chambers judge determining MS had reasonable expectation Term Sheet would be honoured but not reasonable expectation he had sufficient shareholder support for control and dismissing appellants’ oppression motion — MS and holding company appealed — Appeal dismissed — Ex- pectation based on loss of opportunity to gain control of CGM Inc., without proof that opportunity more than merely speculative, insufficient to ground oppression — MS failing to identify personal interest that was violated; not sufficient to allege shareholders generally have expectation directors will not act oppressively — Timing, source and pricing of additional financing was solely matter of business judgment entitled to substantial deference and no evidence directors did not act in best interests of corporation, despite that so acting may not have coincided with MS’s personal interests — Any expectation to control composition of board past date of annual meeting was inconsistent with corporation’s public statements, statutory disclosure obligations and basic rights of shareholders to choose board of publicly-traded company — MS’s reasonable expectation to appoint third director arising out of MS’s capacity as potential financier rather than shareholder — MS and holding company’s claims were Shefsky v. California Gold Mining Inc. 3 contractual in nature, falling outside legal and jurisdictional boundaries of oppression remedy — MS and holding company not met burden of showing they suffered oppression, unfair prejudice or unfair disregard. CGM Inc. was a public corporation involved in mineral exploration. The appellants, MS and his solely owned holding company, alleged the respondents breached MS’ reasonable expectations that he would control CGM Inc. if he raised at least $5M in investments. In particular, MS claimed he was entitled to name three of five directors on the board and would retain control through the shares owned by him and the investors he introduced to CGM Inc. The appellants claimed the respondents engaged in oppressive conduct including a secret placement of shares that diluted MS’s voting power and refusing to allow MS to appoint a third member to the board when his initial nominee refused to accept the position. The chambers judge determined that even though MS did not raise $5M by the deadline specified in the Term Sheet, he had a reasonable expectation that the Term Sheet would be extended and honoured. He held that MS had a reasonable expectation that he would be permitted to appoint a director when his initial nominee refused to accept the position but declined to find that MS had an ongoing right to name a new director because he never took steps to appoint a new third director. The chambers judge found as a fact that MS did not have a reasonable expectation that he had sufficient shareholder support to control CGM Inc. at any time. He dismissed motion for oppression. MS and holding company appealed. Held: The appeal was dismissed. Per Costigan and Schutz JJ.A.: The chambers judge did not err in failing to find that the loss of an opportunity to gain control of CGM Inc. was a reasonable expectation violated by the secret private placement. An expectation based on a loss of opportunity, without proof that such opportunity was more than merely speculative, was insufficient to ground an oppression claim because causation and compensable injury have not been established. MS and holding company failed to identify any specific expectation, apart from the expectation of control, which was violated. MS was required to identify a personal interest that was violated. It was not sufficient to allege that shareholders generally have an expectation that directors generally will not act oppressively. In any event, the chambers judge did not find that the secret private placement was below market value nor was there any evidentiary foundation for that assertion. The chambers judge accepted evidence that CGM Inc. had to raise additional funds in order to redo geological reports and other work the directors determined had been done improperly. The timing, source and pricing of this financing was solely a matter of business judgment entitled to substantial defer- 4 ALBERTA LAW REPORTS 31 Alta. L.R. (6th) ence. There was no evidence the directors did not act in the best interests of the corporation, despite that so acting may not have coincided with MS’s personal interests. The chambers judge found that MS had not attempted to exercise his right to appoint a third members of the board of CGM Inc. Any expectation to control the composition of the board past the date of the annual meeting was inconsistent with the corporation’s public statements, its statutory disclosure obligations and the basic rights of its shareholders as a whole to choose the board of directors of their publicly-traded company. MS’s reasonable expectation to appoint a third director were not made by, or to, MS in his capacity as a shareholder but rather in his capacity as a potential financier, promoter or underwriter. MS possessed a legal entitlement to acquire shares at the relevant time but he did not have a right to enjoin any further share placements. In addition, MS and holding company’s claims were contractual in nature and fell outside the legal and jurisdictional boundaries of an oppression remedy. The chambers judge found that MS and holding company did not meet the burden of showing they suffered oppression, unfair prejudice or unfair disregard but there was not sufficient evidence to controvert the finding that MS took no steps to appoint a third director. Nor was there evidence that MS’s expectation that he could appoint a third director was violated in a manner that was oppressive, unfairly prejudicial or that unfairly disregarded his protected interests. Per Slatter J.A. (dissenting): The appeal should be allowed. Given the factual context, MS and holding company were properly regarded as complainants and the allegations they made were properly characterized as complaints about oppressive corporate conduct. It was difficult to regard the Term Sheet as being merely a contract. It was equally important in creating reasonable expectations that could be relied on by MS and holding company once they became shareholders and MS became a director and officer. Nor was MS merely an underwriter or financier. He was to become the CEO, a board member, and was also to have control of the appointment of the board. The chambers judge’s description of MS and holding company’s expectation as centering around whether they could maintain control artificially characterized what was alleged, focusing on narrow legalities rather than business realities. He also set an unreasonably high evidentiary standard. MS and holding company demonstrated palpable and overriding error with respect to the expectation of control. The finding that MS never nominated a third director reflected a reviewable error of fact. The secret private placement unfairly disregarded MS and holding company’s interests and was prejudicial to them, making it oppressive. It was in direct breach of the Term Sheet. The chambers judge committed reviewable error by overlooking these breaches and overlooking the point that oppression remedies Shefsky v. California Gold Mining Inc. 5

are concerned as much with fairness as they are with strict legal rights. It would be appropriate to refer the issue of remedy back to the chambers judge. Cases considered by Peter Costigan, Frederica Schutz JJ.A.: Adeco Exploration Co. v. Hunt Oil Co. of Canada Inc. (2008), 2008 ABCA 214, 2008 CarswellAlta 1043, 94 Alta. L.R. (4th) 270, 48 B.L.R. (4th) 161, 437 A.R. 33, 433 W.A.C. 33 (Alta. C.A.) — referred to Alvi v. Misir (2004), 2004 CarswellOnt 5302, 50 B.L.R. (3d) 175, 73 O.R. (3d) 566, [2004] O.J. No. 5088, [2004] O.T.C. 1102 (Ont. S.C.J. [Commercial List]) — considered BCE Inc., Re (2008), 2008 CarswellQue 12595, 2008 CarswellQue 12596, 71 C.P.R. (4th) 303, 52 B.L.R. (4th) 1, (sub nom. Aegon Capital Management Inc. v. BCE Inc.) 383 N.R. 119, (sub nom. Aegon Capital Management Inc. v. BCE Inc.) 301 D.L.R. (4th) 80, 2008 SCC 69, [2008] S.C.J. No. 37, (sub nom. BCE Inc. v. 1976 Debentureholders) [2008] 3 S.C.R. 560 (S.C.C.) — followed Charles v. Young (2014), 2014 ABCA 200, 2014 CarswellAlta 957, 97 E.T.R. (3d) 1, 577 A.R. 54, 613 W.A.C. 54 (Alta. C.A.) — considered Cusson v. Quan (2009), 2009 SCC 62, 2009 CarswellOnt 7958, 2009 Carswell- Ont 7959, 70 C.C.L.T. (3d) 1, 397 N.R. 94, 314 D.L.R. (4th) 55, 258 O.A.C. 378, (sub nom. Quan v. Cusson) [2009] 3 S.C.R. 712, 102 O.R. (3d) 480 (note), [2009] S.C.J. No. 62 (S.C.C.) — considered Ford Motor Co. of Canada v. Ontario (Municipal Employees Retirement Board) (2004), 2004 CarswellOnt 208, [2004] O.J. No. 191, 41 B.L.R. (3d) 74, 2004 D.T.C. 6224, [2004] O.T.C. 53 (Ont. S.C.J. [Commercial List]) — considered Ford Motor Co. of Canada v. Ontario (Municipal Employees Retirement Board) (2006), 2006 CarswellOnt 13, [2006] O.J. No. 27, 12 B.L.R. (4th) 189, 206 O.A.C. 61, 263 D.L.R. (4th) 450, 79 O.R. (3d) 81 (Ont. C.A.) — referred to Ford Motor Co. of Canada v. Ontario (Municipal Employees Retirement Board) (2006), 2006 CarswellOnt 5134, 2006 CarswellOnt 5135, 358 N.R. 393 (note), [2006] S.C.C.A. No. 77, 225 O.A.C. 400 (note), 267 D.L.R. (4th) ix, [2006] 2 S.C.R. x (note) (S.C.C.) — referred to Hryniak v. Mauldin (2014), 2014 CarswellOnt 640, 2014 CarswellOnt 641, 37 R.P.R. (5th) 1, [2014] S.C.J. No. 7, 46 C.P.C. (7th) 217, 27 C.L.R. (4th) 1, (sub nom. Hryniak v. Mauldin) 366 D.L.R. (4th) 641, 2014 CSC 7, 453 N.R. 51, 12 C.C.E.L. (4th) 1, 314 O.A.C. 1, 95 E.T.R. (3d) 1, 21 B.L.R. (5th) 248, [2014] 1 S.C.R. 87, [2014] A.C.S. No. 7, 2014 SCC 7 (S.C.C.) — followed Icahn Partners LP v. Lions Gate Entertainment Corp. (2010), 2010 BCSC 1547, 2010 CarswellBC 2936, 75 B.L.R. (4th) 212, 15 B.C.L.R. (5th) 132, [2010] B.C.J. No. 2130 (B.C. S.C.) — considered Icahn Partners LP v. Lions Gate Entertainment Corp. (2011), 2011 BCCA 228, 2011 CarswellBC 1135, 17 B.C.L.R. (5th) 391, 68 E.T.R. (3d) 13, 333 D.L.R. (4th) 257, [2011] 9 W.W.R. 449, [2011] B.C.J. No. 876, 84 B.L.R. 6 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

(4th) 1, 306 A.R. 173, 316 W.A.C. 173, 306 B.C.A.C. 173 (B.C. C.A.) — referred to J.S.M. Corp. (Ontario) Ltd. v. Brick Furniture Warehouse Ltd. (2008), 2008 ONCA 183, 2008 CarswellOnt 1348, 41 B.L.R. (4th) 51, 234 O.A.C. 59, 67 R.P.R. (4th) 1, [2008] O.J. No. 958 (Ont. C.A.) — referred to Keho Holdings Ltd. v. Noble (1987), 52 Alta. L.R. (2d) 195, 78 A.R. 131, 38 D.L.R. (4th) 368, 1987 CarswellAlta 107, [1987] A.J. No. 334, 1987 ABCA 84 (Alta. C.A.) — considered Legion Oils Ltd. v. Barron (1956), 17 W.W.R. 209, 2 D.L.R. (2d) 505, 1956 CarswellAlta 3 (Alta. T.D.) — considered McRoberts v. Whissell (2006), 2006 ABCA 388, 2006 CarswellAlta 1689, [2006] A.J. No. 1589 (Alta. C.A.) — referred to Naneff v. Con-Crete Holdings Ltd. (1995), 23 O.R. (3d) 481, 85 O.A.C. 29, 23 B.L.R. (2d) 286, 1995 CarswellOnt 1207, [1995] O.J. No. 1377 (Ont. C.A.) — referred to Pente Investment Management Ltd. v. Schneider Corp. (1998), 1998 Carswell- Ont 4035, 113 O.A.C. 253, (sub nom. Maple Leaf Foods Inc. v. Schneider Corp.) 42 O.R. (3d) 177, 44 B.L.R. (2d) 115, [1998] O.J. No. 4142 (Ont. C.A.) — referred to Rea v. Wildeboer (2015), 2015 ONCA 373, 2015 CarswellOnt 7602, 384 D.L.R. (4th) 747, 37 B.L.R. (5th) 101, 126 O.R. (3d) 178, 335 O.A.C. 161 (Ont. C.A.) — followed Rogers Communications Inc. v. MacLean Hunter Ltd. (1994), 2 C.C.L.S. 233, 1994 CarswellOnt 1079, [1994] O.J. No. 408, 2 C.C.L.T. 233 (Ont. Gen. Div. [Commercial List]) — considered Sandhu v. Siri Guru Nanak Sikh Gurdwara of Alberta (2015), 2015 ABCA 101, 2015 CarswellAlta 384, 382 D.L.R. (4th) 150, [2015] 7 W.W.R. 53, 39 B.L.R. (5th) 1, 599 A.R. 267, 643 W.A.C. 267, 12 Alta. L.R. (6th) 299 (Alta. C.A.) — referred to Smith v. Hanson Tire & Supply Co. (1927), [1927] 2 W.W.R. 529, 21 Sask. L.R. 621, [1927] 3 D.L.R. 786, 1927 CarswellSask 50 (Sask. C.A.) — considered Stahlke v. Stanfield (2010), 2010 BCSC 142, 2010 CarswellBC 250 (B.C. S.C.) — considered Stahlke v. Stanfield (2010), 2010 BCCA 603, 2010 CarswellBC 3686, [2010] B.C.J. No. 2708, 305 B.C.A.C. 18, 515 W.A.C. 18 (B.C. C.A.) — referred to Teck Corp. v. Millar (1972), [1973] 2 W.W.R. 385, 33 D.L.R. (3d) 288, 1972 CarswellBC 284, [1972] B.C.J. No. 566 (B.C. S.C.) — referred to Windsor v. Canadian Pacific Railway (2014), 2014 ABCA 108, 2014 Carswell- Alta 395, [2014] 5 W.W.R. 733, 94 Alta. L.R. (5th) 301, [2014] A.J. No. 256, 371 D.L.R. (4th) 339, 56 C.P.C. (7th) 107, (sub nom. Windsor v. Canadian Pacific Railway Ltd.) 572 A.R. 317, (sub nom. Windsor v. Canadian Pacific Railway Ltd.) 609 W.A.C. 317 (Alta. C.A.) — followed Shefsky v. California Gold Mining Inc. 7

820099 Ontario Inc. v. Harold E. Ballard Ltd. (1991), 3 B.L.R. (2d) 113, 1991 CarswellOnt 141, [1991] O.J. No. 1082 (Ont. Div. Ct.) — referred to 1216808 Alberta Ltd. v. Crown Capital Corp. (2014), 2014 ABCA 386, 2014 CarswellAlta 2128, [2014] A.J. No. 1306, 35 B.L.R. (5th) 1 (Alta. C.A.) — referred to

Cases considered by Frans Slatter J.A. (dissenting): Achtem v. McConnell (1986), 1986 CarswellAlta 844, [1986] A.J. No. 207 (Alta. C.A.) — referred to in a minority or dissenting opinion Attila Dogan Construction and Installation Co. v. AMEC Americas Ltd. (2015), 2015 ABCA 406, 2015 CarswellAlta 2342 (Alta. C.A.) — referred to in a minority or dissenting opinion BCE Inc., Re (2008), 2008 CarswellQue 12595, 2008 CarswellQue 12596, 71 C.P.R. (4th) 303, 52 B.L.R. (4th) 1, (sub nom. Aegon Capital Management Inc. v. BCE Inc.) 383 N.R. 119, (sub nom. Aegon Capital Management Inc. v. BCE Inc.) 301 D.L.R. (4th) 80, 2008 SCC 69, [2008] S.C.J. No. 37, (sub nom. BCE Inc. v. 1976 Debentureholders) [2008] 3 S.C.R. 560 (S.C.C.) — considered in a minority or dissenting opinion Barter v. Barter (1996), 42 Alta. L.R. (3d) 221, 1996 CarswellAlta 633, 1996 ABCA 248 (Alta. C.A.) — referred to in a minority or dissenting opinion Burton v. Burton (1987), 12 R.F.L. (3d) 113, 84 A.R. 338, 1987 CarswellAlta 345 (Alta. C.A.) — referred to in a minority or dissenting opinion Charles v. Young (2014), 2014 ABCA 200, 2014 CarswellAlta 957, 97 E.T.R. (3d) 1, 577 A.R. 54, 613 W.A.C. 54 (Alta. C.A.) — considered in a minority or dissenting opinion Confederation Trust Co. v. Alizadeh (1998), 1998 CarswellOnt 397, [1998] O.J. No. 408, 54 O.T.C. 226 (Ont. Gen. Div.) — referred to in a minority or dissenting opinion Dagher v. Glenn (2016), 2016 ABCA 38, 2016 CarswellAlta 184 (Alta. C.A.) — referred to in a minority or dissenting opinion Goldman v. Devine (2007), 2007 ONCA 301, 2007 CarswellOnt 2352, [2007] O.J. No. 1491 (Ont. C.A.) — referred to in a minority or dissenting opinion Guarantee Co. of North America v. Gordon Capital Corp. (1999), 1999 Cars- wellOnt 3171, 1999 CarswellOnt 3172, [1999] S.C.J. No. 60, 178 D.L.R. (4th) 1, 247 N.R. 97, [2000] I.L.R. I-3741, 126 O.A.C. 1, 49 B.L.R. (2d) 68, 15 C.C.L.I. (3d) 1, [1999] 3 S.C.R. 423, 39 C.P.C. (4th) 100 (S.C.C.) — referred to in a minority or dissenting opinion Guimond v. Sornberger (1980), 13 M.P.L.R. 134, 25 A.R. 18, 115 D.L.R. (3d) 321, 13 Alta. L.R. (2d) 228, 1980 CarswellAlta 78, [1980] A.J. No. 650 (Alta. C.A.) — referred to in a minority or dissenting opinion Haluschak v. Stokowski (1990), 39 C.P.C. (2d) 8, 104 A.R. 10, 1990 Carswell- Alta 293 (Alta. Master) — referred to in a minority or dissenting opinion 8 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

Housen v. Nikolaisen (2002), 2002 SCC 33, 2002 CarswellSask 178, 2002 Car- swellSask 179, [2002] S.C.J. No. 31, 286 N.R. 1, 10 C.C.L.T. (3d) 157, 211 D.L.R. (4th) 577, [2002] 7 W.W.R. 1, 219 Sask. R. 1, 272 W.A.C. 1, 30 M.P.L.R. (3d) 1, [2002] 2 S.C.R. 235, REJB 2002-29758, 2002 CSC 33 (S.C.C.) — considered in a minority or dissenting opinion Hryniak v. Mauldin (2014), 2014 CarswellOnt 640, 2014 CarswellOnt 641, 37 R.P.R. (5th) 1, [2014] S.C.J. No. 7, 46 C.P.C. (7th) 217, 27 C.L.R. (4th) 1, (sub nom. Hryniak v. Mauldin) 366 D.L.R. (4th) 641, 2014 CSC 7, 453 N.R. 51, 12 C.C.E.L. (4th) 1, 314 O.A.C. 1, 95 E.T.R. (3d) 1, 21 B.L.R. (5th) 248, [2014] 1 S.C.R. 87, [2014] A.C.S. No. 7, 2014 SCC 7 (S.C.C.) — considered in a minority or dissenting opinion Icahn Partners LP v. Lions Gate Entertainment Corp. (2010), 2010 BCSC 1547, 2010 CarswellBC 2936, 75 B.L.R. (4th) 212, 15 B.C.L.R. (5th) 132, [2010] B.C.J. No. 2130 (B.C. S.C.) — considered in a minority or dissenting opinion Icahn Partners LP v. Lions Gate Entertainment Corp. (2011), 2011 BCCA 228, 2011 CarswellBC 1135, 17 B.C.L.R. (5th) 391, 68 E.T.R. (3d) 13, 333 D.L.R. (4th) 257, [2011] 9 W.W.R. 449, [2011] B.C.J. No. 876, 84 B.L.R. (4th) 1, 306 A.R. 173, 316 W.A.C. 173, 306 B.C.A.C. 173 (B.C. C.A.) — referred to in a minority or dissenting opinion Keho Holdings Ltd. v. Noble (1987), 52 Alta. L.R. (2d) 195, 78 A.R. 131, 38 D.L.R. (4th) 368, 1987 CarswellAlta 107, [1987] A.J. No. 334, 1987 ABCA 84 (Alta. C.A.) — referred to in a minority or dissenting opinion Klein v. Wolbeck (2016), 2016 ABQB 28, 2016 CarswellAlta 61 (Alta. Q.B.) — referred to in a minority or dissenting opinion Legion Oils Ltd. v. Barron (1956), 17 W.W.R. 209, 2 D.L.R. (2d) 505, 1956 CarswellAlta 3 (Alta. T.D.) — referred to in a minority or dissenting opinion Montgomery v. Riviere (1989), 1989 CarswellAlta 743, [1989] A.J. No. 958 (Alta. C.A.) — referred to in a minority or dissenting opinion Nieuwesteeg v. Barron (2009), 2009 ABCA 235, 2009 CarswellAlta 957, 69 R.F.L. (6th) 30, 460 A.R. 329, 462 W.A.C. 329, [2009] A.J. No. 677 (Alta. C.A.) — referred to in a minority or dissenting opinion Papaschase Indian Band No. 136 v. Canada (Attorney General) (2008), 2008 SCC 14, 2008 CarswellAlta 398, 2008 CarswellAlta 399, 86 Alta. L.R. (4th) 1, [2008] 5 W.W.R. 195, (sub nom. Lameman v. Canada (Attorney Gen- eral)) 372 N.R. 239, 68 R.P.R. (4th) 59, 292 D.L.R. (4th) 49, [2008] S.C.J. No. 14, [2008] 2 C.N.L.R. 295, (sub nom. Lameman v. Canada (Attorney General)) 429 A.R. 26, (sub nom. Lameman v. Canada (Attorney General)) 421 W.A.C. 26, (sub nom. Canada (Attorney General) v. Lameman) [2008] 1 S.C.R. 372, [2008] A.C.S. No. 14 (S.C.C.) — referred to in a minority or dissenting opinion Pioneer Exploration Inc. (Trustee of) v. Euro-Am Pacific Enterprises Ltd. (2003), 2003 ABCA 298, 2003 CarswellAlta 1498, [2003] A.J. No. 1305, Shefsky v. California Gold Mining Inc. 9

339 A.R. 165, 312 W.A.C. 165, 27 Alta. L.R. (4th) 62 (Alta. C.A.) — referred to in a minority or dissenting opinion Pizza Pizza Ltd. v. Gillespie (1990), 75 O.R. (2d) 225, 33 C.P.R. (3d) 515, 45 C.P.C. (2d) 168, 1990 CarswellOnt 408, [1990] O.J. No. 2011 (Ont. S.C.J.) — referred to in a minority or dissenting opinion R. Floden Services Ltd. v. Solomon (2015), 2015 ABQB 450, 2015 CarswellAlta 1274, 24 Alta. L.R. (6th) 76 (Alta. Q.B.) — referred to in a minority or dissenting opinion Rogers Cable TV Ltd. v. 373041 Ontario Ltd. (1994), 22 O.R. (3d) 25, 1994 CarswellOnt 166, [1994] O.J. No. 2196 (Ont. Gen. Div.) — referred to in a minority or dissenting opinion Rogers Communications Inc. v. MacLean Hunter Ltd. (1994), 2 C.C.L.S. 233, 1994 CarswellOnt 1079, [1994] O.J. No. 408, 2 C.C.L.T. 233 (Ont. Gen. Div. [Commercial List]) — considered in a minority or dissenting opinion Schmidt v. Wood (2013), 2013 ABCA 138, 2013 CarswellAlta 460 (Alta. C.A.) — referred to in a minority or dissenting opinion Stahlke v. Stanfield (2010), 2010 BCSC 142, 2010 CarswellBC 250 (B.C. S.C.) — considered in a minority or dissenting opinion Teck Corp. v. Millar (1972), [1973] 2 W.W.R. 385, 33 D.L.R. (3d) 288, 1972 CarswellBC 284, [1972] B.C.J. No. 566 (B.C. S.C.) — considered in a minority or dissenting opinion Windsor v. Canadian Pacific Railway (2014), 2014 ABCA 108, 2014 Carswell- Alta 395, [2014] 5 W.W.R. 733, 94 Alta. L.R. (5th) 301, [2014] A.J. No. 256, 371 D.L.R. (4th) 339, 56 C.P.C. (7th) 107, (sub nom. Windsor v. Canadian Pacific Railway Ltd.) 572 A.R. 317, (sub nom. Windsor v. Canadian Pacific Railway Ltd.) 609 W.A.C. 317 (Alta. C.A.) — considered in a minority or dissenting opinion Statutes considered by Frederica Schutz, Peter Costigan JJ.A.: Business Corporations Act, R.S.A. 2000, c. B-9 s. 239(a) “action” — considered s. 239(b) “complainant” — considered s. 242 — considered

Statutes considered by Frans Slatter J.A. (dissenting): Business Corporations Act, R.S.A. 2000, c. B-9 Generally — referred to s. 239(b) “complainant” — considered s. 242(2) — considered 10 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

s. 242(3)(p) — considered

APPEAL by appellants MS and holding company from decision reported at Shefsky v. California Gold Mining Inc. (2014), 2014 ABQB 730, 2014 Carswell- Alta 2173 (Alta. Q.B.), which dismissed oppression motion.

A.G. Formosa, for Appellants S.M. Robinson, M.J. Diskin, for Respondents

Peter Costigan, Frederica Schutz JJ.A.: Overview 1 This is an appeal from the dismissal of the appellants’ oppression application. This appeal engages the analytical framework applied to oppression claims and remedies stipulated by the Supreme Court of Canada in BCE Inc., Re, 2008 SCC 69, [2008] 3 S.C.R. 560 (S.C.C.). 2 Not all unfair conduct rises to the level of oppression for which a court may grant a remedy; what may be oppressive in one factual context may not be oppressive in a slightly different factual context. Fact findings are the crucial foundation for the legal analysis that must follow, because within such fact findings the hearing court identifies the interests that merit relief, and within such fact findings the court assesses the nature of the impugned conduct and its effect. “The evidence is also critical to the court’s determination of the appropriate remedy in the event that oppression is found”: David S. Morritt, Sonia L. Bjorkquist & Allan D. Coleman, The Oppression Remedy [Toronto: Canada Law Book, 2015] at 1-10-1-11. 3 Although this reviewing Court may have assessed the evidence differ- ently, we have identified no juridically permissible basis upon which to interfere with the chambers judge’s decision. Fact findings are entitled to a high degree of deference. The parties were well aware of the limitations of the summary procedure they chose and we are satisfied from our review of the entire record that the chambers judge was entitled to find the facts and apply the law as he did; accordingly, the appeal is dismissed, for the reasons that follow.

Background 4 Detailed background information can be found in the decision of the special chambers judge: Shefsky v. California Gold Mining Inc., 2014 ABQB 730 (Alta. Q.B.) [Decision]. Shefsky v. California Gold Mining Inc. Peter Costigan, Frederica Schutz JJ.A. 11

5 In brief, this was a fight for control of the Board of Directors of Cali- fornia Gold Mining Inc (CGMI), a public corporation involved in mineral exploration. The appellants Martin Shefsky and his solely owned holding company, 2350183 Ontario Inc, alleged that the respondents breached Mr. Shefsky’s reasonable expectations that he would control the corporation if he raised at least $5,000,000 in investments for CGMI. In particular, he would be entitled to name three of five directors on the board and would retain control through the shares owned by him and the investors he introduced to CGMI. The appellants assert that the respondents engaged in oppressive conduct, including a secret placement of shares that diluted Mr. Shefsky’s voting power and refusing to allow Mr. Shefsky to appoint a third member to the board when his initial nominee, Mr. Cohen, refused to accept the position.

Decision Below 6 The chambers judge set out the uncontested facts, the facts that he found could be inferred from the affidavit evidence and documents, and the contested facts, before defining the issues, undertaking a legal analysis and setting out his conclusions. During the two-day special chambers hearing — which hearing was preceded by important interlocutory mo- tions — the sole issues before the chambers judge were: (i) whether the newly-elected Board of Directors of CGMI ought to be replaced by a Board selected by Mr. Shefsky; (ii) whether shares ought to be offered to Mr. Shefsky and his desig- nees on the same terms as what the appellants refer to as the “Se- cret Private Placement” (which also is the terminology used by the chambers judge in his Decision and which phrase we will continue to use as an aid to comprehension); and, (iii) whether the Court should give control of CGMI to Mr. Shefsky? 7 The chambers judge reviewed a substantial volume of affidavits, documents and transcripts from cross-examinations on numerous affidavits. 8 The chambers judge specifically noted the admonition about conflicting evidence in Charles v. Young, 2014 ABCA 200 (Alta. C.A.) at paras 4-5, (2014), 577 A.R. 54 (Alta. C.A.) and the cases cited therein, and to that end reviewed “the extensive materials to ensure that I make findings based on uncontested facts or, where there are contested facts, on reasonable inferences which can be drawn from uncontested facts, objective evidence, and the conduct of the parties”: Decision at para 6. The chambers 12 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

judge identified facts, and drawn inferences, and noted many of the instances where the evidence conflicted. 9 After citing the culture shift embedded in Hryniak v. Mauldin, 2014 SCC 7 (S.C.C.) at para 2, [2014] 1 S.C.R. 87 (S.C.C.), and this Court’s endorsement of same in Windsor v. Canadian Pacific Railway, 2014 ABCA 108 (Alta. C.A.) at para 15, (2014), 572 A.R. 317 (Alta. C.A.), the chambers judge noted that the parties chose a chambers procedure knowing the limitations of affidavit evidence, and were aware of the implications of such a decision. Further, the chambers judge noted that the parties expressed a desire to avoid the expense and complication of trial if possible because most, if not all, of the witnesses were in Ontario, some of the lawyers are from Ontario, and because matters in issue were relatively time-sensitive. 10 The chambers judge identified the alleged reasonable expectations that Mr. Shefsky contended merited oppression relief: • the Term Sheet be honoured; • Mr. Shefsky be permitted to appoint a director to replace Mr. Co- hen; and • Mr. Shefsky retain control of CGMI. 11 As to the first expectation, the chambers judge determined that even though Mr. Shefsky did not raise $5,000,000 by the deadline specified in the Term Sheet, and despite the dispute about whether to count certain investors, Mr. Shefsky had a reasonable expectation that the Term Sheet would be extended and honoured: Decision at paras 81-103. 12 As to the second expectation, the chambers judge concluded that Mr. Shefsky had a reasonable expectation that he would be permitted to appoint a director other than Mr. Cohen when the latter refused to take the position: Decision at paras 104-108. However, he declined to find that Mr. Shefsky had an ongoing right to name a new director after the April 2013 shareholders’ meeting because Mr. Shefsky had never taken steps to appoint a new director (which finding of fact is strenuously disputed by the appellants). Since Mr. Shefsky had not taken steps to appoint a new director, the chambers judge decided that Mr. Shefsky was asserting a “purely hypothetical breach of expectations” and concluded that “[w]hile the actions of the Board suggest that its members agreed that Shefsky could nominate a third person to the Board, thus giving rise to both a subjective and objective expectation, Shefsky never tried to act on Shefsky v. California Gold Mining Inc. Peter Costigan, Frederica Schutz JJ.A. 13

that expectation and therefore it was never breached”: Decision at paras 109-121. 13 As to the expectation of control of CGMI, the chambers judge found as a fact that Mr. Shefsky did not have a reasonable expectation that he had sufficient shareholders’ support to control CGMI, at any time: Deci- sion at paras 122-126. 14 In the result, the chambers judge dismissed the appellants’ motion for oppression.

Applicable Legislation 15 The oppression remedy is located in the Alberta Business Corpora- tions Act, RSA 2000, c B-9, in particular sections 239 and 242: 239 In this Part, (a) “action” means an action under this Act or any other law; (b) “complainant” means (i) a registered holder or beneficial owner, or a former registered holder or beneficial owner, of a security of a corporation or any of its affiliates, (ii) a director or an officer or a former director or officer of a corporation or of any of its affiliates, (iii) a creditor (A) in respect of an application under section 240, or (B) in respect of an application under section 242, if the Court exercises its discretion under sub- clause (iv), or (iv) any other person who, in the discretion of the Court, is a proper person to make an application under this Part. 16 A complainant within the categories mentioned may apply to the court for an oppression remedy: 242(1) A complainant may apply to the Court for an order under this section. (2) If, on an application under subsection (1), the Court is satisfied that in respect of a corporation or any of its affiliates (a) any act or omission of the corporation or any of its affiliates effects a result, (b) the business or affairs of the corporation or any of its affiliates are or have been carried on or conducted in a manner, or 14 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

(c) the powers of the directors of the corporation or any of its affiliates are or have been exercised in a manner that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder, creditor, director or officer, the Court may make an order to rectify the matters complained of. (3) In connection with an application under this section, the Court may make any interim or final order it thinks fit including, without limiting the generality of the foregoing, any or all of the following: (a) an order restraining the conduct complained of; (b) an order appointing a receiver or receiver-manager; (c) an order to regulate a corporation’s affairs by amending the articles or bylaws; (d) an order declaring that any amendment made to the articles or bylaws pursuant to clause (c) operates notwithstanding any unanimous shareholder agreement made before or after the date of the order, until the Court otherwise orders; (e) an order directing an issue or exchange of securities; (f) an order appointing directors in place of or in addition to all or any of the directors then in office; (g) an order directing a corporation, subject to section 34(2), or any other person, to purchase securities of a security holder; (h) an order directing a corporation or any other person to pay to a security holder any part of the money paid by the security holder for securities; (i) an order directing a corporation, subject to section 43, to pay a dividend to its shareholders or a class of its shareholders; (j) an order varying or setting aside a transaction or contract to which a corporation is a party and compensating the corporation or any other party to the transaction or contract; (k) an order requiring a corporation, within a time specified by the Court, to produce to the Court or an interested person financial statements in the form required by section 155 or an accounting in any other form the Court may determine; (l) an order compensating an aggrieved person; (m) an order directing rectification of the registers or other records of a corporation under section 244; (n) an order for the liquidation and dissolution of the corporation; (o) an order directing an investigation under Part 18 to be made; Shefsky v. California Gold Mining Inc. Peter Costigan, Frederica Schutz JJ.A. 15

(p) an order requiring the trial of any issue; (q) an order granting permission to the applicant to (i) bring an action in the name and on behalf of the corporation or any of its subsidiaries, or (ii) intervene in an action to which the corporation or any of its subsidiaries is a party, for the purpose of prose- cuting, defending or discontinuing an action on behalf of the corporation or any of its subsidiaries. (4) This section does not confer on the Court power to revoke a certificate of amalgamation. (5) If an order made under this section directs an amendment of the articles or bylaws of a corporation, no other amendment to the articles or bylaws may be made without the consent of the Court, until the Court otherwise orders. (6) If an order made under this section directs an amendment of the articles of a corporation, the directors shall send articles of reorgani- zation in the prescribed form to the Registrar together with the documents required by sections 20 and 113, if applicable. (7) A shareholder is not entitled to dissent under section 191 if an amendment to the articles is effected under this section. (8) An applicant under this section may apply in the alternative under section 215(1)(a) for an order for the liquidation and dissolution of the corporation. RSA 2000 cB-9 s242; 2014 c13 s49

Grounds of Appeal 17 Although the appellants list numerous grounds of appeal in their factum, the only issues on which they provided written and oral argument can be summarized as follows: (a) the chambers judge erred by mischaracterizing the appellants’ argument about the Secret Private Placement as being loss of control rather than loss of the opportunity to gain control; (b) the chambers judge erred by limiting their complaint about the Se- cret Private Placement to being an issue about control and failing to consider that regardless of control, the appellants had a reasonable expectation that the Secret Private Placement would not proceed in the circumstances; and (c) the chambers judge erred by concluding that the issue of Mr. Shef- sky’s reasonable expectation that he would be permitted to ap- 16 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

point a third director to the Board was moot because Mr. Shefsky did not propose a replacement nominee for Mr. Cohen.

Standard of Review 18 Issues of jurisdiction and the test for oppression are questions of law, and should be reviewed on a standard of correctness: Sandhu v. Siri Guru Nanak Sikh Gurdwara of Alberta, 2015 ABCA 101 (Alta. C.A.) at para 33, (2015), 382 D.L.R. (4th) 150 (Alta. C.A.); McRoberts v. Whissell, 2006 ABCA 388 (Alta. C.A.) at para 4, 2006 CarswellAlta 1689 (Alta. C.A.). 19 The application of a legal test to a set of facts is a question of mixed fact and law. Whether conduct amounts to oppression is a question of mixed fact and law and is therefore reviewable for palpable and overriding error. The same standard is applicable to whether a party possessed reasonable expectations, which is a question of fact: 1216808 Alberta Ltd. v. Crown Capital Corp., 2014 ABCA 386 (Alta. C.A.) at para 24, (2014), 35 B.L.R. (5th) 1 (Alta. C.A.). 20 Normally, when reviewing a decision that omits an issue, an appeal court is left with two options: (1) direct a new trial on the issue; or (2) review the record and attempt to arrive at a conclusion with respect to the missed issue: Adeco Exploration Co. v. Hunt Oil Co. of Canada Inc., 2008 ABCA 214 (Alta. C.A.) at para 49, (2008), 437 A.R. 33 (Alta. C.A.). 21 The imposition of a remedy for oppression is discretionary, and deference should be accorded to it unless an error in principle has been made or the decision is otherwise unjust: Naneff v. Con-Crete Holdings Ltd. (1995), 23 O.R. (3d) 481 (Ont. C.A.) at 487, (1995), 23 B.L.R. (2d) 286 (Ont. C.A.).

Analysis The Supreme Court of Canada’s Analytical Framework in BCE 22 A court’s broad equitable jurisdiction under the oppression remedy is subject to three governing principles. • First: not every expectation, even if reasonably held, will give rise to a remedy because there must be some wrongful conduct, causation and compensable injury in the claim for oppression: BCE at paras 68, 89-94. Shefsky v. California Gold Mining Inc. Peter Costigan, Frederica Schutz JJ.A. 17

• Second: not every interest is protected by the statutory oppression remedy. Although other personal interests may be connected to a particular transaction, the oppression remedy cannot be used to protect or advance, directly or indirectly, these other personal interests. “[I]t is only their interests as shareholder, officer or director as such which are protected”: Naneff v. Con-Crete Holdings Ltd. at para 27. Furthermore, “the oppression remedy protects only the interests of a shareholder qua shareholder. Oppression remedies are not intended to be a substitute for an action in contract, tort or misrepresentation”: Stahlke v. Stanfield, 2010 BCSC 142 (B.C. S.C.) at para 23, aff’d 2010 BCCA 603 (B.C. C.A.) at para 38, (2010), 305 B.C.A.C. 18 (B.C. C.A.). • Third: courts must not second-guess the business judgment of directors of corporations. Rather, the court must decide whether the directors made decisions which were reasonable in the circumstances and not whether, with the benefit of hindsight, the directors made perfect decisions. Provided the directors acted honestly and reasonably, and made a decision in a range of reasonableness, the court must not substitute its own opinion for that of the Board. If the directors have chosen from one of several reasonable alternatives, deference is accorded to the Board’s decisions: Stahlke at para 22; Pente Investment Management Ltd. v. Schneider Corp. (1998), 42 O.R. (3d) 177 (Ont. C.A.) at para 36, (1998), 44 B.L.R. (2d) 115 (Ont. C.A.); BCE at para 40. 23 In BCE the Supreme Court underlines that the stakeholder’s actual expectations are not conclusive; rather, reasonableness implies that the analysis is objective and contextual. “In the context of whether it would be ‘just and equitable’ to grant a remedy, the question is whether the expectation is reasonable having regard to the facts of the specific case, the relationships at issue, and the entire context, including the fact that there may be conflicting claims and expectations”: BCE at para 62. 24 BCE at para 68 stipulates a two-step inquiry in an oppression claim: 1. Does the evidence support the reasonable expectation asserted by the claimant? 2. Does the evidence establish that the reasonable expectation was (a) violated by conduct, and (b) falls within the terms “oppression”, “unfair prejudice” or “unfair disregard” of a relevant interest? 18 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

25 It is essential that the complainant establish wrongful conduct, causation and compensable injury: BCE at para 90. 26 BCE at paras 72-83 sets out some useful factors the court may consider in determining whether a reasonable expectation exists, including: • general commercial practice • the nature of the corporation • the relationship between the parties • past practice • steps the claimant could have taken to protect himself • any representations and agreements, and • the fair resolution of conflicts between corporate stakeholders 27 As the chambers judge states in para 75 of his decision: Once it is determined what an applicants’ reasonable expectations were, and that those expectations were not met, the Court must go on to determine whether the failure to meet the expectation was unfair. Not all failures to meet a reasonable expectation “will give rise to the equitable considerations that ground actions for oppression.” The conduct must be oppressive or demonstrate unfair prejudice, or unfair disregard of the claimants’ interests (at para 89). Often the proof required to establish reasonable expectation will also be relevant to the proof of oppression, unfair prejudice or unfair disregard of interests (para 90). 28 The chambers judge goes on to state that oppression has been described as conduct that is “burdensome, harsh and wrongful”, “a visible departure from standards of fair dealing”, and an “abuse of power” related to the conduct of the corporations’ affairs. That is, “a wrong of the most serious sort”: Decision at para 76. 29 Unfair prejudice is described in BCE at para 93 as conduct that is less serious than oppression and includes such things as: ... squeezing out a minority shareholder, failing to disclose related party transactions, changing corporate structure to drastically alter debt ratios, adopting a “poison pill” to prevent a takeover bid, paying dividends without a formal declaration, preferring some shareholders with management fees and paying directors’ fees higher than the industry norm ... 30 Unfair disregard is described as the least serious of the three, and it includes favoring a director by failing to properly prosecute claims, im- Shefsky v. California Gold Mining Inc. Peter Costigan, Frederica Schutz JJ.A. 19

properly reducing dividends, or failing to deliver a claimant’s property: BCE at para 94. 31 With all this in mind, each specific ground of appeal is discussed below.

Did the chambers judge err by mischaracterizing the appellants’ argument about the Secret Private Placement as being loss of control rather than loss of the opportunity to gain control? 32 The chambers judge found that there is no evidence the appellants ever had control of CGMI. This finding is supported by the evidentiary record and is fatal to the suggestion that Mr. Shefsky had a reasonable expectation that he could control CGMI, or that this alleged expectation was defeated by the Secret Private Placement. 33 The appellants now assert that the special chambers judge did not properly characterize their submissions regarding the Secret Private Placement. They say their argument was not that the Secret Private Placement was oppressive because it resulted in Mr. Shefsky losing control of CGMI, but rather because it resulted in him losing the opportunity to gain control of the company. The appellants acknowledge that it was not a certainty that Mr. Shefsky would win control. However, they argue that the issuance of the Secret Private Placement diluted his shares and ensured that he could not win a shareholder vote. The appellants essentially argue that the Secret Private Placement resulted in the loss of a chance for control of CGMI. 34 However, the appellants’ argument about their expectation as summarized above was not clearly articulated before the chambers judge. The transcript of the hearing below shows that the appellants’ arguments focused on Mr. Shefsky’s expectation that he would control CGMI once he raised the funds specified in the Term Sheet, and the issue of control underlies the appellants’ entire case including their requested remedies; the chambers judge cannot be faulted for characterizing the appellants’ expectation in the manner he did. In addition to establishing that their expectations were reasonable, the onus is on the claimants to identify the particular expectations that they allege have been violated: BCE at para 70. 35 The respondents rely on Cusson v. Quan, 2009 SCC 62 (S.C.C.) at paras 36-37, [2009] 3 S.C.R. 712 (S.C.C.) to urge us not to entertain a new issue raised for the first time on appeal because they say the inter- 20 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

ests of justice do not require it and there is not a sufficient evidentiary record. 36 We do not agree the appellants are raising a new issue for the first time on this appeal. Despite the fact that their position was not clearly articulated before the chambers judge, the record shows that the appellants did make submissions effectively stating that insofar as Mr. Shef- sky was concerned, the true intention of the Secret Private Placement was to dilute his shares and prevent him from winning a proxy war that, absent the Secret Private Placement, would have been a possibility. This issue was sufficiently canvassed on the record such that this Court can address it on appeal. 37 The essential difficulty with Mr. Shefsky’s position is that a finding of oppression requires objective evidence that there has been oppression. A mere speculation or hope or, as the respondents put it, an “aspirational belief” is insufficient to form the foundational evidence for this type of extraordinary action and remedy. The ability of the disappointed or aggrieved to avail themselves of the oppression action and its remedies must be carefully circumscribed so as not to expand the legal right to mere aspirations or disappointments. This is why wrongful conduct, causation, and compensable injury must all be established by the claimant in an oppression claim: BCE at para 90. An expectation based on a loss of an opportunity, without proof that such opportunity was more than merely speculative, is insufficient to ground an oppression claim because causation and compensable injury have not been established. 38 In our view, the chambers judge did not err in failing to find that the loss of an opportunity to gain control of CGMI was a reasonable expectation violated by the Secret Private Placement.

Did the chambers judge err by limiting the appellants’ complaint about the Secret Private Placement to being an issue about control and failing to consider that regardless of control, the appellants had a reasonable expectation that the Secret Private Placement would not proceed in the circumstances? 39 Aside from the issue of control, the appellants argue that the Secret Private Placement was also oppressive because of the circumstances in which it occurred; they allege it involved the issuance of shares to a select group of investors that did not include Mr. Shefsky, at a price below market value, without Mr. Shefsky’s knowledge but after he had advised the other Board members that he intended to call a shareholders’ meeting Shefsky v. California Gold Mining Inc. Peter Costigan, Frederica Schutz JJ.A. 21

for the purpose of electing a new slate of directors, and in the context of what the appellants allege was a significantly better offer from Mr. Caland. 40 The difficulty with this argument is that the appellants have failed to identify any specific expectation, apart from the expectation of control, which was violated by these actions. The appellants submit that a shareholder does not need to prove control in order to establish that the act of issuing shares to a select group of investors well below market value is oppressive, and that every shareholder, including Mr. Shefsky, has a reasonable expectation that directors will not do this. However, the oppression remedy is a personal claim and requires the complainant to identify a personal interest that is alleged to have been violated. It is not sufficient to allege that shareholders generally have an expectation that directors generally will not act oppressively. Such assertions are contrary to the analytical framework set out in BCE. 41 In Rea v. Wildeboer, 2015 ONCA 373 (Ont. C.A.) at paras 34-35, the distinction between a generalized expectation and a personal claim that potentially attracts the oppression remedy is clearly set out: The oppression remedy is not available — as the appellants contend — simply because a complainant asserts a “reasonable expectation” (for example, that directors will conduct themselves with hon- esty and probity and in the best interests of the corporation) and the evidence supports that the reasonable expectation has been violated by conduct falling within the terms “oppression”, “unfair prejudice” or “unfair disregard”. The impugned conduct must be “oppressive” of or “unfairly prejudicial” to, or “unfairly disregard” the interests of the complainant: OBCA, s. 248(2). No such conduct is pled here. That the harm must impact the interest of the complainant personally — giving rise to a personal action — and not simply the complainant’s interests as a part of the collectivity of stakeholders as a whole — is consistent with the reforms put in place to attenuate the rigours of the rule in Foss v. Harbottle. The legislative response was to create two remedies, with two different rationales and two separate statutory foundations, not just one: a corporate remedy, and a personal or individual remedy. 42 We agree that the cases cited in support of Mr. Shefsky’s claim that he had some other reasonable expectation that was violated are distinguishable. In contradistinction to Legion Oils Ltd. v. Barron (1956), 2 D.L.R. (2d) 505, 17 W.W.R. 209 (Alta. T.D.), Keho Holdings Ltd. v. Noble, 1987 ABCA 84, 38 D.L.R. (4th) 368 (Alta. C.A.) and Smith v. 22 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

Hanson Tire & Supply Co., [1927] 3 D.L.R. 786, 21 Sask. L.R. 621 (Sask. C.A.), in the case at bar Mr. Shefsky did not have an articulated reasonable expectation that was violated by the Secret Private Placement. Moreover, oppression cases are highly fact-specific and what may be oppressive or improper in the case of a closely-held private corporation is not necessarily oppressive in the context of a publicly-held corporation: BCE at para 59. 43 In any event, the chambers judge did not find that the Secret Private Placement was below market value, nor was there any evidentiary foundation for that assertion. Indeed, the determination of market value for a junior mining company in the context of a private placement (as opposed to a sale of a small block on the stock market) would require expert evidence. The pricing of shares issued through the Secret Private Placement was made in accordance with the rules established by the TSX Venture Exchange. On August 12, 2013 CGMI’s lawyers filed for a price reservation at a price of $0.05, which was approved by the TSX Venture Ex- change as an acceptable price in light of prevailing market prices. 44 In connection with the requirement to raise additional funds, there was evidence accepted by the chambers judge that in the aftermath of the COO’s termination, it was necessary for CGMI to raise additional funds in order to redo the geological reports and other work that the directors determined had been done improperly. As is a common occurrence in junior mining companies, as admitted by Mr. Shefsky, the Board of CGMI decided to turn to existing shareholders to try to raise these funds. There is no reason that Mr. Shefsky was entitled to prevent the corporation from offering additional shares to investors. The directors were entitled to make decisions in the best interests of the corporation, including raising additional capital, which may adversely affect the interests of particular stakeholders. 45 Absent any evidence to the contrary, the timing, source and pricing of this financing was solely a matter of business judgment. We agree that a board of directors is entitled to substantial deference and we are loath to step into the discretionary purview of the Board absent any evidence which would lead us to a contrary view. We agree that based upon the unassailable findings of the chambers judge and our review of the record, the decision of the CGMI Board to engage in the Secret Private Place- ment was reasonable and entitled to judicial deference. 46 Even if Mr. Shefsky and other shareholders had a claim for loss of value of their shares due to the Secret Private Placement, that claim be- Shefsky v. California Gold Mining Inc. Peter Costigan, Frederica Schutz JJ.A. 23

longed to the corporation. In Alvi v. Misir (2004), 73 O.R. (3d) 566, 50 B.L.R. (3d) 175 (Ont. S.C.J. [Commercial List]), Cameron J. determined that a claim brought by shareholders for loss of value of their shares was a claim that belonged to the corporation. He stated at para 57 that directors cannot owe statutory fiduciary duties and duties of care to shareholders if they are already owed to the corporation without placing the directors in an intolerable conflict of interest and explained that “[s]uch parallel duties would create untenable and unreasonable conflicts” that would render impossible the jobs of directors and officers. 47 The Supreme Court of Canada has adopted a similar analysis in BCE at para 66: The fact that the conduct of the directors is often at the centre of oppression actions might seem to suggest that directors are under a direct duty to individual stakeholders who may be affected by a corporate decision. Directors, acting in the best interests of the corporation, may be obliged to consider the impact of their decisions on corporate stakeholders, such as the debentureholders in these appeals. This is what we mean when we speak of a director being required to act in the best interests of the corporation viewed as a good corporate citizen. However, the directors owe a fiduciary duty to the corporation, and only to the corporation. People sometimes speak in terms of directors owing a duty to both the corporation and to stakeholders. Usually this is harmless, since the reasonable expectations of the stakeholder in a particular outcome often coincides with what is in the best interests of the corporation. However, cases (such as these appeals) may arise where these interests do not coincide. In such cases, it is important to be clear that the directors owe their duty to the corporation, not to stakeholders, and that the reasonable expectation of stakeholders is simply that the directors act in the best interests of the corporation. 48 Put simply, Mr. Shefsky’s interests in not having his shares diluted by the Secret Private Placement were not interests that the directors of the corporation were obliged to consider. In fact, Mr. Shefsky’s sole interests were diametrically opposed to the interests of the corporation and its directors’ attempts to raise additional funding for this junior mining company so that exploration could continue after Mr. Moeller’s departure. Mr. Shefsky’s only reasonable expectation in these circumstances was that the directors would act in the best interests of the corporation, and there is no evidence to suggest that they did not do so. 49 Moreover, it was entirely reasonable and open to the Board of CGMI to reject the deal offered by Mr. Caland for reasons that were before the 24 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

chambers judge as reflected in the minutes of the director’s meeting of September 10, 2013. Notwithstanding the rejection of Mr. Caland’s offer, there is further evidence upon which the chambers judge did decide that the CGMI Board was open to the possibility of both doing the Secret Private Placement and Mr. Caland’s deal, but Mr. Shefsky indicated that the deals were mutually exclusive and that to accept Mr. Caland’s offer would require rejection of the other financing. 50 The chambers judge was not persuaded that the Board’s purpose in approving the Secret Private Placement was to dilute Mr. Shefsky’s ownership; rather, the chambers judge found that the Secret Private Place- ment was intended to raise money to replace the money that had been wasted on the improper exploration work done by the COO. Even if the effect was dilutive, Mr. Shefsky’s only reasonable expectation was that the directors act in the best interests of the corporation, despite that so acting may not have coincided with Mr. Shefsky’s personal interests. As BCE makes clear, the directors owe fiduciary obligations to the corporation only, and when particular shareholder interests do not coincide with the best interests of the corporation, the directors are nonetheless duty bound to protect the interests of the corporation above all else. 51 Assuming that there was some evidence to support Mr. Shefsky’s the- ory that the CGMI Board was acting to buttress the existing management slate of directors through the Secret Private Placement, contrary to Mr. Shefsky’s personal interests, that is insufficient. Mr. Shefsky is required to prove that the Board’s actions were contrary to the best interests of the corporation. Directors are entitled to consider who is seeking control and why. If the Board believes there will be substantial damage to the company’s interests if the company is taken over, then the exercise of their powers to defeat those seeking a majority will not necessarily be categorized as improper: Teck Corp. v. Millar (1972), 33 D.L.R. (3d) 288 (B.C. S.C.) at para 99, [1973] 2 W.W.R. 385 (B.C. S.C.); Icahn Partners LP v. Lions Gate Entertainment Corp., 2011 BCCA 228 (B.C. C.A.) at para 83, (2011), 333 D.L.R. (4th) 257 (B.C. C.A.). 52 Accordingly, we see no reviewable error in the chambers judge’s articulation and application of the binding law, or in his findings of fact or inferences drawn based upon the evidentiary record that was before him. This ground of appeal is dismissed. Shefsky v. California Gold Mining Inc. Peter Costigan, Frederica Schutz JJ.A. 25

Did the chambers judge err by concluding that the issue of Mr. Shefsky’s reasonable expectation that he would be permitted to appoint a third director to the Board was moot because Mr. Shefsky did not propose a replacement nominee for Mr. Cohen? 53 The chambers judge did not find it necessary to decide whether Mr. Shefsky had a continuing right after the April 2013 annual meeting to appoint a third member to the Board of CGMI because Mr. Shefsky did not attempt to exercise this asserted right, and therefore any reasonable expectation he may have had in this regard was never breached. 54 The appellants argue that it was an error for the chambers judge to rely on this narrow technicality, rather than considering all the circumstances of the alleged oppression. Moreover, the appellants contend that Mr. Shefsky did in fact nominate a third director to the Board, in a letter from his lawyer dated October 2, 2013. Implicit in their argument is the assumption that Mr. Shefsky had a continuing right to appoint a third member to the Board up until the January 2014 annual shareholders’ meeting, when a different management slate of board members was elected. 55 The respondents suggest that there are three fatal problems with the appellants’ position: (i) It mischaracterizes the reasonable expectation that was actually found by the chambers judge in this case; (ii) Mr. Shefsky’s expectations did not arise in his capacity as a shareholder, director, or officer of CGMI and therefore are not protected by the oppression remedy; and (iii) Mr. Shefsky’s expectation, if it did exist, was not disregarded in an oppressive manner. 56 Each of these contentions is addressed separately below.

