Former B.C. Socred government abused power in water export dealings, says judge; Damages in the decades-old lawsuit to be decided at later date

What does the ruling say about water exports under NAFTA? Is it legal for provinces and the federal government to protect fresh water in Canada?

The complete ruling

From the ruling:


[218] I did not find either the plaintiff’s or the defendants’ evidence or submissions on damages to be very helpful. In my view this was not the fault of counsel for either party. The facts of this case are complex and the range of possible outcomes very wide.

[219] In my view it should be open to counsel for both parties to put before the court evidence and submissions based on the findings made in these Reasons for Judgment to assist the Court in arriving at a proper quantum of damages.

[220] I ask counsel to arrange a mutually convenient time to hold a Judicial Management Conference to plan this aspect of the case. Of course, if the findings of fact enable the parties to resolve the damages issue without further assistance from the Court, that would be an acceptable result.


[221] Dealing with the issues:

1. The Limitation Act is not available to the defendants as a defence.

2. The plaintiff has failed to establish that any defendant committed the tort of negligent misrepresentation.

3. The plaintiff has established that Bill Vander Zalm and the Province of British Columbia have committed the unlawful means tort.

4. I decided that it was inappropriate to permit the plaintiff to make arguments based on Bhasin v. Hyrnew at this stage of this case.

5. (a) The plaintiff has established that Richard Roberts has committed the tort of misfeasance in public office by unlawful cancellation of the plaintiff’s Foreshore Licence.

(b) I find that the Deputy Comptroller of Water Rights, J.W. Farrell, committed the tort of misfeasance in public office by failing to disclose the $5,000 water tariff to the plaintiff. Mr. Farrell was not a defendant in this action but I found the Province of B.C. liable for Mr. Farrell’s actions on the basis of respondent superior. I also found that Bill Vander Zalm committed the tort of misfeasance in public office by causing the O.I.C. creating a moratorium on the issue of export licences for water to be issued at a time that would assist WCW and harm the plaintiff as well as Sun Belt and Snowcap. I found the Province of B.C. liable for a Category B misfeasance in public office for its dealings with Western Canada Water.

6. I found it unnecessary to decide whether the Order in Council or statute establishing a moratorium banning the export of water in bulk was ultra vires the Province of British Columbia.

7. I have not yet decided what damages the plaintiff is entitled to recover but have given counsel for both the plaintiff and the defendants the opportunity to call further evidence and make further submissions on that subject. [How many decades will that part of the legal process take?]

Former B.C. Socred government abused power in water export dealings, says judge by Dan Fumano, May 13, 2016, Vancouver Sun

Former B.C. Premier Bill Vander Zalm and members of the 1980s Social Credit government committed “misfeasance in public office” in their dealings with a B.C. water export company, a B.C. Supreme Court judge said this week in a ruling on a decades-old case.

A civil suit filed by Rain Coast Water Corp. claimed the company experienced “mistreatment by the Government of British Columbia through actions of Premier Vander Zalm, several Cabinet Ministers and a number of civil servants,” in the 1980s and early 1990s, according to reasons for judgment handed down Thursday.

Rain Coast, which was originally called Coast Mountain Aquasource and incorporated in 1983 by B.C. businessman Colin Beach, had applied for licences to export water in bulk from B.C. to California.

Rain Coast’s lawsuit alleged the government of the day gave a rival company, Western Canada Water (WCW), “preferential treatment in an unlawful manner.”

In Thursday’s decision, Justice Peter Leask wrote: the “initial selection of WCW was a clear example of giving favourable treatment to one competitor at the expense of others, including the plaintiff, and against the public interest.”

The original writ was filed in 1996. Reached for comment Thursday, Beach said that after nearly 20 years of involvement in the case, “Some people have called it a battle, but maybe it’s better to call it a war.”