(i) Mischaracterization of the reasonable expectation that was actually found by the chambers judge in this case 57 The chambers judge found that Mr. Shefsky had not attempted to exercise his right to appoint a third member of the Board of CGMI. In April 2013, the slate of directors was duly elected by the shareholders, so the relevant period of time for complaint by Mr. Shefsky was between April 2013 and the January 2014 annual shareholders’ meeting. 58 Contrary to the appellants’ suggestion, the chambers judge did not make a finding that Mr. Shefsky had a continuing right to appoint a third 26 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

member to the Board up until the January 2014 annual shareholders’ meeting. As noted above, the chambers judge found it unnecessary to decide this point, and the evidence does not support the appellants’ position. Rather, the record shows that any reasonable expectation Mr. Shef- sky may have had to appoint a third member to the Board was extin- guished by the April 2013 annual meeting, because any expectation to control the composition of the Board past this date is inconsistent with the corporation’s public statements, its statutory disclosure obligations, and the basic rights of its shareholders as a whole to choose the board of directors of their publicly-traded company. 59 Prior to the April 2013 annual meeting, Mr. Shefsky had an opportunity to comment on the draft circular but did not propose any changes to the slate which listed Messrs. Shefsky, Brandolini, Churchill, Cronin and Cinq-Mars as the management slate of directors. Indeed, at the April 2013 meeting Mr. Shefsky voted for the slate nominated and set out in the circular. 60 As the respondents point out, if there had in fact been an arrangement whereby Mr. Shefsky retained a unilateral power after the April 2013 shareholders’ vote to compel one of the elected directors to resign in favor of an unidentified nominee of his choice, that would have been contrary to the voting shareholders’ wishes and would be material information requiring disclosure in the circular. Failure to disclose would constitute an offence under s 122(1)(b) of the Ontario Securities Act, RSO 1990, c S-5, the commission of which would clearly not be in the corporation’s best interests. 61 Moreover, the Board has a fiduciary interest to act in the best interests of the corporation, which includes an obligation not to fetter its discretion absent a unanimous shareholders’ agreement: 820099 Ontario Inc. v. Harold E. Ballard Ltd. (1991), 3 B.L.R. (2d) 113 (Ont. Div. Ct.) at paras 102-10, aff’d (1991), 3 B.L.R. (2d) 113 (Ont. Div. Ct.) at 123. The expectation alleged by Mr. Shefsky is inconsistent with his own obligations as a director, and is not reasonable.

(ii) Mr. Shefsky’s expectations did not arise in his capacity as shareholder, director, or officer of CGMI and therefore are not protected by the oppression remedy 62 The respondents suggest that there is doubt about the correctness of the chambers judge’s analysis of Mr. Shefsky’s alleged expectations arising from the Term Sheet. Shefsky v. California Gold Mining Inc. Peter Costigan, Frederica Schutz JJ.A. 27

63 In particular, they submit that the chambers judge erred in principle in finding that the oppression remedy protects Mr. Shefsky’s expectation to appoint Mr. Cohen (or his replacement), when that expectation arose in Mr. Shefsky’s capacity as a financier or underwriter of CGMI, and not as a shareholder, officer or director. 64 In this branch of their argument, the respondents note that the oppression remedy protects the interests of a “complainant” within the meaning of s 239(b) of the Alberta Business Corporations Act, which includes security holders, creditors, officers and directors. The statute does not protect the interests of those acting as financiers, underwriters or investment dealers for or on behalf of a corporation. 65 Simply put, where harm is alleged to have been done to a complainant’s interests in a capacity outside of the scope of s 239(b), the oppression remedy is not engaged so as to protect these interests outside the scope of the legislation: Markus Koehnen, Oppression and Related Rem- edies (Toronto: Thomson Carswell, 2004) at 265-267. 66 In particular, Rogers Communications Inc. v. MacLean Hunter Ltd. (1994), 2 C.C.L.S. 233 (Ont. Gen. Div. [Commercial List]) makes clear that in a position qua bidder, relief cannot be obtained under the applicable legislation; rather, it is only in the position qua shareholder that there can be a claim of oppression. Looking at matters as a whole in that case, the court concluded that Rogers’ complaint arose in its position as a bidder and not as a shareholder: Rogers at para 9. 67 The same point is made by the British Columbia Supreme Court in Icahn Partners LP v. Lions Gate Entertainment Corp., 2010 BCSC 1547 (B.C. C.A.) at paras 179-83, (2010), 15 B.C.L.R (5th) 132 (B.C. S.C.), aff’d 2011 BCCA 228, 333 D.L.R. (4th) 257 (B.C. C.A.), and in Stahlke at para 23 where it stated: “The oppression remedy protects only the interests of a shareholder qua shareholder. Oppression remedies are not intended to be a substitute for an action in contract, tort or misrepresentation.” 68 We agree that Mr. Shefsky’s reasonable expectation to appoint a third director found in the Term Sheet, or grounded in the various representations that were made by Mr. Churchill to Mr. Tomlinson, were not made by, or to, Mr. Shefsky in his capacity as a shareholder, director or officer of CGMI. We note that the initial version of the Term Sheet was signed on or about October 19, 2012, well before Mr. Shefsky became an officer (in December of 2012), a shareholder (in February of 2013) or a director (in April of 2013). 28 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

69 We also agree with the respondents’ contention that the October 19, 2012 Term Sheet — replaced by the December 12, 2012 Term Sheet but with no change to material terms — is simply a sui generis contract made between CGMI and Mr. Shefsky in his capacity as a potential financier, promoter or underwriter in relation to the $5,000,000-8,000,000 private placement to be arranged for CGMI. 70 The respondents further argue that prospective shareholders do not have standing under the oppression remedy. The requirement that a complainant actually be a shareholder at the time of the oppression complained of is logical, since the question whether a complainant shareholder has sustainable grounds of oppression that brings the shareholder within the ambit of the oppression remedy “requires a time-related factual nexus between the complainant and the oppression complained of”: Ford Motor Co. of Canada v. Ontario (Municipal Employees Retirement Board) (2004), 41 B.L.R. (3d) 74 (Ont. S.C.J. [Commercial List]) at para 246, [2004] O.T.C. 53 (Ont. S.C.J. [Commercial List]), rev’d (but not on this point) (2006), 263 D.L.R. (4th) 450 (Ont. C.A.), leave to appeal to SCC refused (2006), 267 D.L.R. (4th) ix (S.C.C.). 71 Although this is a legally correct proposition, we find that in October of 2012 Mr. Shefsky possessed a legal entitlement to acquire shares. He had acquired an option, a right of first refusal, to shares and his subscription (and that of other accredited investors) was to be reflected in a formal subscription agreement to be entered into prior to December of 2012. In other words, Mr. Shefsky’s acceptance of the Term Sheet conferred upon him the right to perform confirmatory due diligence and exercise his option in respect of the “Issue”, defined in the Term Sheet as “[p]rivate placement of units (each unit consisting of one common share ... in the Capital of the Company and three-quarters one Common Share purchase warrant, each whole warrant ... being exercisable for one Com- mon Share) of the Corporation (the “Units”) (together, the “Offering”)” at a price of $0.10 per Unit. 72 What the Term Sheet did not do, however, was confer upon Mr. Shef- sky a right to enjoin any further share placements. Quite simply, an existing shareholder cannot complain about subsequent share offerings even if it has the effect of diluting that complaining shareholder’s shares, provided the share offering is done in the best interests of the corporation. And, no shareholder has the right to acquire additional shares and no corporation is obliged to offer additional shares to existing shareholders. When a corporation offers its shares for sale, an individual can de- Shefsky v. California Gold Mining Inc. Peter Costigan, Frederica Schutz JJ.A. 29

cide whether to accept the offer. But, it is not the case that a shareholder or putative shareholder can demand that shares be sold to him personally. There are good corporate business judgment reasons why a corporation may not, in fact, wish to sell shares to a certain individual or entity, either because of regulatory issues or because the directors do not believe that the putative purchaser’s participation in the corporation would serve the best interests of the corporation. In this corporate exercise of business judgment, this Court will not and should not lightly interfere. 73 We reject the respondents’ assertion that because the Subscription Agreement contains an “entire agreement” clause that governs the relationship of Mr. Shefsky qua shareholder, the effect of the entire agreement clause is that it supersedes any prior understanding between Mr. Shefsky qua shareholder and CGMI. Since the Subscription Agreement does not contain any reference to the management provisions in the re- vised Term Sheet upon which Mr. Shefsky bases his claim, the respondents submit that is the end of the matter. We disagree. Similarly, we disagree that Mr. Shefsky’s role as CEO, as governed by the terms of the Consulting Agreement between CGMI and 2350183 Ontario Inc, is a complete answer to Mr. Shefsky’s oppression claim, despite that the Consulting Agreement also contains an “entire agreement” clause. Put another way, the fact that neither the Subscription Agreement nor Con- sulting Agreement contain a reference to any expectation or right on behalf of Mr. Shefsky to control the composition of CGMI’s Board is not determinative. Rather, we must consider the entire context, not merely the discrete contracts made between the appellants and some of the respondents. 74 The essential difficulty with Mr. Shefsky’s invocation of the oppression remedy in respect of the Term Sheet, however, is that he attempts to gain access to the court’s equitable oppression remedy jurisdiction for a personal claim that arises pursuant to the provisions of the Term Sheet: his personal claim for breach of contract. At its core, the Term Sheet is a commercial agreement negotiated at arm’s-length by sophisticated parties. That commercial agreement must not be rewritten by a court import- ing notions of “just and equitable”. It would be dangerous territory, indeed, and an improper conflation of contract law and equitable oppression principles to suggest that the latter can come to the aid of a claim for breach of any contractual promises made to Mr. Shefsky in his personal capacity. See, for example, J.S.M. Corp. (Ontario) Ltd. v. Brick Furniture Warehouse Ltd., 2008 ONCA 183 (Ont. C.A.) at para 60, (2008), 234 O.A.C. 59 (Ont. C.A.). 30 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

75 The legal and jurisdictional boundaries which circumscribe, and de- lineate, resort to an oppression remedy must be firmly set. A party aggrieved, whether by having made an imprudent, or incomplete, or im- provident personal bargain, cannot be permitted to seize an oppression remedy and, thus, gain an equitable remedy that was never in the contemplation of the contracting parties. 76 In summary, Mr. Shefsky and 2350183 Ontario Inc’s claims deriva- tive of the provisions of the Term Sheet are contractual in nature. These claims fall outside the legal and jurisdictional boundaries of an oppression remedy.

(iii) Mr. Shefsky’s reasonable expectation, if it did exist, was not disregarded in an oppressive manner 77 Assuming the appellants had proven that their reasonable expectations were unmet, they must go farther to prove that those reasonable but unmet expectations were violated by conduct that falls within the terms ‘oppression’, ‘unfair prejudice’ or ‘unfair disregard’ of a relevant interest. This proposition is made abundantly clear in BCE at para 68. See also Rea v. Wildeboer at paras 34-35. 78 On appeal, the parties conceded that the chambers judge had articulated correctly the principles of law and, in particular, that he was required to consider the meaning of “oppression” and “unfair prejudice” and “unfair disregard”. 79 In his decision at paras 76-77 the chambers judge correctly notes: [76] Oppression has been described as conduct that is “burdensome, harsh and wrongful”, “a visible departure from standards of fair dealing”, and an “abuse of power” related to the conduct of the corporations affairs: “a wrong of the most serious sort” (at para 92). Unfair prejudice is conduct that is less serious than oppression, and includes such things as: ... squeezing out a minority shareholder, failing to disclose related party transactions, changing corporate structure to drastically alter debt ratios, adopting a “poison pill” to prevent a takeover bid, paying dividends without a formal declaration, preferring some shareholders with management fees and paying directors’ fees higher than the industry norm ... (at para 93) [77] The Supreme Court went on to describe unfair disregard as the least serious of the three, and noted that it included favouring a direc- Shefsky v. California Gold Mining Inc. Peter Costigan, Frederica Schutz JJ.A. 31

tor by failing to properly prosecute claims, improperly reducing dividends, or failing to deliver a claimant’s property. 80 The chambers judge found that the appellants had not met their persuasive burden of showing that they had suffered oppression, unfair prejudice or unfair disregard because Mr. Shefsky did not name a replacement, seek to call, or actually call a shareholders’ meeting himself, or propose a different slate of directors. The appellants challenge the trial judge’s finding in this regard on the basis of an October 2, 2013 letter from the appellants’ lawyer to the respondents. 81 A demand letter emanating from counsel’s office does not amount to Mr. Shefsky naming a replacement, seeking to call, or actually calling a shareholders’ meeting himself, nor does it equate to Mr. Shefsky propos- ing a different slate of directors. The October 2, 2013 letter from WeirFoulds says as follows: Mr. Shefsky demands: (a) that one of Michael Churchill, Kevin Cinq-Mars or Patrick Cronin immediately resigns from the board so that his place can be taken by Charlie Cohen who is prepared to accept the nomination; and (b) that the September Placement be immediately unwound. 82 After making the demands cited, the letter abruptly concludes: “If we have not received a positive response by October 11, 2013 our client intends to commence immediate legal proceedings against you, and to seek any appropriate injunction or mandatory order.” 83 The reader of the demand letter would appreciate that the demand to replace one of the duly elected directors within 9 days, without any notice or regard to the shareholders of the corporation, would expose the corporation to significant jeopardy. The law requires that all shareholders be notified of material information. Mr. Shefsky’s assertion of a right to appoint a third director was certainly material information. The demand letter from the lawyer was not copied to all other shareholders; thus, it cannot in any sense amount to notification that would have satisfied the reasonable expectations of the other shareholders, which may not have comported with Mr. Shefsky’s personal interests, or with the best interests of the corporation. 84 We find that the demand letter does not meet the requisite degree of proof required of Mr. Shefsky to meet his burden of controverting evidence on the record that he did not — within the corporate governance structure — name a replacement, seek to call, or actually call a share- 32 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

holders’ meeting, or propose a different slate of directors. Compliance with that which was demanded, within a 9-day period, would not have been in the best interests of CGMI. 85 We conclude that the October 2, 2013 letter is not an exercise of Mr. Shefsky’s right to appoint a third member of the Board of Directors, nor is it sufficient evidence to controvert the chambers judge’s finding that Mr. Shefsky took no steps to appoint a third director. Further, there is no evidence that Mr. Shefsky’s expectation that he could appoint a third director to the Board was violated in a manner that was oppressive, unfairly prejudicial, or that unfairly disregarded his protected interests.

Conclusion 86 In conclusion, and for the foregoing reasons, the appeal is dismissed.

Frans Slatter J.A. (dissenting):

87 The issue on this appeal is whether the appellants Shefsky and 2350183 Ontario Inc. are entitled to a remedy for oppressive conduct arising from the way the business of California Gold Mining Inc. was conducted.

Facts 88 California Gold Mining is a junior mining company listed on the TSX-Venture Exchange. In 2012 it was managed and controlled by its president and CEO, Michael Churchill; its chairman Patrick Cronin; a director, Kevin Cinq-Mars; a major shareholder, R.W. Tomlinson; and other associates of theirs. This original group can conveniently be described as the “Incumbent Group”. 89 California Gold Mining had unsuccessfully attempted to raise money to purchase a gold mining property in Mariposa County, California. The company’s financial advisor, Haywood Securities, introduced Shefsky as a person who might be able to assist in raising the necessary funds. 90 In October 2012, California Gold Mining and Shefsky signed a Term Sheet respecting the raising of funds to purchase the Mariposa property. The essential terms were that Shefsky would attempt to raise between $5 million and $8 million via a private placement of shares by November 30, 2012. If he was successful, certain changes would be made to the management structure of the company: Shefsky v. California Gold Mining Inc. Frans Slatter J.A. 33

• two existing board members would resign in favour of Shefsky and his nominee, Charlie Cohen; • Nuno Bandolini, another ally of the appellants, would be appointed to the board, provided he invested at least $100,000; • Churchill would resign as CEO, but remain as president, and Shef- sky would be appointed as CEO; • the Chief Operating Officer would resign in favour of Eric Moeller. The expectation was that Shefsky would nominate three members of a five-person board, and Shefsky and Moeller would essentially control the day-to-day operations: reasons, para. 105. 91 Shefsky was unable to raise the funds by the original deadline of No- vember 30, 2012, and the deadline was extended to December 31. All of the money was actually raised by February, 2013, when the private placement closed. The chambers judge found that nobody involved considered time to be “of the essence”, and all were content that the funds were actually raised. There was ample evidence about the words and conduct of the parties to support the inference that Shefsky had complied with the fundraising pre-conditions of the Term Sheet. 92 At some point a dispute arose as to whether Shefsky was entitled to credit for all of the $5 million raised. It was suggested that Shefsky was not entitled to credit for subscriptions from incumbent shareholders, or subscriptions that had been solicited by other members of the Board, or for units given to Haywood Securities for services rendered. Shefsky took the position that he had raised $5 million, or alternatively that the Term Sheet merely required that $5 million be raised for the private placement, regardless of the exact motivation for any specific investment. It is unclear whether this issue was only raised later, after the even- tual falling out of the various groups. The chambers judge found (reasons, paras. 60, 102-3) “... it was objectively reasonable for Shefsky to conclude that his obligations under the Term Sheet had been met ...”. 93 However, once Shefsky had raised the necessary funds, there was some resistance among the Incumbent Group to the agreed changes to the Board. None of the incumbents were keen to resign, and the suggestion was made that the deal had “morphed significantly” from what was originally contemplated. Further, Cohen was unexpectedly unable to serve on the Board, and Shefsky could not immediately find a replacement. There were various discussions about the final makeup of the 34 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

Board, with Shefsky continuing to assert his right to nominate three members of a five-person board. 94 In March 2013, when the time came to send out the management information circular for the April Annual General Meeting, Shefsky had still not identified a replacement for Cohen. As a result, the slate of directors proposed by management was Churchill, Shefsky, Bandolini, Cronin and Cinq-Mars. The appellants voted in favour of that slate. As a result, the appellants cannot complain that the election of these directors was in any way oppressive. On the other hand the record does not support an inference that Shefsky had abandoned his long-term right to appoint three members of a five-member board. The chambers judge declined to make a finding of fact about whether there were conversations about one board member resigning when a replacement for Cohen was identified: reasons, para. 36. 95 Problems in the relationship started to appear. None of the incumbent directors was eager or willing to resign in favour of Shefsky’s nominee. Moeller was terminated in July, allegedly for shortcomings in the performance of his work. Shefsky had some concerns about his own employment contract. There was evidence on the record that Shefsky continued to raise the topic of calling another shareholders meeting to restructure the composition of the Board. 96 Matters came to a head in August of 2013. California Gold Mining’s lawyers were instructed to file a price reservation with the TSX-V for a private placement with a share price of $0.05. This was below both the recent trading range and the book value of the company. At the Board meeting on August 21, 2013, Churchill made a general statement about seeking financing in the short term. Shefsky again expressed a desire to call a shareholders meeting to reconstitute the Board. Churchill approached the Incumbent Group and its supporters to subscribe to a proposed new private placement. The appellants were neither informed of the impending private placement, nor were they invited to participate. On September 9, 2013, a notice was sent to the Board members indicating that a vote would be held the next day to authorize the private placement, which by this point had been fully subscribed. This was the first time that Shefsky and Bandolini became aware of what they accurately describe as the Secret Private Placement. 97 The Secret Private Placement contemplated the issuance of 15,860,000 units at $0.05 a unit, for gross proceeds to California Gold Mining of $793,000. Shefsky immediately contacted Pierre Caland, an Shefsky v. California Gold Mining Inc. Frans Slatter J.A. 35

investor, and persuaded him to finance a competing private placement. Within 48 hours, Shefsky was able to present to the Board a “Bought Deal” which contemplated the issuance of about 14,286,000 units at $0.07 a unit, for gross proceeds to California Gold Mining of approximately $1 million. In other words, the Bought Deal generated more capital for the company, through less dilution of the shareholdings. 98 The Board raised a number of technical objections to the Bought Deal. It refused even a 48-hour adjournment of the meeting to allow Shefsky to address some of their concerns. The Secret Private Placement was approved, thereby diluting the shareholdings of the appellants and their supporters. The next week, Cinq-Mars proposed an equivalent private placement for the appellants’ supporters in the sum of $793,000. Churchill, however, would not permit a further private placement for any more than $304,454. That obviously would not neutralize the dilution resulting from the Secret Private Placement. That, combined with the apparent repudiation of the overall arrangement in the Term Sheet by the Incumbent Group, caused Shefsky to decline the offer. Given all that had happened, it was now abundantly clear that the Incumbent Group was not going to implement the provisions of the Term Sheet which would have given Shefsky control of the Board. 99 The appellants then commenced this litigation, alleging that the affairs of California Gold Mining had been conducted in an oppressive manner that unfairly disregarded their interests.

The Reasons of the Chambers Judge 100 After reviewing the evidence and the facts, and stating the law with respect to oppression, the chambers judge identified the following issues: 1. What reasonable expectations are alleged by Shefsky? The chambers judge concluded at para. 79 that the applicants had asserted three: a. The Term Sheet would be honoured; b. Shefsky would be permitted to appoint a director to replace Cohen; and c. Shefsky would have control of California Gold Mining. 2. Were these expectations reasonable? a. The Term Sheet (i) Did Shefsky meet the deadline? If not, was there conduct that could have led Shefsky to a reasonable 36 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

expectation that the deadline in the Term Sheet was extended? (ii) Did Shefsky reach the goal of $5 million in subscriptions? b. Appointment of a director to replace Cohen (i) Did Shefsky have a reasonable expectation that he could nominate a third director when Cohen refused the nomination? (ii) Were Shefsky’s reasonable expectations regarding Board nominations breached? c. The expectation of control. 3. If any reasonable expectations were breached, did any actions of the respondents constitute oppressive conduct? 4. If oppressive conduct was found, what is the appropriate remedy? In summary, the chambers judge found (reasons at para. 127) that the applicants had established the first two reasonable expectations: that the Term Sheet would be honoured, and that Shefsky would be allowed to appoint a third member to the Board. The chambers judge concluded, however, that those two expectations were not violated. He found that the third expectation, that of “retaining control”, was not reasonable, because Shefsky never had control. 101 The chambers judge found that the first expectation, respecting the honouring of the Term Sheet, was established on the record. Even considering the dispute about who brought in some of the subscribers, Shef- sky could reasonably expect that he had met his obligation of raising $5 million: reasons at para. 103. The record showed that the parties did not regard time as being “of the essence”, and the fact that a small amount of the money was raised after December 31 was not significant. 102 With respect to the second expectation, the chambers judge found that Shefsky had a reasonable expectation that he could appoint a third member to the Board. He was not limited to appointing only Cohen, and Shef- sky was entitled to find a replacement when Cohen was unable to accept the appointment: reasons at para. 108. However, this expectation was not breached. Shefsky voted for the slate in the 2013 management circular, and never thereafter named a replacement director: reasons at para. 114. Whether one of the existing directors would have resigned in favour of this nominee was therefore moot. Further, Shefsky did not prove that if Shefsky v. California Gold Mining Inc. Frans Slatter J.A. 37

he had nominated a replacement, a majority of the shareholders would have elected that nominee. 103 The chambers judge found that the third expectation, that Shefsky would retain control of the Board, was not reasonable since he never had control to start with. Shefsky had not brought forward affidavits from a majority of the shareholders indicating that they would vote for him, an absence of evidence that the chambers judge found to be fatal: reasons at paras. 119, 123, 126. Thus, any expectation that Shefsky had about control was unreasonable. 104 Given these conclusions, it was not necessary for the chambers judge to decide the third issue (whether any of the conduct was oppressive) nor the fourth issue (the appropriate remedy): reasons at para. 127.

Issues and Standards of Review 105 The formulation of the core standards of review is set out in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235 (S.C.C.): (a) conclusions on issues of law are reviewed for correctness: Housen para. 8, (b) findings of fact, including inferences drawn from the facts are reviewed for palpable and overriding error: Housen paras. 10, 23; H.L. v Canada (Attorney General), 2005 SCC 25 at para. 74, [2005] 1 SCR 401, and (c) findings on questions of mixed fact and law call for a “higher standard” of review, because “matters of mixed law and fact fall along a spectrum of particularity”: Housen para. 36. A deferential standard is appropriate where the decision results more from a consideration of the evidence as a whole, but a correctness standard can be applied when the error arises from the statement of the legal test: Housen paras. 33, 36. The standard of review for findings of fact and of inferences drawn from the facts is the same, even when the judge heard no oral evidence: Housen at paras. 19, 24-25; Attila Dogan Construction and Installation Co. v. AMEC Americas Ltd., 2015 ABCA 406 (Alta. C.A.) at para. 9. 106 The appellants allege a number of errors. Firstly they argue that the chambers judge mischaracterized the third complaint as being limited to “a reasonable expectation of control”. They argue that in the whole context, they had a reasonable expectation that the Incumbent Group would not proceed with the Secret Private Placement, which itself was an op- 38 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

pressive act that unfairly disregarded their interests. This issue engages a mixed question of fact and law. The facts surrounding the Secret Private Placement are not materially in dispute; the remaining issue is whether they can reasonably amount in law to oppressive conduct. 107 Secondly, error is alleged in the finding that any question about the reasonable expectation of nominating three directors out of five was moot. This is essentially a finding of fact. 108 Thirdly, it is alleged that the chambers judge erred in requiring that the appellants bring forth direct evidence from shareholders that they would support Shefsky by voting their shares as he recommended. This is primarily a question of the weight of the evidence, which is only reviewable for palpable and overriding error.

The State of the Record 109 The chambers judge unfortunately declined to make key findings of fact on some issues. He concluded that the law prevents a chambers judge from making findings on disputed evidence. He thus decided at para. 6 to resolve contested factual issues only “on reasonable inferences which can be drawn from uncontested facts, objective evidence, and the conduct of the parties.” The reluctance of the chambers judge to draw inferences from the evidence before him leaves gaps in the record that require the necessary inferences to be drawn on appeal. 110 There are admittedly cases that point out the dangers of attempting to resolve disputed issues, especially those that rely on findings of credibility, based on conflicting affidavits and documents that would support either party’s position. An example is Charles v. Young, 2014 ABCA 200 (Alta. C.A.) at para. 4, in which the chambers judge attempted to decide whether the respondent was the adult interdependent partner of the deceased. But the record before the court will never be perfect or complete, even after a trial. Not every conflict in the evidence precludes the chambers judge from drawing inferences from the admitted facts, the disputed evidence, the conduct of the parties, and the corroborating evidence (such as documents with objective reliability). 111 Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87 (S.C.C.), a summary judgment case, pointed out the need to make greater use of summary procedures for deciding disputes. Rules that saw the trial as a de- fault method of proving disputed facts should be moderated: 4 In interpreting these [new summary judgment] provisions, the On- tario Court of Appeal placed too high a premium on the “full appreci- Shefsky v. California Gold Mining Inc. Frans Slatter J.A. 39

ation” of evidence that can be gained at a conventional trial, given that such a trial is not a realistic alternative for most litigants. In my view, a trial is not required if a summary judgment motion can achieve a fair and just adjudication, if it provides a process that allows the judge to make the necessary findings of fact, apply the law to those facts, and is a proportionate, more expeditious and less ex- pensive means to achieve a just result than going to trial. The mere fact that there might be some conflicting evidence on the record did not mean that a “fair and just adjudication” was not possible. 112 The cases where it was impossible to resolve disputed factual issues in chambers tend to be more extreme. One category is cases that depend almost entirely on credibility, without any collateral documentation to support either side: Nieuwesteeg v. Barron, 2009 ABCA 235 (Alta. C.A.) at paras. 9-10, (2009), 460 A.R. 329 (Alta. C.A.); Haluschak v. Stokow- ski (1990), 104 A.R. 10 (Alta. Master) at paras. 23-25, (1990), 39 C.P.C. (2d) 8 (Alta. Master). In these cases, sometimes there has not even been cross-examination on the affidavits: Montgomery v. Riviere, [1989] A.J. No. 958 (Alta. C.A.); Guimond v. Sornberger (1980), 25 A.R. 18 (Alta. C.A.) at para. 20, (1980), 13 Alta. L.R. (2d) 228 (Alta. C.A.); Burton v. Burton (1987), 84 A.R. 338 (Alta. C.A.) at para. 15, (1987), 12 R.F.L. (3d) 113 (Alta. C.A.). As another example, in Schmidt v. Wood, 2013 ABCA 138 (Alta. C.A.), which involved an application for contempt, it could not be seen from the record with clarity what the underlying order actually required, never mind whether the respondent had complied. Some issues are particularly unsuited to resolution on a paper record: Achtem v. McConnell, [1986] A.J. No. 207 (Alta. C.A.) (the bona fides of a party); Barter v. Barter (1996), 42 Alta. L.R. (3d) 221 (Alta. C.A.) at para. 8 (best interests of a child with special medical needs). 113 Not every piece of disputed evidence requires a trial. For example, a “bare denial” or bald allegation does not raise a triable issue: Papaschase Indian Band No. 136 v. Canada (Attorney General), 2008 SCC 14 (S.C.C.) at para. 11, [2008] 1 S.C.R. 372 (S.C.C.); Goldman v. Devine, 2007 ONCA 301 (Ont. C.A.) at para. 23; R. Floden Services Ltd. v. Solo- mon, 2015 ABQB 450 (Alta. Q.B.) at para. 23, R. Floden Services Ltd. v. Solomon (2015), 24 Alta. L.R. (6th) 76 (Alta. Q.B.); Confederation Trust Co. v. Alizadeh, [1998] O.J. No. 408 (Ont. Gen. Div.) (QL). Nor does a self-serving affidavit unsupported by other evidence: Guarantee Co. of North America v. Gordon Capital Corp., [1999] 3 S.C.R. 423 (S.C.C.) at pp. 436-37. Nor does evidence that flies in the face of the balance of the record: Dagher v. Glenn, 2016 ABCA 38 (Alta. C.A.) at paras. 30-2; 40 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

Pioneer Exploration Inc. (Trustee of) v. Euro-Am Pacific Enterprises Ltd., 2003 ABCA 298 (Alta. C.A.) at para. 25-6, (2003), 27 Alta. L.R. (4th) 62 (Alta. C.A.); Rogers Cable TV Ltd. v. 373041 Ontario Ltd. (1994), 22 O.R. (3d) 25 (Ont. Gen. Div.); Klein v. Wolbeck, 2016 ABQB 28 (Alta. Q.B.) at para. 26; Pizza Pizza Ltd. v. Gillespie (1990), 75 O.R. (2d) 225 (Ont. S.C.J.) at p. 253. Whether there is truly a “genuine issue requiring resolution at a trial” requires a nuanced balancing of the weight and perceived reliability of the evidence, the importance of the issue, the likelihood of there being a better record at trial, and any other relevant considerations. 114 Where the parties decide, for whatever reason, that they do not wish to suffer the expense or delay of a full trial, a chambers judge should still attempt to resolve the dispute, if possible. It is important to note that the Business Corporations Act, RSA 2000, c. B-9, contemplates that oppression disputes will be decided “on application”. Section 242(3)(p) includes as a possible remedy “an order requiring the trial of any issue”, which demonstrates that a trial is not the presumptive forum for oppression litigation. Rigid rules preventing the reconciliation of inconsistent evidence in a chambers setting are inconsistent with this approach. 115 As the chambers judge noted at para. 9: 9 In this case, the parties chose a chambers procedure, knowing the limitations of affidavit evidence and aware of the implications of such a decision. It is appropriate, then, to decide the issues that I can, based on the best available evidence before me. This is the proper approach, but it should not be constrained by artificial or formalistic rules stating that any issue of fact disputed on the record cannot be resolved in chambers. As noted in Windsor v. Canadian Pacific Railway, 2014 ABCA 108 (Alta. C.A.) at para. 15, (2014), 94 Alta. L.R. (5th) 301 (Alta. C.A.): “Interlocutory decisions that can resolve a dispute in whole or in part should be made when the record permits a fair and just adjudication.”

The Oppression Remedy 116 The Business Corporations Act provides a remedy to any “complainant” (defined to include any security holder, creditor, director, officer or “other proper person”) who has been the subject of oppressive conduct Shefsky v. California Gold Mining Inc. Frans Slatter J.A. 41

with respect to the business of the corporation. The scope of the remedy is provided in s. 242(2): (2) If, on an application under subsection (1), the Court is satisfied that in respect of a corporation or any of its affiliates (a) any act or omission of the corporation or any of its affiliates effects a result, (b) the business or affairs of the corporation or any of its affiliates are or have been carried on or conducted in a manner, or (c) the powers of the directors of the corporation or any of its affiliates are or have been exercised in a manner that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder, creditor, director or officer, the Court may make an order to rectify the matters complained of. This statutory remedy has been described as extending beyond strict legal rights to encompass “not just what is legal but what is fair .... It follows that courts considering claims for oppression should look at business realities, not merely narrow legalities”: BCE Inc., Re, 2008 SCC 69 (S.C.C.) at para. 58, [2008] 3 S.C.R. 560 (S.C.C.). The three types of conduct mentioned in s. 242(2) are not mutually exclusive and should be read in combination: BCE at para. 89. 117 BCE at para. 68 outlines a two-step process for the analysis: (1) Does the evidence support the reasonable expectation asserted by the claimant? and (2) Does the evidence establish that the reasonable expectation was violated by conduct falling within the terms “oppression”, “unfair prejudice” or “unfair disregard” of a relevant interest? Once these two initial conditions are satisfied, the applicant must still go on to establish wrongful conduct, causation, and compensable injury: BCE at para. 90. 118 The first part of the analysis is factually and contextually driven: 59 Second, like many equitable remedies, oppression is fact-specific. What is just and equitable is judged by the reasonable expectations of the stakeholders in the context and in regard to the relationships at play. Conduct that may be oppressive in one situation may not be in another. ... 62 As denoted by “reasonable”, the concept of reasonable expectations is objective and contextual. The actual expectation of a particular stakeholder is not conclusive. In the context of whether it would be “just and equitable” to grant a remedy, the question is whether the 42 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

expectation is reasonable having regard to the facts of the specific case, the relationships at issue, and the entire context, including the fact that there may be conflicting claims and expectations. Again, the assessment of the “reasonable expectations” is driven by the context and business realities, not merely by the strict legal rights and relationships existing between the parties. 119 There is no strict legal constraint on what can generate reasonable expectations. BCE listed some factors that might commonly be in play: 72 Factors that emerge from the case law that are useful in determining whether a reasonable expectation exists include: general commercial practice; the nature of the corporation; the relationship between the parties; past practice; steps the claimant could have taken to protect itself; representations and agreements; and the fair resolution of conflicting interests between corporate stakeholders. Reasonable expectations may also arise from the dealings and relationships of the parties, and from the way the corporation was operated. 120 However, not every disappointed expectation will be oppressive: 89 Thus far we have discussed how a claimant establishes the first element of an action for oppression - a reasonable expectation that he or she would be treated in a certain way. However, to complete a claim for oppression, the claimant must show that the failure to meet this expectation involved unfair conduct and prejudicial consequences within s. 241 of the CBCA. Not every failure to meet a reasonable expectation will give rise to the equitable considerations that ground actions for oppression. The court must be satisfied that the conduct falls within the concepts of “oppression”, “unfair prejudice” or “unfair disregard” of the claimant’s interest, within the meaning of s. 241 of the CBCA. Viewed in this way, the reasonable expectations analysis that is the theoretical foundation of the oppression remedy, and the particular types of conduct described in s. 241, may be seen as complementary, rather than representing alternative approaches to the oppression remedy, as has sometimes been supposed. Together, they offer a complete picture of conduct that is unjust and inequita- ble, to return to the language of Ebrahimi. It is thus necessary for the applicant to prove that the challenged conduct was oppressive, or unfairly prejudicial to it, or unfairly disregarded its interests. 121 It is not suggested on appeal that the chambers judge erred in his statement of the law of oppression. The alleged errors arise primarily from the way the law was applied to the facts. Shefsky v. California Gold Mining Inc. Frans Slatter J.A. 43

Status of the Appellants 122 The respondents argue that the Act only gives rights to “complainants” and that the appellants’ complaints arise in another context. Com- plainants are defined to include any security holder, creditor, director, officer or “other proper person”. The appellants are clearly security holders, and Shefsky was a director and officer. It is sufficient that their status arose as a result of the Term Sheet; it matters not that Shefsky was not a director when the Term Sheet was signed, because the oppressive conduct occurred later. Given the conduct of the Incumbent Group in entering into the Term Sheet, it would be artificial to think that the appellants are not also “other proper persons” for the purposes of the oppression remedies. 123 The respondents argue, however, that the dispute does not arise out of Shefsky’s status as a shareholder, director, or officer. Rather, they argue that the complaints of oppression arise in his capacity as a financier or underwriter, which does not entitle him to oppression remedies. In support of this argument, the respondents cite Rogers Communications Inc. v. MacLean Hunter Ltd. (1994), 2 C.C.L.S. 233 (Ont. Gen. Div. [Com- mercial List]) at para. 9; Stahlke v. Stanfield, 2010 BCSC 142 (B.C. S.C.) at para. 23; and Icahn Partners LP v. Lions Gate Entertainment Corp., 2010 BCSC 1547 (B.C. S.C.) at paras. 182-3, (2010), 75 B.L.R. (4th) 212 (B.C. S.C.) affirmed other grounds 2011 BCCA 228 (B.C. C.A.) at para. 89. Those cases are, however, distinguishable; while the applicants were shareholders, the complaints they made did not arise out of their status as shareholders, but rather out of collateral contracts or relationships. 124 Allegations of oppression will generally arise against a background of other legal rights. There will frequently be contractual relationships between the various parties. Further, there are always corporate law rights in play, some of which are loosely analogous to contractual rights. It is generally not oppressive for a party to rely on clear contractual rights, unless they are asserted entirely out of proportion to the reasonable expectations of the parties. If the real complaint is a breach of contract, it should be pursued as such, and not under the guise of an oppression claim: Stahlke at para. 23. “Reasonable expectations”, however, can arise from a background of contractual rights, and can also arise absent any specific contractual right. In this case the expectations of the appellants arose primarily as a result of the terms of the Term Sheet, combined with rights arising from the law of corporations. There were also contractual 44 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

relationships between the parties, but they were primarily in place to implement the understandings set out in the Term Sheet. 125 It is difficult to regard the Term Sheet as being merely a contract. The only parties to it were California Gold Mining and Shefsky, yet the expectations it created required the cooperation of other parties. Many of the things outlined in the Term Sheet were beyond the practical power of the corporation, for example, the composition of its own board. As another example, it contemplated that one or more of the sitting directors would resign in favour of Shefsky’s nominees. Given the reality of “shareholder democracy”, the Term Sheet contemplated others (such as the Incumbent Group) voting their shares in ways that would make possible the realization of the reasonable expectations it created. Whatever its contractual content, the Term Sheet was equally important in creating reasonable expectations that could be relied on by the appellants once they became shareholders and Shefsky became a director and officer. 126 Further, describing Shefsky as merely an underwriter or financier does not accurately describe his role. It is true that he was to raise a certain amount of money for California Gold Mining, but that was only the precondition to him taking a larger role. In addition to becoming a shareholder, Shefsky was to become the Chief Executive Officer, a board member, and was also to have a control of the appointment of the Board. The expectations thus created went well beyond what he might have had as a mere financier. 127 Given the factual context, and having regard to the particular allegations and complaints being made by the appellants, they are properly regarded as being complainants, and the allegations that they make are properly characterized as complaints about oppressive corporate conduct.

The Expectation of Control 128 The chambers judge found that Shefsky had met the requirement of raising $5 million in capital, which created a reasonable expectation that the provisions of the Term Sheet would be honoured. That in turn created an expectation that Shefsky could nominate three directors, but this issue was said to be moot because Shefsky never purported to name a third director. Finally, the chambers judge found that the Shefsky’s expectation of “control” was unreasonable because the appellants never had control. 129 The appellants argue that the chambers judge defined the alleged scope of the oppressive conduct too narrowly. They argue that the expec- Shefsky v. California Gold Mining Inc. Frans Slatter J.A. 45

tation of control went well beyond demonstrating that they could prove a majority of the shareholders would vote as Shefsky recommended. Fur- ther, the chambers judge erred in concluding that Shefsky had never nominated a replacement director. The respondents argue that any expectation of control was unreasonable because, at the end of the day, the shareholders control who will be elected as a director. 130 On this issue it is important to highlight what is not in dispute. Neither side disputes the concept of “shareholder democracy”. It is not disputed that only the shareholders can elect the directors. It is thus artificial to characterize Shefsky’s asserted expectation of “control”, as an expectation that he could override shareholder democracy. His expectations could, however, encompass: (a) an agreement by the Incumbent Group that they would vote their shares with the appellants in such a way that they could maximize their chances of obtaining control of the Board, (b) an understanding that Shefsky would never have to concern himself with “winning a proxy fight”, because the Incumbent Group agreed that they would vote to elect his three nominees; there would never be a proxy fight, and (c) the business reality that if Shefsky had control of the Board he could effectively control the management nominees for directors. The chambers judge’s description of the appellants’ expectation as centering around whether they could “maintain control” artificially charac- terizes what was alleged, and sets up an expectation that would be impossible to achieve. It focusses on “narrow legalities” rather than “business realities”: BCE at para. 58. 131 Further, in the context of an oppression action, “shareholder democracy” is not an absolute. The Business Corporations Act allows the Court to order several remedies that are inconsistent with a strict view of shareholder democracy. Thus, the Court can amend the articles or bylaws, appoint additional or replacement directors, and make other corporate changes that usually require shareholder approval. The respondents’ artificial reliance on the concept of “shareholder democracy” to justify their oppressive conduct is unsupported by the statute. The statute makes it clear that “shareholder democracy” is not a trump card that always over- rides reasonable expectations. 132 The chambers judge also set an unreasonably high evidentiary standard. The appellant filed affidavits from a few key investors indicating 46 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

that they had invested because of the appellant’s involvement. The chambers judge would not, however, draw an inference that they would have voted as Shefsky recommended. The chambers judge would not accept that Shefsky could have ensured the election of his nominees because he had not brought forward affidavits from all of those who subscribed for units at his invitation indicating that they would support him. The suggestion that such affidavits would be required from every shareholder sets an artificially high evidentiary standard that could never be met for a publicly traded company. 133 In any event, the only reasonable inference is that many, if not all who subscribed for units at Shefsky’s invitation had a considerable mea- sure of confidence in him, which they demonstrated by writing cheques for units. Absent some noticeable change of circumstances, it is unreasonable to infer that they would have abandoned support for him in favour of the Incumbent Group. Any findings and inferences to the contrary represent palpable and overriding errors. 134 Further, as noted the chambers judge ignored the business realities. Churchill acknowledged that the “shareholders had never voted against the slate of directors proposed by management”: reasons, para. 15. If Shefsky had control of the Board, he controlled the management slate. Further, the Term Sheet implied that the Incumbent Group would vote their shares to support Shefsky’s nominees, or at the very least they would not obstruct the process. The finding that the appellants had not proven an ability to control the Board is inconsistent with the finding that they had a legitimate expectation that the Term Sheet would be honoured. The chambers judge’s refusal to draw the inference that the board of a company could be controlled notwithstanding the concept of “shareholder democracy” was unreasonable. The only reasonable inference is that if the appellants and the Incumbent Group had joined together to nominate and then vote for a particular slate, that slate would undoubtedly have been elected. 135 It is also unreasonable to interpret the Term Sheet as only creating reasonable expectations about control of the Board until the next shareholders meeting. Gold mining is not a short-term enterprise. There is nothing in the Term Sheet to suggest that Shefsky’s control of the Board would end only a few months after he raised the $5 million. The Term Sheet in fact specifies that Shefsky’s initial term as Chief Executive Of- ficer would be for 36 months. The respondents argue that because of “shareholder democracy” no one could guarantee the composition of the Shefsky v. California Gold Mining Inc. Frans Slatter J.A. 47

Board beyond the next shareholders meeting. As previously discussed, that is an artificial argument and no answer to Shefsky’s reasonable expectations that he would have control of the Board, with the support of the Incumbent Group at least in the medium term. 136 The appellants argue that their reasonable expectation that Shefsky could nominate a third member of the Board was well-established on this record, and that this issue was not moot. 137 The essence of the arrangement in the Term Sheet was that Shefsky would be able to nominate three members of a five-person board. The Term Sheet specifically provides that if the $5 million was raised “two of the existing members of the board of the Company shall resign in favour of Martin Shefsky and Charlie Cohen”. The essential business arrangement was control of the Board, and it is unreasonable to interpret the Term Sheet as meaning that Shefsky could only nominate the two candidates specifically named. If (as it turned out) one of them could not act, or if one commenced to serve but had to resign, the only commercially reasonable interpretation is that Shefsky could nominate qualified replacements: reasons, paras. 107-8. Indeed, the record does not appear to disclose that the respondents ever asserted otherwise. Further, it must be implicit in this arrangement that incumbent directors would resign in order to make place for Shefsky’s nominee; in any event the Term Sheet says so explicitly. 138 The chambers judge concluded at para. 114 that the refusal of any members of the Incumbent Group to resign was a “red herring and moot” because Shefsky “did not name a replacement, seek to call, or actually call a shareholders meeting himself”. This fact finding and inference are surprising, as all the objective evidence on the record discloses that Shef- sky was persistently asserting his right to nominate three members of a five-member board. On several occasions he proposed calling a shareholders meeting, but was rebuffed. On October 2, 2013 the appellants’ counsel wrote a letter demanding that one of the Incumbent Group’s directors “immediately resign from the board so that his place can be taken by Charlie Cohen who is prepared to accept the nomination”. The chambers judge appears to have overlooked this evidence. 139 The appellants are justified in arguing that the findings on this point represent palpable and overriding error. Shefsky did nominate a third director, and none of the incumbent directors resigned as specifically required by the Term Sheet, which further defeated a reasonable expectation of the appellants. 48 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

140 In summary, the appellants have demonstrated palpable and overriding error with respect to the expectation of control. The conclusion that Shefsky could not prove potential control arose only because an impossible and unreasonable standard of proof was set. Further, the chambers judge’s failure to draw the inference that Shefsky, once in control of the Board, could effectively control the election of directors, reflects palpable and overriding error. The finding that Shefsky never nominated a third director reflects a reviewable error of fact; the letter of October 2, 2013 proves that he did do so no later than then. The failure of one of the incumbent directors to resign to make room for Shefsky’s nomination reflected a clear breach of the Term Sheet and the expectation that it would be honoured.

Was the Conduct Oppressive? 141 BCE confirms that it is not sufficient for a complainant to prove a breach of a reasonable expectation. The complainant must also show that the offending conduct falls within the terms “oppression”, “unfair prejudice” or “unfair disregard” of a relevant interest. 142 The Secret Private Placement unfairly disregarded the appellants’ interests and was prejudicial to them, making it oppressive. The primary reason it unfairly disregarded the appellants’ interests was that it was in direct breach of the Term Sheet. As the chambers judge found, once Shefsky had raised $5 million, he had a reasonable expectation that the Term Sheet would be honoured. Not only did the Secret Private Place- ment dilute the shareholdings of the company, it was part of an overall pattern of conduct by the Incumbent Group that demonstrated their repudiation of the Term Sheet. 143 No later than at the time of the Secret Private Placement, it became apparent that the Incumbent Group had no further intention of respecting the provisions of the Term Sheet. It may well be that the conditions of the financing had “morphed significantly”, but that did not justify secret, unilateral steps by the Incumbent Group to change the agreement. At this point, Shefsky had completely performed his side of the deal; he had raised the $5 million that California Gold Mining needed to buy the Mar- iposa property. It was unfair and oppressive for the Incumbent Group to aspire to enjoy the benefits of Shefsky’s performance of the Term Sheet, while not performing their reciprocal obligations under it. 144 The inference is clear that the Incumbent Group was not motivated to perform its obligations under the Term Sheet. It appears that in some Shefsky v. California Gold Mining Inc. Frans Slatter J.A. 49

quarters there was a lack of enthusiasm from the very beginning for the concept of giving Shefsky control of the company. There was also the view that the capital structure had “morphed” from what was originally envisioned. The Incumbent Group was not disposed to perform its obligations under the Term Sheet, and persistently resisted or deflected attempts by Shefsky to call a shareholders meeting or to appoint a third member to the Board. They seized on the idea, rejected by the chambers judge, that Shefsky had not performed his obligations under the Term Sheet. 145 There are further aspects of the Secret Private Placement which demonstrate that it unfairly disregarded the appellants’ rights. Its very secrecy was objectionable, as was the appellants’ exclusion from the opportunity to subscribe to shares. It was only offered to supporters of the Incumbent Group, not to the shareholders as a whole. It was done on very short notice, without opportunity for any amendment or mitigation. For the purposes of the oppression analysis, another important distinction between the Bought Deal and the Secret Private Placement is that the former was consistent with the Term Sheet, which stipulated that Shef- sky would retain control, whereas the latter was inconsistent with that agreement. 146 Further, the Secret Private Placement was oppressive because it was not in the best interests of the corporation. The Secret Private Placement contemplated the issuance of 15,860,000 units at $0.05 a unit, for gross proceeds to the California Gold Mining of $793,000. At the time, the shares were trading at about $0.07 each, and the book value was higher than that. The Bought Deal contemplated the issuance of about 14,286,000 units at $0.07 a unit, for gross proceeds of approximately $1 million. In other words, the Bought Deal generated more capital for the company through less dilution of the shareholdings. While the directors of a company are entitled to act in what they consider to be in the best interests of the company, it is impossible to rationalize how the Secret Private Placement could possibly have been the better deal. 147 The respondents argue that it is neither unusual nor improper for a junior mining company to want to raise additional capital. That is not the issue. No one doubts that any junior mining company can benefit from more capital. That, however, does not justify oppressive methods of raising that capital. 148 It also unfairly disregards the interests of the shareholders if the Board acts in its own best interest, rather than in the interests of the cor- 50 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

poration: Legion Oils Ltd. v. Barron (1956), 2 D.L.R. (2d) 505 (Alta. T.D.) at p. 516 [33], (1956), 17 W.W.R. 209 (Alta. T.D.); Keho Holdings Ltd. v. Noble, 1987 ABCA 84 (Alta. C.A.) at para. 38, (1987), 52 Alta. L.R. (2d) 195 (Alta. C.A.). While the courts defer to the reasonable business judgment of the directors, no reasonable justification for the Secret Private Placement has been advanced. The respondents cite Teck Corp. v. Millar, [1973] 2 W.W.R. 385 (B.C. S.C.) at p. 413 for the proposition that it may sometimes be acceptable for the directors to act to retain control of the corporation: My own view is that the directors ought to be allowed to consider who is seeking control and why. If they believe that there will be substantial damage to the company’s interests if the company is taken over, then the exercise of their powers to defeat those seeking a majority will not necessarily be categorized as improper. Having expressly agreed in the Term Sheet to voluntarily give control of the company to Shefsky, the Incumbent Group can hardly argue that there was anything contrary to the interests of the company in that change of control. The Secret Private Placement was undoubtedly better for the Incumbent Group, but it cannot reasonably be said to have been in the best interest of the company.

Justification for the Oppressive Conduct 149 While BCE makes it clear that corporate oppression is as much concerned with equitable expectations as it is with strict legal rights, the respondents’ frequent response to the appellants’ claims is that they are inconsistent with strict legal rules. 150 For example, the respondents argue that after the Term Sheet was signed, the appellants subscribed to shares using a standard form subscription agreement. That agreement had a “whole agreement” clause that disclaimed any prior representations or covenants. Thus, the respondents argue, the subscription agreement overtook the Term Sheet, and at that point any of Shefsky’s expectations arising from it expired. This is a completely technical and artificial argument. It was obvious that the arrangements in the Term Sheet would not become operational until after the $5 million private placement had been successfully completed. If that was the true meaning of the whole agreement clause, Shefsky would never be entitled to become Chief Executive Officer, or to nominate three out of five directors; the entire Term Sheet would become mean- ingless. This proposition is simply unreasonable. The whole agreement clause in the subscription agreement must mean that there were no prior Shefsky v. California Gold Mining Inc. Frans Slatter J.A. 51

surviving representations representing the subscription itself, not representing other agreements relating to the operation of the company. 151 Another example of this technical response is the respondents’ reliance on artificial and technical concepts of “shareholder democracy”, as previously discussed. 152 The respondents justify the Board’s refusal of the Bought Deal in favour of the Secret Private Placement on other technical grounds. For example: (a) the respondents reply that the Bought Deal, as proposed, was not compliant with the securities regulations because Caland was not licensed to engage in underwriting. That is undoubtedly so, but that does not mean that the Bought Deal could not have easily been made compliant, for example by enlisting Haywood Securi- ties as the underwriter; (b) the respondents also allege that the Bought Deal required shareholder approval because it would result in Caland owning more than 20% of the shares. That presupposes that Caland was going to retain control of that entire block, whereas the concept of a “bought deal” is that the underwriter will sell the shares to numerous investors. Indeed, the minutes of the Directors’ meeting of September 10, 2013 confirm that the “proposed financing would be distributed widely so as to avoid creation of a control person”. If some of the proposed steps and filings were inadvertently non-compliant with securities regulations, that does not necessarily mean that the appellants’ expectations were unreasonable. 153 Neither side disputes that the securities industry is highly regulated. All concerned were sophisticated players, and they knew that whatever was to be done had to be done in compliance with the rules of the TSX- Venture Exchange and the directives of the Securities Commission. The Term Sheet contains numerous references to securities’ regulatory requirements. Thus, when proposals were made to take certain steps with respect to California Gold Mining, it must have been the intention of all concerned that such steps were subject to, and would be undertaken in compliance with, the appropriate securities regulation. Securities regulation being extremely complex, it must have been anticipated that expert advice would have been sought on how exactly to implement any steps. It is thus no answer to the oppression claim, or to the appellants’ expectations, to say that any particular proposed step required regulatory approval, as it must have been anticipated that such approval would be ob- 52 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

tained. It is also no answer that any particular step, as proposed, would be offside the securities regulations, because it must have been intended that all steps would be structured to be compliant. 154 It should also be remembered that the Bought Deal was put together and presented to the Board with great haste because the Incumbent Group had essentially ambushed the appellants with the Secret Private Placement. It is hardly surprising that the appellants had not had time to explore all of the regulatory requirements that would have to be met, but it was not unreasonable for them to think that those details could be worked out if the Board accepted the Bought Deal in principle. The Board would not even consider a 48 hour adjournment of the meeting to allow the appellants to deal with these regulatory details. 155 The respondents argue that any agreements about the composition of the board, or about control of the company, should have been publicly disclosed in accordance with the securities regulations. If such an obligation rested on the company or the directors, they may well have been in breach of them. However, those breaches cannot fairly be used to defeat Shefsky’s rights; any consequences of a breach of the Board’s duties in that regard more fairly lie on the Incumbent Group. Any such duty of disclosure was equally knowable to all involved, including counsel for the company, and any deficiencies in disclosure should obviously have been promptly remedied as soon as they were identified. The failure to comply with those duties does not, in any event, justify oppressive conduct. 156 The respondents complain that the Bought Deal was presented on an “all or nothing” basis. Having unilaterally foisted the Secret Private Placement on the appellants, they can hardly complain about the Bought Deal on that basis. The appellants had made it clear that the Bought Deal was an “either/or” proposal, in that it could not proceed contemporane- ously with the Secret Private Placement. But it would be unreasonable to permit the Incumbent Group to acquire units at $0.05 under the Secret Private Placement, and then expect those participating in the Bought Deal to acquire units at $0.07. Any of the subscribers to the Secret Pri- vate Placement would undoubtedly have been offered shares under the Bought Deal. 157 The respondents also argue that the appellants failed to mitigate the effect of the Secret Private Placement because they refused an offer to take up units on the same terms. A few days after the Secret Private Placement, Cinq-Mars proposed a further private placement for the ap- Shefsky v. California Gold Mining Inc. Frans Slatter J.A. 53

pellant’s supporters in the sum of $793,000. Churchill, however, would not permit a further private placement for any more than $304,454. That obviously would not neutralize the dilution resulting from the Secret Pri- vate Placement. Combined with the Incumbent Group’s obvious repudiation of the overall arrangement in the Term Sheet, there was ample justification for the appellants to decline this offer. 158 In summary, the conduct of the respondents breached the expectations of the appellants in ways that were unfairly prejudicial, and unfairly disregarded their interests. The reasons disclose reviewable error to the extent that they overlooked these breaches based on any of the technical defences raised. They overlook the point that oppression remedies are as much concerned with fairness as they are with strict legal rights, and they are based on unreasonable assumptions, or draw unreasonable inferences about the legitimate expectations of the parties.

The Appropriate Remedy 159 Given a finding of oppressive conduct, it would be necessary to consider the appropriate remedy. Both parties agree that, given the passage of time, it would be inappropriate to attempt to devise an appropriate remedy from this record. It would accordingly be appropriate to refer the issue of a remedy back to the chambers judge.

Conclusion 160 In conclusion, the appeal should be allowed. The appellants were able to demonstrate breaches of their reasonable expectations resulting from conduct of the respondents that was unfairly prejudicial and unfairly disregarded their interests. The question of remedy should be referred back to the chambers judge. Appeal dismissed. 54 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

[Indexed as: Peters v. Peters] Marette Leslie Florence Peters, Appellant (Applicant) and Gordon Daniel Peters / Estate of Ileen Caroline Peters, Respondents (Respondents) Alberta Court of Appeal Docket: Calgary Appeal 1501-0067-AC 2015 ABCA 301 Patricia Rowbotham, J.D. Bruce McDonald, Brian O’Ferrall JJ.A. Heard: September 11, 2015 Judgment: September 22, 2015 Estates and trusts –––– Estates — Intestate succession — Inheritance by children — Children born outside marriage –––– Deceased and spouse had one biological child together and spouse also had four children from previous marriage — Deceased died intestate and her spouse predeceased her — Biologi- cal child was only beneficiary of estate — One stepchild brought application seeking equal division of net proceeds of estate among biological child and stepchildren — Chambers judge dismissed application — Chambers judge held that stepchild was not descendant for purposes of Wills and Succession Act and stepchildren were not beneficiaries of deceased’s estate — Stepchild appealed — Appeal dismissed — Intestate succession legislation in Alberta had historically excluded stepchildren from inheriting estate of intestate stepparent — Act was not intended to alter scheme as it previously existed and stepchildren continued to be excluded from inheriting estate of intestate stepparent — Legislation was clear in its intent and it had to be followed — Biological child was sole beneficiary of estate. Estates and trusts –––– Trusts — Constructive trust — Secret trusts –––– Deceased and spouse had one biological child together and spouse also had four children from previous marriage — Deceased died intestate and her spouse predeceased her — Biological child was only beneficiary of estate — One stepchild brought application seeking equal division of net proceeds of estate among biological child and stepchildren — Chambers judge dismissed application — Chambers judge held that stepchild was not descendant for purposes of Wills and Succession Act and stepchildren were not beneficiaries of deceased’s estate — Stepchild appealed — Appeal dismissed — Stepchild had not satisfied requirements of establishing secret trust — Elements of communication and acquiescence were vital to formation of secret trust — Evidence did not demonstrate communication of trust to trustee, biological child, and there was no evi- Peters v. Peters 55

dence that biological child acquiesced to hold property of deceased’s estate in trust — Biological child was sole beneficiary of estate. Civil practice and procedure –––– Practice on appeal — Powers and duties of appellate court — Evidence on appeal — New evidence –––– Deceased and spouse had one biological child together and spouse also had four children from previous marriage — Deceased died intestate and her spouse predeceased her — Biological child was only beneficiary of estate — One stepchild brought application seeking equal division of net proceeds of estate among biological child and stepchildren — Chambers judge dismissed application — Chambers judge held that stepchild was not descendant for purposes of Wills and Succession Act and stepchildren were not beneficiaries of deceased’s estate — Stepchild appealed — Appeal dismissed — Application to admit fresh evidence dismissed — Fresh evidence was inadmissible — Fresh evidence was available at time of application — Fresh evidence was not relevant and could not have affected result. Cases considered: Goodman Estate v. Geffen (1987), 52 Alta. L.R. (2d) 210, [1987] 4 W.W.R. 730, 80 A.R. 47, 1987 CarswellAlta 108 (Alta. Q.B.) — referred to Goodman Estate v. Geffen (1989), 68 Alta. L.R. (2d) 289, 61 D.L.R. (4th) 431, [1989] 6 W.W.R. 625, 34 E.T.R. 132, 98 A.R. 321, 1989 CarswellAlta 121, [1989] A.J. No. 767 (Alta. C.A.) — referred to Goodman Estate v. Geffen (1991), [1991] 5 W.W.R. 389, 42 E.T.R. 97, (sub nom. Geffen v. Goodman Estate) [1991] 2 S.C.R. 353, 125 A.R. 81, 14 W.A.C. 81, 80 Alta. L.R. (2d) 293, (sub nom. Geffen v. Goodman Estate) 81 D.L.R. (4th) 211, 127 N.R. 241, [1991] S.C.J. No. 53, 1991 CarswellAlta 91, 1991 CarswellAlta 557, EYB 1991-85679 (S.C.C.) — referred to Houston v. Houston Estate (2014), 2014 BCSC 489, 2014 CarswellBC 781 (B.C. S.C.) — referred to Jankowski v. Pelek Estate (1995), [1996] 2 W.W.R. 457, 10 E.T.R. (2d) 117, 131 D.L.R. (4th) 717, 107 Man. R. (2d) 167, 109 W.A.C. 167, 1995 Car- swellMan 447, [1995] M.J. No. 663 (Man. C.A.) — referred to Knight v. Knight (1840), 49 E.R. 58, 3 Beav. 148 (Eng. Ch. Div.) — referred to Ottaway v. Norman (1971), [1972] Ch. 698, [1971] 3 All E.R. 1325 (Eng. Ch. Div.) — referred to R. v. Palmer (1979), [1980] 1 S.C.R. 759, 30 N.R. 181, 14 C.R. (3d) 22, 17 C.R. (3d) 34 (Fr.), 50 C.C.C. (2d) 193, 106 D.L.R. (3d) 212, 1979 CarswellBC 533, 1979 CarswellBC 541, [1979] S.C.J. No. 126 (S.C.C.) — referred to Tataryn v. Tataryn Estate (1994), [1994] 7 W.W.R. 609, 46 B.C.A.C. 255, 75 W.A.C. 255, 116 D.L.R. (4th) 193, [1994] 2 S.C.R. 807, 3 E.T.R. (2d) 229, 169 N.R. 60, 93 B.C.L.R. (2d) 145, 1994 CarswellBC 283, 1994 Car- swellBC 1243, [1994] S.C.J. No. 65, EYB 1994-67087 (S.C.C.) — referred to 56 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

Wetmore v. Wetmore Estate (1999), 1999 CarswellBC 1232 (B.C. S.C.) — referred to White (LeBlanc), Re (1945), [1945] 1 W.W.R. 78, [1945] 2 D.L.R. 803, 1945 CarswellAlta 13 (Alta. S.C.) — referred to Statutes considered: Fatal Accidents Act, R.S.A. 2000, c. F-8 s. 1(a) “child” — considered Wills and Succession Act, S.A. 2010, c. W-12.2 Generally — referred to Pt. 5, Div. 2 — referred to s. 1(1)(e) “descendants” — considered s. 65 — considered s. 65(a) — considered s. 66 — considered s. 66(1)(a) — considered

APPEAL by stepchild of deceased of judgment reported at Peters v. Peters (2015), 2015 ABQB 168, 2015 CarswellAlta 389, 28 Alta. L.R. (6th) 196 (Alta. Q.B.), dismissing application for equal division of net proceeds of estate among biological child and stepchildren.

Marette Leslie Florence Peters, Appellant, for herself

Per curiam: I. Introduction 1 This is an appeal from a decision of the Court of Queen’s Bench (Sur- rogate Matter) which held that an intestate’s stepchildren were not beneficiaries of their stepmother’s estate. The appellant also applies for the admission of fresh evidence on appeal. For the reasons which follow, both the application and the appeal are dismissed.

II. Facts 2 Ileen Peters died intestate in 2013. Her spouse, Lester Peters, predeceased her in 2009. They had one biological child, the respondent Gordon Peters. Lester Peters also had four daughters from a previous marriage, the stepdaughters of Ileen Peters. The appellant Marette Peters is one of the four stepdaughters. 3 The appellant sought an equal division of the net proceeds of the estate among the four stepdaughters and the respondent. The chambers judge dismissed the application. He held that a stepchild was not a “de- Peters v. Peters Per curiam 57

scendant” for the purposes of sections 65 and 66 of the Wills and Succes- sion Act, SA 2010, c W-12.2 (the Act): Peters v. Peters, 2015 ABQB 168, [2015] A.W.L.D. 1691 (Alta. Q.B.).

III. Grounds of Appeal 4 The appellant submits that the trial judge erred in his interpretation of the Act; by failing to find a trust; and in finding that none of the stepchildren were unable to earn a livelihood by reason of mental or physical disability. 5 The first two issues are reviewed by this court for correctness, and the third for palpable and overriding error.

IV. Analysis a. Fresh Evidence Application 6 The appellant seeks to adduce fresh evidence. The stated purposes of the additional evidence are to provide a “clear and true representation of this family” and to provide further evidence of a trust expressly created by the deceased. The additional evidence consists of (1) family photographs; an invitation to attend the respondent’s wedding; a Mother’s Day card and other communication from the deceased; an award from Many- berries Public School; an affidavit of another stepdaughter, Sheilagh Jean Peters; and a photograph of a gift from the deceased to Sheilagh Jean Peters. 7 Freshevidence will be admitted on appeal if it meets the following criteria: (i) the evidence should not generally be admitted if, by due diligence, it could have been adduced at trial; (ii) the evidence must bear upon a decisive or potentially decisive issue in the trial; (iii) the evidence must be credible in the sense that it is reasonably capable of belief; and (iv) the evidence, if believed, could reasonably, when taken with other evidence adduced at trial, be expected to have affected the result: R. v. Palmer (1979), [1980] 1 S.C.R. 759 (S.C.C.), at 775, (1979), 106 D.L.R. (3d) 212 (S.C.C.). 8 None of the fresh evidence is admissible. It was all available at the time of the chambers application. Moreover, as will be evident from the discussion of the issues on appeal, it is not relevant and therefore could not have affected the result. While the proposed fresh evidence is demon- strative of the relationship between the deceased and two of her stepdaughters, the main issue is whether the legislation includes stepchildren as beneficiaries of an intestate. With respect to the allegation that the 58 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

evidence supports a secret trust, it does not provide evidence that the deceased expressed her intentions to the alleged trustee, the respondent, as required by law. 9 The application for fresh evidence is dismissed.

b. Descendants Pursuant to the Act 10 Sections 65 and 66 of the Act provide: 65 If an individual dies leaving no surviving spouse or adult interdependent partner, the intestate estate shall be distributed (a) to the descendants of the intestate in accordance with section 66 ... 66(1) When a distribution is to be made under this Part to the descendants of any individual, the intestate estate or the portion of it being distributed shall be divided into as many shares as there are (a) children of that individual who survived the intestate ... 11 “Descendants” is defined in the Act as “all lineal descendants of an individual through all generations”: section 1(1). “Lineal descendant” is not defined in the Act. However, Black’s Law Dictionary, 10th ed. defines a lineal descendant as “a blood relative in the direct line of descent- children, grandchildren and great grandchildren are lineal descendants.” 12 The Act does not define “child.” Other statutes do. For example, the definition of “child” in the Fatal Accidents Act, RSA 2000, c F-8 includes stepsons and stepdaughters: section 1(a). If the legislature had intended to provide that stepchildren should have the same rights as natural and adopted children when a parent died intestate, it could have drafted the Act in a similar manner. 13 The appellant’s main submission is eloquently stated at paragraph 18 of her factum: “The current Wills and Succession Act has failed to recognize the need to protect blended (step) families.” In response to this argument, we note that intestate succession legislation in Alberta has historically excluded stepchildren from inheriting the estate of an intestate stepparent: White (LeBlanc), Re, [1945] 2 D.L.R. 803 (Alta. S.C.), at 807, [1945] 1 W.W.R. 78 (Alta. S.C.). Recent studies by the Alberta Law Reform Institute (ALRI) continue to support the exclusion of stepchildren from the distributive scheme: Reform of the Intestate Succession Act: Report No 78 (Edmonton: Alberta Law Reform Institute, 1999) at 1. According to the ALRI report, the relationships between stepchildren and stepparents are too variable to support a presumption that a majority of stepparents intend their stepchildren to inherit in their estate. Peters v. Peters Per curiam 59

14 When the Act was drafted, it closely mirrored the recommendations made by the ALRI and supports the position that the Act was not intended to alter the scheme as it had previously existed. Thus, stepchildren continue to be excluded from inheriting the estate of an intestate stepparent. 15 The appellant cites a number of cases where courts have recognized that a testator has moral and legal obligations to make adequate provision for his or her family: Tataryn v. Tataryn Estate, [1994] 2 S.C.R. 807, 116 D.L.R. (4th) 193 (S.C.C.); Houston v. Houston Estate, 2014 BCSC 489 (B.C. S.C.) (available on CanLII) and Wetmore v. Wetmore Estate [1999 CarswellBC 1232 (B.C. S.C.)], 1999 CanLII 6552. But all of these cases arose in the context of a will and an application to vary that will. They are of no assistance to the interpretation of the statute. 16 The legislation is clear in its intent and we are bound to follow it. Accordingly, this ground of appeal is dismissed.

c. Secret Trust 17 The appellant also argues that the deceased created anexpress trust, and the respondent son held the property in trust for the benefit of himself and all four stepdaughters. 18 Anexpress trust must satisfy eachof the three certainties: the language of intention to form the trust, the subject or trust property, and the trust objects or beneficiaries (Knight v. Knight (1840), 3 Beav. 148, 49 E.R. 58 (Eng. Ch. Div.). Also see: Goodman Estate v. Geffen (1987), 52 Alta. L.R. (2d) 210 (Alta. Q.B.), reversed, (1989), 68 Alta. L.R. (2d) 289 (Alta. C.A.), reversed, (1991), 80 Alta. L.R. (2d) 293 (S.C.C.)). 19 A secret trust is a form ofan express trust, where the deceased’s testamentary intentions are supplemented by oral or written instructions to the designated heirs that property is to be held on trust for certain purposes or persons. Those who undertake to hold the property of the intestate on trust for specific purposes or persons will be held to that obligation: Don- ovan Waters QC, Mark Gill & Lionel Smith, eds, Waters’ Law of Trusts, 3rd ed (Toronto, Ontario: Thomson Carswell, 2005) at 269. 20 To form a secret trust, the following additional conditions precedent must be satisfied: • The deceased intended to impose a trust obligation; 60 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

• The intestate communicated the intention that the property should be held in trust for others and communicated the intended beneficiaries of the trust to the trustee; and • The trustee acquiesced to hold the property on trust for the specified beneficiaries Ottaway v. Norman, [1971] 3 All E.R. 1325 (Eng. Ch. Div.), at 1332 cited in Jankowski v. Pelek Estate, [1995] M.J. No. 663 (Man. C.A.) at para 107, (1995), 131 D.L.R. (4th) 717 (Man. C.A.) 21 The elements of communication and acquiescence are vital to the formation of a secret trust. When these elements have not been satisfied, no secret trust exists: Waters’ Law of Trusts at 274. 22 In this case, the appellant submits evidence of statements made by the deceased to the stepdaughters that the estate was to be held on trust for the benefit of all five children. The appellant relies on her own affidavits and the fresh evidence affidavit of another stepdaughter, Sheilagh Jean Peters. However, none of the evidence demonstrates the communication of the deceased’s intention to the trustee, in this case, the respondent son. There is no evidence that the respondent was advised by the deceased that she intended some property to be held in trust, or of the intended beneficiaries of the trust. There is no evidence that the respondent acquiesced to hold the property of the deceased’s estate in trust. 23 As a result, the elements of communication and acquiescence are not satisfied. The respondent is the sole beneficiary of the estate. This ground of appeal is dismissed.

d. Family Relief 24 The appellant takes issue with the chambers judge’s observation that there was no allegation that any of the stepchildren was unable to earn a livelihood by reason of mental or physical disability and as a result that there was no claim pursuant to the family maintenance and support provisions of the Act. The appellant says that in the brief which she submitted to the Court of Queen’s Bench, she stated that one of her sisters, Sheilagh Jean Peters, is disabled. There is nothing in the record which provides any evidentiary support for this assertion and there is no claim advanced pursuant to Division 2 of the Act on behalf of Sheilagh Jean Peters. Indeed, the affidavit of Sheilagh Jean Peters, which is submitted as part of the fresh evidence, mentions nothing in this regard. Peters v. Peters Per curiam 61

V. Conclusion 25 The underlying theme of the appellant’s submissions is that the result is unfair. The children (step and biological) all assisted both financially and otherwise in the maintenance of Lester and Ileen Peters. They func- tioned as a family unit for many years and all five of the adult children worked together to provide for Ileen. They assisted Lester and Ileen when they were petitioned into bankruptcy. When Lester Peters died intestate, the five adult children agreed that Ileen Peters should receive all of their father’s estate. 26 In conclusion we can do no better than to repeat the words of the chambers judge: this case is an example of the personal difficulties and harm to relationships that can occur when an individual does not have a will. 27 The appeal is dismissed. Appeal dismissed. 62 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

[Indexed as: Lakeman v. Bayne] Loretta Ann Lakeman, Applicant and Peggy Sue Bayne, Respondent Alberta Court of Queen’s Bench Docket: Red Deer ES10-19498 2016 ABQB 180 M. David Gates J. Heard: January 19-23, 2015; February 20, 2015 Judgment: March 24, 2016 Estates and trusts –––– Estates — Testamentary instruments — Holograph wills — Validity –––– Deceased had four children including parties — Deceased operated dairy farm and children all helped on farm when they were growing up — Deceased had difficult personality — Deceased had serious health issues and parties would help care for younger siblings — Deceased transferred land and GICs into joint names of respondent and herself — Deceased did not have formal will but she prepared handwritten document in 1998 purporting to be holograph will, and she prepared two documents in notebook in 2009 and 2011 — Applicant applied to determine effect and validity of testamentary instruments and to determine effect and validity of transfer of land and GICs — Application granted — Deceased died after new Wills and Succession Act came into force but old Wills Act continued to apply to wills made prior to date new Act came into force, subject to certain exceptions — Formal requirements for holographic will under old Wills Act were that will was in testator’s handwriting and instrument was signed — 1998 document met requirements of valid will, as it was in deceased’s handwriting and it was signed — However, 1998 holographic will was revoked by making of subsequent holographic will — 2009 document was in deceased“s handwriting but it lacked signature — Standing alone, 2009 document did not constitute valid holographic will — 2011 document was in deceased’s handwriting and it was signed so it met formal requirements for valid holographic will — 2009 and 2011 writings in notebook were meant to be read together as single document and together constituted holographic will — Writings were intended by deceased to be testamentary in nature — When read together, documents expressed deliberate and fixed or final expression of intention with respect to assets of estate, including disposition of land — Intention was for respondent to hold land for benefit of other siblings, rather than as sole owner. Estates and trusts –––– Trusts — Resulting trust — Rebuttal of presumption of resulting trust — Relationship of parties –––– Deceased had four chil- Lakeman v. Bayne 63 dren including parties — Deceased operated dairy farm and children all helped on farm when they were growing up — Deceased had difficult personality — Deceased had serious health issues and parties would help care for younger siblings — Deceased transferred land and GICs into joint names of respondent and herself — Deceased did not have formal will but she prepared handwritten document in 1998 purporting to be holograph will, and she prepared two documents in notebook in 2009 and 2011 — Applicant applied to determine effect and validity of testamentary instruments and to determine effect and validity of transfer of land and GICs — Application granted — Children all made significant contributions to farm over years and had suffered some emotional and physical abuse by deceased — Efforts of respondent to assist deceased over years was not valuable consideration for her receiving beneficial interest in land — While deceased had closest relationship with respondent, assistance and support respondent provided did not establish that transfer was for consideration — Transfer was gratuitous — Presumption of resulting trust applied and respondent had not met onus of rebutting presumption — Deceased did not intend to transfer gift of right of survivorship to respondent — Land was to be distributed according to holographic will contained in notebook, namely, it was to be distributed to children in equal shares — Presumption of resulting trust respecting GICs had been rebutted — Deceased considered creation of joint accounts with right of survivorship as valuable consideration for respondent’s efforts in assisting her — De- ceased’s treatment of other accounts while she kept GICs secret from respondent suggested that she intended to gift GICs to her based on right of survivorship. Cases considered by M. David Gates J.: Bates v. Oryshchuk (2009), 2009 ABQB 688, 2009 CarswellAlta 1923, 18 Alta. L.R. (5th) 306, 54 E.T.R. (3d) 207, (sub nom. Oryshchuk Estate, Re) 485 A.R. 379 (Alta. Q.B.) — referred to Bennett v. Toronto General Trusts Corp. (1958), [1958] S.C.R. 392, 14 D.L.R. (2d) 1, 1958 CarswellMan 66 (S.C.C.) — followed Cho Ki Yau Trust (Trustee of) v. Yau Estate (1999), 1999 CarswellOnt 3232, 29 E.T.R. (2d) 204, [1999] O.J. No. 3818, [1999] O.T.C. 106 (Ont. S.C.J.) — referred to Christmas Estate v. Tuck (1995), 10 E.T.R. (2d) 47, 1995 CarswellOnt 1121, [1995] O.J. No. 3836 (Ont. Gen. Div.) — referred to Coate Estate, Re (1987), 26 E.T.R. 161, 1987 CarswellOnt 642, [1987] O.J. No. 1492 (Ont. Surr. Ct.) — referred to Cooper v. Cooper Estate (1999), 1999 CarswellSask 327, 27 E.T.R. (2d) 170, [1999] 11 W.W.R. 592, 181 Sask. R. 63, [1999] S.J. No. 338 (Sask. Q.B.) — referred to Dagle v. Dagle (1990), 38 E.T.R. 164, 81 Nfld. & P.E.I.R. 245, 255 A.P.R. 245, 70 D.L.R. (4th) 201, 1990 CarswellPEI 22, [1990] P.E.I.J. No. 54 (P.E.I. C.A.) — referred to 64 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

Decore v. Decore (2009), 2009 ABQB 440, 2009 CarswellAlta 1090, 12 Alta. L.R. (5th) 221, [2009] A.J. No. 770 (Alta. Q.B.) — considered Dixon-Marsden Estate, Re (1985), 21 E.T.R. 216, 1985 CarswellOnt 711, [1985] O.J. No. 1766 (Ont. Surr. Ct.) — referred to Doucette v. Doucette Estate (2009), 2009 BCCA 393, 2009 CarswellBC 2402, 50 E.T.R. (3d) 163, 275 B.C.A.C. 226, 465 W.A.C. 226, 311 D.L.R. (4th) 410 (B.C. C.A.) — considered Facey v. Smith (1997), 1997 CarswellOnt 1643, 17 E.T.R. (2d) 72, (sub nom. Facey v. Galbuogis Estate) 35 O.T.C. 372, [1997] O.J. No. 1858 (Ont. Gen. Div.) — referred to Figley v. Figley (2012), 2012 SKCA 36, 2012 CarswellSask 193, 77 E.T.R. (3d) 1, 393 Sask. R. 44, 564 W.A.C. 44 (Sask. C.A.) — referred to Fuchs v. Fuchs (2013), 2013 ABQB 78, 2013 CarswellAlta 244, 555 A.R. 387 (Alta. Q.B.) — referred to Garnett Estate v. Garnett Estate (2013), 2013 BCSC 1731, 2013 CarswellBC 2835, 92 E.T.R. (3d) 91 (B.C. S.C.) — referred to Hanson v. Mercredi (2014), 2014 ABCA 216, 2014 CarswellAlta 1019, 98 E.T.R. (3d) 1, 99 Alta. L.R. (5th) 77, [2014] 10 W.W.R. 41, 577 A.R. 110, 613 W.A.C. 110 (Alta. C.A.) — referred to Lecky Estate v. Lecky (2011), 2011 ABQB 802, 2011 CarswellAlta 2230, 72 E.T.R. (3d) 263, 52 Alta. L.R. (5th) 295, [2012] 3 W.W.R. 512, (sub nom. Lecky Estate, Re) 530 A.R. 286 (Alta. Q.B.) — considered McDermid v. McDermid (2011), 2011 BCSC 952, 2011 CarswellBC 1879 (B.C. S.C.) — referred to McDonald Estate, Re (2012), 2012 ABQB 704, 2012 CarswellAlta 2235, 84 E.T.R. (3d) 43, 552 A.R. 308, [2012] A.J. No. 1283 (Alta. Q.B.) — referred to McLear v. McLear Estate (2000), 2000 CarswellOnt 2410, 33 E.T.R. (2d) 272, [2000] O.T.C. 505, [2000] O.J. No. 2570 (Ont. S.C.J.) — referred to Mittelstadt Estate, Re (2002), 2002 ABQB 656, 2002 CarswellAlta 885, 46 E.T.R. (2d) 227 (Alta. Q.B.) — referred to Oliver Estate v. Reid (1994), 4 E.T.R. (2d) 105, (sub nom. Oliver Estate, Re) 124 Nfld. & P.E.I.R. 294, (sub nom. Oliver Estate, Re) 384 A.P.R. 294, 1994 CarswellNfld 44, [1994] N.J. No. 318 (Nfld. C.A.) — referred to Pecore v. Pecore (2007), 2007 SCC 17, 2007 CarswellOnt 2752, 2007 Carswell- Ont 2753, [2007] S.C.J. No. 17, 361 N.R. 1, 32 E.T.R. (3d) 1, 37 R.F.L. (6th) 237, 279 D.L.R. (4th) 513, 224 O.A.C. 330, [2007] 1 S.C.R. 795 (S.C.C.) — followed Petrowski v. Petrowski Estate (2009), 2009 ABQB 196, 2009 CarswellAlta 465, 47 E.T.R. (3d) 161, 5 Alta. L.R. (5th) 199, [2009] A.J. No. 353, 466 A.R. 59 (Alta. Q.B.) — considered Reid, Re (1921), 50 O.L.R. 595, 64 D.L.R. 598, 1921 CarswellOnt 148 (Ont. C.A.) — referred to Lakeman v. Bayne 65

Rose v. Rose (2006), 2006 CarswellOnt 3776, 24 E.T.R. (3d) 217, 81 O.R. (3d) 349, [2006] O.J. No. 2483, [2006] O.T.C. 555 (Ont. S.C.J.) — referred to Saylor v. Madsen Estate (2005), 2005 CarswellOnt 5896, 20 E.T.R. (3d) 171, 203 O.A.C. 295, 261 D.L.R. (4th) 597, [2005] O.J. No. 4662 (Ont. C.A.) — referred to Saylor v. Madsen Estate (2007), 2007 SCC 18, 2007 CarswellOnt 2754, 2007 CarswellOnt 2755, [2007] S.C.J. No. 18, (sub nom. Saylor v. Brooks) 360 N.R. 327, 32 E.T.R. (3d) 61, 279 D.L.R. (4th) 547, (sub nom. Saylor v. Brooks) 224 O.A.C. 382, 42 C.P.C. (6th) 1, (sub nom. Madsen Estate v. Saylor) [2007] 1 S.C.R. 838 (S.C.C.) — referred to Shephard v. Cartwright (1954), [1954] 3 All E.R. 649, [1955] A.C. 431 (U.K. H.L.) — considered Smith v. Lister (2015), 2015 ABQB 420, 2015 CarswellAlta 1225, 11 E.T.R. (4th) 315, 24 Alta. L.R. (6th) 332, [2016] 3 W.W.R. 384 (Alta. Q.B.) — referred to Totten, Re (1904), 179 N.Y. 112, 71 N.E. 748 (U.S. N.Y. Ct. App.) — referred to Woods v. Cannon (2014), 2014 ABQB 614, 2014 CarswellAlta 1846, 4 E.T.R. (4th) 44 (Alta. Q.B.) — referred to Statutes considered: Administration of Estates Act, R.S.A. 2000, c. A-2 s. 24 — referred to Estate Administration Act, S.A. 2014, c. E-12.5 s. 15 — referred to Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) s. 73 — referred to Judicature Act, R.S.A. 2000, c. J-2 s. 4 — referred to s. 5 — referred to Trustee Act, R.S.A. 2000, c. T-8 s. 16 — referred to Wills Act, R.S.A. 2000, c. W-12 s. 7 — referred to s. 8 — considered s. 16 — considered s. 16(b) — referred to Wills and Succession Act, S.A. 2010, c. W-12.2 Generally — referred to s. 26 — considered s. 37 — considered ss. 37-40 — referred to s. 38 — considered s. 39 — considered 66 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

Rules considered: Surrogate Rules, Alta. Reg. 130/95 R. 64 — referred to

APPLICATION to determine effect and validity of testamentary instruments and to determine effect and validity of transfer of land and GICs to respondent.

Lisa F. Kerwin, for Applicant Michael D. Keyes, for Respondent

M. David Gates J.: Introduction and Overview 1 This is an application by Loretta Ann Lakeman (the “Applicant”), daughter of the late Edith Schaeffer (the “Deceased”), to determine the effect and validity of alleged testamentary instruments in the possession of Peggy Sue Bayne (the “Respondent”), daughter of the Deceased and executor of the estate, and to determine the effect and validity of a transfer of land and GICs by the Deceased into the joint names of herself and the Respondent. 2 This matter was heard on January 19-23, 2015. Written argument was received on February 3, 2015. Closing argument was heard on February 21, 2015, at the conclusion of which I reserved my decision. These are my reasons for judgment.

Factual Background 3 Many of the relevant background facts related to this application are not in dispute, as evidenced by the agreement between the parties to enter a Joint Exhibit Book as well as an Agreed Statement of Facts, attached hereto as Appendix A. Unless otherwise stated, the parties agree that the documents in the joint exhibit book can be admitted into evidence for the truth of their content. 4 Edith Schaeffer died on February 6, 2012 leaving four adult children, Peggy Bayne, Loretta Lakeman, Michelle Hazen, and Jason Schaeffer. 5 The Deceased married Morris Schaeffer on November 25, 1961. The family moved to the farm in the spring of 1972, when the Applicant and Respondent were six and nine years of age, respectively. The couple sep- arated in October 15, 1977, at which time the Deceased assumed custody of all of the children. As part of the 1978 divorce settlement, Morris Schaeffer transferred all of his interest in farmlands near Blackfalds, Al- Lakeman v. Bayne M. David Gates J. 67

berta, (“the land”), and waived child and/or spousal support (Exhibit #1, Binder 1, Tab 1,2). This same land was transferred into the sole name of the Deceased on December 13, 1982, from Arthur and Alice Mary Ann Pedersen. (Exhibit #1, Binder 1, Tab 5) 6 The Deceased operated a dairy farm on the land for many years. At its peak, the land supported a herd of 30 dairy cattle. The land was not suitable to support any more cattle. It was also not suitable for growing crops and most of the feed had to be purchased. Apart from having a large garden, the land was not suitable for anything else. When the dairy herd and milk quota were sold in 1999, the focus shifted to leasing garden plots as a source of income. The Deceased also used a portion of the farm for rental garden plots and also taught community members how to process and preserve produce. The Deceased loved gardening and thought that everyone should have a garden. At one point, she sought to have her garden plot designated as an organic garden. 7 The Deceased was a hard and persistent worker. It is very clear from all of the evidence before me that the Deceased had a very strong attach- ment to the land, and a passionate desire to preserve it in its natural state even after she was gone. However, she was not, as her daughter Michelle testified, “a warm, cuddly person”. At least some of her children found her unpredictable. One day she would speak to a family member and the next she would not. After she became ill, she became quite manipulative in order to get others to do things for her. According to the Applicant, the Deceased always came first, and did whatever it took to get her way. In the eulogy that she wrote for the Deceased’s funeral, the Respondent stated: “All of us escaped the good german [sic] work ethic of using your kids for cheap farm labour by leaving home as soon as we could see what the world had to offer.”

The Relationship with the Children 8 During the course of the trial, all four children gave evidence. I heard extensive testimony from each of the children regarding their childhood and particularly, the significant responsibilities that they carried in terms of assisting with daily farm chores before and after school. These activities consisted of planting, maintaining and harvesting a very large garden, assisting in canning, helping with the feeding and milking of the dairy cattle, cleaning barns, assisting with the bailing, strapping and tarp- ing of hay, and other chores around the house and farm. All four children gave a detailed account of their respective relationships with the De- 68 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

ceased during childhood and from the time they left home until the De- ceased’s death. 9 The Deceased had very serious health issues over the years. She spent five months in hospital in 1978-79. The Respondent was in school at the time and was not able to look after the children but did assumed significant responsibility for the farming operating, including the milking and feeding of the dairy herd. The Deceased’s mother and sister cared for the children. A neighbour and the children’s father helped around the farm. 10 Upon reaching the age of 16 years, the Respondent sent her Mother a letter in hospital attaching a power of attorney for her to sign to permit the Respondent to sign cheques. (Exhibit #1, Binder #3, Tab 80) When the Deceased returned home from the hospital, the Respondent recalled that the Deceased was not able to do very much but sit in the house and tell her how she (the Respondent) was doing things wrong. There was a great deal of conflict regarding changes to the routine instituted during her absence. The Deceased told the Respondent that the yard was not big enough for both of them. The Respondent left the farm shortly thereafter. She lived at an adjacent farm from 1979 until 1981, and then went to college in Red Deer until 1983. She moved back to the farm for a period of time in 1983. 11 The Respondent always kept in touch with the Deceased. The De- ceased came to depend on the Respondent more and more over the years and the two were in regular contact. Given their shared love of farming, the two would regularly discuss farm issues. 12 The Applicant had a particularly difficult relationship with the De- ceased. She spent increasing times with her father and with friends away from the farm to avoid conflict. At one point the Deceased handed over the Applicant’s birth certificate to a social worker and said that she never wanted to see the Applicant again. Between June 1979 and June 1981, the Applicant spent time in numerous foster homes; in the care of her father, Morris; and short spells back in the care of the Deceased. When the temporary wardship order expired in July 1981, the Applicant returned to the farm. Until 1983, the Applicant spent periods of time at the farm, but came and went every few months. In 1983, the Applicant left a job in Red Deer to return to look after the farm, as well as her younger sister and brother while her mother was ill and in hospital for six to eight weeks. When her mother was released from hospital and able to do chores, the Applicant left again. She returned for approximately five Lakeman v. Bayne M. David Gates J. 69

months in early 1985, but never lived on the farm again. She married in June 1986. 13 Both the Applicant and her husband visited the farm frequently over the years and regularly assisted the Deceased with chores and farm maintenance. In 1992, the Applicant and her husband looked after the farm, including the daily feeding and milking of the cattle, while the Deceased was hospitalized on a couple of occasions. At one point, the Applicant’s brother Jason came to live with them. The Applicant and her family moved to Strathmore in 2002, a two hour drive from the farm. 14 The Applicant’s husband, David Lakeman, also gave evidence. He confirmed that starting in about 1986, he spent a substantial amount of time at the farm undertaking various chores around the property. Typi- cally, when arrived at the farm, the Deceased would have a lengthy list of tasks for him to complete. He described the relationship with the De- ceased as generally good, but she was unpredictable and there were times when she told them that she did not want to see them. He says that they stopped visiting as frequently starting in 2004 or 2005, after they had moved to Strathmore, as it became increasingly difficult to “ride the waves” of her shifting attitude towards them. 15 The Applicant’s son Matthew maintained and lived at the farm for several months while the Deceased was in hospital in early 2008. When the Deceased returned, she asked him to leave. That fall, discussions took place with the Deceased about the Applicant and her husband moving to the farm to provide home care and to maintain the farm. The arrangement was never finalized as the Deceased attached conditions which the Applicant and her husband were not prepared to accept, and also refused to provide them with a long-term lease on the land where they had planned to construct a modular home. 16 Michelle Hazen remained at home on the farm until she completed the Dairy Herdsman Assistant program at Olds College in 1987. She lived with her father for a few months when she was 12 or 13. She was unhappy with her Mother at the time and felt she was being too tough on her. Arrangements were made with the court to allow her to live with her father. At the end of the four months, she went back to the farm. With both the Applicant and Respondent away from the farm, much of the work fell to her. Jason was not interested in the dairy operation or the cows. Generally, she enjoyed the farm work, particularly watching the baby animals grow up. 70 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

17 Michelle returned to work at the farm full-time around 1997 as the Deceased was having health issues at the time and could not afford to pay for farm help. The Deceased approached her to come and help and she agreed. The arrangement lasted about six months and ended because Michelle could not support herself and two children on what her Mother could afford to pay. Her Mother was upset when told that she could not work there anymore. The health of the cows declined after that as she was unable to milk them every day. 18 After the Deceased’s death, effective July 2012, the Respondent agreed to rent the farmhouse to Michelle for $1,000 per month, including utilities on a month to month basis. Michelle is responsible for the upkeep of the yard. The Respondent has made no commitment as to how long she can stay in the house. 19 Jason Schaeffer is the youngest child of the Deceased. For the past five years, he has worked overseas, most recently in Saudi Arabia. He lives in Panama, but visits Canada once a year. He has a container of his belongings at the farm. 20 He testified that as soon as he could pick up a pail, at around aged three or four, he began doing chores at the farm. The chores increased as he got older and as his sisters began to leave the farm. The Respondent left in 1979 when he was eight years of age. The Applicant left shortly thereafter, but was back and forth for a number of years. When the De- ceased began to get sick, the Applicant came home to look after Michelle and Jason. The Respondent also came back for several months during the Deceased’s initial illnesses. Other family members and neighbours also assisted over the years when the Deceased was away from the farm due to hospitalization. 21 Jason left the farm after he finished high school. The situation with the Deceased had become intolerable and he went to live with his sister, the Applicant, under a Kinship Agreement with Children’s Services. 22 Starting in 1997, Jason worked at several different locations in Africa and the Middle East. He was working in Saudi Arabia at the time of his mother’s death. He also lived in the Edmonton area and in Calgary at various points in time 23 Jason maintained a good relationship with the Deceased after he left the farm and returned to assist on a regular basis. He also spent time at the farm between overseas contracts, always assisting with chores. He took the Deceased on an extended holiday to South America in 1998, and later paid half of the cost of a new car for her. Lakeman v. Bayne M. David Gates J. 71

24 In February 1991, the Deceased set up an RRSP in Jason’s name at Alberta Treasury Branch with an initial deposit of $1,500. Jason first learned of the existence of the RRSP in his name following his Mother’s death. The Respondent advised him to contact the bank. He received the value of the RRSP, $25,019.74, in March 2012 (Exhibit #1, Binder 2, Tab 51, 53). He does not believe that this represents adequate compensation for his work on the farm over the years. 25 In 2002, the Deceased asked Jason if he had any interest in operating the farm. While he told the Deceased that he had no interest in being a farmer, he also told her that he would want his fair share if the farm was ever sold. According to Jason, the Deceased agreed. (Exhibit #1, Binder #2, Tab 50) He testified that he does not recall when he first learned that his mother had transferred the farm into the joint names of herself and the Respondent. The Deceased never told him about the 2002 land transfer. He believes that she may have once spoken to him about him being an executor, but she never discussed her testamentary intentions with him. The Respondent testified that she told Jason in 2007 that she was joint owner of the land with the Deceased in response to his question regarding what would happen to the land once their Mother died. Jason has no recollection of any such discussion. 26 Starting around 1986, the Deceased began to have kidney problems that ultimately led to a kidney transplant in September 1991. She started scaling back dairy farm in 1996-97 and sold part of the milk quota. Around the same time, she acquired a bull from the Respondent and starting raising cattle. She was very sick in 1999 and could not get out to milk the cows. She lost a lot of cows that year. The Respondent assisted her in the sale of the herd and, ultimately, the milk quota. (Exhibit #1, Binder 1, Tab #15) The farm ran at a small deficit every year after 1996, save for 2000, 2004, and 2005 27 After terminating the dairy operation, the Deceased maintained over twenty beef cattle. As of 2007, she no longer kept the cattle on the farm during the winter. The Deceased relied on the Respondent to assist her with managing the remaining cattle herd. According to the Respondent, this “did not make my life easy”. The Deceased had seven cattle on the farm until she died. 28 The Deceased began collecting the old age pension, as well as a disability pension, in 2000. [29] In 2007, one of the Deceased’s legs was amputated. The Applicant took time off work and went to stay with Ja- 72 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

son in Edmonton so that she could be close to her Mother. In 2009, the Deceased’s other leg was amputated.

Transfer of the Land 30 On March 21, 2002, the Deceased transferred the land to herself and the Respondent as joint tenants. The Offer to Purchase was signed by the Respondent on February 8, 2002, and stated that the consideration was $1 (Exhibit #1, Binder 1, Tab 7,8). The Respondent paid the Deceased by way of a cheque dated March 27, 2002 in the sum of $1 (Exhibit #1, Binder 1, Tab 43E). The land transfer was dated March 15, 2002 and was witnessed by the Deceased’s lawyer, Alan Sully. Following the death of the Deceased, the land was transferred to the Respondent on February 28, 2012. Neither the Deceased nor the Respondent reported a disposition or acquisition of land or residence in their 2003 income tax returns, or their GST reporting for that or any subsequent year. (Exhibit #1, Binder #2, Tab #56, #57, #58, #59) 31 Casey Kooyman was the Deceased’s accountant and filed her income tax returns for many years. He met with the Deceased and the Respon- dent on October 24, 2001 to discuss possible methods of transferring the farmland to the children and the related tax consequences. Mr. Kooyman took rough notes indicating that he had discussed tax rollovers and utili- zations on transfers. 32 Mr. Kooyman candidly acknowledged that he had limited recollection of the discussion. As such, he relied on his very brief notes to attempt to reconstruct what he probably advised the Deceased based on his general practice in providing advice in these types of circumstances. He also acknowledged that it is likely that his discussion was more information- gathering and that there was likely a follow-up discussion, but he has no recollection of any such further discussion and his time and billing records from that period are no longer available. 33 Mr. Kooyman testified that the Deceased’s farm income was low and that she had some savings and was receiving social benefits as a result of health issues. As such, he reasoned that the transfer was a rollover as the Deceased would have lost her social benefits if the transfer triggered a capital gain on the property. 34 In cross-examination, Mr. Kooyman stated that he was unable to conclude from a review of his notes made at the time of the meeting that the Deceased intended to transfer a beneficial interest in the land to the Re- spondent. He confirmed that if the Deceased intended to pass the benefi- Lakeman v. Bayne M. David Gates J. 73

cial interest in the land only upon her death, there would be no requirement to report the transfer on her income tax return. He also testified that there is no requirement to report such a transfer for income tax purposes if the transfer was intended to immediately transfer the beneficial interest in the land, although “it is good practice to do that” (Transcript, p, 24, l. 24). 35 In response to written questions on affidavit submitted by the Appli- cant’s counsel, Mr. Kooyman, stated that he could not recall whether the Deceased intended “to transfer all the land ... into a Joint tenancy with Peggy Bayne” (Exhibit #1, binder #3, Tab 66, 67). He went on to state, “we would have reported the disposition on schedule 3 of Edith’s 2002 return if there was a disposition of a beneficial interest in the property.” 36 Mr. Sully, a lawyer with over 40 years in practice who had given the Deceased legal advice in the past, met with the Deceased in January 2002. He candidly acknowledged that his “recollection is very poor” regarding the meeting, though did prepare some contemporaneous notes. He did recall that the Deceased sought his assistance in preparing a will, but that the requirements she wanted included in the will were, in his view, not reasonable and possibly not enforceable. He refused to take instructions from her to prepare a will in the manner that she requested. He also recalled that the Deceased wished to name the Respondent as executor and her son Jason as the alternate executor. 37 In response to his refusal to prepare a will in the requested fashion, the Deceased told Mr. Sully that she would look after it herself but she wanted something done with the land in the meantime. She made mention of wanting to transfer the land into the names of the Respondent, Michelle, Jason and herself. The Deceased wished to impose certain conditions on the transfer, the specifics of which Mr. Sully did not recall. He refused to transfer the land based on the requested conditions. The De- ceased then instructed him to transfer the property into the joint names of herself and the Respondent. 38 The Respondent attended the meeting with Kooyman. The Deceased asked her to attend as they needed to talk about capital gains and how it potentially affected the property. The Respondent was concerned that she might have to sell the property to pay capital gains. The Respondent was not present in the room when the Deceased spoke to him about a will and the disposition of her estate. During the meeting, she heard Mr. Sully tell the Deceased that she could not control people from beyond the grave. 74 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

39 On January 23, 2002, Mr. Sully wrote to Mr. Kooyman advising that the Deceased had requested a transfer of the land to her daughter and herself jointly without consideration. He went on to seek confirmation from Mr. Kooyman that the transfer would not create unanticipated tax implications (Exhibit #1, Binder #3, Tab #65d). 40 In his response dated January 28, 2002, Mr. Kooyman advised that the transfer “will be a rollover under Section 73(3) of the ITA ...and will not incur any tax.” He went on to state that to qualify for a rollover, the recipient must be a resident of Canada and have paid no consideration relative to the transfer. Finally, he indicated that the recipient “must self- assess GST on the return applicable to the date the transfer is made.” 41 Mr. Sully prepared a purchase agreement and a land transfer. The purchase agreement showed that no consideration flowed from the Re- spondent to the Deceased, but that the Respondent would be required to self-assess on GST. Mr. Sully could not recall if he understood the transfer to be a transfer of a legal interest or a beneficial interest in the land. He did not discuss the conditions the Deceased wished to include in a will or in the land transfer to her children by way of a trust agreement. 42 The Deceased also asked Mr. Sully to prepare a personal directive. The Deceased signed this document on February 8, 2002 (Exhibit #1, Binder #3, Tab 71b). In the Personal Directive, the Deceased appointed the Respondent as her agent. The Respondent’s authority relative to instructions to heath care providers was subject to explicit guidelines. The Deceased specifically directed the Respondent to contact Michelle and Jason prior to making any decision that might result in her death, and to abide by any majority decision. 43 Mr. Sully testified that the Respondent asked about the need to amend her cohabitation agreement with her common law spouse to include a provision that he had no claim on the land that she would be receiving from the Deceased (Exhibit #1, Binder #3, Tab 74). Another lawyer in Mr. Sully’s office prepared this amendment. On April 29, 2002, they signed an amendment to their 1997 cohabitation agreement confirming her common law spouse at the time would have no claim to the land. The Respondent believes that the Deceased made this request prior to meeting with the lawyer. 44 In 2010, the Deceased contacted the Alberta Conservation Associa- tion (“ACA”) seeking a Conservation Easement to protect the wildlife habitat and agricultural lands. At the time, the ACA was not entering into new conservation easements. In 2013, the Respondent re-newed the re- Lakeman v. Bayne M. David Gates J. 75

quest an official from the ACA visited the property and determined that it was land deserving of conservation efforts. A series of possible agreement options were presented to the Respondent at that time, subject to ACA approval and the removal of any restrictions filed against the land. (Exhibit #1, Binder #3, Tab 88) The Respondent testified that this would conform with Deceased’s wishes — 12 acre plot containing the house and garden plots would still be available to be enjoyed by all four children and remain in Respondent’s name.

The GICs 45 On February 28, 2008, the Deceased purchased two guaranteed investment certificates (GICs) in the joint names of “Edith Schaeffer or Peggy Bayne” in the amount of $18,308.24 and $17,367.39. The GICs included a right of survivorship. The funds originated from the De- ceased’s bank account as of September 16, 1999. On the date of matur- ity, March 1, 2010, they were extended for a further two years to March 1, 2012. (Exhibit #1, Binder #1, Tab 25) Following the Deceased’s death, the bank issued the proceeds of the GICs to the Respondent, who had no prior knowledge that the Deceased had purchased the GICs in their joint names.

The Testamentary Instruments 46 During the last year and a half of her life, the Deceased initially had live-in caregivers, followed by 24 hour palliative care. In the last six months, she was hospitalized half of the time. She had a very serious health issue related to a bleeding ulcer in August 2011. The 2011 will came very shortly after this narrow escape. She also purchased a funeral plan. In October 2011, the Deceased told the Respondent where to find all of the relevant documents upon her death. 47 The Deceased left no formal will prepared or witnessed by a lawyer. Instead, she prepared a handwritten document purporting to be a holograph will dated January 28, 1998. In this document, she left 70% of the farm to the Respondent, of which 30% was to go to Jason upon his return to Canada, and the remaining 30% was to go to her Michelle. (Ex- hibit #1, Binder #1, Tab 43D). The document also addresses the distribution of personal effects, including the dairy herd and milk quota, and the contents of the house. 48 The original of the January 28, 1998 document was stolen from the Deceased’s purse while she was in hospital in the fall of 2008. The Ap- 76 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

plicant was aware that the Deceased’s 1998 will was stolen. A photocopy of the January 28, 1998 document was later discovered in the possession of Mr. Sully. Shortly thereafter, the Applicant told the Deceased about the importance of a will and for her to re-write her will so as to avoid problems in the future. The Deceased’s neighbour Carol Kearns told the Deceased in the summer of 2011 that she should make sure that her wishes regarding the farm should be set out clearly in her will. 49 On the date of their mother’s death, February 6, 2012, the Applicant and Respondent reviewed the contents of a blue spiralled-coil notebook found in the possessions of the Deceased. The notebook contains what the parties identified as two documents in the Deceased’s handwriting. The two documents are on three consecutive pages in the notebook and are dated December 2, 2009, and August 13, 2011, respectively. (Exhibit #7) 50 The first document, dated December 2, 2009, is written in pencil and is unsigned. It is set forth on the first two pages. The second document is dated August 13, 2011. Part of this document is written in pen and part in pencil. The Deceased signed the document at the end. 51 The two documents read as follows: December 2/09 — This is the final dispersement of my worldly assets. I choose to do this without consulting or being advised by anyone. I have appointed Peggy Sue (daughter) as executor of my affairs. She has been the constant conection and has the expertise and is able to manage without discrimination. I also appoint son Jason for support and advice. The land owns you you don’t own the land. To my children I leave land NW 1/42 40-27 — W4 to grow your food, a quiet place to walk and enew your spirits a place where life is save, a place to call home. My wishes are to not develope [sic] the land, and destroy its natural beauty and to always maintain a safe home for wildlife, a place where my gardeners can continue to grow their food and you, all of you can grow your food. Rent the pastures for grazing, preserve the forests and rent the garden for income - open an account. Asset dispersal - Land — stays intact — family (blood) has first option to rent at a fair price. Letter to executor why you should rent. Account to operate Lakeman v. Bayne M. David Gates J. 77

business set up to cover taxes, insurance maitaine [sic] repairs, new buildings Shared income at year 2. Example income — minus 2019 expenses is dispersed Dec 31 2020. Blood line related only. Share Garden to remain as a rental area and or a community garden if a reliable coordinator is available. Family gardens encouraged. August 13, 2011 House hold — 4 children — Pick # for 1 item grandchildren Pick # for 1 item. Desk to Bonnie Dyck. I fridge 1 stove 1 dishwasher 1 washer 1 dryer remain in the house to rent. Freezers + food Michelle Co-op shares Agrifood Shares RRSP Bank account [account number redacted by Court] + investment First: pay all debts. Education of grandchildren: They pay all first year expenses and good to excellent grades All of tuition for 3 years with honours 1 /2 of tuition for 3 years with good grades To take place within 5 years of my death 5 years after life the remianing assets are to be divided equally between my 4 children, Peggy sue, Loretta Ann, Michelle Cheri and Jason Avron This is the money from my life’s work in witch [sic] you were all part of in different degrees. The land is in Peggy’s name Acc # [account number redacted by Court] stays with the farm for maintenance, rental plots and house rent goes in this acc.