The tort of misfeasance in public office, also referred to as abuse of power, has been on the legal radar in Canada since the 1950s, but “far more claims fail than succeed,” according to a 2007 report by Lisa A. Peters, head of the research department at Vancouver-based law firm Lawson Lundell.

The matter went to trial in 2012, with lawyer George Douvelos representing Rain Coast. Prior to the trial, Justice Leask dealt with the cancellation of the plaintiff’s foreshore licence at a summary trial, finding the government had cancelled the licence unlawfully.

In Thursday’s decision, Leask detailed the events surrounding the government’s cancellation of Rain Coast’s licence, and described the procedure as “Kafkaesque.”

“I am satisfied the behaviour described above amounted to ‘reckless indifference or willful blindness to the lack of statutory authority for the Act,’” Leask wrote.

Vander Zalm said Thursday he thought the judgment was “very strange.”

The decisions at issue in the suit, Vander Zalm said, were made by cabinet, and not by him.

“I don’t know why I get to wear it, but it’s the cabinet that decided,” said the ex-premier.

“Not having read the material, not being familiar, not having been (in court), I don’t know exactly what the judge ruled on, or how he ruled, or why he ruled as he did,” he said.

In an emailed statement, a justice ministry official said:”We just received the decision of the court.

“We are still in the process of analyzing the decision and considering options.”

Regarding damages, the judge has not yet decided on the amount the plaintiff is entitled to recover, and will ask both sides to make further submissions on the subject.

Norman Ruff, professor emeritus of political science at the University of Victoria, reviewed Thursday’s judgment and said: “The reminders of the main provincial players and the policy concern over water exports bring back a host of memories for many British Columbians.”

“The misfeasance in public office finding is an extremely weighty one, but I’m not at all sure of the decision’s current political resonance given the 25 year time lapse,” he said.

“That could well change, however, when the second shoe, i.e. the award of damages, drops and the judgment becomes more than an historical footnote.”

Ruff said: “With damages, someone has to pay, and my guess is it’s very the likely B.C. taxpayer.” [Isn’t it always when governments get caught engaging in fraud to enable corporate friends? Emphasis added]

B.C. government guilty of misfeasance in long-running water dispute by Justin McElroy, May 13, 2016, Global News

A legal dispute over bulk water exports from a B.C. ghost town to drought-stricken California has finally ended – 30 years after it began.

BC Supreme Court Justice Lesak ruled this week that former premier Bill Vander Zalm and the Social Credit government of the day were guilty of misfeasance in public office in giving a company named Western Canada Water (WCW) “preferential treatment in an unlawful manner.”

Damages will be decided at a later date. The current government hasn’t said whether it will appeal.

In the mid 1980s, the provincial government allowed private companies to sell bulk water to the United States from the area around Ocean Falls.

The stated aims of the government were twofold: to create a new source of revenue and to revitalize Ocean Falls, at one point the largest city on the Central Coast, which had been decaying ever since the pulp and paper mill shut down.

WATCH: The quest to sell water from Ocean Falls began 30 years ago. John Daly reported live from Ocean Falls on March 28, 1986.

The government made several agreements with WCW in the late 1980s and early 90s. But Justice Lesak ruled the government gave an unfair advantage over other companies, including Rain Coast Water Corp., whose owner initiated the lawsuit.

“The initial selection of WCW was a clear example of giving favorable treatment to one competitor at the expense of others, including the plaintiff, and against the public interest,” wrote Lesak.

“I am prepared to find the Provincial Government to be guilty of Category B misfeasance in public office as well as the then Premier, Bill Vander Zalm.” [Emphasis added]

WV water fight goes to court, Entrepreneur sues B.C. in 80s-era dispute by Jane Seyd, November 2, 2012, nsnews

A West Vancouver businessman who claims actions of the provincial government unfairly robbed him of lucrative business opportunities is finally getting his day in court.

A lawsuit launched by Rain Coast Water Corp. owned by Colin Beach, is being heard this month before a B.C. Supreme Court justice, 20 years after Beach says the government of the day dammed up his business plans while showing preferential treatment to a competitor.