Evidence of June Baker and Carol Kearns 52 June Baker was a long-time friend of the Deceased. She discussed the Deceased’s wishes and plans for the farm. She recalled in a sworn statement that while the Deceased’s health was fragile, and was always at risk for life threatening reoccurrences, she worked as long as she could to manage the farm and maintain the cattle. She indicated the Deceased’s relationship with the Respondent was on a business level and “that she solely entrusted Peggy to conduct her business affairs.” When the De- ceased’s health deteriorated she stated “when it came time to let my dairy 78 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

herd go, Peggy helped me find a suitable buyer for them.” After she lost her leg in 2007, the Deceased became even more interested in using her land to help others. She had garden plots tilled on her property and posted an invitation at the food bank for people to come and learn how to grow vegetables and process them for healthy organic produce. 53 According to Ms. Baker, the Deceased was very dedicated and disci- plined in terms of the farm. She expected the children to help with the chores and to be partners in keep the farm running. Over the years, Ms. Baker never saw any physical discipline of the children, but acknowledged that the Deceased would get very angry and upset with them. 54 The Deceased had a difficult time with people from Lacombe County who wanted her to sell the property for development. According to Ms. Baker, the Deceased was adamant that this would not happen. She wanted the land left in its natural state for the benefit of not only her family, but also for other people. According to Ms. Baker, the Deceased believed that the Respondent really understood that she wanted the land to continue in its natural state. 55 Ms. Baker was not aware that the Deceased had transferred the land into the joint names of the Deceased and the Respondent until after the Deceased’s death. The Deceased never discussed this with Ms. Baker. While Ms. Baker was aware that the Deceased’s will was stolen while she was in hospital, she had no specific knowledge as to the Deceased’s intentions as regards a will beyond the fact that they both agreed that they each needed to have a will. 56 Carol Kearns gave evidence with respect to the Deceased’s wishes for the land. Ms. Kearns kept horses on the Deceased’s property and was in regular contact with her during the last five to six years of her life. 57 Ms. Kearns met the Deceased in 2006, when she sought permission to ride her horses on the land. The Deceased initially refused. The following year, the Deceased allowed Ms. Kearns to ride on the land as Ms. Kearns’ agreed to spread manure on the Deceased’s garden. 58 Sometime in 2008, the Deceased told Ms. Kearns that the Respondent “has it, she’ll take care of it” when asked what was going to happen to the land now that the Deceased was having increasing difficulty in maintaining the land. Later, in 2010, Ms. Kearns’ had another conversation with the Deceased regarding the future of the land. She testified, “I really don’t know what Peggy would do, but I know that she will - she will look after it, she’ll keep it the way I want it, because she loves the land too” (Transcript, p. 9, l. 16-23). Lakeman v. Bayne M. David Gates J. 79

59 Ms. Kearns recalled a particular conversation with the Deceased in the summer of 2011. According to Ms. Kearns, she shared concerns that she did not want the Applicant to have anything to do with the land because she would just sell it. Jason similarly would not care for the land and lived overseas. Michelle had a busy life and might find it difficult to manage. The Deceased indicated the only person that cared about the farm was the Respondent. According to Ms. Kearns, “It was on this day that she disclosed to me those same thought[s] along with the fact that she had willed the property to Peggy for safekeeping it the way it is. I remember saying to her at that time that she better make sure that was laid out clearly in her will ...” Ms. Kearns testified that it was the De- ceased’s wish to keep the land as a sanctuary to keep it from being in- vaded by outsiders, such as the County (Exhibit #1, Binder #3, Tab 75 1A). 60 During the 2011 conversation, the Deceased told Ms. Kearns that she had willed the land to the Respondent because of the fact that she would never change the land and would always be kept the way it is, as a wildlife conservation and also to have it for people to use it for their cattle (Transcript, p. 10, l. 14-19). During the same conversation, the Deceased mentioned that she was going to get in touch with a conservation officer again. 61 Ms. Kearns related that at one point the County wanted to put a walk- ing path on the back road to Blackfalds, but the Deceased did not want walkers that close to her land. According to Ms. Kearns, the Deceased did not like anyone trespassing on her land.

Background to the Litigation 62 Following the Deceased’s funeral, the four children, together with other family members, went back to the farm and distributed the De- ceased’s personal possessions by way of a draw, as set out in the De- ceased’s January 1998 holograph will and the August 13, 2011 handwritten document. 63 Neither the Applicant nor Michelle were aware that the farm was in the joint names of the Deceased and the Respondent. Even if Jason had been told about the transfer in 2007, it seems clear that he had forgotten. Other than the Respondent, none of the other children were aware of the content of the January 28, 1998 will until seeing the Respondent’s affidavit filed in relation to the Application for Advice and Direction. The Ap- 80 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

plicant and Jason were concerned to learn that the land would be in the Respondent’s name only. 64 The Respondent gave her niece her number in the draw to pick things from her Mother’s home. According to the Respondent, she did not want anything from the house. 65 On the day of the funeral, the Applicant approached the Respondent and told her that she needed to put all four names on the title to the land. On the same day, Jason asked her when the land would be sold. As executor, she was involved in disposing of the property that no one else wanted and had to pay the staff who had cared for her mother. She “warned” her siblings that she stated calving on March 1st, but agreed to resume her work in terms of settling the estate as of June 1st. At no time did she seek the input or assistance of any of her siblings in settling the estate. 66 The Respondent declined a family meeting to discuss the matter, claiming there was nothing to discuss and there was “just dissatisfaction right now”. When questioned as to source and meaning of her statement regarding the consequences to anyone challenging the estate, the Respon- dent replied that the source was written “on my forehead.” 67 After a few further conversations and exchanges, the Applicant retained counsel and filed an application in the Court of Queen’s Bench on April 18, 2012 seeking advice and directions. (Exhibit #1, Binder #1, Tab 36) Sisson J set the matter down for trial to address the issues as set out below. A Certificate of Lis Pendens was filed against the property on April 26, 2012. 68 The Applicant, with the consent of the Respondent, has made all of the annual maintenance fees on the Fairmont time-share bequeathed to her in the January 1998, document. At one point, the Respondent asked the Applicant to transfer the time-share into the Applicant’s name, but she declined. 69 In 2014, the Respondent received correspondence from the County of Lacombe as an adjacent landowner to the Kuhnen farm advising of an application to subdivide the land into a residential parcel (4 acres) and a parcel of 146 acres to be transferred to the County for recreational purposes. The Respondent then contacted the County and received a draft donation agreement in late 2014 whereby the County would purchase the land, save for a 12.89 parcel associated with the residence, for the sum of $1 plus an income tax receipt in the amount of $1,019,461. (Ex. #5) Lakeman v. Bayne M. David Gates J. 81

70 The draft agreement contained a provision whereby the County agreed that the land would generally remain in a natural state and not be resold for commercial or residential development. Nothing has been done to finalize the agreement.

Issues 71 The issues for trial are as follows: 1) What is the testamentary effect and validity of the testamentary documents dated January 28, 1998; December 2, 2009; and Au- gust 13, 2011? 2) What is the legal and beneficial effect of the transfers of NW2? 3) What is the legal and beneficial effect of the transfer of GICs into the joint names of the Deceased and the Respondent? 4) Should the Applicant or the Respondent be the executor of the estate?

Analysis 1) What is the Testamentary Effect and Validity of the Testamentary Documents dated January 28, 1998, December 2, 2009, and August 13, 2011? 72 The Applicant says that the handwritten document dated January 28, 1998, satisfies the requirements of a holograph will in that it is wholly in the handwriting of the testatrix and was signed by her. Further, it shows a deliberate, fixed and final intention to dispose of her property on death. The Applicant contends that following the theft of the original document, the Deceased believed that she was without a will and, on December 2, 2009, set about writing a new testamentary instrument in the blue spiralled-coil notebook. The Deceased was still making changes and addi- tions to this testamentary instrument over a period of more than two years, as evidenced by the date August 13, 2011, located on the top of the third page. 73 The Applicant contends that the contents of the lined spiral notebook constitute a single testamentary document that should be read together as a valid holographic will. Finally, the Applicant takes the position that the writing in the blue spiralled-coil notebook had the effect of revoking the prior will. 74 The Respondent argues that the January 28, 1998 handwritten document constitutes a photocopy of a valid holographic will. During oral 82 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

argument, the Respondent conceded that if any of the other testamentary documents are accepted as valid, that the 1998 handwritten document should be treated as revoked. 75 The Respondent says that the two documents found in the blue spiralled-coil notebook should be read separately. The Respondent notes that the Deceased did not sign the December 2009 document, and therefore the document, standing alone, is not a valid holographic will. Fur- ther, the 2011 document cannot act as a codicil to republish the 2009 document as there is no reference to the 2009 document in the latter. The August 13, 2011 document, on the other hand, is entirely in the De- ceased’s handwriting and is signed. It meets the required formalities for a holograph will. 76 The Applicant and the Respondent agree that once the requirements for formal validity are satisfied, the Court is required to interpret the document to determine whether it was intended to have testamentary effect.

a) The Law - Testamentary Effect and Validity 77 The contents of the notebook and the photocopy of the January 28, 1998 document may constitute holographic wills. If one or more of these documents constitute a valid will, then the Court must still determine what assets of the Estate fall to be distributed according to the will. 78 The date of the Deceased’s death, February 6, 2012, is significant. The new Wills and Succession Act, SA 2010, c. W-12.2 (“WSA”), came into force on February 1, 2012. Section 8 provides that the Wills Act, RSA 2000, c. W-12, continues to apply to wills made prior to that date, subject to the exceptions set out in the section: Fuchs v. Fuchs, 2013 ABQB 78 (Alta. Q.B.). The section also provides that s. 26 and ss. 37 to 40 of the new Act apply if the testator died after the coming into force of the new statute. Section 26 refers to the interpretation of wills and testamentary dispositions, while sections 37 and 39 refer to the validation of non-compliant wills, alterations and rectifications. 79 The only two formal requirements for a holographic will under the Wills Act are that the will be in the testator’s handwriting, and that the instrument be signed (ss. 7 and 8). A will may be revoked by the making of another will according to s. 16 of the Wills Act. 80 Even once the formalities for a valid will have been met, the Court must determine whether the instrument expresses a testamentary intent. Lakeman v. Bayne M. David Gates J. 83

These requirements are described in Bennett v. Toronto General Trusts Corp., [1958] S.C.R. 392, 14 D.L.R. (2d) 1 (S.C.C.) at para 5: There is no controversy, either in the reasons for judgment in the Courts below, or between the parties, that under the authorities, a holographic paper is not testamentary unless it contains a deliberate or fixed and final expression of intention as to the disposal of property upon death, and that it is incumbent upon the party setting up the paper as testamentary to show, by the contents of the paper itself or by extrinsic evidence, that the paper is of that character and nature. 81 To determine whether any of the documents are testamentary in effect, the will must then be interpreted in accordance with s. 26: 26 A will must be interpreted in a manner that gives effect to the intent of the testator, and in determining the testator’s intent the Court may admit the following evidence: a) evidence as to the meaning, in either an ordinary or a special- ized sense, of the words or phrases used in the will, b) evidence as to the meaning of the provisions of the will in the context of the testator’s circumstances at the time of the making of the will, and c) evidence of the testator’s intent with regard to the matters referred to in the will. 82 In Lecky Estate v. Lecky, 2011 ABQB 802 (Alta. Q.B.), Kent J, citing Decore v. Decore, 2009 ABQB 440 (Alta. Q.B.), described how the law on extrinsic evidence, “has now evolved to the point where armchair or context evidence is always admissible, when construing a will, and that extrinsic evidence of intent which is potentially probative, necessary and may reasonably be true, is also admissible” (para. 85). See Hanson v. Mercredi, 2014 ABCA 216 (Alta. C.A.), at para. 9.

b) January 28, 1998 Document 83 The Applicant and Respondent agree that the photocopy of the document dated January 28, 1998, meets the requirements of a valid will. The document is signed by the Deceased and is entirely in her handwriting. Further, the wording of the document is sufficient to demonstrate a deliberate, fixed and final intention. 84 However, the making of another will revokes the former will (Wills Act, s. 16(b)). Even in the absence of an express revocation clause, where a subsequent will disposes of, or shows an intention to dispose of, all of the testator’s property, the Court may infer that the testator has impliedly 84 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

revoked the whole of the first will (Bates v. Oryshchuk, 2009 ABQB 688 (Alta. Q.B.) at para 23). 85 Following the theft of the Deceased’s purse in the fall of 2008, she believed she was without a will and was urged by family members and friends to prepare a new will. The Applicant contends that the subsequent documents, dated December 2, 2009 and August 13, 2011, together constitute a valid holographic will and, as such, operate to revoke the will dated January 28, 1998. The Respondent, on the other hand, says that the August 13, 2011 document alone is a valid holographic will. 86 While the testamentary effect and validity of the document dated De- cember 2, 2009 is in dispute, the parties agree that the Deceased created a valid holographic will following the theft of her January 28, 1998 will. 87 Accordingly, I find that the holographic will dated January 28, 1998 was revoked by the making of a subsequent holographic will disposing of the property in the estate.

c) December 2, 2009 Document 88 There is disagreement whether the December 2, 2009 constitutes a valid testamentary instrument and whether the purported gift of the parcel of land contained in the document expresses a valid testamentary intent. The parties do, however, agree that the December 2, 2009 document is in the handwriting of the Deceased. However, it lacks a written signature as is required for a holographic will under section 7 of the Wills Act. 89 The Applicant contends that the December 2, 2009 document and the August 13, 2011 document should be read together as a single testamentary instrument. As such, the Applicant says that there is no formal requirement that a holograph will be dated or that it be created all at one time or with one writing instrument. The sole requirement, satisfied in this case, is that the will be signed at the bottom (Wills Act, s. 7). The Applicant concedes that the December 2, 2009 document is not signed, but nevertheless asks the Court to validate a non-compliant will. 90 The Applicant concedes that the Court’s ability to validate a will or a non-compliant alteration under sections 37 and 38 of the WSA does not include the power to dispense with the requirements for signature: Woods v. Cannon, 2014 ABQB 614 (Alta. Q.B.) at para 18, 20). Section 39 of the WSA, on the other hand, permits the Court to rectify a will which a testator has failed to execute. 39(1) The Court may, on application, order that a will be rectified by adding or deleting characters, words or provisions specified by the Lakeman v. Bayne M. David Gates J. 85

Court if the Court is satisfied, on clear and convincing evidence, that the will does not reflect the testator’s intentions because of (a) an accidental slip, omission or misdescription, or (b) a misunderstanding of, or a failure to give effect to, the testator’s instructions by a person who prepared the will. (2) Subsection (1) applies to the omission of the testator’s signature only if the Court is satisfied on clear and convincing evidence that the testator (a) intended to sign the document but omitted to do so by pure mistake or inadvertence, and (b) intended to give effect to the writing in the document as the testator’s will. (3) An application under this section may not be made more than 6 months after the date the grant of probate or administration is issued, unless the Court orders an extension of that period. (4) The Court may order an extension of the period on any terms the Court considers just. 91 Since no one was even aware of the existence of the writings in the blue spiralled-coil notebook until just after the death of the Deceased, there is a lack of clear and convincing evidence to satisfy the Court that the Deceased intended to sign the document but omitted to do so by pure mistake or inadvertence. In the absence of any evidence to this effect, I find that the December 2, 2009, document standing alone does not constitutes a valid holographic will.

d) August 13, 2011 Document 92 The parties agree the August 13, 2011 document is in the handwriting of the Deceased and is signed and, as such, standing alone meets the formal requirements for a valid holographic will. The Applicant and Re- spondent disagree, however, whether the December 2, 2009 and the Au- gust 13, 2011 are to be read together as a single document. 93 The foundation of the Respondent’s position is the contention that the documents may only be read together if they satisfy the requirements for incorporation by reference. The Respondent argues that the August 13, 2011 document does not refer explicitly to the December 2, 2009 document, and therefore the requirements for incorporation are not satisfied: Garnett Estate v. Garnett Estate, 2013 BCSC 1731 (B.C. S.C.) at para 65. 86 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

94 This argument presupposes that the writings are indeed separate documents. The doctrine of incorporation is the basis upon which “an unexe- cuted writing entirely separate and apart from the will may considered be part of a duly executed will” (Feeney’s Canadian Law of Wills (Mark- ham, Ont.: LexisNexis Canada), 4th ed., 2000 (loose-leaf), ch 6 at 6-8). I am of the view that the writings in the blue coil lined notebook are not “entirely separate and apart”. Rather they are together in the coil-bound notebook and set forth on consecutive pages. As such, I am satisfied that they should not be read separately but as a single document (see also, Dixon-Marsden Estate, Re, [1985] O.J. No. 1766, 21 E.T.R. 216 (Ont. Surr. Ct.), Coate Estate, Re, [1987] O.J. No. 1492, 26 E.T.R. 161 (Ont. Surr. Ct.), Facey v. Smith, [1997] O.J. No. 1858, 17 E.T.R. (2d) 72 (Ont. Gen. Div.), and Oliver Estate v. Reid (1994), 124 Nfld. & P.E.I.R. 294 (Nfld. C.A.) in Feeney’s, ch 6 at 6-10). The requirements for incorporation therefore do not apply. 95 The evidence of the Deceased’s actions prior to her death tend to support this view. The Deceased instructed the Respondent to locate her “will,” in the singular, in the blue coil ring binder. No reference was made to different dates or separate documents. The presence of the writings in the blue coil ring binder is itself strong contextual evidence that they should be read together. 96 The writings themselves evidence that they are to be read together as a single document. The December 2, 2009 writings and the August 13, 2011 writings are on consecutive pages and read coherently from start to finish as a single document. They can be read consistently with respect to the disposition of property. The writings are also entirely in the handwriting of the deceased and signed, meeting the formal requirements of a valid holographic will. 97 The extrinsic context to making of the writings in the blue coil ring binder also supports a finding that the December 2, 2009 document and the August 13, 2011 document are a single document. Following the theft of the 1998 holograph will in 2008, the deceased believed she was without a will. The Applicant, the Respondent, June Baker and Carol Kearns all either urged her to prepare a new will or spoke to her about the importance of having a will. I accept that she set about preparing a will and these efforts are reflected in her writings commencing on De- cember 2, 2009, and continuing on August 13, 2011. 98 From the time the Deceased expressed her concerns about the loss of the 1998 holograph will, the evidence suggests that she began to write Lakeman v. Bayne M. David Gates J. 87

her intentions in the notebook and continued to do so for a period of years nearly until the time of her death. The writings are in pencil, except for the bottom of the final page of the August 13, 2011 writing, which is written in ink. The pencil writings contain several erasures and inser- tions. The cursive in pencil is consistent between the December 2, 2009 writings and the August 13, 2011. The writing in ink is in a very un- steady hand, suggesting the document was not completed until she was ailing in her last days. The evidence of the Respondent is that the De- ceased, “wrote the last of her will when she was very ill ... [m]aybe even the Friday before she died.” It is difficult to separate her efforts in making the writings dated December 2, 2009 from the writings dated August 13, 2011. 99 The affixation of her signature in pen at the foot of the writings meets the requirements for the formalities of a signature under section 8 of the Wills Act, and expresses the culmination of her efforts over the last years of her life to set out her testamentary intentions in the notebook. 100 There is no formal requirement that the document be dated in order to constitute a valid holographic will (Feeney’s, at ch 4 p 4-26). Indeed, I am of the view that the dates tend to obscure rather than clarify the manner in which these writings should be interpreted. 101 I find that the writings dated December 2, 2009 and the August 13, 2011 contained in the blue spiralled-coil notebook should be read together to constitute a single holographic will.

e) Testamentary Intent 102 The parties disagree on the extent to which the gift of the parcel of land contained in the December 2, 2009 document is a valid testamentary instrument. The wording of the document, taken together with extrinsic evidence, must express a deliberate or fixed and final expression of intention as at the time of death (Bennett, at para. 5). 103 The Applicant relies on evidence of the words of the document to argue that the wording of the gift, “To my children I leave the land ‘NW1.4 2 40-327 W4’”, expresses a clear testamentary intention towards the four children. The instructions on the second page which further relate to the use of the land as a business, in which the “blood line related only” are to share in the proceeds, while precatory, relate to the use of the land by the siblings and are consistent with such a gift. 104 The Applicant contends that the Deceased, frustrated by her unsuccessful attempt to have her lawyer prepare a formal will bequeathing the 88 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

property on conditions, entrusted the Respondent through the 2002 joint tenancy arrangement, to carry out her wishes regarding the future use of the land. As such, those wishes found expression in the 2009 and 2011 documents. 105 The Respondent argues that the wording, particularly the words preceding the reference to the land in the 2009 document, “The land owns you. You don’t own the lands,” do not express a testamentary intention and are merely precatory. According to the Respondent, the wording was not intended to make a bequest of ownership to all of the four children and rather represented an expression of the Deceased’s musings and wistful ideas in her final years and confidence that the Respondent as owner would be able to preserve the land in its natural state. 106 The Respondent argues that the words relating to the named parcel in the December 2, 2009 do not express a testamentary intention because she intended the Respondent as owner to care for and protect the land. The others, if they chose to, and without responsibility, could enjoy the land, in the words of the Deceased, as “a quiet place to walk and renew your spirits; a place where the wildlife is safe.” 107 In support of this interpretation, the Respondent relies on the words in the August 13, 2011 document stating that the land was in the Respon- dent’s name and the fact that no obligations for work were specified. The later document also refers only to the “remaining assets,” suggesting that the land had already passed to the Respondent. 108 The Respondent also relied on the evidence of Carol Kearns, who rode horses on the land since 2006 and became a close friend of the De- ceased. The Respondent contends that the timing of the conversations between the Deceased and Ms. Kearns, between 2008 and 2011, are direct evidence of the Deceased’s intent at the time of making the two documents dated December 2, 2009, and August 13, 2011. In particular, in 2008, the Deceased told her that the Respondent would take care of the land. She understood this to mean that the Respondent would take care of the land as owner. Under the circumstances, the Respondent says that the meaning attributed by the Applicant is inconsistent with this evidence. 109 A further conversation took place with Ms. Kearns in 2010, where she reiterated that the Respondent “... will look after it, she’ll keep it the way I want it, because she loves the land too.” Ms. Kearns related a subsequent conversation in 2011 in which the Deceased expressed a concern that the Applicant would end up selling NW2; and that Jason never really Lakeman v. Bayne M. David Gates J. 89

cared about the land; that he would never live on the land; and that it did not matter to him. 110 It does not make sense that she would be referring to the possible actions of the Applicant and Jason in 2011, if she intended at the time she transferred the land into the joint names of herself and the Respon- dent that the Respondent would obtain full title to the property upon her death. In my view, this statement is consistent with an intention that the Respondent would hold the land for the benefit of her other siblings and not as the sole owner. 111 I also take into consideration the fact that the Deceased was involved in communications, and possibly negotiations, with the municipality regarding the possibility that the land could be preserved as a natural habitat. Additional evidence was also produced confirming that the De- ceased was serious about preserving the natural habitat on the land. A letter from a Mr. Fontana was produced to indicate that the Deceased had considered the property for a conservation easement in 2010. 112 The Respondent argued it was not a reasonable interpretation that her intention for the conservation of NW2 could be achieved except by the Respondent owning the land 113 Ms. Kearns also recalled during that same 2011 conversation that the Deceased “had willed the property to Peggy for safekeeping it the way it is.” While I have no reason to doubt Ms. Kearns’ recollection, it is also plausible that what the Deceased intended by this statement that legal title had been transferred to the Respondent to carry out her wishes with respect to the property. 114 I am of the view that the assurances given to Carol Kearns that the land is to be preserved and that the Respondent would act as a steward is also consistent with a testamentary gift to the siblings. Her discussions with Ms. Kearns between 2008 and 2011, rather than suggesting that the transfer of title into joint names fully disposed of the property, indicate that she continued to think about how best to distribute the property. It does not make sense that she would be referring to the possible actions of the Applicant and Jason in 2011, if she intended at the time she transferred the land into the joint names that the Respondent would obtain full title to the property upon her death. 115 On reviewing the evidence, it becomes apparent that the assurances given to Carol Kearns that NW2 is to be preserved and that the Respon- dent would act as a steward is also consistent with a testamentary gift to the siblings. 90 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

116 I am satisfied that the writings contained in the blue spiralled-coil notebook were intended by the Deceased to be testamentary in nature. Prior to her death, she communicated to the Respondent that the writings contained in the notebook were her “will.” The fact that she purported to deal with the entirety of her estate, in my view, creates a strong inference that she intended this document to be testamentary in nature. 117 These were not the musings or wistful ideas of a woman in her last days but rather an expression of her firm intentions with respect to her estate that took shape over a number of years. 118 When the Deceased went to see her counsel, Alan Sully, in 2002, she wanted to make a will leaving the land to three of her children, not including the Applicant, as joint tenants. Moreover, according to Mr. Sully, the Deceased wanted to impose conditions affecting the manner in which her three children would hold the property following her death. Mr. Sully’s evidence was that he refused to draft a will that included such conditions and, indeed told the Deceased that she was trying to control things from the grave. The Deceased told Mr. Sully that she would look after things herself and was never subsequently called on him to prepare a will. 119 The circumstances surrounding the transfer of title into joint names tends to support the inference that the Deceased intended for the blue spiralled-coil notebook to have testamentary effect. The fact that she initially contemplated placing the title to the land in the joint names of the Respondent, Michelle and Jason is consistent with the 1998 holograph will. It was only later after the theft of the 1998 holographic will that she set about writing the contents of the blue spiralled-coil notebook that her intentions changed with respect to gifting the estate to all four of the children. After Mr. Sully refused to prepare the will in the manner that she requested, I am satisfied that the transfer title into joint names was done with the intention of having the Respondent to carry out her wishes with respect to the land in a similar manner that she had initially requested of her lawyer. 120 The Deceased was a fiercely independent individual who possessed a passion for the land bordering on an obsession. I note in this regard that, in essence, she traded the children’s right to receive child support from their father at the time of separation in return for the transfer of his interest in the land. Her independent mindedness can be seen in the fact that she prepared the 1998 holographic will and the writings in the notebook without the benefit of legal assistance and without either the knowledge Lakeman v. Bayne M. David Gates J. 91

or assistance of her children. This is clear from the statement contained at the outset of the revoked 1998 holographic will and in the December 2, 2009 document that she intended to have her wishes carried out without legal and accounting direction. 121 In my view, the evidence is more consistent with an intention that the Respondent would hold the land for the benefit of her other siblings rather than as the sole owner.

f) Conclusion 122 I conclude that, on balance, the December 2, 2009 and August 13, 2011 documents, when read together, meet the requirements of formal validity and express a deliberate and fixed or final expression of intention with respect to the assets of the estate, including the disposition of land.

2) Presumption of Resulting Trust/Presumption of Advancement — The Law 123 In Pecore v. Pecore, 2007 SCC 17, [2007] 1 S.C.R. 795 (S.C.C.), Rothstein J for the majority of the Supreme Court of Canada described the common law approach to ascertaining the intentions of a deceased where there is a gratuitous transfer of a joint interest in property to an adult child. Pecore confirms that the presumptions of advancement and the presumption of resulting trust “continue to have a role to play in disputes over gratuitous transfers” (at paras 19-23). 124 The presumption of resulting trust was described as follows in Pecore: 24 The presumption of resulting trust is a rebuttable presumption of law and general rule that applies to gratuitous transfers. When a transfer is challenged, the presumption allocates the legal burden of proof. Thus, where a transfer is made for no consideration, the onus is placed on the transferee to demonstrate that a gift was intended: see Waters’ Law of Trusts, at p. 375, and E. E. Gillese and M. Milczynski, The Law of Trusts (2nd ed. 2005), at p. 110. This is so because equity presumes bargains, not gifts. 25 The presumption of resulting trust therefore alters the general practice that a plaintiff (who would be the party challenging the transfer in these cases) bears the legal burden in a civil case. Rather, the onus is on the transferee to rebut the presumption of a resulting trust. 92 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

26 In cases where the transferor is deceased and the dispute is between the transferee and a third party, the presumption of resulting trust has an additional justification. In such cases, it is the transferee who is better placed to bring evidence about the circumstances of the transfer. 125 The presumption of advancement, by contrast, will arise “depending on the nature of the relationship between the transferor and the transferee” (Pecore, at para 27). Historically, the presumption of advancement applied in two situations: first, where the transferor was a husband and the transferee his wife, and second where the transferor is the father and transferee his child (Pecore, at para 28). 126 The decision in Pecore did two things. First, it confirmed that the presumption of advancement applies equally to gifts made by both fa- thers and mothers gifts to their children (Pecore, at para 33). Secondly, it found that the presumption no longer applied between parents and adult independent children (Pecore, at para 36). The court may consider the quality of the relationship between the transferor and the transferee to determine whether the presumption of resulting trust has been rebutted (Pecore, at para 37). 127 Where the assets are placed into joint names, the “rights of survivorship, both legal and equitable, vest when the joint account is opened and the gift of those rights is therefore inter vivos in nature” (Pecore, at para 48). The presumption of resulting trust in those circumstances means that it will fall to the surviving joint account holder to prove that the transferor intended to gift the right of survivorship. Otherwise, the assets will be treated as part of the transferor’s estate to be distributed according to the transferor’s will (Pecore, at para 53). 128 Where a gratuitous transfer is being challenged, the trial judge must begin the inquiry by determining the proper presumption to apply and then weigh all the evidence relating to the actual intention of the transferor to determine whether the presumption has been rebutted (Pecore, at para 55). 129 The traditional rule is that evidence adduced to show the intention of the transferor at the time of the transfer “ought to be contemporaneous, or nearly so,” to the transaction. However, in Pecore, the Court held: 56 Whether evidence subsequent to a transfer is admissible has often been a question of whether it complies with the Viscount Simonds’ Lakeman v. Bayne M. David Gates J. 93

rule in Shephard v. Cartwright,, [1955] A.C. 431 (H.L.), at p. 445, citing Snell’s Principles of Equity (24th ed. 1954), at p. 153: The acts and declarations of the parties before or at the time of the purchase, [or of the transfer] or so immediately after it as to constitute a part of the transaction, are admissible in evidence either for or against the party who did the act or made the declaration .... But subsequent declarations are admissible as evidence only against the party who made them .... The reason that subsequent acts and declarations have been viewed with mistrust by courts is because a transferor could have changed his or her mind subsequent to the transfer and because donors are not allowed to retract gifts. As noted by Huband J.A. in Dreger, [1994] 5 ETR (2d) 250 (Man. CA), at para. 33: “Self-serving statements after the event are too easily fabricated in order to bring about a desired result.” 57 Some courts, however, have departed from the restrictive — and somewhat abstruse — rule in Shephard v. Cartwright. In Neazor v. Hoyle (1962), 32 D.L.R. (2d) 131 (Alta. S.C., App. Div.), for example, a brother transferred land to his sister eight years before he died and the trial judge considered the conduct of the parties during the years after the transfer to see whether they treated the land as belonging beneficially to the brother or the sister.... 130 Evidence of intention that arises subsequent to a transfer should not automatically be excluded if it does not comply with the Shephard v. Cartwright [(1954), [1955] A.C. 431 (U.K. H.L.)]; McDermid v. McDer- mid, 2011 BCSC 952 (B.C. S.C.) rule. Such evidence must be relevant to the intention of the transferor at the time of the transfer. The trial judge must assess the reliability of this evidence and determine what weight it should be given, guarding against evidence that is self-serving or that tends to reflect a change in intention (Pecore, at para 59).

a) Analysis 131 The Respondent argues that the court need not resort to the presumption of resulting trust to settle the issue of the current ownership of the land as the work provided by the Respondent throughout her life was adequate consideration for the transfer into joint title. 132 The Respondent’s argument is that she took on significant responsibilities relating to the property from the time she was fifteen and taking care of her younger siblings while maintaining the farm with the De- 94 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

ceased. The Deceased continued to rely on the Respondent over the years, including her assistance selling the dairy herd and the milk quota in 1999. The Respondent argues that the transfer was not gratuitous. 133 Neither party relies on the “Offer to Purchase or Interim Agreement” prepared by legal counsel in favour of the Respondent as evidence tend- ing to rebut the presumption. The specified consideration for the transfer was, however, nominal, in the amount of $1.00. 134 The Respondent submits that the unpaid work she undertook relative to the farm and her commitment to preserving the property should be given significant weight in determining the Deceased’s intentions respecting the transfer of the property. Her evidence was corroborated by Ms. Kearns, Ms. Baker and Michelle. This evidence speaks to whether there was consideration for the transfer and to the quality of their relationship, which might reasonably be expected to influence her intention at the time of transfer (McDermid v. McDermid, 2011 BCSC 952 (B.C. S.C.) at para 51). 135 The three other children also provided very detailed evidence regarding their difficult upbringing and the personal demands on their time, even as young children, to assist with the farm chores. While there is some conflict in the evidence relating to their respective contributions to the upkeep of the farming operations, I am satisfied that they all made very significant contributions over the years and, in some instances, under very challenging circumstances that involved both emotional and physical abuse. It was abundantly clear to me at the conclusion of the evidence that all four children are deeply scarred by their childhood ex- periences on the farm and their relationship with the Deceased. 136 Given the significant contributions of the other siblings, I am not satisfied that the efforts of the Respondent to assist over the years should be viewed as valuable consideration for her receiving a beneficial interest in the land or to infer that the transfer was based on a particularly close relationship. The reality is that the Deceased did not have a close or warm and loving relationship with any of her children. While undoubtedly the Deceased trusted the Respondent to provide advice and assistance in the general management of her affairs, the assistance and support she rendered does not, in my view, establish that the transfer was for consideration. In my view, the transfer was gratuitous. 137 The Respondent contends that at the time of transfer in 2002 the presumption of advancement still operated in favour of the independent adult child transferee on a gratuitous transfer of an interest in property Lakeman v. Bayne M. David Gates J. 95

from a parent. Relying on Petrowski v. Petrowski Estate, 2009 ABQB 196 (Alta. Q.B.), at para 423, the Respondent says that the advice given by Mr. Sully at the time would be that the presumption of advancement applied to a transfer of property to an adult independent child. 138 Pecore confirmed that the principal justification for the presumption of advancement, namely the parental obligation to support their children, should not apply to adult independent children. A number of courts had previously concluded the realities of modern Canadian society meant that it was common for an adult child to hold property in trust for the ageing parent to facilitate the free and efficient management of that parent’s affairs (Pecore, at para 34). Contemporary opinion accorded little weight to the presumption of advancement in relation to an independent, adult child (Waters’ Law of Trusts, 3rd ed., Toronto: Thomson Carswell, 2005 at p. 395 in Pecore at para 35, citing Cooper v. Cooper Estate (1999), 181 Sask. R. 63 (Sask. Q.B.), McLear v. McLear Estate (2000), 33 E.T.R. (2d) 272 (Ont. S.C.J.) and Mittelstadt Estate, Re (2002), 46 E.T.R. (2d) 227 (Alta. Q.B.)). 139 Even those decisions that found that the presumption of advancement applied to adult independent children did so on the basis of parental af- fection for their children (Pecore at para 37, citing Saylor v. Madsen Es- tate (2005), 261 D.L.R. (4th) 597 (Ont. C.A.), aff’d 2007 SCC 18 (S.C.C.), at para 21, Dagle v. Dagle (1990), 38 E.T.R. 164 (P.E.I. C.A.), Christmas Estate v. Tuck (1995), 10 E.T.R. (2d) 47 (Ont. Gen. Div.) and Cho Ki Yau Trust (Trustee of) v. Yau Estate (1999), 29 E.T.R. (2d) 204 (Ont. S.C.J.)). Courts may still consider evidence of the quality of the relationship between the transferor and the transferee to rebut the presumption of resulting trust (Pecore, at para.). 140 For these reasons, I do not consider persuasive the rationale in Pe- trowski that the presumption of advancement should be applied on the basis that Pecore affected a “significant change in the law” (at para 421). Accordingly, I find that the presumption of resulting trust applies. I would simply add that in Petrowski, Moen J found that even if the presumption of resulting trust applied, the evidence led “inevitably” to the conclusion that a gift was intended. 141 The Respondent argues that at the time of transfer, the 1998 holographic will provides an expression of the Deceased’s intentions with respect to the land. The 1998 document demonstrates, according to the Respondent, that the Deceased did not intend an equal distribution of either the land or the value of the heard or the quota. The Respondent ar- 96 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

gues that it is inconsistent to infer based on her earlier will that she intended for the property to be co-owned. The Respondent argues when Mr. Sully was unwilling to draft a will according to the Deceased’s wishes, a transfer of a right of survivorship was most consistent with her intentions in the 1998 holographic will. 142 In October 2001, the Deceased, accompanied by the Respondent visited the Deceased’s accountant, Mr. Kooyman, to discuss various methods of transferring the farmland. Mr. Kooyman testified from notes that he discussed the tax implications of the transfer, meaning that he would have discussed the consequences of the different methods of transferring either a bare title or a beneficial interest. There was no further meeting to discuss the transfer or clarify what the Deceased’s intentions were with respect to the property. Mr. Kooyman frankly acknowledged that he was unable to determine, based on his limited recollection, records and correspondence whether the Deceased intended a beneficial or a legal transfer of interest. 143 The Deceased did not report in her 2002 income tax return a disposition of the property following the land transfer. Likewise, the Respon- dent did not self-assess GST relative to the transfer in her 2002 income tax return, ostensibly on the advice of her bookkeeper. Both parties accept that the lack of capital gains or rollover in the Deceased’s taxes is not determinative of whether or not she intended to transfer her beneficial interest in the property, since she would have jeopardized her social benefits by doing so. 144 The expert report of Collin Simmons suggests that the tax treatment of the property in 2002 was consistent only with a transfer of bare legal title. On evidence given during cross-examination, he also acknowledged that those factors could also be consistent with a transfer of beneficial interest on death or an oversight of reporting. The evidence of Messrs. Kooyman and Simmons regarding the tax treatment of the transfer provides limited assistance in the assessment the Deceased’s intentions at the time of transfer. Accordingly, I give this evidence little weight. 145 The Deceased initially approached Mr. Sully, her solicitor, to prepare a will that would have placed the title into joint tenancy and divided the property between three of the four children. Mr. Sully refused to execute the will in the manner requested because of the difficulty in preparing the terms of the will based on the conditions she wished to attach to the transfer of land. The evidence of Mr. Sully was that the Deceased reacted Lakeman v. Bayne M. David Gates J. 97

to his refusal to prepare the will by stating that she would deal with it herself. 146 The Applicant argues the transfer of title into the joint name of the Respondent was an attempt to go around the restrictions in the making of her will described by her lawyer. The Deceased passed title to the Re- spondent, whom the Deceased believed would carry out her wishes. These wishes, according to the Applicant, were to distribute the lands according to initially, the 1998 holograph will, and ultimately, the writings in the blue spiralled-coil notebook. 147 The Respondent argues that a transfer of land into the joint names of the Respondent was the only one that the Deceased was prepared to make without conditions and the only one that Mr. Sully was willing to prepare. According to the Respondent, based on the instructions provided to him with respect to the will, Mr. Sully knew the Deceased was not prepared to transfer any interest to the Applicant with or without conditions, and that the Deceased was not prepared to transfer any interest to Michelle or Jason without conditions. The Deceased was, however, prepared to unconditionally transfer an interest in the lands to the Respon- dent. Further, relying on the January 28, 2002 letter from Mr. Kooyman, Mr. Sully believed that no tax would be payable on the transfer. Accord- ing to the Respondent, as an “experienced counsel,” Mr. Sully would have recognized that a transfer of the right of survivorship was the only option so as to give effect to the Deceased’s intention to give unconditional ownership of the land to the Respondent upon the Deceased’s death. 148 Mr. Sully has no recollection if he discussed with the Deceased whether she intended to transfer bare legal title or a beneficial interest. All he discussed was the difference between a joint tenancy and tenancy in common. It is entirely plausible such a transfer was done with the intent that the Respondent was to carry out the Deceased’s wishes following her death based on her instructions for the preparation of the will. As previously referenced, the Deceased told Mr. Sully that she would look after things herself when advised that he was not prepared to draft a will in accordance with her instructions. 149 Given his lack of recollection of the events surrounding the transfer, I am unwilling to draw the inference that Mr. Sully understood, let alone discussed, that the effect of the transfer was to gift a right of survivorship to the Respondent. I am also not satisfied that Mr. Sully ever spoke to the Deceased about the presumption of advancement or the presumption of 98 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

resulting trust. In my view, Mr. Sully’s evidence is not very helpful in terms of attempting to ascertain the intentions of the Deceased at the time of the land transfer. I am simply unable to draw the various inferences urged upon me by the Respondent given Mr. Sully’s incomplete recollection of what took place. 150 The Deceased was, by all accounts, a very stubborn and independent individual who had strong views and wanted to do things her way. This is perhaps best evidenced by the fact that when Mr. Sully was unwilling to prepare a will for her in accordance with her stated wishes, she told him she would look after things herself and never thereafter sought his assistance regarding a will. The Deceased did, ultimately, prepare her own will disposing of the land subject to “conditions” or, at the very least, an expression of her views as to how the land was to be used by her children. Under all of the circumstances, I am not prepared to assume that the Deceased entirely abandoned her desire to attach conditions regarding the use of the land upon her death after Mr. Sully refused to prepare a land transfer to three of her children that contained conditions, or to draft a will that also contained conditions. To acede to the Respon- dent’s argument requires a finding that the Deceased, over the space of a single meeting with her counsel, entirely abandoned her desire to attach conditions to the disposition of the land and settled on an unconditional transfer of the land to the Respondent that included a gift of the right of survivorship. In my view, this is contrary to the evidence. 151 The Respondent argues that the devise of the property in the will, even if found to be a valid testamentary disposition, is ineffective. Ac- cording to the Respondent, the gift of survivorship is a complete and perfect inter vivos gift that cannot be reversed (Pecore, at para 49, citing Reid, Re (1921), 64 D.L.R. 598 (Ont. C.A.), per Ferguson JA at 608). 152 The presumption of a resulting trust means that it will fall to the surviving joint interest holder to prove that the transferor intended to gift the right of survivorship. Otherwise, the assets will be treated as part of the transferor’s estate to be distributed according to the transferor’s will (Pecore, at para 53). 153 The Respondent has not met her onus to rebut the presumption of resulting trust and accordingly the claim to a right of survivorship by the Respondent to the land is defeated. The land is to be distributed according to the holograph will found in the blue spiralled-coil notebook, namely, that the land be distributed in equal shares to the four siblings. Lakeman v. Bayne M. David Gates J. 99

b) Conclusion 154 Based on the foregoing, I am not satisfied on a balance of probabilities that the Deceased intended to transfer a gift of the right of survivorship to the Respondent. Under all of the circumstances, it seems far more probable that after Mr. Sully refused to draft a will or a land transfer to three of the Deceased’s children on her terms, she transferred title into the joint names of herself and the Respondent with the intention of imposing her desired conditions on the future use of the land through a hand-written will. The Deceased believed that the Respondent loved and understood the land and would carry out the Deceased’s wishes regarding the preservation of the land in its natural state after the Deceased was gone. 155 It follows that I am not satisfied that the Respondent has established that the Deceased intended to gift the land to her. As such, the presumption of resulting trust has not been rebutted and the land forms part of the estate and subject to the terms of the Deceased’s will. The parties are granted leave to provide further oral or written submissions as regards the crafting of an appropriate order to implement the judgment. 156 Even if I am wrong in my conclusion that the presumption of resulting trust arises in this situation, I am satisfied that the evidence establishes that the Deceased did not intend to make a gift to the Respondent. As such, the presumption of advancement, if it applies, is rebutted.

3) What is the legal and beneficial effect of the transfer of GICs into the joint names of the Deceased and the Respondent? 157 The relevant considerations that apply specifically to joint bank accounts were described in Pecore. Rothstein J highlighted five types of evidence to be considered: (i) evidence subsequent to the transfer; (ii) bank documents; (iii) control and use of funds in the account; (iv) existence of a power of attorney; and (v) tax treatment of joint accounts (at paras 55-70, see, M.H. Ogilvie, “Joint Bank Accounts and Survivorship Clauses in the Supreme Court of Canada: Pecore v. Pecore and Saylor v. Madsen Estate,” (2008) 23 BFLR 421 at 425). 158 While banking documents do not necessarily set out the equitable interests in joint accounts, they may be detailed enough to provide strong evidence of the intentions of the transferor regarding how the balance of the account should be treated at death (Pecore at para 61, citing B. Ziff, Principles of Property Law, 4th ed., Toronto, ON: Thomson Carswell, 100 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

2006, at p. 332). The clearer the evidence of intention, the greater weight the documents should carry. 159 Evidence of control following transfer may further assist in determining the transferor’s intention. The transferor’s retention of an exclusive beneficial interest in the account while alive may support a finding of resulting trust, unless other evidence proves that a gift was intended to the transferee (Pecore at para 63). 160 Evidence of use and control may not be determinative, without more, for three reasons. First, whether the transferor makes management decisions with respect to the account is not necessarily determinative of beneficial interests. Second, the transferee, although legally entitled to a beneficial interest, may refrain from withdrawing funds in order to ensure there are sufficient funds to care for an aging or infirm parent. Third, the transfer of funds during the transferee’s lifetime does not necessarily indicate that the transferee would acquire the balance of the account on the transferor’s death through a right of survivorship (Pecore, at paras 64- 66). 161 The existence of a power of attorney suggests that the transferee ap- preciated the distinction between granting that power and gifting a right of survivorship. The setting up of a power of attorney, however, is not necessarily determinative (Pecore, at para 68). 162 Whether or not the transferor continues to pay taxes on the income derived from joint accounts should not be determinative of his or her intent absent other evidence. Where, in setting up a joint account, the transferor intends to transfer full legal and equitable title and the assets are intended to reflect a capital gain, taxes on capital gains become payable in that year. However, where the transferor’s intention is to gift the right of survivorship to the transferee but retain beneficial ownership of the assets during the life of the transferor, there is no disposition at the moment of the setting up the joint account (Pecore, at paras 69-70, citing s. 73 of the Income Tax Act, RSC 1985 c. 1 (5th Supp.)). 163 The Respondent advances two arguments in support of her position that the Deceased intended to gift the right of survivorship in the GICs. First, she says that the funds deposited into the GICs originated from the sale of the dairy quota and, as such, represent valuable consideration for her assistance in arranging the sale of the herd and the quota. Second, the Respondent maintains that her lack of knowledge of the existence of the GICs during the Deceased’s lifetime is more consistent with an intention Lakeman v. Bayne M. David Gates J. 101

to make a gift than to have any remaining funds simply flow to the estate upon the death of the Deceased. 164 The Applicant contends, on the other hand, that the Deceased placed the two GICs into joint names with the Respondent, though retaining exclusive control of the account, solely for the purposes of avoiding the expense and complexity of the administration of the estate upon her death. 165 In 1999, the Deceased purchased GICs in the joint names of herself and the Respondent. The Respondent was unaware until after her Mother’s death that she was named as a joint owner of the GICs. There were four other GICs, each in the amount of $10,000, all of which the Deceased held in her sole name. In addition, the Deceased set up a RRSP in the sole name of her son Jason in February 1991. A power of attorney over all of the other bank accounts was already granted in the Respon- dent’s name. 166 The Deceased received income from the GICs into her personal che- quing account and paid tax on the accounts. The Respondent did not receive any income, pay any taxes, or exercise any management or control over these accounts during the Deceased’s life. 167 Since the Deceased did not tell the Respondent that he had transferred the certificates into their joint names, it is difficult to ascertain the De- ceased’s intentions relative to the GICs. While the Applicant suggests, based on an e-mail between the Respondent and Jason, that the Respon- dent had some knowledge of the GICs, I am not prepared to draw that inference. 168 A letter from ATB created during this litigation confirms that the funds originated from the same of the dairy quota into an account in the joint names of the Deceased and the Respondent. This strongly suggests that the Deceased was cognizant of the efforts and assistance provided to her when she named the Respondent as a joint account holder. 169 The language in the banking documents is relied upon by the Respon- dent to indicate the Deceased’s awareness of the legal consequences of putting the GICs into a jointly held account. The language of the document reads as follows: 6 b. Where it is indicated on the face hereof that there is a right of survivorship, the Depositor or Depositors may redeem the investment and receive payment of the Funds upon proving to the satisfaction of Alberta Treasury Branches that one of the Depositors has died and payment by Alberta Treasury Branches to the surviving Depositor or 102 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

Depositors shall constitute a full and final discharge of the obligation of Alberta Treasury Branches hereunder (Exhibit #1, Binder #1, Tab #25, pp. 2-3). 170 The document refers to a right of survivorship, though it does not provide any detailed explanation in that regard. Nevertheless, given that the Deceased had previously set up a RRSP in the sole name of her son, and had a number of GICs in her sole name, I am prepared to infer, based on the differing treatment of these other accounts and the language of the banking documents, that the Deceased was aware of the consequence of opening a joint accout with the right of survivorship. The practicality of setting up an account in favour of a named beneficiary has long been recognized (Pecore, at para 52, citing Totten, Re, 179 N.Y. 112 (U.S. N.Y. Ct. App. 1904)). 171 The Respondent relies on Doucette v. Doucette Estate, 2009 BCCA 393 (B.C. C.A.), as support for the improbability that a transfer was made to assist the parent to handle finances in old age in a situation where an adult child is not told that the account was put in joint names (at paras 58-59). 172 Under the circumstances, I do not accept the Applicant’s contention that the Deceased’s purpose in creating joint ownership of the GICs may have been to assist in the administration of the estate according to the Deceased’s wishes. The unstated premise of Pecore is that the adult joint holder of the asset, has at the very least, knowledge of his or her status as a jointure to exercise management and control over the accounts during the Deceased’s lifetime (Doucette, at para 58). Doucette rejected the notion that the adult child was intended to hold the surviving joint interest in trust for the estate as nonsensical, since the account would ordinarily pass to the estate at the time of death if a survivor was not named (Dou- cette, at para 63). 173 I am satisfied on a balance of probabilities that the presumption in favour of a resulting trust has been rebutted in this instance. The transfer of the funds from the dairy quota into the GICs suggests that the De- ceased considered the creation of joint accounts with a right of survivorship as valuable consideration for the Respondent’s efforts in assisting her. The Deceased’s treatment of the other accounts while she kept the GICs secret from the Respondent suggests that she intended to gift these GICs to the Respondent based on a right of survivorship. Lakeman v. Bayne M. David Gates J. 103

4) Who will be the Personal Representative of the Estate? 174 The Court has both a statutory and an inherent power to remove exec- utors: Smith v. Lister, 2015 ABQB 420 (Alta. Q.B.) at para 19, citing McDonald Estate, Re, 2012 ABQB 704 (Alta. Q.B.); Figley v. Figley, 2012 SKCA 36 (Sask. C.A.) at para 31,); Administration of Estates Act, RSA 2000, c A-2, s 24 and now The Estate Administration Act, SA 2014, c E-12.5, s 15 (in force June 1, 2015); Trustee Act, RSA 2000, c T-8, s 16; Surrogate Rules, r 64; Judicature Act, RSA 2000, c J-2, ss 4, 5. 175 The standard of proof for the removal of the executor is a balance of probabilities. The Court should not act too readily to remove the executor and must exercise sensitivity. An executor should only be removed in a case of clear necessity and on the clearest of evidence that there is no other course to follow (Smith, at para 20, cites omitted). 176 While the fact that an executor is also a beneficiary is not in and of itself a disqualifying conflict of interest, a trustee must not be in a position of weighing personal interests against those interests of the beneficiaries. The trustee must be removed were a trustee cannot deal with the interests of the beneficiaries in an objective manner (Smith, at para 25, citing Figley, at para 34, and Rose v. Rose, [2006] O.J. No. 2483 (Ont. S.C.J.), at para 76). 177 Friction or hostility may provide grounds where it has affected the manner in which the trust has been administered. Some level of friction between an executor and one or more of the beneficiaries may be quite normal, and even anticipated. However, where the degree of hostility between the beneficiaries and the trustee renders administration of the trust difficult such that the executor is unable to exercise the duties in a completely impartial and objective manner, removal may be necessary regardless of fault. The question is whether it would be difficult for the trustee to act with impartiality, not whether, in fact, she would do so. The guiding concern is the welfare of the beneficiaries under the will (Smith at paras 26-27 citing Rose at paras 74-75). 178 The Applicant is seeking to be named personal representative of the estate, arguing that the Respondent is unsuitable based on temperament and a lack of accommodation with the siblings, all of whom are the other beneficiaries named under the will. 179 The Respondent maintains that she has acted responsibly and in the best interests of the estate throughout. 104 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

180 While there clearly has been conflict between the Respondent in her role as executor relative to at least some of her siblings, the other beneficiary named in the will, I am not satisfied that it is necessary to remove her from this office. Most, if not all, of the actual work required to settle this estate has been completed by this point in time. Some additional work may be required as a result of my decision regarding the land, but there is no reason to believe that the Respondent will not fulfill her required duties impartially and in the best interests of the estate.