Beach is claiming the government misconduct caused him to lose lucrative contracts.

In the mid-to-late 1980s, both his company and a competitor, Western Canada Water, were vying for a chance to export B.C.’s water in bulk to parched areas of California that were experiencing a drought.

Beach alleges the Social Credit government of the day gave unfair advantages to his competitor while remaining unduly harsh and unaccommodating towards his own business plans.

The province later banned bulk water exports in the early 1990s.

In the lawsuit, launched by Rain Coast Water Corp., Beach argues he could have had a successful company if it hadn’t been for government interference. He is also arguing the province had no right to disallow bulk water exports.

Along with the province, the lawsuit names former Social Credit premier Bill Vander Zalm and the estate of Elwood Veitch, former minister of international business and immigration, as defendants, along with several other former Social Credit cabinet ministers from the 1980s.

The province has argued that regardless of provincial actions at the time, Beach didn’t suffer any business losses, because before any company got a bulk water contract from the Goleta Water District in California, rains returned, ending the drought and making the import of water unnecessary.

In an earlier court decision, Justice Peter Leask ruled there were enough inconsistencies in affidavits concerning the potential California water contract that the issues would have to be decided in a full civil trial, currently being heard.

According to court documents, Beach first approached the province about taking water from Freil Lake in Hotham Sound in the mid 1980s.

His company was granted a 15-year water licence and foreshore licence to build a plant, but under terms requiring Beach to pay all of the fees – totaling almost $100,000 – upfront, regardless of how much water he actually used.

According to court documents, when Beach asked for a break from the government, the province refused, saying it would set a precedent.

Later, the province abruptly cancelled the licence, saying Beach hadn’t paid his fees.

But at the same time, according to the claim, the same government granted a licence with much more favourable terms to Western Canada Water Enterprises to take water from a lake near Ocean Falls.

That company received a longer lease, was allowed to make payments in installments and was excused from many of the application fees required of Rain Coast, Beach argues.

He claims that gave his competitor an unfair advantage.

The competitor later went bankrupt, but not before a period of considerable business success with both domestic and export sales of water under the Canadian Glacier brand, according to the lawsuit.

Michael Weiner of White Rock, a former business marketer, testified in the trial.

Weiner told the judge he got involved with Beach over the prospect of marketing his water in the late 1980s.

At that time, there was a good market for that kind of business, he said. “It was a very, very pure source.”

The trial is continuing in B.C. Supreme Court. [Emphasis added]

The commodification of ‘blue gold’ by Alexis Brown, February 15, 2009North Shore News
Not far from Lynn Headwaters in North Vancouver is a “secret” spring – a hole in the ground with cold, clear water bubbling up.

Its thirsty fans come bearing water bottles and empty milk jugs, parking their cars in the park’s overflow lot before collecting a share of Nature’s beverage. Although the water is untested, that hasn’t stopped the crowds that gather on a hot summer day.

But fresh water is a resource that the spring’s frequenters – like many Canadians – may take for granted. There is a myth that this country is an endless resource of water and that its lakes, rivers and glaciers provide more freshwater than 33 million Canadians can consume.

Experts like Michael Byers, a Canadian Research Chair in global politics and international law, believe it’s essential this myth be debunked and that Canadians understand that a water crisis is not impossible. “Relatively speaking, Canada does face a situation of water scarcity with respect to where most people live,” said Byers, who is a political science professor at UBC.

Canada ranks third among countries with the greatest freshwater supply, after Brazil and Russia respectively. According to Environment Canada, 2.5 per cent of the world’s water is freshwater, and Canada holds almost one-tenth of that supply.

Byers explained that most of Canada’s freshwater is in the north, and that by looking at river flow directions and arid zones it becomes clear the country’s urban centres are in trouble.