Conclusion 181 Order accordingly. The parties may arrange to speak to costs. Application granted. R. v. Watts 105

[Indexed as: R. v. Watts] Her Majesty the Queen and David Watts, Accused Alberta Provincial Court Docket: Edmonton 130439011P1 2016 ABPC 57 F.K. MacDonald Prov. J. Heard: June 3, 2015; September 10, 2015 Judgment: March 1, 2016 Written reasons: April 8, 2016 Criminal law –––– Offences — Obscenity and pornography — Child pornography — Sentencing –––– From May 2010 to October 2012, accused used his computer to obtain images and videos of child sexual exploitation — During that time, he sent some of those images to another person and used file sharing software which allowed some of those images to be accessible to other people on internet — Accused pleaded guilty to charges of possessing and distributing child pornography — Accused was sentence to six months for possession and one year for distribution — Accused was in possession of 318 unique child pornography images and 99 unique child pornography videos almost uniformly of males — Accused was 39 years old, Aboriginal and born and raised on reserve — Accused was sexually abused by female babysitter when he was eight or nine years old — Accused did not have criminal record and since arrest had undertaken course of counseling — Considering relative depravity and violence of accused’s collection in relation to other child pornography cases, this case was at lower end of scale — Accused was otherwise of good character and had shown some insight into his problem — Accused had been waiting for some time for sentencing to conclude — Multitude of Gladue factors were applicable to sentencing — Accused was not large scale distributor of child pornography — Sections 163.1(3) and (4) of Criminal Code did not breach s. 9 of Charter. Cases considered by F.K. MacDonald Prov. J.: Krieger v. Law Society (Alberta) (2002), 2002 SCC 65, 2002 CarswellAlta 1133, 2002 CarswellAlta 1134, 4 C.R. (6th) 255, 217 D.L.R. (4th) 513, 168 C.C.C. (3d) 97, 43 Admin. L.R. (3d) 167, [2003] 1 W.W.R. 193, 293 N.R. 201, 7 Alta. L.R. (4th) 1, [2002] S.C.J. No. 45, [2002] 3 S.C.R. 372, REJB 2002-34458 (S.C.C.) — considered Kvello v. Miazga (2009), 2009 SCC 51, 2009 CarswellSask 717, 2009 Carswell- Sask 718, 69 C.C.L.T. (3d) 1, [2010] 1 W.W.R. 45, [2009] S.C.J. No. 51, 106 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

395 N.R. 115, 337 Sask. R. 260, 464 W.A.C. 260, (sub nom. Kvello Estate v. Miazga) 313 D.L.R. (4th) 330, (sub nom. Miazga v. Kvello Estate) [2009] 3 S.C.R. 339, 69 C.C.L.T. 1 (S.C.C.) — referred to R. v. Alcorn (2008), 2008 ONCJ 547, 2008 CarswellOnt 6490, [2008] O.J. No. 4386 (Ont. C.J.) — considered R. v. Anderson (2014), 2014 SCC 41, 2014 CSC 41, 2014 CarswellNfld 166, 2014 CarswellNfld 167, [2014] S.C.J. No. 41, 60 M.V.R. (6th) 1, 11 C.R. (7th) 1, 458 N.R. 1, 373 D.L.R. (4th) 577, 1088 A.P.R. 289, 350 Nfld. & P.E.I.R. 289, 311 C.C.C. (3d) 1, [2014] 3 C.N.L.R. 267, 310 C.R.R. (2d) 197, [2014] 2 S.C.R. 167 (S.C.C.) — followed R. v. Andrukonis (2012), 2012 ABCA 148, 2012 CarswellAlta 864, [2012] A.J. No. 481, 524 A.R. 306, 545 W.A.C. 306, 77 Alta. L.R. (5th) 168 (Alta. C.A.) — considered R. v. Arcand (2010), 2010 ABCA 363, 2010 CarswellAlta 2364, [2010] A.J. No. 1383, 264 C.C.C. (3d) 134, 40 Alta. L.R. (5th) 199, [2011] 7 W.W.R. 209, 83 C.R. (6th) 199, (sub nom. R. v. A. (J.L.M.)) 499 A.R. 1, (sub nom. R. v. A. (J.L.M.)) 514 W.A.C. 1 (Alta. C.A.) — referred to R. v. B. (P.J.) (2010), 2010 ABCA 49, 2010 CarswellAlta 236, 474 A.R. 161, 479 W.A.C. 161, 24 Alta. L.R. (5th) 4, [2010] A.J. No. 145 (Alta. C.A.) — considered R. v. B. (T.L.) (2007), 2007 ABCA 61, 2007 CarswellAlta 194, [2007] A.J. No. 169, 70 Alta. L.R. (4th) 1, 218 C.C.C. (3d) 11, 409 A.R. 40, 402 W.A.C. 40 (Alta. C.A.) — followed R. v. Beare (1987), [1989] 1 W.W.R. 97, [1988] 2 S.C.R. 387, 55 D.L.R. (4th) 481, 88 N.R. 205, 71 Sask. R. 1, 45 C.C.C. (3d) 57, 66 C.R. (3d) 97, 36 C.R.R. 90, [1987] S.C.J. No. 92, EYB 1987-67944, 1987 CarswellSask 674, 1987 CarswellSask 675 (S.C.C.) — considered R. v. Bishop (2007), 2007 ONCJ 442, 2007 CarswellOnt 6386, [2007] O.J. No. 3807 (Ont. C.J.) — considered R. v. Bock (2010), 2010 ONSC 3117, 2010 CarswellOnt 3681, [2010] O.J. No. 2277 (Ont. S.C.J.) — considered R. v. Dunphy (2003), 2003 NBQB 272, 2003 CarswellNB 351, (sub nom. R. v. A.J.D.) 264 N.B.R. (2d) 390, (sub nom. R. v. A.J.D.) 691 A.P.R. 390, [2003] N.B.J. No. 297 (N.B. Q.B.) — considered R. v. Gardiner (2009), 2009 BCPC 358, 2009 CarswellBC 3318 (B.C. Prov. Ct.) — considered R. v. Gauthier (2008), 2008 ABCA 39, 2008 CarswellAlta 172, 425 A.R. 267, 418 W.A.C. 267, [2008] A.J. No. 138 (Alta. C.A.) — considered R. v. Gladue (1999), [1999] S.C.J. No. 19, 1999 CarswellBC 778, 1999 Car- swellBC 779, 133 C.C.C. (3d) 385, 171 D.L.R. (4th) 385, [1999] 2 C.N.L.R. 252, 23 C.R. (5th) 197, 238 N.R. 1, [1999] 1 S.C.R. 688, 121 B.C.A.C. 161, 198 W.A.C. 161, [1999] A.C.S. No. 19 (S.C.C.) — followed R. v. Watts 107

R. v. Goltz (1991), 8 C.R. (4th) 82, 5 B.C.A.C. 161, 11 W.A.C. 161, [1991] 3 S.C.R. 485, 7 C.R.R. (2d) 1, 67 C.C.C. (3d) 481, 61 B.C.L.R. (2d) 145, 131 N.R. 1, 31 M.V.R. (2d) 137, 1991 CarswellBC 280, 1991 CarswellBC 924, [1991] S.C.J. No. 90, EYB 1991-67055 (S.C.C.) — considered R. v. Hammond (2009), 2009 ABCA 415, 2009 CarswellAlta 2013, 249 C.C.C. (3d) 340, 17 Alta. L.R. (5th) 238, 469 A.R. 317, 470 W.A.C. 317 (Alta. C.A.) — followed R. v. Hassell (2006), 2006 ABPC 314, 2006 CarswellAlta 1787, [2006] A.J. No. 1679, [2004] NZCA 450 (Alta. Prov. Ct.) — considered R. v. Ipeelee (2012), 2012 SCC 13, 2012 CarswellOnt 4375, 2012 CarswellOnt 4376, 91 C.R. (6th) 1, 280 C.C.C. (3d) 265, [2012] 2 C.N.L.R. 218, 428 N.R. 1, 288 O.A.C. 224, [2012] S.C.J. No. 13, 318 B.C.A.C. 1, [2012] 1 S.C.R. 433, 541 W.A.C. 1, 113 O.R. (3d) 320 (note) (S.C.C.) — followed R. v. Jiggins (2003), 2003 ABPC 75, 2003 CarswellAlta 510, 338 A.R. 153, [2003] A.J. No. 462 (Alta. Prov. Ct.) — considered R. v. Jordan (2002), 2002 ABPC 114, 2002 CarswellAlta 1102, [2002] A.J. No. 1096, 325 A.R. 112 (Alta. Prov. Ct.) — considered R. v. Konechny (1983), [1984] 2 W.W.R. 481, 6 D.L.R. (4th) 350, 10 C.C.C. (3d) 233, 25 M.V.R. 132, 38 C.R. (3d) 69, 1983 CarswellBC 700 (B.C. C.A.) — considered R. v. Konechny (1984), 25 M.V.R. 132n, 55 N.R. 156A, 1984 CarswellBC 922 (S.C.C.) — referred to R. v. Kozun (2007), 2007 MBPC 7, 2007 CarswellMan 65, 211 Man. R. (2d) 213, [2007] M.J. No. 55 (Man. Prov. Ct.) — considered R. v. Kwok (2007), 2007 CarswellOnt 671, [2007] O.J. No. 457 (Ont. S.C.J.) — followed R. v. Ladouceur (1987), 59 O.R. (2d) 688, 41 D.L.R. (4th) 682, 20 O.A.C. 1, 35 C.C.C. (3d) 240, 57 C.R. (3d) 45, 46 M.V.R. 1, 1987 CarswellOnt 91, [1987] O.J. No. 333 (Ont. C.A.) — considered R. v. Larocque (2004), 2004 ABPC 114, 2004 CarswellAlta 889, [2004] A.J. No. 794, 366 A.R. 139 (Alta. Prov. Ct.) — considered R. v. Lazore (2008), 2008 ONCJ 578, 2008 CarswellOnt 6630, [2008] O.J. No. 4545 (Ont. C.J.) — considered R. v. Lonegren (2009), 2009 BCSC 1678, 2009 CarswellBC 3291, 250 C.C.C. (3d) 377, [2009] B.C.J. No. 2434 (B.C. S.C. [In Chambers]) — considered R. v. McArthur (2012), 2012 ABPC 217, 2012 CarswellAlta 1309, [2012] A.J. No. 800 (Alta. Prov. Ct.) — considered R. v. Morrisey (2000), 2000 SCC 39, 2000 CarswellNS 255, 2000 CarswellNS 256, [2000] S.C.J. No. 39, 36 C.R. (5th) 85, 148 C.C.C. (3d) 1, 191 D.L.R. (4th) 86, 259 N.R. 95, 77 C.R.R. (2d) 259, [2000] 2 S.C.R. 90, 187 N.S.R. (2d) 1, 585 A.P.R. 1, REJB 2000-20235 (S.C.C.) — referred to R. v. Nixon (2011), 2011 SCC 34, 2011 CarswellAlta 988, 2011 CarswellAlta 989, [2011] S.C.J. No. 34, 41 Alta. L.R. (5th) 221, [2011] 7 W.W.R. 429, 13 108 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

M.V.R. (6th) 1, 417 N.R. 274, 85 C.R. (6th) 1, 271 C.C.C. (3d) 36, 502 A.R. 18, 517 W.A.C. 18, 335 D.L.R. (4th) 565, 237 C.R.R. (2d) 333, [2011] 2 S.C.R. 566 (S.C.C.) — referred to R. v. North (2002), 2002 ABCA 134, 2002 CarswellAlta 734, [2002] 9 W.W.R. 277, 165 C.C.C. (3d) 393, [2002] A.J. No. 696, 303 A.R. 321, 273 W.A.C. 321, 3 Alta. L.R. (4th) 290 (Alta. C.A.) — considered R. v. Nur (2013), 2013 ONCA 677, 2013 CarswellOnt 15898, [2013] O.J. No. 5120, 5 C.R. (7th) 292, 117 O.R. (3d) 401, 311 O.A.C. 244, 303 C.C.C. (3d) 474, 296 C.R.R. (2d) 21 (Ont. C.A.) — considered R. v. Nur (2015), 2015 SCC 15, 2015 CSC 15, 2015 CarswellOnt 5038, 2015 CarswellOnt 5039, [2015] S.C.J. No. 15, [2015] A.C.S. No. 15, 469 N.R. 1, 18 C.R. (7th) 227, 322 C.C.C. (3d) 149, 385 D.L.R. (4th) 1, 332 O.A.C. 208, [2015] 1 S.C.R. 773, 332 C.R.R. (2d) 128 (S.C.C.) — followed R. v. Pohl (April 6, 2011), Doc. Edmonton 091261891P1 (Alta. Prov. Ct.) — considered R. v. Proulx (2000), 2000 SCC 5, 2000 CarswellMan 32, 2000 CarswellMan 33, [2000] S.C.J. No. 6, 140 C.C.C. (3d) 449, 30 C.R. (5th) 1, 182 D.L.R. (4th) 1, 249 N.R. 201, [2000] 4 W.W.R. 21, 49 M.V.R. (3d) 163, [2000] 1 S.C.R. 61, 142 Man. R. (2d) 161, 212 W.A.C. 161, [2000] A.C.S. No. 6 (S.C.C.) — considered R. v. Schultz (2008), 2008 ABQB 679, 2008 CarswellAlta 1768, 100 Alta. L.R. (4th) 70, 239 C.C.C. (3d) 535, [2009] 6 W.W.R. 316, 450 A.R. 37, 182 C.R.R. (2d) 55, [2008] A.J. No. 1264 (Alta. Q.B.) — considered R. v. Secreti (February 18, 2010), Doc. Calgary 081045460Q1 (Alta. Q.B.) — considered R. v. Sharpe (2001), 2001 SCC 2, 2001 CarswellBC 82, 2001 CarswellBC 83, [2001] S.C.J. No. 3, 194 D.L.R. (4th) 1, 150 C.C.C. (3d) 321, 39 C.R. (5th) 72, 264 N.R. 201, 146 B.C.A.C. 161, 239 W.A.C. 161, 88 B.C.L.R. (3d) 1, [2001] 6 W.W.R. 1, [2001] 1 S.C.R. 45, 86 C.R.R. (2d) 1, REJB 2001-22168 (S.C.C.) — considered R. v. Smith (2008), 2008 CarswellOnt 6783, [2008] O.J. No. 4558 (Ont. S.C.J.) — considered R. v. Smith (1987), [1987] 5 W.W.R. 1, [1987] 1 S.C.R. 1045, (sub nom. Smith v. R.) 40 D.L.R. (4th) 435, 75 N.R. 321, 15 B.C.L.R. (2d) 273, (sub nom. Smith v. R.) 34 C.C.C. (3d) 97, 58 C.R. (3d) 193, (sub nom. Smith v. R.) 31 C.R.R. 193, 1987 CarswellBC 198, 1987 CarswellBC 704, EYB 1987- 80054, [1987] S.C.J. No. 36 (S.C.C.) — referred to R. v. Trautman (2015), 2015 ABPC 281, 2015 CarswellAlta 2354, [2015] A.J. No. 1430 (Alta. Prov. Ct.) — considered R. v. Treleaven (2006), 2006 ABPC 99, 2006 CarswellAlta 646, 400 A.R. 201, [2006] A.J. No. 601 (Alta. Prov. Ct.) — considered R. v. Turcotte (2000), 2000 ABPC 189, 2000 CarswellAlta 1386, 279 A.R. 219, [2000] A.J. No. 1402 (Alta. Prov. Ct.) — considered R. v. Watts 109

R. v. Tylek (2006), 2006 ABPC 85, 2006 CarswellAlta 430, 392 A.R. 304, [2006] A.J. No. 391 (Alta. Prov. Ct.) — considered Statutes considered: Canadian Charter of Rights and Freedoms, Part I of the Constitution Act, 1982, being Schedule B to the Canada Act 1982 (U.K.), 1982, c. 11 s. 7 — considered s. 9 — considered s. 12 — considered s. 15 — considered Criminal Code, R.S.C. 1985, c. C-46 Generally — referred to s. 151 — considered s. 161 — referred to s. 163.1 [en. 1993, c. 46, s. 2] — considered s. 163.1(1) “child pornography” (a) [en. 1993, c. 46, s. 2] — considered s. 163.1(1) [am. 2005, c. 32, s. 7(4)] — referred to s. 163.1(1)(c) [en. 2005, c. 32, s. 7(1)] — considered s. 163.1(1)(d) [en. 2005, c. 32, s. 7(1)] — considered s. 163.1(3) [en. 1993, c. 46, s. 2] — referred to s. 163.1(3) [rep. & sub. 2005, c. 32, s. 7(3)] — considered s. 163.1(4) [en. 1993, c. 46, s. 2] — referred to s. 164.2 [en. 2002, c. 13, s. 7] — referred to s. 487.051 [en. 1998, c. 37, s. 17] — referred to s. 490.012 [en. 2004, c. 10, s. 20] — referred to s. 490.013(2.1) [en. 2010, c. 17, s. 6] — referred to s. 718.01 [en. 2005, c. 32, s. 24] — considered s. 718.2 [en. 1995, c. 22, s. 6] — referred to s. 718.2(b) [en. 1995, c. 22, s. 6] — considered s. 718.2(e) [en. 1995, c. 22, s. 6] — considered s. 786 — considered Safe Streets and Communities Act, S.C. 2012, c. 1 s. 17(3) — considered Sex Offender Information Registration Act, S.C. 2004, c. 10 Generally — referred to Tougher Penalties for Child Predators Act, S.C. 2015, c. 23 s. 7 — considered

SENTENCING of accused on charges of possession and distribution of child pornography.

C. Krieger, for Crown S. King, for Accused 110 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

F.K. MacDonald Prov. J.: I. Overview 1 Mr. David Watts (“Mr. Watts” or “Accused” or “offender”) has plead guilty to the following two offences of the Criminal Code of Canada, R.S.C. 1985, c. C-46 (“Criminal Code”): Count 1: Between the 20th day of May, 2010, and the 18th day of October, 2012, both dates inclusive, at or near Edmonton, Al- berta, did possess child pornography, contrary to section 163.1(4) of the Criminal Code of Canada. Count 3: Between the 20th day of May, 2010, and the 18th day of October, 2012, both dates inclusive, at or near Edmonton, Al- berta, did transmit, make available, distribute, sell, import, export, or possess for the purpose of transmission, making available, distribution, sale or exportation, child pornography, contrary to section 163.1(3) of the Criminal Code of Canada. Mr. Krieger, for the Crown, submits that a fit and appropriate sentence is eighteen months imprisonment. Mr. King, counsel for the Accused, submits that a sentence of eighteen months is grossly disproportionate for this offence and this offender. In this case, he submits, the mandatory minimum is grossly disproportionate. He submits that as such the section falls afoul of section 12 of the Canadian Charter of Rights and Free- doms, s. 2, Part I of the Constitution Act, 1982, being Schedule B to the Canada Act 1982 (UK), 1982, c. 11 (“Charter”). Mr. King submits that I should impose a non-custodial sentence upon Mr. Watts. In the alternative, he submits that the reasonably foreseeable application of the sections would impose cruel and unusual punishment on other (hypothetical) offenders. As such, Defence counsel argues that even if I do not find that the section imposes a grossly disproportionate punishment on Mr. Watts that I should nonetheless find that the sections breach s. 12 of the Charter. 2 Crown has proceeded by indictment. By virtue of the many amendments which have been made to s. 163.1 of the Criminal Code, the minimum punishment for a distribution offence under s. 163.1(3) is one year. It has been so since An Act to amend the Criminal Code (protection of children and other vulnerable persons) and the Canada Evidence Act, S.C. 2005, c. 32, s. 7(3) came into force November 1, 2005. The minimum punishment for a possession offence under s. 163.1(4) was increased on the same date to forty-five days (S.C. 2005, c. 32, s. 7(4)). Section 163.1(4) has been amended again by the Safe Streets and Com- R. v. Watts F.K. MacDonald Prov. J. 111

munities Act, S.C. 2012, c. 1, s. 17(3), in force August 9, 2012. The minimum penalty was raised to six months. 3 In response to Mr. King’s latter argument, the Crown responds that this same question and the same hypotheticals have been addressed by Madame Justice Topolniski in her decision, R. v. Schultz, 2008 ABQB 679 (Alta. Q.B.) (“Schultz”). The Crown submits that decision is binding upon me, and forecloses the second stage of the s. 12 analysis. 4 Mr. King also argues that the imposition of a mandatory minimum sentence infringes Mr. Watts’ right to be free from arbitrary imprisonment, contrary to s. 9 of the Charter. More specifically, he argues that the delegation of the decision as to which mandatory minimum will apply, by virtue of the Crown’s election to proceed summarily or by indictment, renders the sentence arbitrary. Further, he argues that even if the exercise of the Crown’s discretion does not render the sentence arbitrary, that there will be circumstances where the Crown’s election will be based on considerations other than the appropriate sentence, and in that situation the sentence would be arbitrary. This, he submits, makes the sections arbitrary and in breach of s. 9 of the Charter.

II. Facts 5 Mr. Watts pled guilty. The facts underlying the guilty pleas are outlined in the Agreed Statement of Facts, Exhibit S-1. From May of 2010 until October 2012, Mr. Watts used his computer to obtain images and videos of child sexual exploitation. In that time he sent some of those images and videos to another person, his friend Mr. H.B. As well, he used file sharing software which allowed some of his collection to be accessible to other people on the internet. When Mr. Watts’ computer was seized on October 18, 2012, it contained the following: • 163 unique child pornography images; and • 97 unique child pornography videos. 6 Mr. Watts’ phone was also seized, and examined by the Edmonton Police Service (“EPS” or “police”). It contained the following: • 155 unique child pornography images; and • 2 unique child pornography videos. 7 In total, Mr. Watts was in possession of 318 unique child pornography images, and 99 unique child pornography videos. 8 The videos and pictures are almost uniformly of males. The Crown provided a representative sampling of the videos. 112 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

9 I will comment further on the content of the videos below when discussing the aggravating and mitigating factors of this case.

III. The Offender 10 The information detailed below is derived from the Gladue Report (Exhibit #9), the Pre-Sentence Report (Exhibit #11), and from Mr. King’s submissions in Court. 11 Mr. Watts is now thirty-nine years of age. His date of birth is Septem- ber 21, 1977. He was born and raised on the Tseshaht Reserve near Port Alberni, British Columbia. He is the oldest of three children. Both of his parents are alive, and both attended the Port Alberni Residential School. All four of Mr. Watts’ grandparents also attended the Port Alberni Resi- dential School. 12 Mr. Watts’ grandparents were fluent in Tseshaht, but did not pass on the language to their children. Mr. Watts’ parents do not speak Tseshaht, but can understand it. Mr. Watts’ can understand some of the language. Neither of the two preceding generations passed down any traditional knowledge or practices. Mr. Watts says that this has since changed. The Tseshaht language was just starting to be taught when he was in school. It is now heavily emphasized in school, as is Tseshaht culture. 13 Mr. Watts describes his community as dysfunctional: most of the people are on welfare, there is a lot of alcohol abuse, and “a huge amount of suicide.” Mr. Watts said that nobody knew how to parent, and nobody finished school. He said that the reservation school left people isolated, and sheltered. Consequently when they transitioned to the public schools they fared badly: “Everybody who left the reserve schools to attend public school, they didn’t make it.” Mr. Watts’ observations about his community are seconded by his cousin Harley Watts, who was also interviewed for the Gladue Report. Harley Watts says that there is a significant amount of addiction in the community — especially to methamphetamine since it is so cheap. Har- ley Watts says that suicide is common in the community, as are mental illnesses such as depression, anxiety, and post-traumatic stress disorder. Like David Watts, Harley Watts has observed that people in the community do not talk about anything, and prefer to hide things; David Watts has observed that people are secretive, and do not talk about problems. 14 Mr. Watts attended reserve schools until grade 7, when he went to a public school. He failed grade 7 twice. He does not have a High School Diploma. R. v. Watts F.K. MacDonald Prov. J. 113

15 Regarding his own upbringing, Mr. Watts said that there was violence against the children in his family — spanking and hitting — harder than it should have been. He noted that family units were not kept together in his community — and no one knew how to parent. He also said that he was subject to emotional abuse. 16 Mr. Watts says that his siblings started using alcohol, and experi- menting with drugs after Grade 6. His relationship with his siblings is distant. This pattern duplicates the family dysfunction of the previous generation. All of his parents’ siblings ended up in foster care; and their relationships with their siblings are distant. 17 Mr. Watts was sexually abused by a female babysitter when he was eight or nine years of age. The babysitter was a youth herself. The abuse took place a couple of times per month over a period of several years. 18 Mr. Watts came to Edmonton when he was twenty-seven years old. He obtained jobs with temp agencies, then at a firm called Convergys, and then at a call centre (Neiman Marcus) for five years. Since that time he has worked at Co-op taxi as a phone operator — for a period of seven years. 19 With regard to the offences which generated the present charges, Mr. Watts reiterated that he did not have a drug or alcohol problem until he came to Edmonton. In the time period before his arrest, he had used cocaine, speed, methamphetamine, and “MDMA”, more commonly called Ecstasy. Mr. Watts’ discovery of and use of child pornography coincided with his drug use on weekends. During this period Mr. Watts also engaged in high risk sexual behaviour. 20 Mr. Watts’ possession of child pornography came to light through his friend and roommate, Mr. H.B. Mr. Watts had communicated to H.B. that he was sexually interested in fourteen and fifteen year old males. He sent H.B. texts and pictures of such males. H.B. was assisting Mr. Watts with his computer when he came upon child pornography — underage males having sexual relations with one another, and sometimes with adult males — all images of child pornography. H.B. went to the police with this information, and Mr. Watts was charged. 21 Mr. Watts did not have a criminal record. Since his arrest, he has undertaken a course of counselling with Dr. George Pugh, a psycholo- gist. This counselling has included sessions to address the sexual abuse Mr. Watts suffered as a child. 114 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

22 As well, since his arrest, and over a period of six months Mr. Watts has weaned himself off of drugs: he advised that he has been clean since January 15, 2013.

IV. Case Law: Possession and Distribution of Child Pornography 23 The Supreme Court of Canada clearly delineated the harms that arise from the distribution and possession of child pornography in R. v. Sharpe, [2001] 1 S.C.R. 45 (S.C.C.) (“Sharpe”) at paragraphs 28 and 158: This brings us to the countervailing interest at stake in this appeal: society’s interest in protecting children from the evils associated with the possession of child pornography. Just as no one denies the importance of free expression, so no one denies that child pornography involves the exploitation of children. The links between possession of child pornography and harm to children are arguably more attenuated than are the links between the manufacture and distribution of child pornography and harm to children. However, possession of child pornography contributes to the market for child pornography, a market which in turn drives production involving the exploitation of children. Possession of child pornography may facilitate the seduction and grooming of victims and may break down inhibitions or incite potential offences. Some of these links are disputed and must be considered in greater detail in the course of the s. 1 justification analysis. The point at this stage is simply to describe the concerns that, according to the government, justify limiting free expression by banning the possession of child pornography. The very existence of child pornography, as it is defined by s. 163.1(1) of the Criminal Code, is inherently harmful to children and to society. This harm exists independently of dissemination or any risk of dissemination and flows directly from the existence of the pornographic representations, which on their own violate the dignity and equality rights of children. The harm of child pornography is inherent because degrading, dehumanizing, and objectifying depictions of children, by their very existence, undermine the Charter rights of children and other members of society. Child pornography eroticises the inferior social, economic, and sexual status of children. It preys on preexisting inequalities. 24 The Alberta Court of Appeal has described child pornography as a gross abuse of children, and a virulent pestilence: see R. v. Hammond, 2009 ABCA 415 (Alta. C.A.) (“Hammond”) at para. 9. Our Court of Ap- peal has repeatedly stated that denunciation and deterrence are the para- R. v. Watts F.K. MacDonald Prov. J. 115

mount sentencing principles in cases of possession of child pornography: see R. v. North, 2002 ABCA 134 (Alta. C.A.) (“North”). 25 In R. v. B. (T.L.), 2007 ABCA 61 (Alta. C.A.) (“B. (T.L.)”), Chief Justice Fraser emphasized that denunciation and deterrence are the primary sentencing principles in distribution cases as well. The maximum sentence for the distribution of child pornography under s. 163.1(3) of the Criminal Code is 10 years — double the penalty for the possession of child pornography. The sexual exploitation of children through child pornography and the use of the Internet to distribute it constitute a profound and present danger to children around the world. Canada, as part of the world community, must do its part in ensuring that appropriate sentences are imposed on those who choose to exploit children in this fashion. This offence is difficult to prosecute given the relative degree of anonymity offered through the use of the Internet. And the ease with which images of sexually exploited children can be transmitted through this instant, worldwide network adds to the gravity of the offence and the degree of victimization of the children. It takes only a click of a mouse for one child pornographer to spread graphic images of child sexual abuse internationally in seconds. Thus, the primary sentencing principles that apply in sentencing those convicted of distributing child pornography must be deterrence and denunciation. ... (Emphasis added) 26 Since 2005, Parliament has legislated a series of escalating mandatory minimum sentences for child pornography offences. 27 Even before the mandatory minimums, the sentences for child pornography offences rose as the extent of this problem became apparent. A number of courts have remarked that the initial response of the courts to these offences was relatively lenient. For example, see R. v. B. (P.J.), 2010 ABCA 49 (Alta. C.A.) at para. 10, where Justice Watson states: As recently reflected by the Supreme Court’s decision in R. v. M. (L.), [2008] 2 S.C.R. 163, and as expressed by the Ontario Court of Appeal in R. v. F. (D.G.), 2010 ONCA 27, at paras. 21 to 22, the initial sentencing response of the courts to the child pornography provisions was relatively lenient. As the courts and society as a whole are increasingly becoming aware of the extent and effects of such abuse of children, the level of sentencing should be responsive to the gravity of the crime thus revealed: ... 116 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

V. Assessing the Aggravating and Mitigating Factors 28 R. v. Kwok, [2007] O.J. No. 457 (Ont. S.C.J.) (“Kwok”) (at para. 7) helpfully lists the factors which a court should consider when sentencing a possession of child pornography case. ... Generally speaking, any of the following are considered to be aggravating factors: (i) a criminal record for similar or related offences; (ii) whether there was also production or distribution of the pornography; (iii) the size of the pornography collection; (iv) the nature of the collection (including the age of the children involved and the relative depravity and violence depicted); (v) the extent to which the offender is seen as a danger to children (including whether he is a diagnosed pedophile who has acted on his impulses in the past by assaulting children); and (vi) whether the offender has purchased child pornography thereby contributing to the sexual victimization of children for profit as opposed to merely collecting it by free downloads from the Internet. Generally recognized mitigating factors include: (i) the youthful age of the offender; (ii) the otherwise good character of the offender; (iii) the extent to which the offender has shown insight into his problem; (iv) whether he has demonstrated genuine remorse; (v) whether the offender is willing to submit to treatment and counseling or has already undertaken such treatment; (vi) the existence of a guilty plea; and (vii) the extent to which the offender has already suffered for his crime (for example, in his family, career or community).

VI. Aggravating and Mitigating Factors i. Aggravating Factors (per Kwok) 1. Size of the Collection 29 The Accused was in possession of 318 unique child pornography images, and 99 unique child pornography videos. This is not a small collection. The Accused downloaded these images from the internet.

2. Distribution 30 The Accused made the child pornography on his computer accessible to others through file sharing software. This activity occurred for almost one and one half years — from May of 2010 to October of 2012. At the time of the Accused’s arrest and the seizure of his computer the Accused was downloading eighteen videos. Exhibit #2 is a screen shot of the titles being downloaded — most if not all of the titles of the videos show that they are child pornography. As well, the Accused forwarded via text R. v. Watts F.K. MacDonald Prov. J. 117

some eight child pornography images of mid-teen boys to his friend, Mr. H.B.

3. The Nature of the Collection 31 As noted in para. 16 of the Agreed Statement of Facts most of the videos depict early teen boys engaged in sexual acts with one another, though there are some depicting boys having sexual relations with adult males. In his submissions, Mr. Krieger conceded that the vast majority of the images are of boys in their mid-teens (13 to 15). There are some scenes with pre-teen boys. Absent largely from this collection are any images of very young children, or scenes of violence. Contrast this collection with that found in R. v. Andrukonis, 2012 ABCA 148 (Alta. C.A.) (“Andrukonis”) (discussed further below) which depicted the sadistic sexual abuse of very young children — see Andrukonis at para. 19. 32 I qualify this observation somewhat since one of the sample videos that I was asked to watch by the Crown contained a short video clip of a close-up of sexual intercourse with a young female. I also note that another video — appeared to be a sexual assault (fellatio and anal intercourse simultaneously) of a younger male (age 10-12?) by two teenage males. The titles are listed in Exhibit #3; the videos themselves are in Exhibit #4. Considering the relative depravity, and violence of Mr. Watts’ collection in relation to other child pornography cases, this case is on the lower end of the scale: i.e. disgusting, as opposed to horrific.

4. Is the Accused a Danger to Children? 33 Exhibit #6 is a psychological assessment of Mr. Watts done by Dr. George Pugh (“Dr. Pugh”), and dated November 13, 2013. On page 4 of the report Dr. Pugh states the following: In general, Mr. Watts presents as a homosexual man whose primary interest is in adult male men of similar sexual orientation. He admits to having sexual relations with teenage boys when he was a youth and their ages were similar. He affirms that his primary interest is for youthful looking males. 34 Mr. Watts explained to Dr. Pugh that his exposure to child pornography began at a time when he was using cocaine heavily, and while he was looking at gay porn online. He began to watch, and then download child pornography. Initially, he did not understand why looking at child pornography was wrong. Dr. Pugh notes that Mr. Watts now understands that looking at child pornography is supportive of child exploitation. 118 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

35 Dr. Pugh suggests that Mr. Watts’ curiosity for child pornography may be related to his own unresolved history of child abuse. He notes that Mr. Watts does not present with any unusual or coercive sexual atti- tudes. It is Dr. Pugh’s conclusion that Mr. Watts does not present as a danger to the community or to children. Dr. Pugh noted in October of 2013, that Mr. Watts presented as an excellent candidate for therapy. 36 Exhibit #7 is a letter from Dr. Pugh, dated May 26, 2015, confirming that Mr. Watts followed up with him for therapy. That letter chronicles that Mr. Watts had eight therapy sessions with Dr. Pugh starting in No- vember of 2013, and continuing until March of 2015. Dr. Pugh concluded that Mr. Watts had made excellent progress in that therapy, which dealt in part with Mr. Watts’ sexual abuse as a child. Dr. Pugh notes, “in my opinion his urge to use pornography has been significantly reduced...I do not believe he is a danger to the community.” 37 In his submissions, the Crown pointed out that some of the conclusions which Dr. Pugh came to are at odds with the material Dr. Pugh had before him. Mr. Krieger pointed out that Dr. Pugh reviewed some of the police reports which indicated that Mr. Watts told a police Detective that he “Is attracted to boys 14-16 years old.” As well, para. 12 of the Agreed Statement of Facts stated that Mr. Watts told his friend H.B. that he is sexually interested in 14 to 15 year old boys. Mr. Krieger also pointed out that Dr. Pugh had before him a report from Cst. Sibbald in which that officer recorded that H.B., Mr. Watts’ boyfriend had told the officer that Mr. Watts had sexual intercourse with a 15 year old male, and that Mr. Watts had asked H.B. to join in with them. This is contradicted by Mr. Watts’ statement to Dr. Pugh that he had sexual relations with younger males (only) when he was himself that age. 38 I think the Crown’s criticisms are well founded. It is not clear to me how Dr. Pugh reconciled the information in the police reports with the information he received from Mr. Watts. The police reports indicate that Mr. Watts is at least expressing an active sexual interest in underage males. Mr. Watts’ statements to Dr. Pugh say otherwise. Complicating this situation is the fact that the information in the police reports are not aggravating facts which have been admitted by Mr. Watts. Mr. Krieger fairly pointed this out. Further, Dr. Pugh was not called to be cross-examined on his report. Mr. Watts did not testify on the sentencing to clarify, or affirm, or deny the information in the police reports. I have some questions about Dr. Pugh’s conclusions. R. v. Watts F.K. MacDonald Prov. J. 119

39 The result is that I accept the report, but the weight I give it is substantially reduced. 40 Consequently, I am not satisfied that Mr. Watts does not present some risk to underage males. His lack of insight at the time he was charged, and in his initial meeting with Dr. Pugh is a concern. Likewise, the length of time he possessed and accessed these materials, and the size of his collection also cause me concern. The fact that this interest arose at a time when Mr. Watts was abusing drugs, leads me to conclude that he is at risk of reoffending should he relapse into drug abuse. 41 I am heartened by Mr. Watts’ course of therapy with Dr. Pugh. If sober and pursuing a course of therapy, I am satisfied that Mr. Watts likely presents a low risk to children. If his circumstances should deterio- rate, and Mr. Watts begins using street drugs again, I am of the view that his risk of reoffending — and his potential danger to the public, and specifically younger teenage males — is likely elevated. These risks can be addressed by a lengthy period of probation with counselling conditions, and by an Order restricting Mr. Watts’ contact with underage males.

5. Statutory Aggravating Factors 42 Section 718.01 of the Criminal Code is plainly engaged here. It reads as follows: 718.01 Objectives — offences against children When a court imposes a sentence for an offence that involved the abuse of a person under the age of eighteen years, it shall give primary consideration to the objectives of denunciation and deterrence of such conduct. 43 See the remarks above from Sharpe, Hammond, and B. (T.L.).

ii. Mitigating Factors 1. Guilty Plea 44 Mr. Watts entered a guilty plea in this matter. This plea was entered before Judge Philp of this Court. Subsequently the pleas were re-entered before me. A guilty plea is traditionally accorded much weight in a sentencing as an acknowledgement of responsibility, and as an expression of remorse. I accept that Mr. Watts’ plea is indicative both of his remorse and acknowledgement of responsibility for his actions. 120 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

2. No Criminal Record 45 Mr. Watts has no criminal record. He is now thirty-nine years of age. He committed these offences when he was thirty-six to thirty-eight years of age. In short, he was a man of mature years and judgment when he committed these offences.

3. Prior Good Character 46 Mr. Watts is otherwise of good character. Notwithstanding a disad- vantaged upbringing, discussed above and below, he has managed to secure himself steady employment. He has been working for Co-op Taxi as a dispatcher for seven years.

4. Counselling and Insight 47 Mr. Watts has shown some insight into his problem. To his credit he has undertaken counselling to address some of the issues which underlie his offending behaviour. As well, I understand that he has remained ab- stinent since being charged. This behaviour, coupled with his guilty plea, satisfy me that Mr. Watts does have some insight into his offending.

5. Delay in the Court Proceedings 48 I also take note that Mr. Watts has been waiting for some time for this sentencing to conclude. Judge Philp accepted his guilty plea on Decem- ber 17, 2013. A Presentence Report and a Gladue Report were ordered, and the matter was scheduled for sentencing on April 14, 2014. The case was then adjourned a number of times, and most recently on June 3, 2015, the plea was re-entered before me because Judge Philp had left the Provincial Court. By the time this matter is concluded he will have been on release for almost three years, and subject to a fairly restrictive recognizance.

iii. Section 718.2(e): Gladue Factors 49 Section 718.2(e) reads as follows: 718.2 Other sentencing principles A court that imposes a sentence shall also take into consideration the following principles: (e) all available sanctions, other than imprisonment, that are reasonable in the circumstances and consistent with the harm done to victims or to the community should be considered for R. v. Watts F.K. MacDonald Prov. J. 121

all offenders, with particular attention to the circumstances of Aboriginal offenders. 50 The Supreme Court of Canada has twice commented at length on the application of this provision in sentencing Aboriginal offenders in R. v. Gladue, [1999] 1 S.C.R. 688 (S.C.C.) (“Gladue”), and again in R. v. Ipeelee, [2012] 1 S.C.R. 433 (S.C.C.) (“Ipeelee”). 51 In Gladue, the Supreme Court affirmed that Parliament’s intention in enacting s. 718.2(e) was remedial. Its purpose was to ameliorate the “serious problem of over-representation of aboriginal persons in Canadian prisons.” To this end, the provision is to encourage judges to have re- course to a restorative approach to sentencing. This provision must also be read in conjunction with the rest of the factors in that section, and in particular with the principle of restraint. 52 Section 718.2(e) requires a sentencing court to specifically consider: ... (a) The unique systemic or background factors which may have played a part in bringing the particular aboriginal offender before the courts; and (b) The types of sentencing procedures and sanctions which may be appropriate in the circumstances for the offender because of his or her particular aboriginal heritage or connection. ... 53 Case specific information on the offender is a necessity. 54 The Supreme Court notes that if there is no alternative to incarceration, that the length of the term must be carefully considered. The court notes that a jail term for an Aboriginal offender may in some circumstances be less that the term imposed on a non-Aboriginal offender for the same offence: see Gladue at para. 93. 55 In Ipeelee the court revisited the principles it expounded in Gladue, and addressed what the court observed to be “a fundamental misunderstanding and misapplication of both s. 718.2(e) and this court’s decision in Gladue.” The Supreme Court’s further guidance to sentencing courts was helpfully summarized by Professor Quigley in his annotation to R. v. Ipeelee in (2012), 91 C.R. (6th) 1 (S.C.C.): 1. Following the Gladue approach is mandatory in any case involving an Aboriginal offender and failure to do so both violates the proportionality principle and is reversible error. Gladue therefore applies to all offences, whether serious or not, and sentencing judges ought not to pay lip service to it by describing the offence as serious. This is an extremely important message since many courts have misinterpreted Gladue to suggest that the sentence for an Aboriginal offender should 122 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

necessarily be the same as for a non-Aboriginal where the offence is serious. 2. Judicial notice must be taken of the historical background that has contributed to the problem of disproportionate incarceration of Aboriginal peoples. 3. There is a duty on counsel to present information specific to the individual Aboriginal offender unless that offender has expressly waived consideration of the Gladue approach. 4. There need not be a causal link established between the systemic and background factors and the commission of the offence. It is sufficient if those factors suggest a link with the offender’s culpability or the sentencing objectives that ought to be paramount in that case. 5. There is nothing in section 718.2(e) or Gladue to prevent sentencing judges from considering background or systemic factors or alternative approaches to sentencing for non-Aborigi- nal offenders. 6. Sentencing is an individualized process and therefore the parity principle is not to be applied in a formalistic way and operates only to reduce sentence disparities that cannot be justified.

1. Gladue Materials 56 I have been provided with two reports to assist me in evaluating the Gladue factors in this case. The first is a Gladue Report authored by Brandie St. Martin and filed with this Court in February of 2015. That report provides me with specific information about Mr. Watts’ Aborigi- nal upbringing, background and heritage. It is an excellent report — the best of its kind that I have read in my three years on the bench. 57 The second is the Summary of the Final Report of the Truth and Rec- onciliation Commission of Canada: “Honouring the Truth, Reconciling for the Future” (hereafter “Honouring Truth”). The Summary details the history of the Canadian government’s policy of assimilation, which culminated in the residential school program. 58 The Summary thoroughly and movingly chronicles the history of the residential school program, and its disastrous effects on Aboriginal people, communities, and culture. More specifically the Summary chronicles how in an effort to destroy the social and political institutions of Aborigi- nal people: “families were disrupted to prevent the transmission of cultural values and identity from one generation to another” (“Honouring R. v. Watts F.K. MacDonald Prov. J. 123

Truth”, page 1). The Summary details how by law Aboriginal children were torn from their families, and compelled to attend residential schools. For children, life in these schools was lonely and alien. Buildings were poorly located, poorly built, and poorly maintained. The staff was limited in numbers, often poorly trained, and not adequately su- pervised. Many schools were poorly heated and poorly ventilated, and the diet was meagre and of poor quality. Discipline was harsh, and daily life was highly regimented. Aboriginal languages and cul- tures were denigrated and suppressed. The educational goals of the schools were limited and confused, and usually reflected a low regard for the intellectual capabilities of Aboriginal people. For the students, education and technical training too often gave way to the drudgery of doing the chores necessary to make the schools self-sus- taining. Child neglect was institutionalized, and the lack of supervision created situations where students were prey to sexual and physical abusers. (Honouring Truth, page 3) 59 “Honouring Truth” is the most recent articulation of the historical, cultural, and political forces that have caused Aboriginal people to be over represented in our prison system. It is clear from both Ipeelee and Gladue that I can, and should take notice of the information in this report. 60 There are a number of points of convergence between the Gladue Re- port and “Honouring Truth.” They are discussed briefly below: 1. The Port Alberni Residential School. It opened in 1893 and closed in 1973. It burned down in 1917 and was rebuilt in 1925 (Honour- ing Truth Appendix 2, page 355). The Gladue report notes that Watts’ parents David and Annie Watts both attended the Port Al- berni residential school until grade 7. Watts maternal grandparents Rosie and Allen Russ also attended the residential school as did his paternal grandparents, Jack and Lillian Watts (Gladue Report, page 10). 2. Abuse at the school. David Watt reports that his grandfather Allen Russ experienced physical abuse at the Residential school. Abuse was rife at the residential school and a full 48% of those eligible have made claims to the in the government claims process: see Honouring Truth p. 106. Mr. Watts was aware that there was sexual abuse at that school “Constantly, everywhere.” (Gladue Report page 10). Honouring Truth specific deal with abuse in the residential schools. Port Alberni was singled out for particular mention. 124 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

Arthur Plint was a supervisor at that school between 1948 and 1968. In 1995 he was sentenced to 11 years imprisonment. Honouring Truth page 107; see also the Gladue Report at page 11. 3. David Watts reported that his grandfather Jack Watts was experi- mented on in the Port Alberni Residential School. This is chroni- cled in the Gladue Report in pages 11 and 12. Specifically, children at that school were the control group in a Canadian government study on the effects of malnutrition and its remedy by doubling the amount of milk consumed. To establish a baseline the children were maintained on an inadequate diet for two years. This is corroborated by the passages in Honouring Truth which chronicle the constant underfunding of the school lead to an inadequate diet for the residents: see “Always hungry” pages 85 to 90. The result, unsurprisingly, was a higher mortality rate for children in residential schools — routinely double the Canadian norm between 1890 and 1950. See Honouring Truth pages 90 to 99. 4. David Watts reports that his grandparents did not pass on traditional knowledge and that only 5 percent of the community speak the language, Nuv-chah-nulth. See Honouring Truth, pages 80 to 84. This is consistent with the policies of the Canadian government in suppressing the use of aboriginal languages through the Residential school system. 61 In addition to the above specific points of convergence, there are a number of other points which to my mind can reasonably be found to be the sequel of this community’s experience of Residential Schools. It is not surprising that given the two previous generations were placed in Residential Schools that intergenerational relations suffered. As Mr. Watts noted in his discussion with the Gladue Report writer “Nobody knew how to parent.” 62 Mr. Watts advised the Gladue writer that he may have some relatives who are or were Fetal Alcohol Spectrum Disorder (“FASD”). As well, he reports that approximately two-thirds of his family have died by suicide. Mr. Watts’ cousin Harley Watts confirmed that there are a lot of addiction problems in the community — specifically with methamphetamine. Harley Watts reports that suicide is common, as are crimes such as sexual assault. Harley Watts describes a community with a significant amount of mental illness: Depression, Post-traumatic Stress Disorder, and Anxiety. R. v. Watts F.K. MacDonald Prov. J. 125

2. Consideration of Gladue Factors 63 Judge M.E. Turpel Lafond in [2000] 43 Criminal Law Quarterly 34, Sentencing within a Restorative Justice Paradigm: Procedural Implica- tions of R. v. Gladue, provides a useful checklist of factors to consider (at pages 40-41): A. Is this offender an Aboriginal person? “Aboriginal person” is defined according to s. 35 of the Constitution Act, 1982, as being In- dian, Metis (of mixed ancestry) or Inuit. • If the answer is yes, determine what community or band the defendant is from. • Does the defendant reside in a rural area, on a reserve or settlement land, or in an urban centre? B. What unique circumstances have played a part in bringing this offender before the courts? The sentencing judge must consider some of the following issues/factors and query counsel or unrepresented offenders. • has this offender been affected by substance abuse in the community? • has this offender been affected by poverty? • has this offender been affected by overt racism? • has this offender been affected by family or community breakdown? • has this offender been affected by unemployment, low income and a lack of employment opportunity? • has this offender been affected by dislocation from an Ab- original community, loneliness and community fragmentation? A pre-sentence or pre-disposition report might be of great benefit to the court in canvassing some of these issues. In order to sensibly ask these questions, it is helpful if counsel, or the judge as the case may be, understands the historical and societal context of these questions. For example, has a community been relocated? Has a significant proportion of the Aboriginal community moved to urban centres? Have many of the members of this community been affected by abuses at Residential Schools? What are the reasons for these developments? Many of these issues have been thoroughly studied by the Royal Commission on Aboriginal Peoples, the reports from which are a valuable educational resource for those unfamiliar with the broader context. 64 I will now consider the above in relation to Mr. Watts. 126 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

65 Mr. Watts is an Aboriginal person. He is a status member of the Tseshaht Reserve near Port Alberni, British Columbia. Mr. Watts’ community and family have been affected by substance abuse. Mr. Watts himself has struggled with addiction. It does not appear that Mr. Watts has been affected by poverty. Mr. Watts did tell the Pre-Sentence Report writer that in his school days he was subject to a type of segregation which he now perceives to be racially motivated. Mr. Watts has been affected by family and community breakdown. The information we have about drug use, assaults, and suicides on the Tseshaht Reserve paints a picture of a devastated community. As well, Mr. Watts himself was sexually abused by a babysitter when he was a child. 66 Mr. Watts is undereducated: he has only a grade 7 education. It is clear that his transition from the reserve school to public high school was unsuccessful, and that his family and community did not have the personal or other resources to assist him to succeed in school. Given his solid work record, I conclude that his lack of education has limited his work opportunities to low skills jobs — i.e. at a call centre, or as a dispatcher. 67 It is clear that the Residential School program was successful in alien- ating Mr. Watts’ family and community from the Tseshaht language and culture. 68 Mr. Watts has chosen to separate himself from his community. As he noted, there are no jobs or resources in his community. 69 It is clear that members of his community and family have been affected by the abuses in the Residential School system. 70 I conclude that there are a multitude of Gladue factors which are applicable to sentencing in this case.

iv. Section 718.2: Parity 1. Possession Cases 71 Section 718.2(b) states that “a sentence should be similar to sentences imposed on similar offenders for similar offences committed in similar circumstances.” 72 The case law has changed substantially in the last decade. This change is no doubt in response to the mandatory minimums legislated by R. v. Watts F.K. MacDonald Prov. J. 127

parliament and by courts across the country realizing that this offence was far more prevalent and serious than had been imagined. As recently reflected by the Supreme Court’s decision in R. v. M. (L.), 2008 SCC 31, [2008] 2 S.C.R. 163, and as expressed by the Ontario Court of Appeal in R. v. F. (D.G.), 2010 ONCA 27, at paras. 21 to 22, the initial sentencing response of the courts to the child pornography provisions was relatively lenient. As the courts and society as a whole are increasingly becoming aware of the extent and effects of such abuse of children, the level of sentencing should be responsive to the gravity of the crime thus revealed: see e.g. R. v. Innes, 2008 ABCA 129, 429 A.R. 164; F. (D.G.). R. v. B. (P.J.), 2010 ABCA 49 (Alta. C.A.) at para. 10. 73 I agree with the Crown’s submission that earlier sentencing cases are of little assistance. I will briefly discuss some of the cases which have been provided to me, and which I have considered in this sentencing. 74 R. v. Hammond, 2009 ABCA 415 (Alta. C.A.) (“Hammond”). Mr. Hammond, a sixty-one year old male with no criminal record pled guilty to accessing child pornography. He was found in possession of 456 images, and 106 videos. In the images teen and pre-teen age children were subject to sexual assaults by adult males. Mr. Hammond admitted to downloading this material for “a couple of years.” A psychological assessment opined that he had deviant sexual interests that were likely to be longstanding. In Provincial Court he received a sentence of forty-five days; and three years of probation. On appeal, the Court of Appeal raised the sentence to one year’s imprisonment. The court remarked as follows: 12 It follows from this that, in principle, a sentencing court that is dealing with a person who has, quite volitionally over a long period time, made recreational use of the products of actual child debasement and abuse must receive condign punishment. There is no indication in the record before us that a special reason for lenity exists. Parliament’s decision to impose a minimum prison term signals that, even in a sample case which is as minimal as can fit the crime definition, a prison term of forty-five days is mandatory. 75 R. v. Andrukonis, 2012 ABCA 148 (Alta. C.A.) (“Andrukonis”). Mr. Andrukonis plead guilty to possession of child pornography. He was found in possession of forty-two images and eighty-seven unique videos. Most of the videos showed the “explicit sexual exploitation of young children, including sadistic sexual abuse.” Andrukonis acknowledged having this material for a year to eighteen months. Andrukonis was forty years old and had no prior criminal record. He had himself suffered sex- 128 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

ual abuse when young, grew up in a chaotic household and was subjected to violence. The sentencing judge imposed a sentence of twelve months jail; and three years of probation. This was upheld on appeal. 76 R. v. Pohl [(April 6, 2011), Doc. Edmonton 091261891P1 (Alta. Prov. Ct.)] (Unreported decision, Action No.: 091261891P1 April 6,) per Henderson PCJ. Mr. Pohl pled guilty to possession of child pornography. He was found to have 584 images, and 7 videos. The content varied from very young children — as young as three, to preteen and teenage children posing or being subject to sexual assaults by adult males. Pohl was twenty-nine years old, and had no criminal record. He had been viewing the images for an extended period of time. Judge Henderson imposed a sentence of twelve months jail; and three years of probation. 77 R. v. Kwok, [2007] O.J. No. 457 (Ont. S.C.J.) (“Kwok”). Mr. Kwok pled guilty partway through trial. He was found in possession of 2000 images, and 60 videos. A significant portion of the collection depicted the rape of small children by adult males. Some of these children were under the age of five; some were babies. Many of the children were bound. The accused had spent many years collecting, and accessing child pornography. Kwok had no criminal record. The court found that Kwok had no insight, and that he was possibly a pedophile. He was sentenced to twelve months imprisonment; and three years of probation. 78 R. v. Gauthier, 2008 ABCA 39 (Alta. C.A.). Mr. Gauthier pled guilty to possession of child pornography. He was found in possession of 2000 images, and 100 movies. The majority of the images were of children age four to ten “engaged in every manner of sexual activity.” The accused had a dated and unrelated criminal record. He was forty-two years old, and employed. He received twelve months incarceration; followed by three years of probation. This sentence was upheld on appeal. 79 Defence counsel referred me to the following cases. 80 R. v. Lazore, [2008] O.J. No. 4545 (Ont. C.J.). Mr. Lazore was twenty-seven years old, and a first time offender who had amassed, over a period of ten years, a collection of 150 videos, and 15,000 still images of child pornography. Lazore, pled guilty, had a favourable PSR, and a psychological assessment which showed him to be a low risk for future “hands on” sexual offending. Lazore was Aboriginal. However the decision is silent on the impact, if any, that Gladue factors had on sentence. A jail sentence of six months; and three years of probation was imposed. 81 R. v. Turcotte, 2000 ABPC 189 (Alta. Prov. Ct.). Mr. Turcotte pled guilty to possession of 59 child pornography images. He was sentenced R. v. Watts F.K. MacDonald Prov. J. 129

to twelve months imprisonment to be served in the community — a CSO. I note that the collection in this case is much smaller than Mr. Watts’ and that this offence arose in 1999 — before the legislative changes discussed above. 82 R. v. North, 2002 ABCA 134 (Alta. C.A.). Mr. North pled guilty to possession of child pornography. He had 1900 to 2000 images, and 100 videos — including scenes of children being raped and beaten, and ex- periencing pain and suffering. In Provincial Court the accused was sentenced to a fine ($750), and two years of probation. On appeal, the Court of Appeal found that sentence to be demonstrably unfit, and sentenced the accused to an eighteen month CSO. This sentence is no longer available. 83 R. v. Jordan, 2002 ABPC 114 (Alta. Prov. Ct.). In this case, the fifty- six year old accused pled guilty to possession of child pornography: 13 images of two female children — ages twelve, and between eight and ten — having sexual relations with an adult male. The court explicitly found that the photos were not possessed for the purposes of sexual gratification. The accused was assessed and found not to be a risk to the community. Mr. Jordan was given a three month CSO. 84 R. v. Jiggins, 2003 ABPC 75 (Alta. Prov. Ct.). Mr. Jiggins pled guilty to possession of child pornography: 342 images. However, none of the images depicted violence or sexual intercourse. Jiggins was twenty-seven years old. He was assessed, and was not a pedophile. Jiggins was given a thirteen month CSO. 85 R. v. Tylek, 2006 ABPC 85 (Alta. Prov. Ct.). Mr. Tylek pled guilty to possessing child pornography. He was found to possess 850 images of child pornography. However, Mr. Tylek possibly suffered from a psychiatric disorder, and that the accused did not view the images for direct sexual gratification. Tylek was a low risk to reoffend. Judge Fradsham imposed a thirteen month CSO. This is a very different case than Mr. Watts’ case.