While 60 per cent of Canada’s freshwater flows northward, 85 per cent of the country’s population lives in the south along the Canada-U.S. border. “There’s actually significant areas of water shortage along the southern border with the U.S.,” said Byers, but many aren’t aware.

According to the Canadian Bottled Water Association, bottled water production in Canada counts for less than 0.2 per cent of total groundwater withdrawn annually. In the past, it has been a lucrative industry, adding $437 million to the Canadian economy in 2006. In the international market, bottled water exports increased from $130 million in 1996 to $284 million

in 2002. By 2007, however, that number had declined significantly to $57 million. On the website for the Ministry of Agriculture and Agri-Food, this steep dive is attributed the rise of the Canadian dollar, making Canadian goods more expensive compared to other markets.

One North Shore bottled water company, Rain Coast Water Corp., stood to gain from the once growing bottled water industry. But the company became embattled in a lawsuit with the B.C. government over what it claims was preferential treatment given to its competitor, Western Canada Water.

Rain Coast Water Corp., owned and operated by West Vancouverite Colin Beach, has been fighting a legal battle with the provincial government for 13 years now. The company once made its profit selling bottled water under the brand name “Mountie” and “Aquasource.” It now operates almost solely to fight the lawsuit and has stopped producing bottled water. Beach, who is representing himself, claims that his company suffered financial losses at the hands of a contract granted by the government to Western Canada Water.

After receiving a water licence to reserve and extract water from Freil Lake in 1986, Rain Coast Water Corp. was required to pay the necessary fees for water reservation – whether it was used or not – and for extraction.

Beach claims that Western Canada Water did not have to pay these same fees to extract from Link Lake in Ocean Falls because it was an affiliate of the government.

Ocean Falls, once a pulp mill town, was purchased by the B.C. government in 1975 who then established Ocean Falls Corp.

Ocean Falls Corp. signed a contract allowing Western Canada Water to extract water from Link Lake, but when the government-owned Ocean Falls Corp. dissolved, Western Canada Water was able to keep the contract. Beach’s complaint revolves around the supposed preferential position given to Western Canada Water. The competitor had exclusive rights to the body of water for three years while Beach’s company had no such rights. In addition, Western Canada Water’s contract was granted for 25 years while Rain Coast Water Corp.’s was for a 15-year period. Western Canada Water also had to pay royalties from its annual profits, rather than the rental and extraction fees outlined in the Water Act.

“I think the key thing is the determination that under the Water Act, to get access to water, a person must hold a water licence and a person must pay the legal rate that is on the books . . . as opposed to being able to get access to water by having a secret agreement with a government ministry,” Beach told the North Shore News.

In 1990 and 1991, Rain Coast Water Corp.’s licences were cancelled. In 1991, an Order in Council was passed, placing a moratorium on any further licences issued for the purpose of bulk water export.

Before Rain Coast Water Corp. launched the lawsuit in 1996, Western Canada Water changed its name to Western Canada Beverage Corp. The company went bankrupt in the early 1990s and was acquired by Selkirk Springs International in 1993.

Beach is seeking damages for the potential profit lost by the alleged preferential position given to Western Canada Water. In an e-mail to the North Shore News, Beach estimated the amount to be $1.5-2 million and up to $10 million, depending on the method for evaluating loss of opportunity.

Rain Coast Water Corp.’s lawsuit is far from over, with a summary trial date set for June 15. It has the alleged deception and backroom deals that could make a good mystery novel.

And it has.

In 2002, former Vancouver-Kingsway MP Ian Waddell published a book titled A Thirst To Die For. The political mystery tells the story of secret B.C. government Orders-in-Council that allow water export to the United States. The story involves murder and hidden bank accounts in the Caribbean. Although Beach says the book is “patterned” on his battle with the B.C. government, author Waddell says there are no parallels and his idea came from years of being the NDP energy critic in Parliament. “I did a lot of work on oil and gas, but I realized on reading a lot of material, that the issue in the future would be water,” Waddell said. Referring to the United States, Waddell says, “They’re going to want our water sooner or later.”