2. Distribution Cases 86 If possession of child pornography is bad, distribution of it is exponentially worse. 87 The Crown cited a number of cases to me. They are as follows. 88 R. v. McArthur, 2012 ABPC 217 (Alta. Prov. Ct.) (“McArthur”). Mr. McArthur was using a file sharing system called Gia Tribe. In doing so 130 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

he shared images and videos of child pornography with an undercover police officer. McArthur’s computer was found to have 991 images, and 67 videos. He did not take any active efforts to distribute child pornography. McArthur was a gay man, HIV positive, and as a result was suffering some difficulties with his health. He was forty-five years old and steadily employed. No risk assessment was before the court. Judge John- son imposed a sixteen month sentence for the distribution; and twelve months concurrent for the possession. 89 R. v. Secreti [(February 18, 2010), Doc. Calgary 081045460Q1 (Alta. Q.B.)] (Unreported decision, Action No.: 081045460Q1 February 18, 2010,; per Hawco QBJ) (“Secreti”). Mr. Secreti possessed a computer which contained 5,316 images of child pornography, and 49 videos. Secreti forwarded 57 pictures to an undercover police officer. The images were of very young female children being subject to all manner of sexual assaults. Justice Hawco described the pictures as “disturbing, degrading and abusive.” He noted that Mr. Secreti had been doing this activity for three years. Justice Hawco rejected a joint submission for two years jail. Justice Hawco noted a number of aggravating factors: i.e. the ages of the children, the activities depicted the length of time of the offences. He specifically noted that the proposed sentence would have been within the range before the one year minimum was enacted in 2005, and under the prior more lenient sentencing range. He sentenced Secreti to three years imprisonment. 90 R. v. Larocque, 2004 ABPC 114 (Alta. Prov. Ct.). Mr. Larocque was the “super operator” of a chatroom which circulated child pornography to members in ten countries. Larocque had greatest control over the membership in the chatroom. The police seized 10,000 images, and 250 videos from Larocque’s computer. The guilty plea had particular merit as the accused cooperated with the police in the prosecution of another chatroom member, and the trial would have required bringing in witnesses from Germany. Larocque was assessed as a low risk to reoffend. Laroc- que was sentenced to eighteen months jail; and three years of probation. Although available at the time, Judge Chrumka explicitly rejected a CSO. Citing R. v. Proulx, [2000] S.C.J. No. 6 (S.C.C.) Judge Chrumka said “Incarceration, in my view, is the only way to express society’s con- demnation of Mr. Larocque’s conduct” (at paras. 31 and 32). 91 Parenthetically I note that given the 2005 amendments, and the infla- tionary floor effect of the one year minimum that, if sentenced now, Mr. Larocque’s sentence would likely be higher than eighteen months. R. v. Watts F.K. MacDonald Prov. J. 131

92 R. v. Treleaven, 2006 ABPC 99 (Alta. Prov. Ct.). Mr. Treleaven was the administrator of an internet chatroom that permitted peer to peer file sharing amongst its members. On Treleaven’s computer was a gigantic amount of child pornography — 20 gigabytes worth — depicting children — some of babies and toddlers, being molested by adults. Judge Creagh was presented with a joint submission for three and half year’s imprisonment. Treleaven was forty-nine years old and steadily employed. He had two dated convictions for sexual offences (respectively 1986 and 1993 for offences which occurred in the 1970’s). The Court noted that this was a very early guilty plea, and that Treleaven had cooperated with investigators. Judge Creagh also noted that in this case, there would have been witnesses from out of the jurisdiction. Judge Creagh accepted the joint submission. 93 R. v. Bock, 2010 ONSC 3117 (Ont. S.C.J.) (“Bock”). Mr. Bock pled guilty on the eve of trial to possessing and distributing child pornography. He did so through a peer to peer network. He was found to be in possession of 381 images, and 1,007 videos. The children depicted, ranged in age from babies and toddlers to children aged 12. All manner of sexual acts were depicted including intercourse by adult males with small children. Justice Henderson described the collection as comprised of “extremely vile and depraved child pornography.” Bock was sixty- seven years old and had no criminal record. He had a lengthy work history, and was a devoted and beloved family man. Bock was sentenced to two years, and nine months for the distribution charge; and one year concurrent for possession. 94 R. v. Alcorn, 2008 ONCJ 547 (Ont. C.J.). Mr. Alcorn pled guilty to possession and distribution. Alcorn used LimeWire for file sharing. The police noted that Alcorn’s publicly available folder of LimeWire contained child pornography. On Alcorn’s computer were 437 images of child pornography. Alcorn was nineteen years old and had no criminal record. He was sentenced to fourteen months for distribution; and two months consecutive for possession. 95 R. v. Smith, [2008] O.J. No. 4558 (Ont. S.C.J.). Mr. Smith, forty-three years old, pled guilty midway through his trial for possession and distribution. Smith was found in possession of 837 images, and 147 movies. Justice Clark described the contents as particularly vile — depicting the abuse of children, and in some cases infants; and sometimes involving bondage (see para. 58). Justice Clark imposed a sentence of twenty-one months for distribution; and twelve months concurrent for possession. 132 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

96 Defence counsel provided me with a number of cases. They are of limited help since the cases for the most part predate the amendments which have increased the penalties for distribution offences. I will consider them briefly. 97 R. v. Hassell, 2006 ABPC 314 (Alta. Prov. Ct.). Mr. Hassell was found in possession of 65 images of child pornography depicting the sexual abuse of prepubescent girls — some of toddlers and infants. More importantly, Hassell admitted to police that he had been routinely trading pornographic images twice per week for four to five years. Hassell was sixty-four years old, retired and married. He was diagnosed as a pedophile. That said, after his arrest he sought and was treated, and an assessment notes his risk of reoffending is low. Hassell pled guilty. Judge Van de Veen sentenced him to nine months jail; followed by three years of probation. Judge Van de Veen explicitly rejected a CSO as being unfit: see para. 28. 98 R. v. Dunphy, 2003 NBQB 272 (N.B. Q.B.). Mr. Dunphy age forty, pled guilty to distribution and possession. He forwarded child pornography to an undercover officer. Subsequently he was found to be in possession of 196 pictures and videos. Mr. Dunphy had a prior conviction for sexual interference on a nine year old nephew. His risk of re-offence was assessed to be moderate. The court imposed a sentence of twenty months to be served conditionally. I am confident that this offender and offence would not now receive such a sentence in Alberta. 99 In R. v. Gardiner, 2009 BCPC 358 (B.C. Prov. Ct.) the Crown proceeded summarily. Thus the mandatory minimum for the distribution charge was ninety days. The size of Mr. Gardiner’s collection was un- specified in this decision. He received a sentence of nine months for the distribution charge; and four months concurrent for the possession charge. He entered a guilty plea, was sixty-two years old, well-educated and recently retired. He was assessed to be a low risk for reoffending. 100 R. v. Kozun, 2007 MBPC 7 (Man. Prov. Ct.). This was an offence committed in 2002, before the mandatory minimums. Mr. Kozun had set up his computer to operate as an automated trading post for child pornography files. On his computer were 3,522 files of child pornography, of which 154 were video files. The ages of the children depicted varied from eight months to fourteen years. Forensic analysis determined that 165 users from 15 countries had used this post. Kozun had pled guilty. He was twenty-five years old, and had no criminal record. In the time between being charged and sentenced Kozun had undergone a lengthy R. v. Watts F.K. MacDonald Prov. J. 133

(over four years) and extensive course of psychotherapy. The court sentenced him to an eighteen month CSO. 101 R. v. Bishop, 2007 ONCJ 442 (Ont. C.J.). Mr. Bishop’s offences pre- dated the legislated minimums. Crown also proceeded summarily. The size of Bishop’s collection is not specified in this decision. He was sentenced to six months for distribution; and six months and three months consecutive for two counts of possession — all to be served in the community. 102 Finally, I found the following case decided by my brother Judge Yake in R. v. Trautman, 2015 ABPC 281 (Alta. Prov. Ct.). Mr. Trautman pled guilty, but then applied unsuccessfully to strike his plea to possession and distribution charges. Trautman used a file sharing program to down load and to distribute child pornography. On his computer were 400 child pornography videos; 266 of which he had shared with others. Trautman had little insight, and showed no remorse. Judge Yake sentenced him to two years for the distribution charge; and one year concurrent for the possession charge. 103 It is apparent that Gladue factors are not present in the majority of the above cases. 104 Mr. Watts’ collection of videos and images are on the lower end of the scale in both number and seriousness. His collection lacks many of the aggravating factors listed in Kwok — small children, violence, cru- elty — and found in cases such as Andrukonis, Smith, Bock and Secreti. 105 Regarding the distribution charge, it is aggravating, in addition to making the child pornography available through the file sharing program on his computer, that Mr. Watts forwarded child pornography to his friend H.B. On the other hand, Mr. Watts is not a large scale distributor of child pornography like Mr. Larocque or Mr. Treleaven; nor did he distribute as frequently as Mr. Hassell.

VII. What is a Fit and Appropriate Sentence? 106 The cardinal principle in sentencing is the principle of proportionality. See: R. v. Arcand, 2010 ABCA 363 (Alta. C.A.). 107 I have considered the aggravating and mitigating factors above. I am of the view that Mr. Watts’ sentence on the possession charge should be in a range less than that in the Andrukonis case — which was one year. I would impose a sentence of six months. 134 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

108 With regard to the distribution charge, I am of the view that the sentence should be in the twelve to fifteen month range. I am cognizant that there is an aggravating feature here not present say in McArthur — i.e. evidence of actual proactive distribution. On the other hand, Mr. Watts has taken steps to address through counselling some of his criminogenic factors. Above all, I am cognizant of the many Gladue factors here, which in my view lessen his degree of responsibility. 109 As noted above in Gladue, a jail term for an Aboriginal offender may sometimes be less than the term imposed on a non-Aboriginal offender. In this case, the Gladue factors are sufficiently compelling that a sentence at the statutory minimum — one year — is fit and proper. 110 I have considered the sentences proposed by Defence counsel. My difficulty with a sentence below the range I have proposed is that it does not adequately reflect the seriousness of the offence and Mr. Watts’ responsibility as an offender. He did possess child pornography for eighteen months. He passively distributed it to others through the file sharing program on his computer, but he also actively distributed it to his friend H.B. 111 The Court of Appeal’s dictum in Hammond is particularly apt here: “[A] sentencing court that is dealing with a person who has, quite volitionally over a long period time, made recreational use of the products of actual child debasement and abuse must receive condign punishment.” As noted previously, distributing child pornography is exponentially worse. A sentence of less than one year in my view would not accord with the proportionality principle. 112 Even if I was not constrained by the mandatory minimums, I would not impose a punishment of a fine, or a fine and probation, or even an intermittent sentence for this offence and offender. Such sentences would not be proportionate or fit. 113 In imposing this sentence I am cognizant of the destructive effect imprisonment for one year will have on Mr. Watts’ life. He will undoubtedly lose his job or be required to take an extended leave of absence from it. He will have to give up his apartment and store his possessions. Incar- ceration will undoubtedly entail some, perhaps extensive, loss of contact with his friends here in Edmonton. These are the inevitable and distres- sing consequences of incarceration. However, these are but aspects of the punishment which must deter him in the future from committing this, or any other, crime. R. v. Watts F.K. MacDonald Prov. J. 135

114 On the other hand, Mr. Watts will be eligible for some form of parole or early release. Defence counsel suggests in his argument that Mr. Watts would likely be in protective custody for the duration of his sentence. I cannot speculate on the conditions under which he will serve his sentence. I am aware of the loathing with which the general population of a prison regards sex offenders. I have no evidence before me that possessors of child pornography are held in the same contempt. I think that I could take judicial notice that sex offenders frequently have to resort to protective custody while serving their sentences. I have no such information regarding possessors of child pornography. I cannot take this factor into account. 115 Finally, this sentence will be supplemented by an order of probation which will, it is hoped, assist in rehabilitating Mr. Watts, and further the creditable work he has begun with Dr. Pugh.

VIII. Section 12 of the Charter 116 Section 12 reads as follows: 12. Treatment or punishment — everyone has the right not to be subjected to any cruel or unusual punishment. 117 In R. v. Nur [2015 CarswellOnt 5038 (S.C.C.)], Chief Justice McLachlin comments on the high standard which an applicant must meet to show that a sentences is a cruel and unusual punishment: 39 This Court has set a high bar for what constitutes “cruel and unusual ... punishment” under s. 12 of the Charter. A sentence attacked on this ground must be grossly disproportionate to the punishment that is appropriate, having regard to the nature of the offence and the circumstances of the offender: R. v. Smith, [1987] 1 S.C.R. 1045 (S.C.C.), at p. 1073. Lamer J. (as he then was) explained at p. 1072 that the test of gross disproportionality “is aimed at punishments that are more than merely excessive”. He added, “[w]e should be careful not to stigmatize every disproportionate or excessive sentence as being a constitutional violation”. A prescribed sentence may be grossly disproportionate as applied to the offender before the court or because it would have a grossly disproportionate impact on others, ren- dering the law unconstitutional. The Supreme Court of Canada has set out the criteria which a court should consider in determining if a sentence is grossly disproportionate: see Nur (2015) at paras. 38-46; R. v. Morrisey, [2000] 2 S.C.R. 90 (S.C.C.) at paras. 26-29; and R. v. Smith, [1987] 1 S.C.R. 1045 (Ont. S.C.J.) at paras. 87-89. Those criteria are: 136 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

• The gravity of the offence; • The particular circumstances of the offender; • And the circumstances of the case. 118 These are to be considered in deciding the range of sentence that would be appropriate to punish, rehabilitate or deter the offender, or to protect the public from the accused. 119 The judge must also consider the 1. Actual effect of the punishment of the accused; the penological goals and sentencing principles on which the sentence is based, any valid alternatives to the sentence imposed; and comparative punishments imposed for other crimes in the same jurisdiction. 120 Essentially this is a two-step process. As Chief Justice McLachlin states in Nur (2015): First, the court must determine what constitutes a proportionate sentence for the offence having regard to the objectives and principles of sentencing in the Criminal Code. Then, the court must ask whether the mandatory minimum requires the judge to impose a sentence that is grossly disproportionate to the fit and proportionate sentence. If the answer is yes, the mandatory minimum provision is inconsistent with s. 12 and will fall unless justified under s. 1 of the Charter. 121 In this case, I propose to sentence Mr. Watts to one year imprisonment for the distribution charge; and six months concurrent for the possession charge. In the course of these reasons I have considered the criteria set out in Nur and listed above. The mandatory minimum for the distribution charge is one year imprisonment. Plainly, the sentence I intend on imposing is not grossly disproportionate.

IX. Reasonable Hypotheticals 122 In Nur (2015) the court affirmed that a court can also consider whether a “... provision’s reasonably foreseeable application will impose grossly disproportionate sentences on others.” ... (Nur (2015) at para. 77). 123 What is a reasonable hypothetical? Chief Justice McLachlin reiterates Justice Gonthier’s dictum from R. v. Goltz [1991 CarswellBC 280 (S.C.C.)]: “fanciful and or remote situations must be excluded.” A court should consider situations which reasonable arise and that are foreseeably captured by the minimum conduct caught by the offence: see R. v. Watts F.K. MacDonald Prov. J. 137

Nur (2015) at para. 68. A court can consider reported cases in determining what is reasonably foreseeable. The Chief Justice states at para. 72: ... Reported cases illustrate the range of real-life conduct captured by the offence. I see no principled reason to exclude them on the basis that they represent an uncommon application of the offence, provided that the relevant facts are sufficiently reported. Not only is the situation in a reported case reasonably foreseeable, it has happened. Re- ported cases allow us to know what conduct the offence captures in real life. ... 124 The court also held that personal characteristics can be considered in a limited fashion. In order to determine what fact situation would be captured by the mandatory minimum some consideration of personal characteristics may be taken into account — based on reason and common sense. The personal characteristics of those who may be caught by the mandatory minimum are relevant. However, this consideration must not venture into the farfetched or remotely imaginable: “... This excludes using personal features to construct the most innocent and sympathetic case imaginable — on that basis almost any mandatory minimum could be argued to violate s. 12 and lawyerly ingenuity would be the only limit to findings of unconstitutionality. ...” (Nur (2015) at paras. 74-76). 125 The court also considered, once a provision has been found not to violate s. 12, whether or not an offender in a future case could argue that the provision as applied to others violates s. 12. 126 The court held that stare decisis precludes an offender from simply rearguing what constitutes a reasonably foreseeable range of the law. This does not preclude a court from considering or an applicant from putting forward different circumstances, and new evidence not presented in the former case. In short, a subsequent court can consider different reasonable applications. However, the court noted that “the threshold for revisiting a mandatory minimum is high and requires a significant change in the reasonably foreseeable applications of the law.” (Nur (2105) at para. 71).

i. The Decision in Schultz 127 In this case the Crown has properly pointed out that the s. 12 constitutionality of these provisions was previously considered by Madame Jus- tice Topolniski in R. v. Schultz, 2008 ABQB 679 (Alta. Q.B.) (“Sch- ultz”). Crown submits that Defence counsel has submitted no new 138 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

evidence or different reasonable applications of the law that were not already considered in Schultz. 128 In Schultz the twenty-two year old accused was in a consensual sexual relationship with a sixteen year old. With her consent, he took photos of her posing and engaging in sexual acts. The accused, post break up advertised on his Nexopia page that he would provide the nude photos of the sixteen year old to anyone who asked. He then posted two nude photos of the complainant on his web page, and again offered more photos. He subsequently posted eight photos of the complainant, of her breast, vagina etc. (Schultz at paras. 2-13). 129 Justice Topolniski did not find that the mandatory minimum was grossly disproportionate when applied to Mr. Schultz. 130 Justice Topolniski considered some hypotheticals. The first of these is found in para. 123 of her judgement. The essential facts are as follows. The accused and the complainant were in a relationship. The accused took intimate photographs of the complainant with her consent. She is fifteen or sixteen; he is eighteen to twenty-two. When the relationship ended the accused showed the photographs to others — acting out of vin- dictiveness. This occurred on one occasion, and the accused acted impul- sively. Justice Topolniski found that this fact situation is common enough to serve as a hypothetical. 131 Justice Topolniski concluded that such a hypothetical would not be in breach of s. 12: 126 It may be that a one year sentence would be somewhat excessive in such a case. However, as argued by the Crown, the test in Smith is not whether a sentence is considered harsh or excessive, but rather whether it would be “so excessive as to outrage standards of decency” and Canadians “would find the punishment abhorrent and intolerable.” Given that Parliament views all child pornography offences with considerable gravity and as the hypothetical involves knowledge and intent on the part of the accused, I would not find that the one year minimum sentence offends s. 12. ...

ii. Defence Counsel’s Hypotheticals 132 In paras. 40 and 41 of his written argument, Mr. King posits a hypothetical which is in essence a duplicate of the Schultz hypothetical reproduced above. An eighteen year old in a relationship with a seventeen year old female takes pictures which meet the criteria under s. 163.1(1)(a). The pictures are taken with the consent of the complainant. R. v. Watts F.K. MacDonald Prov. J. 139

The accused then shares the pictures with another, perhaps even sharing by way of social media (text, Facebook, etc.). 133 I am bound by Justice Topolniski’s finding on this hypothetical: “Once a law is held not to violate s. 12, stare decisis prevents an offender in a later case from simply rearguing what constitutes a reasonably foreseeable range of the law” (Nur (2015) at para. 71). 134 Defence counsel advances a number of other hypotheticals. An eighteen year old accused could write about a consensual sexual encounter with a seventeen year old. He could share that sexual encounter with a friend or other in the form of a written description. The dominant characteristic is the sexual act which is described for a sexual purpose. Mr. King adds that given the proliferation of electronic media that such a writing could be distributed via text, or Facebook, or on Twitter. This Mr. King says, is child pornography as defined in s. 163.1(1)(c) and its distribution would be an offence under s. 163.1(3). He also proposes a variation where the accused would leave a voicemail of the description of the sex act with the seventeen year old on a friend’s phone — which he says would fall afoul of s. 163.1(d). 135 The Crown properly points out that neither of these hypotheticals contravene the Act. It is not illegal for an eighteen year old to have consensual sexual relations with a seventeen year old. Sections 163.1(1)(c) and (d) proscribe written materials or audio recordings “of sexual activity with a person under the age of 18 years that would be an offence under this Act.” (Emphasis added) 136 Consequently, neither of these hypotheticals would attract a conviction, much less a mandatory minimum. Section 12 is not engaged here. 137 Mr. King posited a number of other hypotheticals at paras. 51 and 52 of his written argument. One is that an image of a female in what he terms a “Catholic School girl uniform” of a white blouse and plaid skirt is depicted in an explicit sexual act etc. He notes that advertisements in Backpage.com frequently have such advertisements, and thus the person who posted the image could be charged with possession and distribution of child pornography. His example is not clear, but for the purposes of the argument, I will assume that the effect is to depict an underage person in an explicit sexual act. 138 Would a one year minimum be grossly disproportionate in such a case? No, it would not. In light of the context — an advertisement for an escort agency on the net — an advertisement which in my view actively 140 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

incites sexual relations with the young persons depicted, for money — I find that the mandatory minimum would be appropriate. 139 Mr. King posited another hypothetical where an accused knowingly possesses, and then posts on the Internet (i.e. distributes) an anime video which depicts sexual relations with underage females in Catholic school girl uniforms. Again, I am of the view that the one year minimum would not be grossly excessive. I echo Justice Topolniski’s comments (reproduced above) from para. 126 of Schultz. The punishment may be harsh or excessive but does not rise to the level of “so excessive as to outrage standards of decency” such that Canadians “would find the punishment abhorrent and intolerable.” 140 Finally in para. 52, Mr. King posited another hypothetical wherein a seventeen year old girl forwards, via text, a nude image of herself to her eighteen year old boyfriend. She gives her boyfriend permission to share it with others. This sharing of the image is discovered by the police, and the boyfriend is charged with distribution of child pornography. Is this a reasonable hypothetical? But for the detail of the girl’s consent to the distribution of the image, the facts in this scenario are those of the Sch- ultz case or of the hypothetical considered by Madam Justice Topolniski. 141 In my view this pushes the hypothetical into the farfetched or the remotely imaginable. Although sexting between couples is reasonably foreseeable, the detail about an underage girl consenting to images of herself being shared with her eighteen year old boyfriend’s friends strikes me as highly unlikely. It is, to paraphrase Justice McLachlin’s comments about the use of personal characteristics in hypotheticals, “an effort to construct the most innocent and sympathetic case imaginable.” (Nur (2015) at paras. 73-75).

iii. Conclusion Regarding the Hypotheticals 142 In conclusion, I have not been provided with any reasonable hypotheticals which have not been already ruled on by Justice Topolniski in Schultz, or which I have found to be reasonable. Defence counsel has not met the burden on him to show by hypothetical that s. 163.1(3) would impose grossly excessive punishment on persons who might reasonably be expected to be caught by this provision. R. v. Watts F.K. MacDonald Prov. J. 141

X. Section 9: Arbitrary Imprisonment i. Section 9 of the Charter 143 Section 9 reads as follows: Detention or imprisonment — Everyone has the right not to be arbitrarily detained or imprisoned. 144 What does the term “arbitrary” mean in this context: i.e. in relation to legislation whose application may result in imprisonment? 145 In the case of R. v. Ladouceur, [1987] O.J. No. 333 (Ont. C.A.) the Ontario Court of Appeal considered different meanings of the term “arbitrary” from both the Oxford English Dictionary, and Webster’s New World Dictionary. The Oxford English Dictionary defines the term as follows: 3. Derived from mere opinion or preference; not based on the nature of things; hence, capricious, uncertain, varying. The Webster’s New World Dictionary defines “arbitrary” as follows: 1. not fixed by rules but left to one’s judgment or choice; discretionary [arbitrary decision, arbitrary judgment]; 2. based on one’s preference, notion, whim, etc.; capricious 3. absolute; despotic. 146 In R. v. Nur, 2013 ONCA 677 (S.C.C.) (“Nur (2013)”) Justice Do- herty considered the meaning of the term “arbitrary” as it relates to s. 7 of the Charter. In relation to legislation he says that the term has the following meaning: ... A law is arbitrary for the purposes of s. 7 if the effect of the challenged law bears no relation to, or is inconsistent with, the legislative objective of the challenged law: see Bedford v. Canada, 2012 ONCA 186, 282 C.C.C. (3d) 1, at paras. 145-47, leave to appeal to S.C.C. granted October 25, 2012: [2012] S.C.C.A. No. 159 (S.C.C.). 147 Mr. King has cited the case of R. v. Konechny (1983), 10 C.C.C. (3d) 233 (B.C. C.A.); leave to appeal to S.C.C. refused [1984 CarswellBC 922 (B.C. C.A.)]. In this case the British Columbia Court of Appeal reviewed the case law on the use of the term in relation to s. 9 and concluded the following: 68 I agree that imprisonment is not less arbitrary because it is authorized by statute if there is no rational basis for the statutory policy. An arbitrary policy, one which is capricious, unreasonable or unjusti- fied, may be struck down under s. 52 of the Constitution Act, 1982, as being inconsistent with the provisions of the Charter. Section 9 of the Charter does not excuse arbitrary imprisonment on the basis that it is authorized by law. 142 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

(Emphasis added) 148 Is s. 163.1(3) and (4) arbitrary? Defence counsel concedes later in his written arguments that there is a rational connection between the legislative goals of s. 163.1(3) and (4) and the minimum mandatory punishments found in that section. 149 Sharpe considered the constitutionality of the legislation when it was first challenged and before the legislation of the mandatory minimums. Since that time, Parliament has imposed and then increased the mandatory minimums for possession and distribution. Chief Justice McLachlin stated in Sharpe at para. 122, “The purpose of the legislation is to protect children from exploitation and abuse by prohibiting possession of material that presents a reasoned risk of harm to children.” Since Sharpe, Parliament’s response has been to expand the reach of the criminal law by the creation of sentencing ranges that place a premium on deterrence and denunciation. Parliament has done so because the possession, production and distribution of child pornography continue to be a pressing social concern. 150 By virtue of the 2005 amendments, the minimum punishment for s. 163.1(3) (distribution) is one year where the Crown has proceeded by way of indictment, and ninety days where the Crown has proceeded summarily. The maximums were respectively ten years, and eighteen months. The minimum penalties for possession s. 163.1(4) were forty- five days (by indictment) and fourteen days summarily. The maximums for this offence were five years, and eighteen months respectively 151 After the 2012 amendments, the minimum for the distribution charge where the Crown proceeded by indictment remained the same — one year. However, on summary conviction matters the maximum increased to two years less a day, and the mandatory minimum increased to six months. On possession charges where the Crown proceeded by indictment the mandatory minimum rose to six months; on summary conviction to ninety days. 152 The sections were again amended by the Tougher Penalties for Child Predators Act, S.C. 2015, c. 23, s. 7 in force July 17, 2015. Distribution became a straight indictable offence with a maximum of fourteen years, and a minimum of one year. Possession changed on indictment to a maximum of ten years, and a mandatory minimum of one year; on summary conviction the maximum is two years less a day, and the mandatory minimum is six months. R. v. Watts F.K. MacDonald Prov. J. 143

153 It is clear that, notwithstanding the steady increase in the length of the mandatory minimums that Parliament has, to borrow a phrase from Jus- tice Doherty in Nur (2013) at para. 199, created a safety valve in the lesser minimums for summary offences. For those offences, where indictable mandatory minimums would be, in the name of deterrence and denunciation, unnecessary and inappropriate, the lesser summary conviction minimums are available. 154 In the same vein, Chief Justice McLachin noted the following in Nur (2015) at para. 90: ... Hybrid offences allow the Crown to take into account the variation that exists between cases. They recognize that the same offence can be committed in more and less serious ways, and allows the Crown to take the specific circumstances of each case into account. As the trial judge noted in Nur, the “state interest, in enacting a hybrid offence, is to provide flexibility so that Crown prosecutors can adapt available procedures and sentences to the needs of a particular case”: (para. 126). 155 In my view s. 163.1(3) and (4) are not arbitrary. The mandatory minimum punishments dictated by the section on convictions can be harsh when they depart from the principle of proportionality which ordinarily governs the sentencing under our Criminal Law. But the section is not arbitrary in the sense that it is “capricious”, “uncertain”, or “unrelated to the legislative objective”, or “having no rational connection to the policy underlying the legislation.” 156 Finally, I note that these mandatory minimums have not, to my knowledge, been subject to any successful Charter challenge under s. 7.

ii. Crown Discretion 157 Does the Crown’s power of election, which decides which mandatory minimum will apply, render the section arbitrary? 158 The exercise of prosecutorial discretion is an essential element of the criminal process. 159 The ambit of prosecutorial discretion, and its reviewability by the courts, has been the subject of a number of cases in the Supreme Court of Canada: R. v. Anderson, 2014 SCC 41 (S.C.C.) (“Anderson”); Kvello v. Miazga, 2009 SCC 51 (S.C.C.); Krieger v. Law Society (Alberta), 2002 SCC 65 (S.C.C.) (“Krieger”); and Nur (2015); Nur (2013). 144 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

160 In Krieger the Court defined the term “prosecutorial discretion” as follows: “Prosecutorial discretion” is a term of art. It does not simply refer to any discretionary decision made by a Crown prosecutor. Prosecutorial discretion refers to the use of those powers that constitute the core of the Attorney General’s office and which are protected from the influence of improper political and other vitiating factors by the principle of independence. [para. 43] 161 The decision to proceed summarily or by indictment in a case is one of the core functions of a Crown prosecutor. This discretion has long been recognized by the Courts. For example in R. v. Beare (1987), [1988] 2 S.C.R. 387 (S.C.C.) at paras. 54-56, the Court said: 54 The existence of the discretion conferred by the statutory provisions does not, in my view, offend principles of fundamental justice. Discretion is an essential feature of the criminal justice system. A system that attempted to eliminate discretion would be unworkably complex and rigid. Police necessarily exercise discretion in deciding when to lay charges, to arrest and to conduct incidental searches, as prosecutors do in deciding whether or not to withdraw a charge, enter a stay, consent to an adjournment, proceed by way of indictment or summary conviction, launch an appeal and so on. 55 The Criminal Code provides no guidelines for the exercise of discretion in any of these areas. The day-to-day operation of law enforcement and the criminal justice system nonetheless depends upon the exercise of that discretion. 56 This court has already recognized that the existence of prosecutorial discretion does not offend the principles of fundamental justice: see R. v. Lyons, supra, at p. 348; see also R. v. Jones, [1986] 2 S.C.R. 284 at 303-304, [1986] 6 W.W.R. 577, 47 Alta. L.R. (2d) 97, 28 C.C.C. (3d) 513, 31 D.L.R. (4th) 569, 25 C.R.R. 63, 73 A.R. 133, 69 N.R. 241. ... 162 The above was cited with approval in Nur (2013) at para. 190 per Doherty J.A.: ... The exercise of Crown discretion throughout the criminal process, including the choice of the mode of trial where Parliament provides that an offence is punishable by indictment or summarily, is a longstanding and essential component of the fair and efficient operation of the criminal justice system: see R. v. Beare (1987), [1988] 2 S.C.R. 387 (S.C.C.), at p. 411; and R. v. Smythe, [1971] S.C.R. 680 (S.C.C.), at pp. 685-86. R. v. Watts F.K. MacDonald Prov. J. 145

163 Finally, this point was directly addressed by Justice Moldaver in An- derson at para. 44: In an effort to clarify, I think we should start by recognizing that the term “prosecutorial discretion” is an expansive term that covers all “decisions regarding the nature and extent of the prosecution and the Attorney General’s participation in it” (Krieger, at para. 47). As this Court has repeatedly noted, “[p]rosecutorial discretion refers to the discretion exercised by the Attorney-General in matters within his authority in relation to the prosecution of criminal offences” (Krie- ger, at para. 44, citing Power, at p. 622, quoting D. Vanek, “Prosecutorial Discretion” (1988), 30 Crim. L.Q. 219, at p. 219 (emphasis added)). While it is likely impossible to create an exhaustive list of the decisions that fall within the nature and extent of a prosecution, further examples to those in Krieger include: the decision to repudiate a plea agreement (as in R. v. Nixon, 2011 SCC 34, [2011] 2 S.C.R. 566 (S.C.C.)); the decision to pursue a dangerous offender application; the decision to prefer a direct indictment; the decision to charge multiple offences; the decision to negotiate a plea; the decision to proceed summarily or by indictment; and the decision to ini- tiate an appeal. All pertain to the nature and extent of the prosecution. As can be seen, many stem from the provisions of the Code itself, including the decision in this case to tender the Notice. (Emphasis added) 164 The exercise of that discretion is only reviewable if it can be shown to be an “abuse of process” see: Anderson at para. 48, citing Krieger, R. v. Nixon [2011 CarswellAlta 988 (S.C.C.)], and Miazga. 165 In Anderson at para. 50, Justice Moldaver states that the term “abuse of process” describes conduct which “... egregiously and seriously com- promises trial fairness and/or the integrity of the justice system. ...”

iii. Discussion 166 Bearing the above in mind, I will discuss Defence counsel’s argument on this point. Mr. King relied on the decision of R. v. Lonegren, 2009 BCSC 1678 (B.C. S.C. [In Chambers]) (“Lonegren”). In that case s. 151 of the Criminal Code was at issue. The Crown had proceeded by way of indictment, which mandated a forty-five day minimum. The accused challenged the constitutionality of the section, alleging breaches of ss. 7, 9, and 12 of the Charter. 167 In that case Justice Barrow found that there was a breach of s. 9 of the Charter. Specifically he found that s. 151 is arbitrary because the Crown 146 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

can elect to proceed by indictment “for reasons which are entirely unconnected to the issue of sentencing.” He was satisfied that the minimum sentence that accompanies an indictable proceeding under s. 151 violated s. 9 (Lonegren at paras. 106-107). 168 Justice Barrow provided a couple of examples of the reasons which the Crown might proceed by way of indictment: see Lonegren at para. 100. These he found illustrated the arbitrary nature of the legislative scheme in s. 151. Defence counsel reproduced and relied on these examples in his argument that s. 163.1(3) and (4) are in breach of s. 9. In addition, Mr. King adds one further hypothetical. I will briefly summa- rize the examples discussed by Justice Barrow and Defence counsel below. 169 The first is a circumstance whereby the offence and the offender would justify the Crown proceeding by way of summary conviction. However, because of delay in reporting, the charge was not laid until after the six month limitation period specified in s. 786. This Justice Bar- row says would necessitate that the Crown proceed by way of indictment, notwithstanding that there are no penological reasons for seeking a higher minimum sentence. Justice Barrow notes that the Crown proceeding by indictment would “expose an offender to a higher minimum sentence for reasons entirely unconnected to the sentencing process.” The second example cited by Justice Barrow is a circumstance where the Crown properly proceeds by indictment, but after trial the offender is convicted on facts substantially different, and less serious than were apparent at the time of election. The facts on conviction would properly justify proceeding by way of summary conviction. Again, the accused is subject to the higher minimum penalty. 170 Justice Barrow concludes: 102 The foregoing two examples illustrate the concern that arises in relation to s. 9. The concern is that the Crown may make a decision for entirely proper reasons but reasons that have nothing to do with sentencing, but which expose an offender to a significantly greater minimum sentence. That is so regardless of whether the Crown’s decision is explained or justified. 171 Defence counsel submits that a prosecutor may also elect to proceed by way of indictment when faced with a difficult case: i.e. one in which the Crown would like to see their witnesses testify at a preliminary inquiry; or one where there is a medically fragile witness who might not survive until trial (thus necessitating a preliminary inquiry to have a writ- R. v. Watts F.K. MacDonald Prov. J. 147

ten, and potentially admissible record of that witness’ evidence); or, a case where the particulars of the offence need to be further elucidated at a preliminary inquiry. Mr. King concedes that it would be proper for the Crown to elect to proceed by indictment in such circumstances, but because of that election the minimum penalty is raised for reasons unrelated to sentencing. 172 Based on the above hypotheticals, I cannot find that there is a breach of s. 9. I note that Lonegren was decided before Nur and Anderson, and that Justice Barrow did not have the benefit of the Supreme Court’s reasons in those cases. 173 I also note that Justice Barrow’s decision is not binding upon me. I decline to follow it. In my view, the principles enunciated in Anderson and Nur foreclose any finding of a s. 9 breach here. 174 Both Justice Barrow, in Lonegren, and Defence counsel in his argument, acknowledge the propriety of the Crown’s election in the examples they cite. As noted above, that election is within the Crown’s prosecutorial discretion, and absent evidence of an abuse of process, im- mune from review by the courts. Notwithstanding that acknowledgement, both Mr. King and Justice Barrow premise their finding of a s. 9 breach on the disconnect between the reasons for the indictable election and the penalty ultimately available. Since the election is made without considering sentencing, they argue, the section is arbitrary. 175 In my view this argument imports a requirement into section 163.1(3) or (4) that the Crown must consider sentence when making its election for an offence where there are mandatory minimums. With respect, this cannot be. Absent conduct amounting to an abuse of process, the Crown’s decision on election cannot be reviewed by this Court. The logical corollary of this principle is that a court cannot dictate the criteria which a prosecutor must consider when making an election. 176 Second, the hypotheticals conflate the prosecutorial and judicial roles and processes. The Crown election does not necessarily predetermine the result at sentencing. In between there are judicial determinations on guilt or innocence. Even if the sentencing options are constrained by the mandatory minimums, that does not inevitably lead to a disproportionate sentence, let alone a grossly disproportionate one. A prosecutor could exercise his discretion arbitrarily, and yet the sentence imposed by the judge at the end of the case could nonetheless be proportionate. 177 The argument advanced by Defence counsel is similar to that advanced by the appellant in Anderson. In that case Anderson argued that 148 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

the Crown should, before tendering the Notice in an impaired case (which would require the court to impose mandatory penalty of 120 days), consider the accused’s Aboriginal status when making decisions that limit the sentencing options available to a judge. The accused argued that the Crown’s failure to do so constituted a breach of ss. 7 and 15 of the Charter. Justice Moldaver vigorously rejected this argument: 25 Importantly, both Gladue and Ipeelee speak to the sentencing obligations of judges to craft a proportionate sentence for Aboriginal offenders. They make no mention of prosecutorial discretion and do not support Mr. Anderson’s argument that prosecutors must consider Aboriginal status when making a decision that limits the sentencing options available to a judge. Mr. Anderson’s argument in effect equates the duty of the judge and the prosecutor, but there is no basis in law to support equating their distinct roles in the sentencing process. It is the judge’s responsibility to impose sentence; likewise, it is the judge’s responsibility, within the applicable legal parameters, to craft a proportionate sentence. If a mandatory minimum regime requires a judge to impose a disproportionate sentence, the regime should be challenged. 178 The above passage was cited with approval by Chief Justice McLach- lin in Nur (2015) at para. 89. 179 It is clear from the discussion in both Nur (2015) and Anderson that the Supreme Court was cognizant of the fact that the exercise of Crown discretion will sometimes, for some offences, result in elections which limit the sentencing option available to judges. In neither case did the Supreme Court suggest that the existence of this prosecutorial discretion for those sections is arbitrary for the purposes of either s. 7 or s. 9 of the Charter. In both cases, the Supreme Court reaffirmed the constitutional propriety of prosecutorial discretion. 180 Chief Justice McLachlin makes clear in paras. 85-97 that the existence of a power of election to proceed summarily and avoid a mandatory minimum will not insulate an unconstitutional law from s. 12 review (see: paras. 88-91 of Nur (2015)). This principle cannot be turned on its head and make the existence of prosecutorial discretion unconstitutional. 181 In the event that the imposition of the mandatory minimum sentence dictated by the Crown’s election is grossly disproportionate, then the Ac- cused can challenge the sentence on s. 12 grounds. I have already found that there is no s. 12 breach in this case. [182] I find that s. 163.1(3) and (4) do not breach s. 9 of the Charter. R. v. Watts F.K. MacDonald Prov. J. 149

XI. Sentence 183 On Count 1: possession of child pornography — I sentence Mr. David Watts to six months imprisonment. 184 On Count 3: distribution of child pornography — I sentence Mr. David Watts to twelve months concurrent. 185 Mr. David Watts shall forthwith provide a sample of his DNA pursuant to section 487.051 of the Criminal Code. 186 All the digitals devices seized from Mr. David Watts are forfeit to the Crown pursuant to section 164.2 of the Criminal Code. 187 Pursuant to sections 490.012 and 490.013(2.1) Mr. David Watts is required to comply with the Sex Offender Information Registry Act (SOIRA) for life. 188 Mr. David Watts shall be subject to an Order under section 161 of the Criminal Code for a period of ten years. Mr. David Watts you are prohibited from: (a) attending a public park or public swimming area where persons under the age of 16 years are present or can reasonably be expected to be present, or a daycare centre, school ground, play- ground or community centre; (b) seeking, obtaining or continuing any employment, whether or not the employment is remunerated, or becoming or being a volunteer in a capacity, that involves being in a position of trust or authority towards persons under the age of 16 years; and (c) having any contact — including communicating by any means — with a person who is under the age of 16 years, unless the offender does so with the written approval of his supervisor (while under probation); or at the end of the probationary period in the presence the young person’s parent or guardian or another adult who is aware of the offender’s conviction for possession of child pornography. 189 In addition to the above, I am placing Mr. David Watts on probation for a term of three years with the following terms: From the date of expiration of his sentence of imprisonment comply with the following conditions, namely, that the said offender shall keep the peace and be of good behaviour, appear before the court when required to do so by the court and notify the court or probation officer in advance of any change of name or address and promptly 150 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

notify the court or probation officer of any change of employment or occupation, and, in addition, 1. You will report to a supervisor within 2 working days from your release and after that, as directed by your supervisor. 2. You will live at an address for which you have written approval from your supervisor (your “approved residence). If you want to move to a different address you must get your supervisor’s written approval. 3. You will attend whatever assessment, counselling or treatment your supervisor tells you to take. The assessment, treatment or counselling may include but is not limited to the following areas: • Psychiatric/Psychological counselling • Alcohol/Drug abuse You will complete any programs your supervisor directs you to take and provide proof satisfactory to your supervisor that you have done so. 4. You will sign whatever release or waiver your supervisor requires you to sign so that your supervisor can have access to any information necessary for your supervision. 5. Internet use: • You shall not possess any pornography • You shall not access any pornography site on the internet • You may possess one device (and only one) capable of accessing the internet: computer, tablet or portable communication device, if your device is portable, you shall on demand by your supervisor (or his designate or a peace officer) submit that device to your supervisor for examination to ensure compliance with the terms of this order • If the device is not portable (i.e. tower model computer or desk top), you shall allow access to your residence and your computer between the hours of 8:00 am and 9:00 pm to your supervisor (or his designate or a peace officer) to ensure compliance with the terms of this order • If your supervisor directs, you shall allow your supervisor (or his designate or a peace officer) to install software or hardware on your device to allow your su- R. v. Watts F.K. MacDonald Prov. J. 151

pervisor (or his designate or a peace officer) to remotely access and monitor your computer or device in order to ensure compliance with this order 6. You may not: • Attend at a public park or public swimming area where persons under the age of 16 years are present or can reasonably be expected to be present, or a daycare centre, school ground or community centre; • Seek, obtain or continue with any employment or volunteer activity that involves being in a position of trust or authority towards persons under the age of 16 years; • Have any contact with any person under the age of 16 years unless [the] in the presence of a parent or guardian or adult who is aware of your conviction for the possession of child pornography • Other: or as approved of in advance by your supervisor 7. Your supervisor may grant a temporary written exemption from any of the terms of this order for the purpose of addressing an immediate need or for any purpose permitted by your supervisor. Order accordingly.

Appendix

CRANKSHAW-HIST 163.1 Crankshaw’s Criminal Code of Canada Legislative Histories Gary P. Rodrigues Criminal Code S. 163.1 The Crankshaw database has been updated to release 2015-1 S. 163.1 163.1 — History Statutory Reference: R.S.C. 1985, c. C-46, s. 163.1 An Act to amend the Criminal Code and the Customs Tariff (child pornography and corrupting morals), S.C. 1993, c. 46 152 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

Section 163.1 was enacted by S.C. 1993, c. 46, s. 2: 163.1 (1) Definition of “child pornography” — In this section, “child pornography” means (a) a photographic, film, video or other visual representation, whether or not it was made by electronic or mechanical means, (i) that shows a person who is or is depicted as being under the age of eighteen years and is engaged in or is depicted as engaged in explicit sexual activity, or (ii) the dominant characteristic of which is the depiction, for a sexual purpose, of a sexual organ or the anal region of a person under the age of eighteen years; or (b) any written material or visual representation that advocates or counsels sexual activity with a person under the age of eighteen years that would be an offence under this Act. (2) Making child pornography — Every person who makes, prints, pub- lishes or possesses for the purpose of publication any child pornography is guilty of (a) an indictable offence and liable to imprisonment for a term not exceeding ten years; or (b) an offence punishable on summary conviction. (3) Distribution or sale of child pornography — Every person who imports, distributes, sells or possesses for the purpose of distribution or sale any child pornography is guilty of (a) an indictable offence and liable to imprisonment for a term not exceeding ten years; or (b) an offence punishable on summary conviction. (4) Possession of child pornography — Every person who possesses any child pornography is guilty of (a) an indictable offence and liable to imprisonment for a term not exceeding five years; or (b) an offence punishable on summary conviction. (5) Defence — It is not a defence to a charge under subsection (2) in respect of a visual representation that the accused believed that a person shown in the representation that is alleged to constitute child pornography was or was depicted as being eighteen years of age or more unless R. v. Watts F.K. MacDonald Prov. J. 153 the accused took all reasonable steps to ascertain the age of that person and took all reasonable steps to ensure that, where the person was eighteen years of age or more, the representation did not depict that person as being under the age of eighteen years. (6) Defences — Where the accused is charged with an offence under subsection (2), (3) or (4), the court shall find the accused not guilty if the representation or written material that is alleged to constitute child pornography has artistic merit or an educational, scientific or medical purpose. (7) Other provisions to apply — Subsections 163(3) to (5) apply, with such modifications as the circumstances require, with respect to an offence under subsection (2), (3) or (4). Criminal Law Amendment Act, 2001, S.C. 2002, c. 13 Section 163.1 was amended by S.C. 2002, c. 13, s. 5(2) by replacing the portion of subsection 163.1(3) before paragraph (a) with the following: (3) Distribution, etc. of child pornography — Every person who trans- mits, makes available, distributes, sells, imports, exports or possesses for the purpose of transmission, making available, distribution, sale or exportation any child pornography is guilty of Section 163.1 was further amended by S.C. 2002, c. 13, s. 5(3) by adding the following after subsection (4): (4.1) Accessing child pornography — Every person who accesses any child pornography is guilty of (a) an indictable offence and liable to imprisonment for a term not exceeding five years; or (b) an offence punishable on summary conviction. (4.2) Interpretation — For the purposes of subsection (4.1), a person accesses child pornography who knowingly causes child pornography to be viewed by, or transmitted to, himself or herself. Section 163.1 was further amended by S.C. 2002, c. 13, s. 5(4) by replacing subsections (6) and (7) with the following: (6) Defences — Where the accused is charged with an offence under subsection (2), (3), (4) or (4.1), the court shall find the accused not guilty if the representation or written material that is alleged to constitute child pornography has artistic merit or an educational, scientific or medical purpose. 154 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

(7) Other provisions to apply — Subsections 163(3) to (5) apply, with such modifications as the circumstances require, with respect to an offence under subsection (2), (3), (4) or (4.1). An Act to amend the Criminal Code (protection of children and other vulnerable persons) and the Canada Evidence Act, S.C. 2005, c. 32 Section 163.1 was amended by striking out the word “or” at the end of paragraph 163.1(1)(a) and by replacing paragraph (b) with the following (S.C. 2005, c. 32, s. 7(1); in force November 1, 2005): (b) any written material, visual representation or audio recording that advocates or counsels sexual activity with a person under the age of eighteen years that would be an offence under this Act; (c) any written material whose dominant characteristic is the description, for a sexual purpose, of sexual activity with a person under the age of eighteen years that would be an offence under this Act; or (d) any audio recording that has as its dominant characteristic the description, presentation or representation, for a sexual purpose, of sexual activity with a person under the age of eighteen years that would be an offence under this Act. Section 163.1 was further amended by replacing paragraphs 163.1(2)(a) and (b) with the following (S.C. 2005, c. 32, s. 7(2); in force November 1, 2005): (a) an indictable offence and liable to imprisonment for a term not exceeding ten years and to a minimum punishment of imprisonment for a term of one year; or (b) an offence punishable on summary conviction and liable to imprisonment for a term not exceeding eighteen months and to a minimum punishment of imprisonment for a term of ninety days. Section 163.1 was further amended by replacing subsection 163.1(3) with the following (S.C. 2005, c. 32, s. 7(3); in force November 1, 2005): (3) Distribution, etc. of child pornography — Every person who trans- mits, makes available, distributes, sells, advertises, imports, exports or possesses for the purpose of transmission, making available, distribution, sale, advertising or exportation any child pornography is guilty of (a) an indictable offence and liable to imprisonment for a term not exceeding ten years and to a minimum punishment of imprisonment for a term of one year; or R. v. Watts F.K. MacDonald Prov. J. 155

(b) an offence punishable on summary conviction and liable to imprisonment for a term not exceeding eighteen months and to a minimum punishment of imprisonment for a term of ninety days. Section 163.1 was further amended by replacing paragraphs 163.1(4)(a) and (b) with the following (S.C. 2005, c. 32, s. 7(4); in force November 1, 2005): (a) an indictable offence and liable to imprisonment for a term not exceeding five years and to a minimum punishment of imprisonment for a term of forty-five days; or (b) an offence punishable on summary conviction and liable to imprisonment for a term not exceeding eighteen months and to a minimum punishment of imprisonment for a term of fourteen days. Section 163.1 was further amended by replacing paragraphs 163.1(4.1)(a) and (b) with the following (S.C. 2005, c. 32, s. 7(5); in force November 1, 2005): (a) an indictable offence and liable to imprisonment for a term not exceeding five years and to a minimum punishment of imprisonment for a term of forty-five days; or (b) an offence punishable on summary conviction and liable to imprisonment for a term not exceeding eighteen months and to a minimum punishment of imprisonment for a term of fourteen days. Section 163.1 was further amended by adding the following after subsection (4.2) (S.C. 2005, c. 32, s. 7(6); in force November 1, 2005): (4.3) Aggravating factor — If a person is convicted of an offence under this section, the court that imposes the sentence shall consider as an aggravating factor the fact that the person committed the offence with intent to make a profit. Section 163.1 was further amended by replacing subsections 163.1(6) and (7) with the following (S.C. 2005, c. 32, s. 7(7); in force November 1, 2005): (6) Defence — No person shall be convicted of an offence under this section if the act that is alleged to constitute the offence (a) has a legitimate purpose related to the administration of justice or to science, medicine, education or art; and (b) does not pose an undue risk of harm to persons under the age of eighteen years. 156 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

(7) Question of law — For greater certainty, for the purposes of this section, it is a question of law whether any written material, visual representation or audio recording advocates or counsels sexual activity with a person under the age of eighteen years that would be an offence under this Act. Safe Streets and Communities Act, S.C. 2012, c. 1 Paragraph 163.1(2)(b) was replaced by the following (S.C. 2012, c. 1, s. 17(1); in force August 9, 2012): (b) an offence punishable on summary conviction and is liable to imprisonment for a term not exceeding two years less a day and to a minimum punishment of imprisonment for a term of six months. Paragraph 163.1(3)(b) was replaced by the following (S.C. 2012, c. 1, s. 17(2); in force August 9, 2012): (b) an offence punishable on summary conviction and is liable to imprisonment for a term not exceeding two years less a day and to a minimum punishment of imprisonment for a term of six months. Paragraphs 163.1(4)(a) and (b) were replaced by the following (S.C. 2012, c. 1, s. 17(3); in force August 9, 2012): (a) an indictable offence and is liable to imprisonment for a term of not more than five years and to a minimum punishment of imprisonment for a term of six months; or (b) an offence punishable on summary conviction and is liable to imprisonment for a term of not more than 18 months and to a minimum punishment of imprisonment for a term of 90 days. Paragraphs 163.1(4.1)(a) and (b) were replaced by the following (S.C. 2012, c. 1, s. 17(4); in force August 9, 2012): (a) an indictable offence and is liable to imprisonment for a term of not more than five years and to a minimum punishment of imprisonment for a term of six months; or (b) an offence punishable on summary conviction and is liable to imprisonment for a term of not more than 18 months and to a minimum punishment of imprisonment for a term of 90 days. Tougher Penalties for Child Predators Act, S.C. 2015, c. 23 Subsections 163.1(2) and (3) were replaced by the following (S.C. 2015, c. 23, s. 7(1); in force July 17, 2015): (2) Making child pornography — Every person who makes, prints, pub- lishes or possesses for the purpose of publication any child pornography R. v. Watts F.K. MacDonald Prov. J. 157 is guilty of an indictable offence and liable to imprisonment for a term of not more than 14 years and to a minimum punishment of imprisonment for a term of one year. (3) Distribution, etc. of child pornography — Every person who trans- mits, makes available, distributes, sells, advertises, imports, exports or possesses for the purpose of transmission, making available, distribution, sale, advertising or exportation any child pornography is guilty of an indictable offence and liable to imprisonment for a term of not more than 14 years and to a minimum punishment of imprisonment for a term of one year. Paragraphs 163.1(4)(a) and (b) were replaced by the following (S.C. 2015, c. 23, s. 7(2); in force July 17, 2015): (a) an indictable offence and is liable to imprisonment for a term of not more than 10 years and to a minimum punishment of imprisonment for a term of one year; or (b) an offence punishable on summary conviction and is liable to imprisonment for a term of not more than two years less a day and to a minimum punishment of imprisonment for a term of six months. 158 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

[Indexed as: R. v. Garnier] Her Majesty the Queen and Chantel Lynn Garnier, Accused Alberta Provincial Court Docket: Edmonton 130653678P1 2015 ABPC 195 D.M. Groves Prov. J. Heard: August 27, 2015 Judgment: October 5, 2015 Criminal law –––– Pre-trial procedure — Pleas — Guilty plea — Duties of court — Permitting withdrawal of plea –––– Accused was charged with one count of possession of methamphetamine for purpose of trafficking, two counts of possession of identity documents, three counts of possession of property obtained by crime and two counts of theft under — With assistance of counsel S she pleaded guilty to one count of possession of methamphetamine for purpose of trafficking, two counts of possession of identity documents and one count of theft under — When she entered her pleas she signed six page document in which she waived her rights in order to qualify for Drug Treatment Court (DTC) — Crown later revoked consent for delayed sentencing and gave notice to terminate accused from DTC program — Matter was scheduled for sentencing but before that happened accused discharged S, retained counsel and brought this application — Accused was prepared to be sentenced offences other than possession for purposes of trafficking — Her extensive and related criminal record of 24 convictions commenced in 2005 — Application dismissed — S was experienced criminal defence counsel — Accused’s plea was entered in open court and it was deemed to be voluntary since contrary was not shown by accused — Accused provided no affidavit to support her application and she chose not to testify — Plea was informed and unequivocal and she signed waiver that clearly acknowledged that she gave up her right to trial — Accused also failed to prove that S was ineffective. Cases considered by D.M. Groves Prov. J.: R. v. Alexandruk (2011), 2011 ABQB 475, 2011 CarswellAlta 1297, [2011] A.J. No. 836, 55 Alta. L.R. (5th) 348, 520 A.R. 124 (Alta. Q.B.) — followed R. v. B. (G.D.) (2000), 2000 SCC 22, 2000 CarswellAlta 348, 2000 CarswellAlta 349, 143 C.C.C. (3d) 289, [2000] S.C.J. No. 22, 32 C.R. (5th) 207, 184 D.L.R. (4th) 577, [2000] 1 S.C.R. 520, 253 N.R. 201, [2000] 8 W.W.R. 193, 81 Alta. L.R. (3d) 1, 261 A.R. 1, 224 W.A.C. 1 (S.C.C.) — followed R. v. Barai (2014), 2014 ONSC 4689, 2014 CarswellOnt 11924, [2014] O.J. No. 4028 (Ont. S.C.J.) — considered R. v. Garnier 159

R. v. Baylis (2015), 2015 ONCA 477, 2015 CarswellOnt 9644, [2015] O.J. No. 3416, 326 C.C.C. (3d) 18 (Ont. C.A.) — referred to R. v. Bhangal (2014), 2014 ONSC 6364, 2014 CarswellOnt 15448, [2014] O.J. No. 5227 (Ont. S.C.J.) — referred to R. v. C. (L.A.J.) (2005), 2005 ABPC 151, 2005 CarswellAlta 859, 382 A.R. 390, [2005] A.J. No. 770 (Alta. Prov. Ct.) — referred to R. v. Clayton (2014), 2014 ABCA 27, 2014 CarswellAlta 68, [2014] A.J. No. 46 (Alta. C.A.) — followed R. v. Djekic (2000), 2000 CarswellOnt 2891, 35 C.R. (5th) 346, 147 C.C.C. (3d) 572, 135 O.A.C. 220, [2000] O.J. No. 3041 (Ont. C.A.) — considered R. v. Downes (2012), 2012 ONCJ 45, 2012 CarswellOnt 1473, [2012] O.J. No. 414 (Ont. C.J.) — referred to R. v. Easterbrook (2005), 2005 CarswellOnt 1505, [2005] O.J. No. 1486 (Ont. C.A.) — referred to R. v. Eastmond (2001), 2001 CarswellOnt 3911, [2001] O.J. No. 4353 (Ont. C.A.) — referred to R. v. Eizenga (2011), 2011 ONCA 113, 2011 CarswellOnt 697, [2011] O.J. No. 524, 273 O.A.C. 98, 270 C.C.C. (3d) 168 (Ont. C.A.) — referred to R. v. Fiske (2014), 2014 SKQB 152, 2014 CarswellSask 357, [2014] S.J. No. 324, 447 Sask. R. 41 (Sask. Q.B.) — considered R. v. G. (G.) (2006), 2006 CarswellOnt 2122, 208 O.A.C. 348, [2006] O.J. No. 1427 (Ont. C.A.) — considered R. v. Hoang (2003), 2003 ABCA 251, 2003 CarswellAlta 1796, 182 C.C.C. (3d) 69, 339 A.R. 291, 312 W.A.C. 291, [2003] A.J. No. 1555, 25 Alta. L.R. (4th) 206, [2004] 7 W.W.R. 663 (Alta. C.A.) — followed R. v. Hughes (1987), 76 A.R. 294, 1987 CarswellAlta 384, [1987] A.J. No. 204 (Alta. C.A.) — referred to R. v. Hunt (2004), 2004 ABCA 88, 2004 CarswellAlta 221, 346 A.R. 45, 320 W.A.C. 45, [2004] A.J. No. 196 (Alta. C.A.) — referred to R. v. J. (J.J.) (1998), 126 Man. R. (2d) 295, 167 W.A.C. 295, 1998 CarswellMan 360, [1998] M.J. No. 235 (Man. C.A.) — considered R. v. Jacobs (2014), 2014 ABCA 172, 2014 CarswellAlta 828, [2014] A.J. No. 544, 312 C.C.C. (3d) 45, 577 A.R. 3, 613 W.A.C. 3 (Alta. C.A.) — considered R. v. Joanisse (1995), 44 C.R. (4th) 364, 85 O.A.C. 186, 102 C.C.C. (3d) 35, 1995 CarswellOnt 960, [1995] O.J. No. 2883 (Ont. C.A.) — considered R. v. Kuzmack (No. 2) (1955), 22 C.R. 357, 17 W.W.R. 54, 1955 CarswellAlta 66, 113 C.C.C. 286, [1955] A.J. No. 43 (Alta. C.A.) — referred to R. v. Laffin (2009), 2009 NSCA 19, 2009 CarswellNS 78, 275 N.S.R. (2d) 244, 877 A.P.R. 244, [2009] N.S.J. No. 66, 185 C.R.R. (2d) 87 (N.S. C.A.) — referred to R. v. McCollum (2008), 2008 NSCA 36, 2008 CarswellNS 188, 264 N.S.R. (2d) 273, 847 A.P.R. 273 (N.S. C.A.) — referred to 160 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

R. v. McLaughlin (2013), 2013 NBCA 28, 2013 CarswellNB 194, 2013 Car- swellNB 195, [2013] N.B.J. No. 121, [2013] A.N.B. No. 121, 1045 A.P.R. 358, 403 N.B.R. (2d) 358 (N.B. C.A.) — followed R. v. Moser (2002), 2002 CarswellOnt 487, 163 C.C.C. (3d) 286, [2002] O.J. No. 552, [2002] O.T.C. 119 (Ont. S.C.J.) — referred to R. v. Noskiye (1996), 181 A.R. 105, 116 W.A.C. 105, 1996 CarswellAlta 135, [1996] A.J. No. 141 (Alta. C.A.) — referred to R. v. Rajaeefard (1996), 46 C.R. (4th) 111, 104 C.C.C. (3d) 225, 87 O.A.C. 356, 27 O.R. (3d) 323, 1996 CarswellOnt 73, [1996] O.J. No. 108 (Ont. C.A.) — considered R. v. Raynor (2014), 2014 ABQB 449, 2014 CarswellAlta 1340, [2014] A.J. No. 847, 591 A.R. 95 (Alta. Q.B.) — referred to R. v. Redlick (1996), 75 B.C.A.C. 241, 123 W.A.C. 241, 1996 CarswellBC 2078, [1996] B.C.J. No. 2289 (B.C. C.A. [In Chambers]) — followed R. v. Roy (2007), 2007 NBCA 75, 2007 CarswellNB 535, 2007 CarswellNB 536, [2007] N.B.J. No. 411 (N.B. C.A.) — considered R. v. Sterling (2007), 2007 SKPC 66, 2007 CarswellSask 280, 300 Sask. R. 22 (Sask. Prov. Ct.) — considered R. v. Sutton (2012), 2012 NLCA 35, 2012 CarswellNfld 198, [2012] N.J. No. 204, 1004 A.P.R. 214, 323 Nfld. & P.E.I.R. 214 (N.L. C.A.) — referred to R. v. T. (J.G.) (2003), 2003 BCCA 1, 2003 CarswellBC 2, [2003] B.C.J. No. 1, 178 B.C.A.C. 29, 292 W.A.C. 29 (B.C. C.A.) — referred to R. v. T. (R.) (1992), 17 C.R. (4th) 247, 10 O.R. (3d) 514, 58 O.A.C. 81, 1992 CarswellOnt 117, [1992] O.J. No. 1914 (Ont. C.A.) — considered R. v. Wetmore (2003), 2003 ABQB 350, 2003 CarswellAlta 571, [2003] A.J. No. 485, 338 A.R. 144, [2004] 7 W.W.R. 527, 27 Alta. L.R. (4th) 305 (Alta. Q.B.) — referred to R. v. Williams (2012), 2012 BCCA 314, 2012 CarswellBC 2185, [2012] B.C.J. No. 1522, 324 B.C.A.C. 166, 551 W.A.C. 166 (B.C. C.A.) — followed Statutes considered: Canadian Charter of Rights and Freedoms, Part I of the Constitution Act, 1982, being Schedule B to the Canada Act 1982 (U.K.), 1982, c. 11 s. 11(b) — considered Controlled Drugs and Substances Act, S.C. 1996, c. 19 Generally — referred to s. 4(1) — considered s. 5(1) — considered s. 5(2) — considered Criminal Code, R.S.C. 1985, c. C-46 Generally — referred to s. 56.1 [en. 2009, c. 28, s. 1] — considered s. 145(3) — considered s. 334(b) — considered R. v. Garnier D.M. Groves Prov. J. 161

s. 344(b) — referred to s. 355(b) — considered s. 606 — considered s. 606(1.1) [en. 2002, c. 13, s. 49(1)] — considered s. 606(1.1)(b) [en. 2002, c. 13, s. 49(1)] — referred to s. 606(1.2) [en. 2002, c. 13, s. 49(1)] — referred to s. 657.3 [en. 1997, c. 18, s. 80] — considered s. 720(2) — considered s. 742.6 [en. 1995, c. 22, s.] — considered

APPLICATION by accused to strike guilty plea.

J. Martin, for Crown A. Attia, for Accused

D.M. Groves Prov. J.: I. Introduction 1 On June 6, 2013 Ms. Garnier was arrested for a theft that she committed at the Home Depot on May 21, 2013. The Loss Prevention Officer recognized Ms. Garnier when she returned to the Home Depot on June 6, 2013. The police were called, Ms. Garnier was arrested, and upon conducting a search incidental to arrest Ms. Garnier was found with 2 pack- ages of methamphetamine in her purse, one package weighed 55.5 grams and the second package weighed .6 grams. She also had .2 grams of methamphetamine hidden on her person. In her wallet police found two drivers’ licenses in different names. Ms. Garnier was charged with eight offences: possession of methamphetamine for the purpose of trafficking contrary to s. 5(2) Controlled Drugs and Substances Act (CDSA); two counts of possession of identity documents contrary to s. 56.1 Criminal Code (C.C.); three counts of possession of property obtained by crime contrary to s. 355(b) C.C.; and two counts of theft under contrary to s. 334(b) C.C. 2 On November 26, 2014, with the assistance of counsel, (hereinafter referred to as Mr. S), Ms. Garnier pled guilty to count #1 — s. 5(2) CDSA; count #2 — s. 56.1 C.C.; count #3 — s. 56.1 C.C.; and count #7 — s. 334(b) C.C. Pursuant to s. 720(2) C.C. Ms. Garnier’s sentence was delayed so that she could participate in the Edmonton Drug Treat- ment Court (“DTC”) program. 3 On April 22, 2015 Ms. Garnier was terminated from DTC for lack of compliance and the matter was adjourned for sentencing. 162 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

4 The matter was before the Court for sentencing on May 27, 2015. On this date, Ms. Garnier advised that she had discharged Mr. S and had retained new counsel. The matter was further adjourned to June 3rd, June 17th, July 6th and finally to August 27th, 2015.

II. Defence Application 5 On August 27th, 2015 Defence counsel made an application to strike Ms. Garnier’s guilty plea only on Count #1 — possession of methamphetamine for the purpose of trafficking contrary to s. 5(2) CDSA. Ms. Garnier was prepared to be sentenced on the remaining offences. 6 Defence counsel puts forth three arguments in support of this application: 1. Ms. Garnier’s plea was not voluntary. 2. Ms. Garnier’s decision to enter a guilty plea was not an informed decision. Defence advances two arguments in support of this proposition: i. Ms. Garnier was not provided full disclosure. ii. The Crown had not provided Ms. Garnier with an expert report that would support the offence that the drugs found in her purse were possessed for the purpose of trafficking. 3. And finally, when Ms. Garnier entered her plea, she never admitted the essential elements of the offence of trafficking, therefore her plea was not unequivocal. 7 The premise of Defence counsel’s assertions that Ms. Garnier’s plea was not informed or unequivocal is based on an ineffectiveness of counsel claim.

II. Evidence 8 In support of this application, the Court was provided with the following evidence: A. An Affidavit from Mr. S; B. Sworn testimony of Mr. S; C. The criminal record of Ms. Garnier provided under Tab 1 of Ex- hibit H-1; R. v. Garnier D.M. Groves Prov. J. 163

D. An Edmonton Drug Treatment and Restoration Court Track 2 Waiver included under Tab 2 of Exhibit H-2 signed by Ms. Gar- nier (also entered as S-1 on the court file); E. The late disclosed DVD (Exhibit H-4); F. A letter from the Crown’s office to Mr. S dated July 28th, 2014 advising that Ms. Garnier was eligible to apply for DTC (Exhibit H-5). G. In addition, this Court reviewed the Information and court endorsements along with the transcripts of the court proceedings from October 15, 2014 and November 26, 2014. 9 Ms. Garnier’s criminal record commenced in 2005 and includes the following convictions: six s. 145(3) C.C. convictions; three conditional sentence order breaches contrary to s. 742.6 C.C.; nine property related convictions; three convictions for possessing drug contrary to s. 4(1) CDSA; and three trafficking convictions contrary to s. 5(1) CDSA. On Ms. Garnier’s two most recent convictions for trafficking she received a two year jail sentence to be served concurrent to one another. In relation to her first in time conviction for trafficking Ms. Garnier received a 23 month conditional sentence order which sentence was ultimately collapsed. 10 When Ms. Garnier entered her pleas on November 26, 2014 she signed the Edmonton DTC Track 2 Waiver. The Waiver is a 6 page document. Of relevance to this application are pages 1 and 2, which are reproduced below: EDMONTON DRUG TREATMENT AND COMMUNITY RESTO- RATION COURT WAIVER — TRACK 2 The ‘Track 2’ program is designed for offenders who are charged with trafficking and/or possession for the purpose of trafficking of a controlled drug or substance pursuant to the CDSA and any Criminal Code offences (usually property — related offences and communication for the purpose of prostitution) where the underlying reason for the offences(s) is the offender’s addiction to drugs/controlled substances. The offender will also have a demonstrable dependence on cocaine, heroin, methamphetamine or other opiates. Upon successful completion of a drug treatment program, Track 2 participants are candidates for a non-custodial sentence. I, CHANTEL LYNN GARNIER, understand that I am charged with: Information #130653678P1 164 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

5(2) CDSA 56.1 x 2 355(B) CC x 3 3349(b) (sic) x 2 I have read the reports to Crown counsel containing a summary of the evidence against me. I have spoken to a lawyer about the charges including whether there are any defences to the charge or any weaknesses in the evidence against me. I do not want a trial. I will give up my right to plead not guilty. I choose to take part in a drug treatment program approved by the court and remain under the supervision of the court (the “Program” hereafter referred to). I understand to be considered for acceptance into the Program I must: • waive my right to be tried within a reasonable time, as per my right under section 11(b) of the Canadian Charter of Rights and Freedoms, until my application is approved and the 60 day grace period has expired, or until my application is denied • plead guilty to the offence(s) • give information about my background • give my history of drug use • voluntarily undergo random drug testing (urinalysis and/or blood or saliva) • participate in an intensive treatment program I understand that at any time within the first 60 day “grace” period I can leave the Program if I choose. My guilty plea will be struck and I will be referred back to the regular court system. ... 11 In order to advance her arguments Ms. Garnier confirmed to this Court that she was waiving any solicitor-client privilege between herself and Mr. S. 12 Ms. Garnier did not submit an Affidavit in support of her application, nor did she provide viva voce testimony at the hearing. 13 The evidence received from previous counsel, Mr. S, was the following: a. Ms. Garnier initially advised him that she had no knowledge of the drugs in her purse. Mr. S testified that: “...she had initially provided an explanation of how they [the drugs] got there, which, if believed — and I say “if R. v. Garnier D.M. Groves Prov. J. 165

believed” — could provide a defence. I can also advise the Court I also provided her early on my opinion as to how meritorious that argument would be, and that in my own opinion that it had — did not have a great success at trial. At the end of the day, after that consultation, she advised me she wanted to get into drug court, she wanted to deal with it, and as such I moved forward from that point.” [Emphasis added] b. Ms. Garnier never admitted that she had knowledge of the drugs nor did she profess her innocence. c. Mr. S testified that he followed his standard practice regarding s. 606(1.1) C.C. Mr. S described his practice as instructing Ms. Garnier her pleas needed to be voluntary, that she would be giving up her right to a trial, there would be consequences inside and outside of the courtroom as the result of her plea. He advised her that any positive defences that she might have to the offences would be given up by her plea and that the issue of sentencing would ultimately be up to the judge. Mr. S also testified that he canvassed with Ms. Garnier the DTC waiver and the requirements of DTC program and DTC protocols. 14 When asked how Mr. S could have admitted to the facts read in by the Crown if Ms. Garnier had told him she had no knowledge of the drugs, Mr. S testified that after the Crown read in the facts and prior to admitting to them on the record, he looked at Ms. Garnier who affirmed those facts by nodding her head.

III. Background A. Prior to Plea 15 Ms. Garnier was charged on June 6, 2013. On June 14, 2013 Mr. S appeared with Ms. Garnier and was endorsed as counsel of record. 16 On September 18, 2013 Ms. Garnier appeared in court with Mr. S. The endorsement indicates that Ms. Garnier was applying for Drug Treatment Court. The matter was further adjourned to September 20, Oc- tober 18, and November 8, 2013. 17 On November 8, 2013, Ms. Garnier with the assistance of Mr. S elected to be tried by a Provincial Court Judge, and a two day trial was scheduled commencing October 23, 2014. 166 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

18 There is no evidence to indicate when Ms. Garnier submitted her application for DTC, but on July 28, 2014 the Crown sent Mr. S a letter advising that Ms. Garnier was assessed as an eligible candidate for the DTC program. Ms. Garnier’s matter was brought forward from the trial date of October 23, 2014 to appear in the regularly scheduled sitting of DTC on August 27, 2014. 19 From August 27 to October 15, 2014 Ms. Garnier appeared weekly in DTC. The court endorsements indicate that she was on the “DTC waitlist”. 20 As of October 15, 2014 Ms. Garnier was approved for the DTC program. She was advised on this date that the team was working on a treatment plan and it was anticipated that they would be ready to accept her into the program in the near future. When Ms. Garnier was informed of this progress she advised the Court that she was also awaiting further disclosure of a DVD. 21 This Court voiced its surprise with Ms. Garnier’s request for further disclosure at such a late date in the proceedings and subsequent to being approved for DTC. Nonetheless, as the October 15, 2014 transcript reveals, her request to adjourn for receipt of the DVD was granted. The final exchange on October 15 was as follows: THE COURT: So, Ms. Garnier, you are still eligible for Drug Treat- ment Court. It may be that you are delayed, but ... THE ACCUSED: Yeah, I just don’t want to go into anything blindly, and I think that it is only fair for me to see my disclosure, right, before anything. THE COURT: Sure. THE ACCUSED: Thank you. [Emphasis added]. 22 The matter of the pending trial date was discussed on October 15, 2014. Crown and Defence both agreed that the DVD disclosure would not be available in time to proceed with the October 23rd trial and as such the trial date was vacated. Mr. S advised at this time that Ms. Garnier was still interested in participating in the DTC program. 23 The matter was adjourned into DTC for October 22, subsequently to October 29, November 5, November 12, November 19, and November 26th, 2014. As such, Ms. Garnier’s matter was adjourned for an additional 6 weeks in order for her to receive the requested DVD disclosure. R. v. Garnier D.M. Groves Prov. J. 167

24 This Court was advised by the Crown that the DVD disclosure was completed on October 28, 2014. Defence counsel did not dispute this fact.

B. Entering the Plea 25 On November 26, 2014 Ms. Garnier appeared in Court with Mr. S and the following exchange took place: [MR. S]: At this time Ms. Garnier offers pleas of guilty to Counts 1, 2, 3 and 7. 606(1.1) has been canvassed, all answers in the affirmative. I am satisfied she meets the criteria of those sections. THE COURT: Thank you. Particulars MR. HILL: On May 21st of 2013 at 2059 hours, Ms. Garnier stole a Dyson vacuum valued at $200 from the Home Depot in Edmonton, Alberta. A short time later returned to the store, selected a Moen faucet for $400. She proceeded to a self- checkout, presented a receipt for a different Moen faucet that was previously purchased by another female observed with the accused. This incident was investigated on May 25th. Po- lice were notified May 27th. The accused had yet to be identified or arrested. On June 6th at 9:12 p.m. the loss prevention officer observed the accused inside the store and called police. The loss prevention officer recognized the accused from — after reviewing the surveillance video of the theft. The police arrived at 9:18 and took the accused into custody without incident. While conducting a search incidental to a lawful arrest located two operator licences belonging to Katrina Carrols (phonetic) and Leanne Galisto (phonetic) in the accused’s pocket — or, in her wallet, rather, sorry. In the accused’s purse police found a Ziploc bag containing approximately 55 1/2 grams of methamphetamine and a small baggie containing 0.6 grams of methamphetamine. She was found to have $340 in her wallet and the bills were arranged by denomination, also $60 in her purse for a total of $400 in Canadian currency, also a small baggie containing approximately 0.2 grams of methamphetamine on her person. A total estimated street value of the drugs was between $3,378 and $4,504. Her iPhone cell phone was ringing persistently. Police were unable to answer it and the battery subsequently died. Are those facts admitted? 168 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

[MR. S]: The facts are admitted, Ma’am. MR. HILL: Thank you. [MR. S]: With respect to the funds that were in the purse she — that of course is not a charge that is before the Court. She — she is emphatic that that money had nothing to do with the drugs that were in her purse. But she is — THE COURT: Madam clerk, can I see that Information again? I just want to check something. MR. HILL: Your Honour, if I could — THE COURT: Yes MR. HILL: — tender as Exhibit 1 on sentencing the waiver for the Drug Treatment Court signed by the accused after having — [MR. S]: I can advise the Court that I read it to her and she signed it. THE COURT: All right. [MR. S]: She had no questions. THE COURT: She understands the waiver? No questions? THE ACCUSED: Yes. THE COURT: You understand the waiver? THE ACCUSED: Yeah. THE COURT: Thank you. [Emphasis added]. 26 Ms. Garnier signed the Edmonton Drug Treatment Court Track 2 Waiver which was entered as Exhibit S1.

C. Post-plea 27 Between November 26, 2014 and April 22nd, 2015 Ms. Garnier appeared in court every Wednesday afternoon that DTC was sitting. 28 On April 22nd, 2015 the Crown revoked its consent for delayed sentencing and gave notice to terminate Ms. Garnier from the DTC program. No issue has been taken regarding Ms. Garnier’s termination. 29 The matter was adjourned to May 27, 2015 for sentencing. On May 27th, the Court was advised that Ms. Garnier had discharged her counsel, Mr. S, and new counsel had been retained. 30 On August 27, 2015 Defence counsel applied to strike Ms. Garnier’s guilty plea on the s. 5(2) CDSA offence. R. v. Garnier D.M. Groves Prov. J. 169

IV. Issues A. Who bears the burden on an application to strike a guilty plea? B. What is that burden? C. Should Ms. Garnier’s guilty plea on the s. 5(2) CDSA offence be struck? a. Was Ms. Garnier’s plea voluntary? b. Was Ms. Garnier’s plea informed? c. Was Ms. Garnier’s plea unequivocal? D. How does an ineffectiveness of counsel claim affect Ms. Garnier’s application to strike her guilty plea?

V. The Law A. Criminal Code 31 The statutory provisions governing the entering of a guilty plea are found in s. 606 C.C. 32 Although advisable, the accused does not personally need to enter the guilty plea. Defence counsel may enter the plea of guilty on behalf of the accused and admit the material facts as related to the court by Crown counsel: R. v. Kuzmack (No. 2), [1955] A.J. No. 43 (Alta. C.A.) at para. 16 (Kuzmack); R. v. T. (J.G.), 2003 BCCA 1 (B.C. C.A.) at para. 19 (T. (J.G.)); E.G. Ewaschuk, Criminal Pleadings and Practice in Canada, loose-leaf, 2d ed. vol. 1 (Toronto: Canada Law Book, 2013) at para. 14:2160 (Ewaschuk); and Clayton C. Ruby, Gerald J. Chan and Nader R. Hasan, Sentencing, 8th ed. (Markham, Ontario: LexisNexis, 2012) at p. 67, §3.32 (Sentencing). 33 Subsections 606(1.1) C.C. sets out what a court must consider when determining whether to accept a guilty plea. Section 606(1.1) C.C. states: (1.1) A court may accept a plea of guilty only if it is satisfied that the accused (a) is making the plea voluntarily; and (b) understands (i) that the plea is an admission of the essential elements of the offence, (ii) the nature and consequences of the plea, and (iii) that the court is not bound by any agreement made between the accused and the prosecutor. 170 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

34 Where the accused is represented by counsel, particularly experienced criminal defence counsel, a trial judge is generally not under an obligation to conduct a section 606 C.C. inquiry to determine whether the accused understands that the plea is an admission of the essential elements of the offence, as well as the nature and consequences of a plea of guilty to a particular charge: R. v. T. (J.G.) at paras. 19 and 20. 35 Discussing the extent of a judge’s duty to conduct a section 606 inquiry, the Alberta Court of Appeal in R. v. Hoang, 2003 ABCA 251 (Alta. C.A.) (Hoang) explained: The duty...does not require the judge to make inquiry in every case. As the majority of the Supreme Court of Canada held in Brosseau and Adgey, where the accused is represented by counsel and tenders a plea of guilty, the trial judge before accepting it is not bound, as a matter of law, to interrogate the accused. Where the accused has had the benefit of advice from experienced criminal defence counsel and an opportunity to consider that advice, the court is entitled to pre- sume the accused’s plea was validly made. Hoang at para. 23 36 Even where an accused is not represented by counsel at the time the pleas were entered, a guilty plea will not be struck because the Court failed to conduct a thorough s. 606(1.1) C.C. inquiry, unless there was reason to doubt the validity of the plea (s. 606(1.2) C.C. and R. v. T. (R.), [1992] O.J. No. 1914 (Ont. C.A.) at para. 43 (R. v. T. (R.)).

B. General Principles 37 For a guilty plea to be valid, it must be voluntary, informed and unequivocal. See: R. v. Noskiye, [1996] A.J. No. 141 (Alta. C.A.) at para. 5 (Noskiye); Hoang at para. 29; R. v. Clayton, 2014 ABCA 27 (Alta. C.A.) at para. 11 (Clayton); and R. v. Bhangal, 2014 ONSC 6364 (Ont. S.C.J.) at para. 19 (Bhangal). 38 The New Brunswick Court of Appeal in R. v. McLaughlin, 2013 NBCA 28 (N.B. C.A.) (McLaughlin) held that an applicant seeking to set aside his or her guilty plea must be able to demonstrate that: (i) He was unaware of the allegations made against him in the charge; (ii) He was unaware of the effect and potential consequences of his plea; (iii) The plea was not made voluntarily; and (iv) The plea was equivocal in nature. R. v. Garnier D.M. Groves Prov. J. 171

McLaughlin at para. 10 39 As suggested by the Court of Appeal in R. v. Shaw, 2015 ABCA 25 (Alta. C.A.) at para. 11 (Shaw), “[a] guilty plea should only be vacated in exceptional circumstances”.

1. Voluntariness of the Guilty Plea 40 A guilty plea must be voluntary, meaning that the plea is made by the accused in a conscious, volitional manner for reasons which the accused deemed appropriate. The accused cannot have been forced, coerced, pressured, tricked, induced or persuaded by the oppressive conduct of another person into making the guilty plea. See: R. v. Downes, 2012 ONCJ 45 (Ont. C.J.) at para. 11 (Downes); Clayton at para. 11 and R. v. Moser, [2002] O.J. No. 552 (Ont. S.C.J.) at para. 33 (Moser). 41 “A guilty plea in open court is presumed to be voluntary unless the contrary is shown”. R. v. T. (R.) at para. 16. 42 In assessing whether the guilty plea was voluntary, the Court may consider the following questions: (1) was the accused represented by experienced counsel; (2) was the accused apprised of his position in law; (3) did the accused have a defence; (4) was the plea given in circumstances that amounted to pressure on him to do so; and (5) what was the experience of the accused with the criminal justice system? See: R. v. Sutton, 2012 NLCA 35 (N.L. C.A.) at para. 16 (Sutton). 43 In R. v. Djekic, [2000] O.J. No. 3041 (Ont. C.A.), the Court of Appeal set aside a guilty plea after finding the presiding judge had put significant pressure on the accused to make a decision whether she was going to plead guilty that day or risk being arrested on new charges if she did not. There was no question that the accused was distraught, she was concerned about the immediate needs of her child and what would happen if she were arrested, the potential for a penitentiary sentence if she did not accept a plea, as well as the fact that she had not attended court on that day prepared to consider the full disposition of her charge. 44 R. v. Rajaeefard, [1996] O.J. No. 108 (Ont. C.A.) involved a guilty plea being struck when a law student appeared and requested an adjournment on the day of trial for an accused who had only recently attended the Student Legal Services office. The student advised the court they had 172 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

not received disclosure and were not in a position to conduct a trial on behalf of the accused. The court adjourned proceedings and took the student and Crown counsel in the back hallway for an off-the-record discussion. The judge denied the student’s request that the accused be allowed to be present at the discussion. The judge then proceeded to advise the student that no adjournment would be granted and that if the accused pled guilty he would be imposing a suspended sentence and probation, but if the accused was convicted after a trial, he would impose a period of incarceration. The student advised the accused of the court’s off-the- record comments. Upon being advised of what had transpired with the judge, the accused who had intended to plead not guilty entered a guilty plea. The Court of Appeal found the trial judge improperly pressured the appellant to plead guilty, and therefore, the appellant’s plea was not freely and voluntarily given.

2. Informed Guilty Plea 45 The validity of a guilty plea depends on the notion that the accused was informed when making the plea (Moser at para. 34). An informed plea is a plea entered by an accused who is aware of the nature of the allegations made against him, the effect of his plea, and the consequences of the plea (Bhangal at para. 20). Prior experience with the justice system may weigh as a factor in determining whether the accused knows how the court process works and how the pleas are entered (Moser at para. 35). 46 In considering whether to strike a guilty plea the judge should decide whether a reasonable and properly informed person put in the same situation would have pled guilty if they knew the relevant essentials (Ewas- chuk CED at 14:2016). 47 In R. v. J. (J.J.), [1998] M.J. No. 235 (Man. C.A.), the Court of Ap- peal allowed the appellant’s application to withdraw his guilty plea. In arriving at their decision the Court of Appeal took into consideration the testimony of the appellant at the hearing wherein the appellant had consistently maintained he had no memory of the shooting for which he was charged; along with statements received in evidence from two jailhouse informants purporting that another inmate had confessed to this shooting. R. v. Garnier D.M. Groves Prov. J. 173

3. Unequivocal 48 A plea is considered to be ‘equivocal’ if it was unintended, confusing, qualified, modified or uncertain in terms of the admission of the elements of the offence (Bhangal at para. 20). 49 In R. v. Roy, [2007] N.B.J. No. 411 (N.B. C.A.), the accused sought leave to appeal from three convictions of possession for the purpose of trafficking. After entering pleas of guilty to the charges, the accused told the sentencing judge that the drugs were for his own use. The Court of Appeal found the sentencing judge should have rejected the guilty pleas. The appeal was allowed and a new trial ordered.

C. Ineffectiveness of Counsel 50 The fact that an accused was “represented by counsel” prior to and at the time of entering the guilty plea is a “significant factor” militating against an application to set aside a guilty plea: R. v. McCollum, 2008 NSCA 36 (N.S. C.A.) at para. 10. This is because where a guilty plea is entered by an accused represented by counsel, and in particular experienced criminal defence counsel, there is a strong presumption that the guilty plea is valid: R. v. Eastmond, [2001] O.J. No. 4353 (Ont. C.A.) at para. 6; Hoang at para. 23; R. v. Eizenga, 2011 ONCA 113 (Ont. C.A.) at paras. 4 and 45; R. v. Laffin, 2009 NSCA 19 (N.S. C.A.), at 44; Downes at para. 13; R. v. Raynor, 2014 ABQB 449 (Alta. Q.B.) at para. 41 (Ray- nor); and Moser at para. 37. 51 The general approach to a claim of counsel ineffectiveness was considered by the Supreme Court of Canada in R. v. B. (G.D.), 2000 SCC 22 (S.C.C.) (B. (G.D.)). The Supreme Court advised: The approach to an ineffectiveness claim is explained in Strickland v. Washington, 466 U.S. 688 (1984), per O’Connor J. The reasons contain a performance component and a prejudice component. For an appeal to succeed, it must be established, first, that counsel’s acts or omissions constituted incompetence and second, that a miscarriage of justice resulted. Incompetence is determined by a reasonableness standard. The analysis proceeds upon a strong presumption that counsel’s conduct fell within the wide range of reasonable professional assistance. The onus is on the appellant to establish the acts or omissions of counsel that are alleged not to have been the result of reasonable professional judgment. The wisdom of hindsight has no place in this assessment. ... 174 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

In those cases where it is apparent that no prejudice has occurred, it will usually be undesirable for appellate courts to consider the performance component of the analysis. The object of an ineffectiveness claim is not to grade counsel’s performance or professional conduct. The latter is left to the profession’s self-governing body. If it is appropriate to dispose of an ineffectiveness claim on the ground of no prejudice having occurred, that is the course to follow (Strickland, supra, at p. 697). B. (G.D.) at paras. 26, 27 and 29 Also see R. v. Baylis, 2015 ONCA 477 (Ont. C.A.) at paras. 61 and 62 52 In R. v. G. (G.), [2006] O.J. No. 1427 (Ont. C.A.) (G.(G.)), the accused unsuccessfully sought to strike his guilty pleas claiming he did not commit the acts relied on by the Crown, that his trial counsel was incompetent, and that his pleas were involuntary. The Ontario Court of Appeal, relying upon the above-noted sentiments in B. (G.D.), explained the test for demonstrating the incompetence of counsel, suggesting it includes two components: a performance component, involving an assessment of counsel’s conduct on a reasonableness standard; and a prejudice component, requiring an appellant to establish that counsel’s conduct occasioned a miscarriage of justice: see R. v. B. (G.D.) [2000] 1 S.C.R. 520 (S.C.C.). G. (G.) at para. 4 53 More recently in R. v. Barai, 2014 ONSC 4689 (Ont. S.C.J.) (Barai), Justice Daley recommended that a three-stage approach be adopted by Courts when scrutinizing claims of ineffective representation by counsel. The Court suggested that in order to succeed in a claim of ineffective assistance of trial counsel, an appellant must establish: “(i) the facts on which the claim of incompetence is based; (ii) that the representation provided by trial counsel was incompetent - the performance component of the test; and (iii) that the incompetent representation resulted in a miscarriage of justice - the prejudice component of the test: R. v. B. (M.), 2009 ONCA 524 (Ont. C.A.), at para 8, [2009] O.J. No. 2653 (Ont. C.A.); see also: R. v. Taylor, 2012 ONSC 2920 (Ont. S.C.J.) at para 14, [2012] O.J. No. 2326 (Ont. S.C.J.).” Barai at para. 34 R. v. Garnier D.M. Groves Prov. J. 175

54 In considering the three-stage assessment, Justice Daley began with an inquiry into the prejudice component of an ineffective assistance of counsel claim. “If the appellant cannot demonstrate prejudice from the alleged ineffective assistance of counsel, it is unnecessary to address the competence of counsel at the time the guilty pleas were taken” (para. 35). 55 According to Justice Daley: Prejudice can be established if the appellant can show that there is a reasonable probability that but for the alleged incompetence, the result of the proceeding would have been different. A reasonable probability in this context is a probability that is sufficiently strong to undermine the appellate court’s confidence in the validity of the verdict. As was stated by Doherty J.A. in R. v. Joanisse (1995), 102 C.C.C. (3d) 35 (Ont. C.A.), at p 64: “A reasonable probability is established when the reviewing court is satisfied that because of counsel’s incompetence, the verdict cannot be taken as a reliable assessment of the appellant’s culpability.” See also: R. v. B. (M.) 2009 ONCA 524 (Ont. C.A.) at para 10. [Emphasis added] Barai at para. 36 56 Justice Daley continued: “The standard to consider in relation to the performance component of the test is one of reasonableness. Hindsight has no place in this assessment: R. v. B. (G.D.), 2000 SCC 22 (S.C.C.) at para 27, R. v. B. (G.D.), [2000] 1 S.C.R. 520 (S.C.C.)” (Barai at para. 37). 57 In Barai, counsel acknowledged he did not conduct a plea inquiry with the appellant in accordance with s. 606 C.C. by diligently reviewing each relevant subsection. Notwithstanding, Justice Daley concluded, based on counsel’s testimony, that he made proper inquiries and observations to be satisfied that the appellant was making voluntary pleas and that he understood the factors contained in s. 606 (1.1)(b) C.C. 58 Further, Justice Daley was satisfied that the appellant’s counsel “did properly and adequately consider with him any possible defences available with respect to the charges ...” (para. 43). 59 Other ineffectiveness of counsel cases are so fact specific to be of limited utility. 60 R. v. Fiske, 2014 SKQB 152 (Sask. Q.B.) involved an applicant who was not present when his counsel changed his not guilty plea to guilty during a telephone conversation with a Provincial Court Judge. During the sentencing hearing, the applicant denied the facts that were alleged 176 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

which denial the appellate court found constituted “more evidence that the elements covered by s. 606(1.1) had not, probably, been complied with by counsel” (para. 15). The application for expungement of the guilty plea was allowed and a trial ordered. 61 In R. v. Sterling, 2007 SKPC 66 (Sask. Prov. Ct.) the Court set aside the accused’s guilty plea, putting significant weight on the testimony of the accused.

D. Burden of Proof 62 A guilty plea is presumed to be voluntary: T. (J.G.) at para. 17. 63 The onus is on the accused to show on a balance of probabilities that the guilty plea was invalid: R. v. Easterbrook, [2005] O.J. No. 1486 (Ont. C.A.) para. 5 (Easterbrook) or that maintaining the guilty plea would result in a miscarriage of justice: R. v. Hughes, [1987] A.J. No. 204 (Alta. C.A.) at para. 10 (Hughes); Clayton at para. 30; and Hoang at para. 28. 64 Upon reviewing Alberta cases involving an application by the accused to strike his/her guilty plea, it was found that the Court was provided with either an affidavit sworn by the accused/applicant or the accused testified at the hearing of the application. See: Hoang at para. 9; R. v. Hunt, 2004 ABCA 88 (Alta. C.A.) at para. 10 (Hunt); R. v. Noskiye at para. 4; Raynor at para. 25; R. v. C. (L.A.J.), 2005 ABPC 151 (Alta. Prov. Ct.) at para. 9 (R. v. C. (L.A.J.)); and R. v. Wetmore, 2003 ABQB 350 (Alta. Q.B.) at para. 34 (Wetmore). 65 In those cases where the applicant did not swear an affidavit or testify, the Court concluded that the applicant failed to meet the aforemen- tioned onus. For example, in Clayton, the applicant contended that his convictions should be set aside because the trial judge coerced or threatened him, and he was led to believe that if he pled guilty a joint submission for a lighter sentence would be put before the Court. The Alberta Court of Appeal noted that the applicant offered no affidavit evidence describing the circumstances or contents of the threat or coercive action he was alleging, and therefore there was “absolutely no evidence to support this allegation” (para. 21). In relation to the joint submission argument, again no affidavit was provided. Instead the Court noted that the applicant only offered “his own lips during argument” (para. 28). In the view of the Court of Appeal, this was insufficient to satisfy the accused’s contention that he entered his guilty pleas on the belief that the Crown would ask that he receive a lighter sentence than that which was actually imposed. R. v. Garnier D.M. Groves Prov. J. 177

66 In R. v. Alexandruk, 2011 ABQB 475 (Alta. Q.B.) (Alexandruk), Jus- tice Shelley pointed out that none of the applicant’s submissions were under oath, either by way of affidavit or viva voce testimony. As a result, “the Crown would not have had the opportunity to cross-examine him on his version of events” (para. 19). Justice Shelley ultimately concluded the applicant had not met the burden of proving that his guilty plea was invalid or that there was otherwise a miscarriage of justice in the proceedings below. 67 In R. v. Williams, 2012 BCCA 314 (B.C. C.A.) (Williams) the British Columbia Court of Appeal provided guidance as to what materials and evidence should be submitted by the applicant on an application to set aside a guilty plea. In dismissing the application to strike, the Court criti- cized the self-represented applicant for not supporting his application with an affidavit and instead attempting to rely solely on the transcript of the court proceedings when the guilty plea was entered (paras. 51 and 55). 68 In R. v. Redlick, [1996] B.C.J. No. 2289 (B.C. C.A. [In Cham- bers]) (Redlick), the British Columbia Court of Appeal said that an application to set aside a guilty plea must be supported by affidavit evidence establishing there has been a miscarriage of justice. The Court specified that where the appellant has been represented by counsel at trial “he ought to file both his own affidavit and that of his [former] lawyer” (para. 12). In addition, the appellant must also file a transcript of the proceedings of the taking of the guilty plea, submissions of counsel, and the reasons for sentence. 69 Therefore, to satisfy the onus that the accused’s guilty plea was invalid, generally the accused must provide evidence by way of affidavit or viva voce testimony attesting to the circumstances and his or her state of mind at the time that the guilty plea was made.

VII. Analysis 70 Ms. Garnier, through her counsel Mr. S, entered guilty pleas and admitted to the facts alleged by the Crown. Such practice is common and allowable (Kuzmack at para. 16; R. v. T. (J.G.) at para. 19; Ewaschuk at para. 14:2160; Sentencing, 8th ed. at p. 67, 3.32). 71 Since Ms. Garnier was represented by Mr. S, experienced criminal defence counsel, there is no obligation for the Court to conduct a thorough s. 606(1.1) C.C. analysis. The failure of the Court to conduct a thor- 178 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

ough s. 606(1.1) C.C. inquiry does not affect the validity of the plea (see s. 606(1.2) C.C. and R. v. T. (R.) at para. 43). 72 Ms. Garnier’s plea was entered in open court, therefore, the plea is deemed to be voluntary unless the contrary is shown (R. v. T. (J.G.), at paras. 16 and 19). 73 As stated by the Court in Shaw “[a] guilty plea should only be vacated in exceptional circumstances” (para. 11). 74 Ms. Garnier bears the burden on an application to strike her guilty plea (Hughes at para.10; Clayton at para. 30; Hoang at para. 28); and that burden is on a balance of probabilities (Easterbrook at para. 5). 75 Ms. Garnier provided no affidavit in support of her application, and despite being provided an opportunity to testify, she chose not to. 76 Following the reasons set out in Clayton, Alexandruk, Williams and Redlick, Ms. Garnier’s decision to provide this Court with no evidence is fatal to her application. (See also: Hoang, Hunt, Noskiye, Raynor, R. v. C. (L.A.J.), and Wetmore). Relying solely on the sworn evidence of Mr. S is insufficient (Redlick para. 12). 77 Even if the Court could accept, which it cannot, that the oral arguments and written submissions of counsel were admissible evidence, the Court would still find that Ms. Garnier’s application to strike her guilty plea fails. 78 For a guilty plea to be valid, it must be voluntary, informed and unequivocal. See Noskiye at paras. 5 and 8; Hoang at para. 29; Clayton at para. 11; Bhangal at para. 19. 79 In assessing the validity of the guilty plea, this Court can take into consideration Ms. Garnier’s experience with the criminal justice system (Sutton at para. 16; Moser at para. 35). 80 Ms. Garnier is no stranger to the criminal justice system. Ms. Garnier has a total of 24 criminal convictions, including 3 convictions for possessing drugs, and 3 convictions for trafficking in drugs.

A. Voluntariness of the Guilty Plea 81 Counsel argued that Ms. Garnier’s plea was not voluntary because she felt pressured into entering her pleas to secure a placement in DTC. Counsel argued that this pressure arose because the Court, on October 15, 2014, voiced its concern with Ms. Garnier’s disclosure request 16 months into the proceedings, and after Ms. Garnier had been informed she was an acceptable candidate for the DTC program. R. v. Garnier D.M. Groves Prov. J. 179

82 This argument is meritless. 83 Ms. Garnier requested that her pleas be delayed to allow her the opportunity to receive and review the DVD disclosure. The request was granted and the matter was adjourned for 6 weeks for that purpose. 84 Further, on October 15th, 2014, when Ms. Garnier advised the Court that she wished to receive this disclosure, the Court stated: THE COURT: So, Ms. Garnier, you are still eligible for Drug Treatment Court. It may be that you are delayed, but ... THE ACCUSED: Yeah, I just don’t want to go into anything blindly, and I think that it is only fair for me to see my disclosure, right, before anything. THE COURT: Sure. [Emphasis added]. 85 In addition, Ms. Garnier is asking this Court to find that her plea to only the s. 5(2) CDSA offence was proffered under pressure, thereby ren- dering it involuntary. However, on the same day, in relation to the same Information, with all facts read in at the same time, Ms. Garnier pled guilty to three further offences to which she is not seeking to have her pleas struck. In so doing, Ms. Garnier is accepting the guilty pleas for these further offences were entered in a conscious, volitional manner for reasons which she deemed appropriate. How can it be that Ms. Garnier felt pressured into involuntarily entering a guilty plea to the CDSA offence, while at the same time acting voluntarily and without undue influence when she entered guilty pleas to the other three offences? 86 Ms. Garnier has not established that she was pressured into entering a guilty plea on the s. 5(2) CDSA offence. This Court finds that there is nothing in the circumstances to indicate that Ms. Garnier’s plea was not voluntary.

B. Informed Guilty Plea 87 Ms. Garnier argues that her plea was not an informed plea because a DVD comprising video surveillance from Home Depot on May 21, 2013 was disclosed late. It is difficult to know what to make of this argument for several reasons. 88 First, the DVD related to the shoplifting charge. Ms. Garnier does not seek to strike the plea to that charge. Apart from providing information relating to the grounds to arrest Ms. Garnier, the DVD does not relate to 180 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

the s. 5(2) CDSA offence - the offence for which she asks the Court to strike her plea. 89 Second, on October 15, 2014, Ms. Garnier voiced her concern about receiving the DVD before entering her plea. The matters were adjourned for her to obtain this disclosure. The Crown indicated that the DVD was disclosed on October 28, 2014. Ms. Garnier’s plea was not entered until November 26, 2014. 90 The information before the Court is that she had the disclosure she sought well before she entered her plea. There is no reason to believe that she and her counsel did not have the opportunity to review the information provided by the DVD before her plea was entered. 91 Ms. Garnier also says that her plea was not an informed plea because she was not provided with an expert report relating to the s. 5(2) CDSA charge. 92 Frequently, as part of its proof of the s. 5(2) CDSA offence, the Crown provides an opinion from an expert (often a police officer) addressing various indicia of trafficking. Where such an expert is to be called at trial, under s. 657.3 C.C. the Crown is obliged to provide notice to defence that it will be calling such a witness and to provide a copy of the witness’s report, if any. 93 Given that Ms. Garnier elected to plead guilty, any further Crown trial preparation was rendered unnecessary. 94 To the extent that it is suggested that the Crown would not have been able to lead evidence to establish the s. 5(2) CDSA offence, such a suggestion is speculative at best. 95 Most significantly, in pleading guilty, Ms. Garnier gave up her right to a trial. She signed a waiver expressly acknowledging this: “I have read the reports to Crown Counsel containing a summary of the evidence against me. I have spoken to a lawyer about the charges including whether there are any defences to the charge or any weaknesses in the evidence against me. I do not want a trial. I will give up my right to plead not guilty.” (Exhibit S-1, page 1). [Emphasis added]. 96 Ms. Garnier has not established that her plea was uninformed. R. v. Garnier D.M. Groves Prov. J. 181

C. Unequivocal Guilty Plea 97 Defence counsel argued that when Ms. Garnier entered her plea, she never admitted the essential elements of the trafficking offence, therefore her plea was not unequivocal. 98 This issue was already addressed. Refer to paras. 70 - 72 above. 99 Additionally, on November 26, 2014 Ms. Garnier was present before the Court when she offered her guilty pleas and stood mute when the facts were alleged. But for qualifying, through Mr. S, that the money found in her purse was not associated to the drugs found in the same purse, Ms. Garnier did not dispute the facts alleged. This qualification alone supports the fact that Ms. Garnier was acknowledging that she possessed the drugs for trafficking, but the money was not proceeds from the sale of drugs.

D. Ineffective Assistance of Counsel 100 Defence counsel suggested that Mr. S’s conduct amounted to counsel ineffectiveness, which he argued, should support the guilty plea being struck. Defence counsel focused on the late disclosed DVD as problem- atic and the fact that the Crown had not supplied Ms. Garnier with an expert report to support the proposition that the drugs were possessed for the purpose of trafficking. Defence counsel relied on the fact that R. v. Jacobs, 2014 ABCA 172 (Alta. C.A.) had already been decided, imply- ing the Crown would have difficulty proving this offence. Combining these issues with the improper recitation of s. 606(1.1) C.C. by Mr. S, Defence counsel suggests the guilty plea should be set aside. 101 For a claim of counsel ineffectiveness to succeed, Ms. Garnier must establish that Mr. S’s acts or omissions constituted incompetence (referred to as the performance component of the test) and that a miscarriage of justice resulted. Miscarriage of justice has been referred to as the prejudice component of the test (R. v. B. (G.D.) at para. 26; Barai at para. 34). 102 Incompetence is based on a reasonableness standard without the benefit of hindsight. Ms. Garnier bears the burden to prove that Mr. S’s acts or omissions were not the result of reasonable professional judgment (R. v. B. (G.D.) at para. 27; Barai at para. 37). 103 In proceedings involving an ineffective assistance of counsel claim, it has been suggested that the proper procedure is to begin with an inquiry into the prejudice component first. “If the appellant cannot demonstrate 182 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

prejudice from the alleged ineffective assistance of counsel, it is unnecessary to address the competence of counsel at the time the guilty pleas were taken” (B. (G.D.) at para. 29; Barai at para. 35). 104 Following the Court in Barai, Ms. Garnier needs to prove there is reasonable probability, which probability need be sufficiently strong, to undermine the court’s confidence in the validity of her guilty plea (para. 36). As stated by Doherty, J.A. in R. v. Joanisse (1995), 102 C.C.C. (3d) 35 (Ont. C.A.) at p. 64: “A reasonable probability is established when the reviewing court is satisfied that because of counsel’s incompetence, the verdict cannot be taken as a reliable assessment of the appellant’s culpability.” 105 As set out in McLaughlin, Ms. Garnier would need to demonstrate that: 1) she was unaware of the allegations made against her in the charge; 2) she was unaware of the effect and potential consequences of her plea; 3) her plea was not voluntary; and 4) her plea was equivocal in nature. 106 Mr. S testified that prior to admitting to the facts read in by Crown counsel he looked at Ms. Garnier who acknowledged the facts by nodding her head. This Court finds it unnecessary to decide on the credibility or reliability of such testimony. 107 Similar to the Court in Barai, notwithstanding that Mr. S had not canvassed s. 606(1.1) C.C. by specifically addressing each question outlined in that provision, this Court finds that Mr. S had sufficient information to be satisfied that Ms. Garnier was making voluntary pleas and that she understood the factors as contained in s. 606 (1.1) C.C. The Court arrives at its decision based on the following: Mr. S’s testimony wherein he in- forms the Court of his initial conversation with Ms. Garnier including his professional opinion regarding Ms. Garnier’s potential defence; Ms. Gar- nier’s comments in court on October 15, 2014, when, in the presence of Mr. S, Ms. Garnier commented: “I just don’t want to go into anything blindly”; and finally, being mindful of Ms. Garnier’s experience with the criminal justice system, Ms. Garnier’s willingness to stand mute and allow Mr. S, to admit the facts read in by the Crown. 108 While this Court agrees that Mr. S’s recitation of s. 606(1.1) C.C. was lacking, the Court nonetheless finds that Ms. Garnier was fully aware of the proceedings and her pleas were unequivocal. R. v. Garnier D.M. Groves Prov. J. 183

109 In addition, Ms. Garnier signed a formal waiver acknowledging that she had read a summary of the evidence against her, had consulted with a lawyer, and that she was agreeing to waive any potential defences or any weaknesses in the case against her. 110 Further, Ms. Garnier had the ability at any time within the first 60 days of entering DTC, regardless of reason, to withdraw her guilty plea and be referred back to the regular court system (see Exhibit S-1, page 2). Ms. Garnier chose not to exercise this option. 111 Nothing in the transcripts reviewed by this Court suggests that Ms. Garnier’s intention was to do anything other than consciously and volitionally admit fully her guilt for the offence of trafficking and to admit the circumstances of the offence as read out by Crown counsel. The Court therefore finds there is nothing in the circumstances that would suggest Ms. Garnier’s plea was not voluntary, informed and unequivocal.