The issue of exporting water south of the border, as Waddell forecasted, has become an incredibly political issue. Beach’s lawsuit was based on events that occurred when bulk water exports, in particular to the United States, were legal in the province of British Columbia.

The federal government has not been silent on the issue of protecting Canada’s water, but has yet to pass a bill that absolutely bans the export of bulk water. In 1988, Bill C-156, known as the Canadian Water Preservation Act was tabled in an attempt to prohibit the exportation of bulk water. The bill never made it into law, however, as Parliament dissolved later that year for an election.

All provinces have since passed regulations or laws that ban bulk water export, with British Columbia passing the Water Protection Act in 1995. In last November’s throne speech, Governor General Michaëlle-Jean, speaking for the Conservative government, brought up the issue once again. “To ensure protection of our vital resources, our government will bring in legislation to ban all bulk-water transfers or exports from Canadian freshwater basins,” she read.

Private interests, including Beach, are wondering how this legislation can be enacted when part of the North American Free Trade Agreement allows for free trade of water. Some argue that water is technically a “good” under the General Agreement on Tariffs and Trade, and using this clause, NAFTA essentially allows Mexico and the United States to freely access Canada’s water resources in trade.

The government, on the other hand, has adamantly said in the past that water in its natural state does not, in fact, qualify as a tradable good and therefore bulk water is free from trade obligations. After announcing plans last fall for legislation, it’s apparent that the government has acceded to pressures calling for a legal protection of Canada’s water.

For those advocating keeping the water in public hands, the announcement came as good news. The Canadian Union of Public Employees is one group that has fought for such a law for a decade now, working under its Water Watch program.

“We’ve said for 10 years Canada should have a water policy. It can’t just be left to provinces, because . . . it’s the federal government that enters into trade deals,” explained Paul Moist, national president for CUPE.

“[Water] should not be a commodity, it should be a human right. And it should be an excluded item from trade deals.”

Moist says the public is more informed than when Water Watch launched 10 years ago, and it has become more protective of resources such as water. In general, Moist says most Canadians polled by CUPE are opposed to privatizing water for business purposes.

And while it may be true that an increasing number of Canadians want to keep the water on home terrain, it’s not a universal viewpoint by any means.

A report by the Montreal Economic Institute published last August suggests that Canada, specifically Quebec, should consider exporting water – or “blue gold.”

The paper notes that Quebec holds three per cent of the world’s renewable freshwater reserves but its population represents a mere one-tenth of one per cent of the world’s population. Quebec could increase its gross annual income by $65 billion if were to invest, through public-private initiatives, in water export.

“Freshwater is a product whose relative economic value has risen substantially and will keep rising in the coming years,” the report states.

Quebec should take advantage of its water supplies, the report argues, and share it with a world that is facing serious issues of water scarcity. Fears about overexploitation can be quelled if the proper regulations and legislations are in place. [Really? Like the AER taking over fresh water in Alberta to give it all unhindered to the oil and gas industry? Like the frac deregulations and jurisdiction-wide blanket approvals spreading like wildfire across the world?]

This outlook – that water can and should be commodified – is not new, and it continues to be met with harsh criticism from those who maintain that Canada simply doesn’t have an abundance of freshwater. But with more than a third of the world’s population now living in a situation of water scarcity – and that figure expected to rise to two-thirds by 2025 – most groups could probably agree that Canada has a responsibility to ease this looming crisis.

Political and environmental analysts around the globe are predicting that wars will increasingly stem from a water shortage. For some, the solution to potential conflict is exporting water to those in need.

Others believe that Canada can’t afford – in more than one way – to sell its precious resource.

As both approaches face the increasing politicization of the water issue, perhaps the most pragmatic advice for all comes from expert Michael Byers.

“It’s important that in countries like Canada we set a good example about the fact that water is an essential resource and that we’re doing our best here at home to use it carefully.” [Emphasis added]

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