VIII. Conclusion 112 Ms. Garnier’s application to strike her guilty plea is denied. Application dismissed. 184 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

[Indexed as: ATU, Local 569 v. Edmonton (City)] Amalgamated Transit Union, Local No. 569, Applicant and The City of Edmonton, Respondent Alberta Court of Queen’s Bench Docket: Edmonton 1503-13748 2015 ABQB 620 W.N. Renke J. Heard: September 16, 2015 Judgment: September 18, 2015 Labour and employment law –––– Labour law — Labour arbitrations — Miscellaneous –––– Enforcement — Contempt of court — Grievor was transit operator with employer city and he was terminated after eight years of employment — Union grieved termination — Arbitration board upheld grievance and ordered city to reinstate grievor to transit operator position — City did not reinstate grievor but applied for judicial review, and applied for stay of award — Award was filed with Court of Queen’s Bench and potentially became enforceable as judgment or order of court — Filed award was served on city — Union brought application for order holding city in contempt for failing to reinstate grievor — Application granted — Award was binding under s. 144 of Labour Relations Code and became enforceable as order of court when it was filed — There was no impediment to recognizing award as order or judgment under s. 146(1) of Code according to its terms — First element of contempt, existing requirement of court, was established — Second element of contempt, notice, was also established — Third element of contempt, breach of requirement of court, had three components, intentional act, breach and no reasonable excuse — Based on evidence, intentionality of city’s action was established — It could be inferred, beyond reasonable doubt, that failure to reinstate was intentional in sense of being deliberate act or choice — Failure to reinstate grievor was not mistake or oversight — Actus reus was established beyond reasonable doubt and failure to reinstate grievor constituted breach of award — City did not reinstate grievor and did not take steps to reinstate him within reasonable time — There was no evidence that city was confused by language of award — City did not provide adequate or reasonable excuse for failing to comply with award — City was in contempt of court for failing to reinstate grievor. Judges and courts –––– Contempt of court — Forms of contempt — Disobe- dience of court — Mandatory orders –––– Grievor was transit operator with employer city and he was terminated after eight years of employment — Union grieved termination — Arbitration board upheld grievance and ordered city to ATU, Local 569 v. Edmonton (City) 185 reinstate grievor to transit operator position — City did not reinstate grievor but applied for judicial review, and applied for stay of award — Award was filed with Court of Queen’s Bench and potentially became enforceable as judgment or order of court — Filed award was served on city — Union brought application for order holding city in contempt for failing to reinstate grievor — Appli- cation granted — Award was binding under s. 144 of Labour Relations Code and became enforceable as order of court when it was filed — There was no impediment to recognizing award as order or judgment under s. 146(1) of Code according to its terms — First element of contempt, existing requirement of court, was established — Second element of contempt, notice, was also established — Third element of contempt, breach of requirement of court, had three components, intentional act, breach and no reasonable excuse — Based on evidence, intentionality of city’s action was established — It could be inferred, beyond reasonable doubt, that failure to reinstate was intentional in sense of being deliberate act or choice — Failure to reinstate grievor was not mistake or oversight — Actus reus was established beyond reasonable doubt and failure to reinstate grievor constituted breach of award — City did not reinstate grievor and did not take steps to reinstate him within reasonable time — There was no evidence that city was confused by language of award — City did not provide adequate or reasonable excuse for failing to comply with award — City was in contempt of court for failing to reinstate grievor. Cases considered by W.N. Renke J.: Alberta v. AUPE (2014), 2014 ABCA 197, 2014 CarswellAlta 950, 374 D.L.R. (4th) 336, 2014 C.L.L.C. 220-043, 100 Alta. L.R. (5th) 255, (sub nom. Alberta v. Alberta Union of Provincial Employees) 575 A.R. 338, (sub nom. Alberta v. Alberta Union of Provincial Employees) 612 W.A.C. 338, 312 C.R.R. (2d) 199, [2015] 4 W.W.R. 98, [2014] A.J. No. 618 (Alta. C.A.) — considered Beaver Hills Holdings Ltd. v. Greenstreet Development Corp. (2013), 2013 ABQB 203, 2013 CarswellAlta 466 (Alta. Q.B.) — considered Bhatnager v. Canada (Minister of Employment & Immigration) (1990), 44 Ad- min. L.R. 1, 71 D.L.R. (4th) 84, [1990] 2 S.C.R. 217, 111 N.R. 185, 12 Imm. L.R. (2d) 81, 43 C.P.C. (2d) 213, 1990 CarswellNat 73, 36 F.T.R. 91 (note), 1990 CarswellNat 737, EYB 1990-67238, [1990] S.C.J. No. 62 (S.C.C.) — considered C.A.L.P.A. v. Canadian Airlines International (1989), 27 F.T.R. 61, 1989 Car- swellNat 154, [1989] F.C.J. No. 151 (Fed. T.D.) — referred to Canada (Attorney General) v. Zhang (2007), 2007 FC 235, 2007 CarswellNat 565, 159 L.A.C. (4th) 353, 2007 CF 235, 2007 CarswellNat 5467, 313 F.T.R. 133 (Eng.) (F.C.) — considered Canadian Broadcasting Corp. v. Assoc. des r´ealisateurs (1993), 73 F.T.R. 44, 1993 CarswellNat 631, [1993] F.C.J. No. 1356 (Fed. T.D.) — distinguished 186 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

Canadian Broadcasting Corp. v. Canada (Arbitrator under Canada Labour Code) (1992), 58 F.T.R. 5, 1992 CarswellNat 791, [1992] F.C.J. No. 871 (Fed. T.D.) — considered Canadian Pacific Air Lines Ltd. v. B.R.A.C., Local 1804 (1987), 11 F.T.R. 112, 1987 CarswellNat 243, [1987] F.C.J. No. 109 (Fed. T.D.) — referred to Central Broadcasting Co. v. Canada (Labour Relations Board) (1976), [1977] 2 S.C.R. 112, 9 N.R. 345, 67 D.L.R. (3d) 538, 76 C.L.L.C. 14,029, 1976 Car- swellNat 427, 1976 CarswellNat 427F (S.C.C.) — considered FIC Real Estate Fund Ltd. v. Lennie (2014), 2014 ABQB 105, 2014 Carswell- Alta 278, 585 A.R. 290 (Alta. Q.B.) — followed FortisBC Inc. and IBEW, Local 213, Re (2013), 2013 CarswellBC 3607, [2013] B.C.L.R.B.D. No. 223 (B.C. L.R.B.) — considered I.B.E.W., Local 529 v. Central Broadcasting Co. (1976), [1977] 2 F.C. 78, 76 C.L.L.C. 14,045, 1976 CarswellNat 149, 1976 CarswellNat 149F (Fed. T.D.) — distinguished Koerner v. Capital Health Authority (2011), 2011 ABQB 191, 2011 Carswell- Alta 456, 506 A.R. 113 (Alta. Q.B.) — considered McMillan v. McMillan (2015), 2015 BCSC 1472, 2015 CarswellBC 2372, 76 C.P.C. (7th) 74 (B.C. S.C.) — considered National Ballet of Canada v. Glasco (2000), 2000 CarswellOnt 1102, 185 D.L.R. (4th) 372, 132 O.A.C. 100, 49 O.R. (3d) 223, [2000] O.J. No. 223, [2000] O.J. No. 1071 (Ont. Div. Ct.) — referred to Northstar Lumber USWA, Local 1-424 and West Fraser Mills Co., Re (2007), 2007 CarswellBC 3986, [2007] B.C.L.R.B.D. No. 76 (B.C. L.R.B.) — referred to Point on the Bow Development Ltd. v. William Kelly & Sons Plumbing Contractors Ltd. (2006), 2006 ABQB 775, 2006 CarswellAlta 1396, 68 Alta. L.R. (4th) 308, [2007] 3 W.W.R. 731, 405 A.R. 1 (Alta. Q.B.) — referred to R. v. Campbell (1972), 21 C.R.N.S. 273, 10 C.C.C. (2d) 26, [1973] 2 W.W.R. 246, 1972 CarswellAlta 125, [1972] A.J. No. 55 (Alta. Dist. Ct.) — referred to R. v. Mabior (2012), 2012 SCC 47, 2012 CarswellMan 509, 2012 CarswellMan 510, [2012] 11 W.W.R. 213, 96 C.R. (6th) 1, 352 D.L.R. (4th) 619, 290 C.C.C. (3d) 32, 284 Man. R. (2d) 114, 555 W.A.C. 114, [2012] 2 S.C.R. 584, 268 C.R.R. (2d) 39, [2012] S.C.J. No. 47, [2012] A.C.S. No. 47, 434 N.R. 341 (S.C.C.) — followed Schitthelm v. Kelemen (2013), 2013 ABQB 42, 2013 CarswellAlta 239, [2013] A.J. No. 154, 278 C.R.R. (2d) 235, 557 A.R. 151 (Alta. Q.B.) — considered Snell v. Farrell (1990), 110 N.R. 200, [1990] 2 S.C.R. 311, 72 D.L.R. (4th) 289, 107 N.B.R. (2d) 94, 267 A.P.R. 94, 4 C.C.L.T. (2d) 229, (sub nom. Farrell c. Snell) [1990] R.R.A. 660, 1990 CarswellNB 82, 1990 CarswellNB 218, [1990] S.C.J. No. 73, EYB 1990-67315, [1988] S.C.C.A. No. 705 (S.C.C.) — followed ATU, Local 569 v. Edmonton (City) W.N. Renke J. 187

Sorochan v. St. Albert Protestant Separate School District No. 6 (2002), 2002 ABQB 179, 2002 CarswellAlta 226, [2002] A.J. No. 200, 311 A.R. 1 (Alta. Q.B.) — considered Tri-Line Expressways Ltd. v. Teamsters, Local 31 (1995), 103 F.T.R. 52, 1995 CarswellNat 1917, [1995] F.C.J. No. 1484 (Fed. T.D.) — distinguished U.N.A., Local 79 v. General Hospital (Grey Nuns) of Edmonton (1990), 104 A.R. 394, 1990 CarswellAlta 356, [1990] A.J. No. 165, 1990 ABCA 65 (Alta. C.A.) — considered U.R.W., Local 973 v. United Tire & Rubber Manufacturing (Toronto) Ltd. (1978), 78 C.L.L.C. 14,120, 1978 CarswellOnt 1420, [1978] O.J. No. 71 (Ont. H.C.) — considered University of Prince Edward Island v. Thomson (2011), 951 A.P.R. 141, 306 Nfld. & P.E.I.R. 141, 2011 CarswellPEI 56, 2011 PESC 5 (P.E.I. S.C.) — referred to Zhang v. Canada (Attorney General) (2011), 2011 FC 1215, 2011 CarswellNat 4315, 2011 CF 1215, 2011 CarswellNat 5219, (sub nom. Zhang v. Deputy Head (Privy Council Office)) 214 L.A.C. (4th) 13 (F.C.) — distinguished Statutes considered: Labour Relations Code, R.S.A. 2000, c. L-1 Generally — referred to s. 144 — considered s. 146(1) — considered s. 146(2) — considered Rules considered: Alberta Rules of Court, Alta. Reg. 124/2010 Generally — referred to R. 3.22 — considered R. 3.22(a) — considered R. 3.22(b) — considered R. 3.22(c) — considered R. 3.22(d) — considered R. 10.52(3) — considered

APPLICATION by union to have employer found in contempt of court.

P.G. Nugent, J. Axelrod, for Applicant J.D. Fitzgerald, C. Taylor, for Respondent

W.N. Renke J. (orally):

1 I am prepared to render my decision relating to the to the contempt application brought by the Amalgamated Transit Union, Union Local 188 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

No. 569 against the City of Edmonton. I’ll begin with a brief overview of the basic facts.

A. Overview 2 Llyn Stuart was a transit operator with the City of Edmonton. He commenced employment with the City on June 5, 2006. He was terminated on April 1, 2014. The union grieved the termination. 3 In an award issued August 7, 2015 an arbitration board upheld the grievance and ordered the City to reinstate Mr. Stuart to the Transit Op- erator position from which he had been terminated (the Award). I do note that the interpretation of the Award is in issue and I’ll deal with that below. The City did not reinstate Mr. Stuart. The City filed an originat- ing application for judicial review of the Award on September 4, 2015. One of the remedies sought was a stay of the Award. 4 On September 8, 2015, the City applied for a stay of the Award under rule 3.23. The Award was filed with the Court of Queen’s Bench on Sep- tember 8, 2015. 5 By virtue of that filing and subsection 1 of s.146 of the Labour Rela- tions Code, the Award potentially became enforceable as a judgment or order of the court. 6 The filed Award was served on the City on September 8, 2015. 7 On September 10, 2015, the union filed an application for an order holding the City in contempt for failing to comply with the Award and for consequent relief. An unfiled copy of the application was served on the City on September 9, 2015. The City has not reinstated Mr. Stuart to this date. 8 At this point, I am dealing only with the union’s application to have the City found in contempt of court for failing to reinstate Mr. Stuart, as the union contends is required by the Award, now filed as an order of this court. I confirm that we are dealing with civil contempt.

B. Elements of Civil Contempt 9 The elements of civil contempt are set out in Schitthelm v. Kelemen (2013 ABQB 42 (Alta. Q.B.)), a decision of Mr. Justice Yamauchi relied on by both parties. At paragraph 40, Justice Yamauchi quotes from Koerner v. Capital Health Authority (2011 ABQB 191 (Alta. Q.B.)), a decision of Justice Shelley, which sets out the elements of civil contempt at para 43 (in turn relying on Point on the Bow Development Ltd. v. ATU, Local 569 v. Edmonton (City) W.N. Renke J. 189

William Kelly & Sons Plumbing Contractors Ltd., 2006 ABQB 775 (Alta. Q.B.), Rooke J, as he then was, at para 19): 1. An existing requirement of the court; 2. Notice of the requirement to the alleged contemnor; 3. An intentional act (or failure to act) that constitutes a breach of the requirement without adequate excuse. Or to use the language of rule 10.52(3), without reasonable excuse. 10 All of the elements of contempt, despite it being civil contempt, must be established beyond a reasonable doubt by the accuser — subject to some comments to follow respecting excuses. This is established by Schitthelm at paragraph 47 and FIC Real Estate Fund Ltd. v. Lennie, a decision of Justice Graesser at paragraph 60 (2014 ABQB 105 (Alta. Q.B.)), who in turn relied on Justice Sopinka in Bhatnager v. Canada (Minister of Employment & Immigration) at paragraph 14 ([1990] 2 S.C.R. 217 (S.C.C.)]).

1. First Element of Civil Contempt: Existing Requirement of the Court 11 As to the first element of civil contempt, the existing requirement of the court, we have the Award of August 7, 2015. The Award was binding under s. 144 of the Labour Relations Code, which provides that the award of an arbitration board is binding on the employers and the bargaining agent. The employers, bargaining agent, and employees shall do or abstain from doing anything as required of them by the award. But as of August 7, the Award was filed with the court. 12 The authority to file the Award with this court and the foundation for the legal effects of the Award in this court fall under s. 146(1) of the Labour Relations Code. Section 146(1) in its material elements provides that if an employer fails to comply with the award of an arbitration board, the bargaining agent or employee affected by the award may after 30 days from the date on which the award was made or reasons were given in respect of it or by the date provided in it for compliance, which- ever is the latest date, file a copy of the award with a clerk of the court, and on filing, the directive is enforceable as a judgment or order of the court. Again, the Award was filed on September 8, 2015. 13 On its face the first element of civil contempt is satisfied, in that the Award became enforceable as an order of this court on filing. However, an issue arises as to whether the language of the Award creates a legal impediment to its enforceability under s. 146(1) of the Labour Relations Code. The contention is not that the award is a nullity. There is no appli- 190 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

cation before me to have the Award declared to be a nullity. The contention is that the Award is not enforceable. It does not provide a proper foundation for finding of contempt; it’s not the equivalent of a court order. 14 There are some issue of interpretation of the Award that are relevant to and that overlap with what I’ll call the actus reus issue, which will be discussed in a moment. I’m going to defer consideration of the interpretation issues until the actus reus discussion. 15 What the Award says in paragraph 5 is that “we uphold the grievance and reinstate the grievor to his Transit Operator position. Our reasons follow.” What the Award says in paragraph 65 is that “We uphold the union’s grievance and order that the grievor be reinstated to his Transit Operator position. As requested by the parties, we reserve jurisdiction to deal with the question of damages and any other issues related to the implementation of this award.” 16 The cases that form the foundation for the contention that the award is not enforceable have as their own foundation the I.B.E.W., Local 529 v. Central Broadcasting Co. case, a 1977 decision of Justice Cattanach in the Federal Court Trial Division ((1976), [1977] 2 F.C. 78 (Fed. T.D.); see Central Broadcasting Co. v. Canada (Labour Relations Board) (1976), [1977] 2 S.C.R. 112 (S.C.C.)). Very generally, I find that our Award is distinguishable from the types of awards impugned by International Brotherhood case and the cases that rely on it. 17 A first difficulty with the International Brotherhood case, and this is a problem that I mentioned during argument, is that there is an apparent error in the case. Justice Cattanach made much of the fact that in his view, the award under consideration failed to identify the positions to which employees were to be reinstated. It appears, however, that the La- bour Relations Board decision that was under attack did specify exactly what positions the employees were to return to. So, if there’s an error there — and the error I concede may well be mine — it’s not clear what vitiating effect that would have, if any, on this decision, and consequently, on the other decisions that follow. 18 Regardless, in our case, the Award does specify the position to which the grievor is to be reinstated - his Transit Operator position. That distinguishes International Brotherhood as well as the case at tab 5 of the second (blue) binder of City materials - U.R.W., Local 973 v. United Tire & Rubber Manufacturing (Toronto) Ltd., the 1978 Ontario High Court ATU, Local 569 v. Edmonton (City) W.N. Renke J. 191

decision ([1978] O.J. No. 71 (Ont. H.C.) [hereinafter United Rubber and Cork]). 19 A further basis for distinguishing our Award from the awards impugned in the cases in this blue binder is that in the awards impugned in those cases, damages or compensation formed part of the award, but these damages or compensation weren’t quantified and were left to be determined later. So, in essence, the awards were conditional. 20 That’s not what we have in our case. In our case, the Award states that the grievance is upheld, with a direction to reinstate the grievor. There is then a reservation of jurisdiction to deal with certain other issues. What we don’t have is “reinstate the grievor and I’m ordering damages, which will be determined later.” That sounds like a small distinction, but in my view, that’s a significant distinction. We don’t have a conditional award here. We have an award that says reinstate the grievor, period, and other issues are shunted to the side to be dealt with later. We’ll return to this point shortly. 21 This feature of our award distinguishes it from the awards considered at tab 3, the Tri-Line Expressways Ltd. v. Teamsters, Local 31 case ([1995] F.C.J. No. 1484 (Fed. T.D.) (QL)), and tab 4, Tri-Line again, as well as the case at tab 7, Canadian Broadcasting Corp. v. Canada (Arbitrator under Canada Labour Code) ([1992] F.C.J. No. 871 (Fed. T.D.) [hereinafter CBC] (QL)). 22 A further basis for distinguishing our situation from situations discussed in cases in the blue blinder is that we are not dealing with what one might call latent ambiguity problems, where the words of the award in the factual context that surrounds them betray ambiguity or difficulty of interpretation or even impossibility of execution of the award in the circumstances. We don’t have the kind of conflict between the facts and the award that we see at tab 8, the Canadian Broadcasting Corp. v. Assoc. des r´ealisateurs case, 1993 Federal Court Trial Division ([1993] F.C.J. No. 1356 (Fed. T.D.) (QL)), or at tab 6, C.A.L.P.A. v. Canadian Airlines International, 1989 Federal Court Trial Division ([1989] F.C.J. No. 151 (Fed. T.D.) (QL)). 23 Finally, and this point was made by Mr. Nugent in argument, and I accept this point as well, our statutory environment is or at least may be different than the statutory environment in which these earlier cases were decided. 24 Subsection 2 of s. 146 of the Labour Relations Code provides that “If an award filed with the court proves uncertain or ambiguous, a judge of 192 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

the court shall refer the award back to the arbitrator for clarification unless the ambiguity may be resolved by the court without the need for oral evidence.” In other words, s. 146(2) is more forgiving than the statutory environment of these earlier decisions and there’s some room for maintaining an award as a legitimately filed and enforceable award even if there are some issues relating to uncertainty or ambiguity. 25 My conclusion is that there’s no impediment to recognizing the award as an order or judgment under s. 146(1) of the Labour Relations Code according to its terms, whatever those may be, which we have not completely explored. The first element of contempt is established — an existing requirement of the court. 26 Again, that’s not sufficient to establish contempt, but it is a necessary element that must be established.

2. Second Element of Civil Contempt: Notice 27 The second element of civil contempt relates to notice, and there was notice of the filing of the Award given to the City. There was notice of the application to have the City cited in contempt. That was served on the City. There were no concerns raised, for example, under rule 10.52(1). 28 So the first element of contempt is fulfilled — we have an existing requirement of the court; and the second element of contempt is fulfilled — we have notice. 29 This takes us to the third element of contempt.

3. Third Element of Civil Contempt: Breach of the Requirement of the Court 30 As stated in the Koerner case, this element concerns an intentional act or failure to act that constitutes a breach of the requirement of the court without adequate excuse or without reasonable excuse. Now evidently, this final requirement is itself internally complex. It includes an intentional act or failure to act. This act must constitute a breach, and the act that constitutes the breach cannot have been supported by a reasonable excuse. Thus this element has three components — intentional act, breach, and no reasonable excuse.

(a) Intentional Act 31 With respect to the first component of this third element of contempt, the intentional act, my finding is that on the evidence the intentionality of the City’s action is established. This finding deals purely with intention- ATU, Local 569 v. Edmonton (City) W.N. Renke J. 193

ality, and does not by itself establish contempt. All that I’m saying is that we have the failure to reinstate Mr. Stuart. On the evidence, I can infer beyond a reasonable doubt that the failure to reinstate was intentional. It was intentional in the sense of being a deliberate act, a choice, an act done for reasons. It was the act intended to be done. The non-reinstatement of Mr. Stuart was not a slip or a mistake or some sort of oversight. The City intentionally did not reinstate Mr. Stuart. 32 We have additional issues to consider, though. 33 First, did the failure to reinstate Mr. Stuart constitute a breach of the award? (the second component of the third element). This is what was referred to as the actus reus question in argument. The position of the City is that while it hasn’t reinstated Mr. Stuart to this point, it has done nothing wrong; it has done nothing that’s violated or contravened the Award. 34 Second, even if the City intentionally breached the Award, did it have an adequate or reasonable excuse? (the third component of the third element). If the City did have a reasonable excuse, if there’s at least a reasonable doubt that it had a reasonable excuse, I should not find contempt. 35 I’ll add a final issue to the Koerner list: is there any policy reason not to stigmatize the City’s conduct with the contempt designation? Mr. Nu- gent aptly characterized this as the de minimis point. I’ll refer to it as an issue relating to the principle of restraint in criminal matters.

(b) Breach of the Requirement 36 Did the failure to reinstate Mr. Stuart constitute a breach of the Award? This is the “actus reus” question. The term actus reus means guilty act or prohibited conduct. The City of Edmonton urges the conclusion that by not reinstating Mr. Stuart, it did nothing wrong, nothing that violated or contravened the Award. 37 The City relies on an interpretation of the Award. Again, the Award says at paragraph 5 that “we uphold the grievance and reinstate the grievor to his Transit Operator position.” The Award says at paragraph 65 that “We uphold the union’s grievance and order that the grievor be reinstated to his Transit Operator position. As requested by the parties, we reserve jurisdiction to deal with the question of damages and any other issues related to the implementation of this award.” 194 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

38 In Schitthelm, Justice Yamauchi wrote as follows at paragraph 48: Does uncertainty in the order have an impact on the prosecution of a contempt allegation? Uncertainty in the order may of itself give rise to a reasonable doubt. Where there are multiple, reasonable interpre- tations of an order or a range of meanings to which the order could give rise, the alleged contemnor is entitled to the benefit of the interpretation that is in their favour. The City argues that the Award does not specify the date by which reinstatement must occur and the Award contemplates some potential time to deal with damages and other implementation issues that have been reserved. I have broken down the City’s submissions into three main arguments, which I hope does justice to the points made by Mr. Fitzgerald.

(i) No Date Certain for Compliance 39 The first argument turns on the absence of a compliance date. Given that the Award doesn’t say that Mr. Stuart shall be reinstated by a date certain, the fact that Mr. Stuart was not reinstated by August 10th or 20th or 30th or September 1st or September 8th can’t by itself constitute a breach of the Award. The union did demand at one point immediate compliance with the Award. The City’s rejoinder is the union can’t set the date. The union claims that the City can’t decide that the time of reinstatement will be later; but equally, the City contends that the union can’t decide that the reinstatement should occur at an earlier time. The Award just doesn’t tell us when it is that Mr. Stuart should be reinstated. Furthermore, in a context lacking the specification of a reinstatement date, the City nonetheless moved very quickly (in its view) to put matters to a state where the issue of reinstatement could be properly dealt with. 40 Under s. 146(1) of the Code, the employer had 30 days to comply with the award or not, and following filing of the award - because it’s only after that 30 days that the award could be filed - the City of Edmonton came to court quickly. It filed its application for judicial review on September 4, which referred to a stay as a remedy. The application for a stay was filed on September 8. The matter was to come into Chambers on September 16th. 41 Hence, the City takes the position that in light of the steps it took, it has not violated the award because the award doesn’t specify a time certain for reinstatement and it has moved matters along as briskly as it could have in the circumstances. ATU, Local 569 v. Edmonton (City) W.N. Renke J. 195

(ii) Reservation of Jurisdiction 42 The second argument turns on the reservation in the Award of jurisdiction to deal with implementation issues. Mr. Fitzgerald points out that any number of eventualities could arise prior to someone in the position of Mr. Stuart actually getting back to work. There could be issues relating to the employee, relating to the union, relating to the employer. What this possibility of eventualities and the need to deal with eventualities entails is that reinstatement need not be immediate. The Award itself creates a space and a time to deal with issues before the arbitration board; and furthermore, says the City, if the union had been concerned with the time that was being taken to implement the Award, it could have gone back to the arbitration board that had expressly reserved jurisdiction to deal with implementation issues. Either party could go back. That’s what’s contemplated. It is the union’s grievance. Mr. Fitzgerald argued that the union could have moved things forward and that we should not ignore the arbitration board which both union and management had given jurisdiction to decide implementation issues. 43 Once again, the implication of this argument is that the City has been working within the time allotted under the Award to accomplish the reinstatement, and if there was a problem with that, it was up to the union to address it.

(iii) A Contemplated Pause 44 The third argument is that the City has not said “no” to reinstatement. It has not defied the Award. In effect, it said “just a moment, please.” The City needed time to consider its position. The City needed time to do its due diligence. The City needed time to ensure that its position was properly protected with respect to judicial review, with particular regard to the Zhang case, which we’ll talk about in a few moments. Given the lack of a specific date for reinstatement in the Award, the City had this time in order to consider its legitimate litigation interests relating to the Award, and the City has said that if the stay application is unsuccessful, it will reinstate Mr. Stuart forthwith. 45 In his affidavit, Mr. Bradshaw indicates at paragraph 3 that he talked to Dina Traynor and Arlene Swendseid and he reports that they told him that the City was considering judicial review and wouldn’t consider reinstatement until a decision had been made about judicial review. That’s hearsay, and in a contempt application we have to be very careful about relying on hearsay evidence. This application has the nature of a final 196 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

determination on which hearsay should not be admitted, absent an excep- tion. However, reference to these remarks is harmless since there’s been confirmation in submissions of what Ms. Traynor and Ms. Swendseid said, in the sense that the City, again, was not saying no to reinstatement, but simply wanted to make sure that it had done its due diligence relating to the upcoming judicial review. 46 This position was confirmed and elaborated by Ms. Traynor in her affidavits of September 8 and September 10 where she specified that the City was in the process of bringing a stay application and the City was holding off on reinstatement particularly to deal with the issue of mootness, an implicit reference to the Zhang case. 47 So, the award created flexibility. The City of Edmonton used that flexibility to consider its legitimate interests respecting the review of the Award, both before and after it was filed. The City was not violating the Award. The City was working within its terms.

(iv) Union Response to the City’s Argument 48 The union looks at the Award and points out that the Award isn’t subject to qualification. What does it say? We uphold the grievance and reinstate the grievor to his Transit Operator position, literally, period. Paragraph 65 states: We uphold the union’s grievance in order that the griever be reinstated to his transit operator position. As requested by the parties, we reserve jurisdiction to deal with the question of damages and any other issues related to the implementation of this award. True enough, says the union, there is no specification of a date by which Mr. Stuart shall be reinstated. The Award just says “reinstate the grievor.” Here, though, the union accepts comments by Justice Cattanach in the International Brotherhood decision at paragraph 79. In a context in which there is a direction to reinstate without specification of a date certain, what is meant is clear: the reinstatement shall occur forthwith or within a reasonable time. And it’s true that there’s some room for sorting out issues around implementation and there could be some competing views about what counts as reasonable implementation, but that’s not this case. 49 In this case, there was no evidence of concerns around clarity of the award. There was no evidence that there were any implementation issues. There was no evidence that the City was in the process of reinstating Mr. Stuart. The stay and judicial review applications are not part of the im- ATU, Local 569 v. Edmonton (City) W.N. Renke J. 197

plementation. The position taken by the City of Edmonton does not turn on reasonable timing of reinstatement. 50 On the evidence and in its submissions, the City is expressing the view that it could suspend the reinstatement process pending its due diligence respecting the City’s issues, so that regardless of the timing of reinstatement - August 10, August 20, August 30 - the reinstatement would be put on hold until the City sorted out its stay application. It’s true that the City’s ambitions aren’t motivated by any sort of pernicious purpose and there’s not a hugely long delay that’s being dealt with here, but the union would caution against being distracted by that. In effect, the City is redrafting the award. 51 And once again, what does the Award say? “We uphold the union’s grievance in order that the grievor be reinstated to his Transit Operator position. As requested by the parties, we reserve jurisdiction to deal with damages and other related issues.” It is as if the City has added an additional clause: “and reinstatement is stayed pending disposition of any application to stay the enforcement of this award.” 52 Regardless of the timing of reinstatement, the City is saying it will attend to its interests before it deals with reinstatement, and that is a violation of the Award. The City is failing to take steps to reinstate as required. There is a refusal until the City has attended to its interests. 53 The union continues: If the City had concerns respecting timing, respecting its ability to do its due diligence, it could have obtained clarification from the arbitration board. And once again I refer to Schitthelm at paragraphs 50 and 51, in turn referring to the Ouellet cases. At paragraph 51 in Justice Yamauchi’s decision, we read the following: ...the single chambers judge held that when a court has issued an order, “if there is some doubt as to what the court order means, then steps must be taken to clarify the doubt.” There’s some issue around whether that statement has been adopted by the Court of Appeal, but it occurs in the three-member panel Court of Appeal decision without adverse comment. In any case, according to Jus- tice Yamauchi, when a mandatory court order is issued — and a mandatory court order would include “reinstate the grievor” - something must be done. The failure to take any action, which may include seeking clarification, may be contempt. 198 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

(v) Conclusion respecting the Breach 54 In my view, the union is correct. The actus reus is made out beyond a reasonable doubt. The City did not reinstate Mr. Stuart, did not take steps to reinstate him within a reasonable time. It explored the judicial review and stay application. It did not commence the reinstatement process. There is no evidence of confusion based on the language of the Award. On the evidence, the City chose to deal with its interests, its due diligence, and suspended the reinstatement pending its resolution of its due diligence. The City failed to follow the Award by failing to reinstate for reasons not contemplated by the Award. The City is not entitled to rewrite the Award. The concerns respecting timing or lack of clarity did not form part of the thinking of the City. It focused on its own interests. Now, those interests were not bad, were not malicious, but there was still an intentional refusal to abide by the Award.

(c) Reasonable Excuse 55 Even if the City intentionally failed to comply with the award, did it have an adequate or reasonable excuse? As for the burden of proof, Jus- tice Yamauchi suggests that the accuser has a burden to disprove the excuse beyond a reasonable doubt, which in my view is ultimately correct. Justice Graesser in FIC Real Estate actually imposes a greater burden on the person accused of having committed contempt and would have that person prove the reasonable excuse on a balance of probabilities. 56 In my view, an onus does lie on the person accused of contempt, and the reason why an onus lies on that person is in line with the Supreme Court’s decision in Snell v. Farrell ([1990] 2 S.C.R. 311 (S.C.C.)), such that where the subject matter of an allegation lies particularly within the knowledge of one party, that party may be required to prove it. 57 An onus lies on the accused person, not to prove the excuse on a balance of probabilities, but only to provide some evidence that would raise a reasonable doubt about whether the person accused of contempt would have a reasonable excuse for failing to comply with the order or other directive. And if there’s some evidence that could raise a reasonable doubt, as Justice Yamauchi indicates, the accuser has the obligation of showing that in all the circumstances, the reasonable excuse is dis- proved and there is no reasonable excuse beyond a reasonable doubt. 58 My effort here is to analogize the contempt procedure to my understanding of an appropriate criminal procedure. ATU, Local 569 v. Edmonton (City) W.N. Renke J. 199

59 Assuming then that I am right and a burden lies on the contemnor - we can call it an evidential burden - to provide some evidence that could support a reasonable doubt about an adequate or reasonable excuse, what’s the nature of that reasonable excuse? It has two aspects. First, the person claiming the excuse must in fact or must have subjectively relied on the excuse, and second, the excuse must have been reasonable. This simply follows the language of the Rules of Court and the language of the Koerner description of the elements of contempt. 60 What in the circumstances are the candidate reasonable excuses?

(i) Planning to Apply for a Stay 61 Planning to apply for a stay wouldn’t count as a reasonable excuse. There’s no anticipatory self-help stay that could be reasonably contemplated as an excuse.

(ii) Application for Stay Launched 62 What is the situation if the City has actually applied for a stay? Does that give rise to a reasonable excuse for non-compliance with an order? An application for a stay doesn’t in itself entail a stay. That must be granted by the court. 63 We do have tab 1 of the blue binder that provides a quotation from International Woodworkers of America, a 1976 Ontario High Court decision (which Mr. Nugent has provided for us in full). What’s quoted at tab 1 is that “there is a practice that applications to enforce are not usually made in the face of a pending application for judicial review.” Were there such a practice, it could give rise to reasonable excuse not to reinstate. The quotation may reflect the Ontario practice, but what we lack in this case is evidence that we have a similar practice in Alberta. 64 Moreover, there is no evidence that the City relied on any such practice. The decision to delay reinstatement pending the disposition of the stay application was made, on the evidence, without consultation with Mr. Nugent. His approval wasn’t obtained first. There is no estoppel based on any conduct of Mr. Nugent or the union. 65 Another instance in which a stay application was considered to be or was potentially considered to be a reasonable excuse is one of the cases provided by the City, the Beaver Hills Holdings Ltd. v. Greenstreet Development Corp. case, a decision of Justice Ross (2013 ABQB 203 (Alta. Q.B.)). What Justice Ross found at paragraph 13 of that decision is “the information before me does not satisfy me that the failure to attend 200 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

[-so, it’s a failure to comply with a mandatory order-] on the first occasion constituted civil contempt. Defendants’ counsel advised Plaintiffs’ counsel in advance that the person accused of contempt would not be attending and further, that the Defendants would be seeking a stay of the Plaintiffs’ judgment. The stay application was heard with the Plaintiffs’ application to enforce Mr. Melchin’s [a defendant’s] attendance.” Then Justice Ross wrote that “The application for a stay may have been a reasonable excuse for Mr. Melchin’s failure to appear on November 28, 2012.” That passage suggests that for Justice Ross, a very experienced jurist, an application for a stay may have been a reasonable excuse fore- stalling a contempt finding. But the last quoted sentence has a second clause: “there is an indication that the Plaintiffs treated the application for a stay as such, and it does not appear that a certificate of nonattend- ance was obtained.” That distinguishes our situation from the Beaver Hills situation. There is no evidence in this case that the union treated the application for a stay as providing a reasonable excuse for failure to reinstate Mr. Stuart. In any event, Justice Ross does not say that an application for a stay does or must or should be a foundation for a reasonable excuse. It just may be a foundation for an excuse in the circumstances. 66 So, the passage respecting the effect of the stay application in Beaver Hills circumstances as a reasonable excuse is not binding in the present circumstances.

(iii) Avoiding Mootness 67 If a reasonable excuse cannot be based on planning to apply for a stay or on having applied for a stay, what about an excuse based on the concern not to render judicial review moot through reinstating Mr. Stuart too early? 68 To give my conclusion on this issue now, I find that this concern does not support a reasonable excuse, being based on an error of law. Al- though this was a concern honestly held by the City, in my view this concern was not a reasonable error, was not an adequate excuse for failing to reinstate Mr. Stuart. 69 Why is that? The City did refer to the Canada (Attorney General) v. Zhang case, a 2007 decision of the Federal Court (2007 FC 235 (F.C.)). In my view, this case is either wrong or distinguishable. ATU, Local 569 v. Edmonton (City) W.N. Renke J. 201

(A) Distinguishing Zhang 70 Zhang is distinguishable because it has a fairly complex factual and specific background and a set of facts which extend out beyond and after the case, and it is distinguishable because it involved a substantial change of legislation after the decision under review had been rendered. 71 It appears that the judge hearing Zhang felt that the employer had been happy to have the employee back. Any issue around her termination and reinstatement had effectively resolved upon her reinstatement. There was no more issue to be litigated relating to her termination, and the only outstanding issue related to some money that should have been paid for a search process. The termination issues were moot. 72 Mr. Nugent pointed out that the story in Zhang became more compli- cated later. We have the decision — Zhang v. Canada (Attorney Gen- eral) once again, 2011 FC 1215 (F.C.) — in which Ms Zhang went once more to judicial review following a second termination. This application was dismissed. It appears that despite the view of the judge in the 2007 decision, there were still some disputes to be worked out between the parties.

(B) Zhang and mootness 73 Whether or not there was an actual issue around Ms Zhang’s reinstatement was at least murky, but in any event, the Zhang case is a very thin reed on which to hang a reasonable excuse. Zhang was referred to in argument as an outlier. What we don’t want to countenance is resting a reasonable excuse on - I’ll put it this way - any old judicial decision. Because the fact of the matter is that judges have the privilege of being wrong. I wish it were otherwise. I wish everything we said were correct, but this isn’t so, and the parties have to determine whether or not it is reasonable to rely on our decisions (see R. v. Campbell (1972), [1973] 2 W.W.R. 246 (Alta. Dist. Ct.), Kerans J, as he then was, at para 27 (QL)). There are some serious problems with the Zhang decision aside from the features that may make it distinguishable. 74 First of all, and it’s a point that was made by Mr. Nugent in argument, we have rule 3.22 which relates to the evidence that’s admissible in judicial review. Essentially rule 3.22 prohibits the admissibility of extrinsic post-event evidence. Rule 3.22 provides that when making a decision about an application for judicial review, the court may consider the following evidence only: (a) certified copy of the record of proceedings; (b) if questioning was permitted ... a transcript of questioning; (c) anything 202 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

permitted by any other rule or enactment; (d) any other evidence permitted by the court. A party seeking to introduce evidence of the reinstatement would have at least an uphill battle in seeking to put that evidence in under rule 3.22. 75 A second difficulty with the Zhang case: The judicial decisions provided by Mr. Nugent in which employer stays were denied and employees were reinstated contained no mention of mootness based on reinstatement. Here I am referring to National Ballet of Canada v. Glasco ((2000), 49 O.R. (3d) 223, [2000] O.J. No. 223 (Ont. Div. Ct.)), the University of Prince Edward Island v. Thomson case (2011 PESC 5 (P.E.I. S.C.)), and Canadian Pacific Air Lines Ltd. v. B.R.A.C., Local 1804 ([1987] F.C.J. No. 109 (Fed. T.D.)). In those cases, reinstatement was resisted by the employer, and reinstatement was ordered, but there was no suggestion that that reinstatement would somehow prejudice the employers’ rights to judicial review. 76 Interesting as well, even given the differences from our own rules respecting stays, are the labour relations board cases that Mr. Nugent provided. 77 At paragraph 9 of Northstar Lumber USWA, Local 1-424 and West Fraser Mills Co., Re ([2007] B.C.L.R.B.D. No. 76 (B.C. L.R.B.) (QL)), it is stated that for the employer to obtain a stay of an arbitration award, it must establish either that its ability to advance its appeal has been irremediably prejudiced or the absence of a stay will effectively deny relief sought in the appeal. The board acknowledged the employer’s concern about reinstating the grievor to a job where integrity is fundamental. The board though, denied the application for a stay. Reinstatement did not affect the employer’s ability to advance its appeal nor did the absence of a stay deny any relief. There was no concern raised about mootness. 78 Similarly, in FortisBC Inc. and IBEW, Local 213, Re ([2013] B.C.L.R.B.D. No. 223 (B.C. L.R.B.) (QL)), the test for a stay is set out in paragraph 7: the employer has to establish serious case for reconsideration and its ability to advance its application for reconsideration would be irremediably prejudiced if the stay were not granted. Once again the board found that the employer did not meet the second requirement of the test for the stay. The employer didn’t wish to see an employee return to the workplace from which it terminated the employee for dishonesty and breach of trust. Unless and until the award was overturned, though, the dismissal grievance succeeded and the arbitrator was entitled to exercise his authority to order reinstatement. In paragraph 9 the board stated: ATU, Local 569 v. Edmonton (City) W.N. Renke J. 203

“I find there are no exceptional circumstances to justify staying the reinstatement order pending appeal in this case.” No mention was made of mootness affecting the employer’s review rights. Were there an angle by which mootness could be worked into a stay application, one might have expected the issue to have been raised. There might be reasons why it didn’t emerge, but those aren’t manifest. 79 In the cases that Mr. Fitzgerald provided, again in the blue binder, we actually have some contempt cases or processes analogous to contempt being pursued against employers who failed to comply with awards or directives or workplace orders. In International Brotherhood an enforcement procedure was sought and in United Rubber and Cork at tab 5, contempt was sought for failure to reinstate. In the CBC case at tab 8 a form of reinstatement was in the offing, and the union was seeking to compel the employer to show cause why it should not be cited in contempt. In these cases, where contempt was at issue, where reinstatement or something like reinstatement was at issue, the attack was on the award itself as the foundation for the contempt. 80 In none of these cases did the court go on to state that a further reason for not reinstating was that it would make judicial review moot. Perhaps the judges were simply confining themselves to what was necessary to decide the cases. That may be, but it’s at least noteworthy that there’s no reference to mootness when one might have thought it could have arisen as a further ground for opposing the union’s efforts to compel reinstatement. 81 I conclude that the Zhang -based excuse subjectively and honestly held by the City was not a reasonable excuse within the contemplation of the rules relating to contempt. To this point, then, all of the elements of contempt have been proven beyond a reasonable doubt. We have the order, we have notice, we have the intentional noncompliance without reasonable excuse, all established beyond a reasonable doubt.

4. Principle of Restraint 82 Is there any policy reason for not stigmatizing the City’s conduct with a contempt designation? Consider the City’s activities: Prior to filing the application for a stay, the City filed an application for judicial review very shortly after the 30-day period under s. 146(1) had elapsed. 83 One of the remedies sought was expressly a stay of the Award. This was on September 4. The City applied for the stay very shortly thereafter, on September 8, the same day that the Award was filed. The matter came 204 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

into court three days later. The matter ended up being argued very shortly after filing. Indeed “very shortly” given the typical journey of applications in our court system. And while it’s true that I found the City didn’t comply with the Award and it’s true that neither the application for judicial review nor the stay application stayed the Award, there was only noncompliance after the Award was filed for a very short period. On the evidence, the City was diligent in pursuing its remedies in the face of the filing of the Award, and even prior to the filing of the Award.

(a) Pre-Filing Conduct 84 Mr. Fitzgerald relied on the McMillan v. McMillan case, a 2015 B.C. Superior Court decision (2015 BCSC 1472 (B.C. S.C.)), in which Justice Macintosh writes as follows at paragraph 4: The procedural steps Ms. McMillan employed to convert the arbitration awards into an order of this Court resulted in the order being pronounced only on May 29, 2015. On the same date, the Court acknowledged that Mr. McMillan’s stay application was imminent and would be heard with the contempt application. In the result, no matter how long Mr. McMillan has taken to pay the awards in full, and no matter how much he is at fault for the delay, the right to apply for an order for contempt is only two months old, as opposed to running from the dates of the awards themselves. Also, whether Mr. McMil- lan’s delay amounts to contempt of court has to be viewed with the recognition that during all of the time the contempt clock has been running, that is from May 29, 2015, Mr. McMillan has made it known to the Court that he is seeking a stay of the obligations upon which to the contempt application is based. From those facts, I infer that if Mr. McMillan has been contemptuous, it has been more as against Ms. McMillan than the Court. McMillan deals with a longer period of contempt than the period we’re dealing with, which only runs some days after the filing of the Award. And the period of time that Justice Macintosh looks to is the time that runs from the date of filing with the court as opposed to the date of the award itself. The question then is whether we have a mitigating factor in this case because we can only, as in McMillan, move forward from the date of filing to review conduct and not consider the conduct that preceded the filing of the Award. 85 At this point we come to the Continuing Care Employers’ Bargaining Assn. v. A.U.P.E. case that I had mentioned during argument, a 2002 de- ATU, Local 569 v. Edmonton (City) W.N. Renke J. 205

cision of the Court of Appeal (2002 ABCA 148 (Alta. C.A.)). Madam Justice McFadyen states the following at paragraph 68: The appellants are wrong to assert the disobedience of a Board directive and disrespect for the law are not punishable by contempt. Im- portantly, Board directives are not converted to court orders when filed with the court. They continue to be directives of the Board, but upon filing in the Court of Queen’s Bench are enforceable as judg- ments or orders of the Court. Then we find the following at paragraph 72, referring to the decision of Justice Stevenson of the Court of Appeal, as he then was, in U.N.A., Local 79 v. General Hospital (Grey Nuns) of Edmonton, 1990 ABCA 65 (Alta. C.A.): In my view, Stevenson JA did not say that judges hearing contempt applications should not consider what occurred prior to the filing of the directive with the Court. He said that resort could not be had to contempt powers until the directive had been filed and served. At paragraph 69 we read the following: While there can be no contempt unless a breach occurs after a Board directive is filed with the Court, the disrespect shown for the law [ — in other words, preceding the filing — ] is a relevant consideration. The approach in Continuing Care Employers Bargaining Association is different than what we find in the McMillan decision. 86 We also have Alberta v. AUPE, a 2014 decision of our Court of Ap- peal (2014 ABCA 197 (Alta. C.A.)). Mr. Nugent correctly emphasized the facts in this case. What commenced events was a wild cat strike on April 26, 2013. On April 27, 2013, the Labour Relations Board issued a directive, which, after modification, was filed with the courts on the 27th. The strike continued after the 27th, for, it appears, a little less than two days after filing. This case involved wild cat strikes and correctional institutions - serious matters. Nobody disputes that. But the conduct per- sisted only about two days after the directive was filed. Further, the evidence supporting the finding of contempt included - and I’m not going to go into detail about the case - evidence relating to videos made prior to the filing of the directive with the courts. There was no suggestion by the Court of Appeal that it was improper to consider this pre-filing evidence which related to conduct that commenced prior to the filing and continued after filing. There was nothing improper in considering that evidence in determining whether or not there was contempt. 206 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

87 It therefore appears that the Alberta approach to the enforcement of arbitral awards in the labour context is different than the approach in BC in the family law context. 88 Given these Court of Appeal decisions, I can and should consider what occurred prior to the filing - the failure to reinstate Mr. Stuart.

(b) Nature of the Conduct 89 Still there’s a question of the conduct of the City in all of the circumstances. Again, the conduct of the City is nothing like the wild cat strikes of correctional workers. It was conduct based on understandable if legally irrelevant interests, and conduct that moved to resolve matters in a relatively brisk manner. Given that and given what I would call the principle of restraint or what Mr. Nugent referred to as a de minimis principle, should there be some latitude extended for what might technically be contempt, but which ought not to receive the label or stigma of being classified as contempt? 90 The principle of restraint isn’t express in Canadian criminal law, or, so far as I know in US criminal law, although it is in some European systems. We do see the principle of restraint at work in legal rules like the de minimis rule. We also see it at work, for example, in the R. v. Mabior decision of the Supreme Court at paragraph 23 (2012 SCC 47 (S.C.C.)). The court says there that “Morality infuses the criminal law. But the law does not seek to criminalize all immorality. The principal objective of the criminal law is the public identification of wrongdoing qua wrongdoing which violates public order and is so blameworthy that it deserves penal sanction.” I take this as an indication of the role of the principle of restraint in the criminal law. Since civil contempt is a quasi- criminal aspect of civil procedure, in my view, a principle of restraint ought to apply in the deployment of the contempt powers, as well. 91 But then the question: Should the City’s conduct be classified as contempt or not? We are not dealing with wild cat strikes of correctional workers across the province. 92 That’s all true, but Mr. Nugent points this out: The failure of the City to reinstate Mr. Stuart, the failure of the City to comply with the award does have an adverse effect on labour relations. It is evidence of a disregard for process and obligations. It has an adverse effect on Mr. Stuart. We should not take the perspective, though, that because Mr. Stuart is directly affected, this is only a private matter. While Mr. Stuart is the focus of concern since he is the person to be reinstated, we are working ATU, Local 569 v. Edmonton (City) W.N. Renke J. 207

within a collective bargaining process. We are operating within a collective agreement environment. Mr. Stuart is important in himself, but he’s also important as a representative of the collective. He is everyone just as everyone is him. He is the representative of the employees just as all the other employees are representative of him. It’s not just about him, it’s about everyone else in the bargaining unit. The conduct of the City af- fects the membership. The message that would be sent if there weren’t a response to the City’s noncompliance with the award would be that management can rewrite the Award itself. 93 I have to say that what brought me up short in our discussions during argument was a very simple question that Mr. Nugent asked. I might have the language a little wrong, but it was to this effect: What do we tell our members? The union violates directives filed as orders and they are punished. Management violates directives filed as orders and we should shrug? We should say it wasn’t so bad? We are not going to do anything about it? What kind of message does that send to the membership? How do we explain that to the membership? 94 Mr. Nugent was not saying that what’s necessary is to impose heavy punishments, but that it is necessary to register the legal reality that an Award was not being followed as it should have been. That management cannot decide for itself whether or not it will comply with an award. The failure to reinstate as required by the Award is serious. It undermines dispute resolution procedures, it undermines collective bargaining, it’s damaging to labour relations, it has an adverse impact to Mr. Stuart, it has an adverse impact on all of the employees in his bargaining unit. While the failure to reinstate Mr. Stuart might appear to be a private matter, not so consequential by itself, we have to understand the activity in its full collective context. 95 Yet Mr. Fitzgerald has a response. What about the Sorochan v. St. Albert Protestant Separate School District No. 6 case (2002 ABQB 179 (Alta. Q.B.))? Justice Belzil reminds us at paragraph 13 of that case that the superior courts shouldn’t interfere if a party has failed to exercise its rights under a collective agreement. By wading into the contempt process in this court we’re arguably showing disregard for collective agreement processes. We should leave collective agreement matters to collective agreement processes. 96 The reply to this argument is that the filing of awards is part of the Labour Relations Code and the attendant procedures are no more con- 208 ALBERTA LAW REPORTS 31 Alta. L.R. (6th)

trary to collective bargaining than seeking judicial review. The filing of awards is just one of the tools that’s available. 97 Again, we have Mr. Nugent’s question - what else is the union to do? This is all the union has. And I look to how Mr. Nugent began his remarks. He said he doesn’t want to be here. He is not happy to be here, but he had no practical way to get the City to do what the Award requires. He’s not seeking to move dispute resolution outside the collective agreement. What he is seeking to do is pull the City back to the Award to deal with it. 98 So, was there an existing requirement of the court? There was. Proven beyond a reasonable doubt. Was there notice of the requirement to the alleged contemnor? There was. Proven beyond a reasonable doubt. Was there an intentional act or failure to act that constituted a breach of the requirement without adequate or reasonable excuse? There was. Proven beyond a reasonable doubt. 99 Therefore, I find that the City of Edmonton was in contempt of court for failing to reinstate Mr. Stuart as required by the Award. Application granted.