Throwing into question the fate of $335,000 in damages awarded late last year (November 21, 2007) by the Quebec Superior Court to former VIA Rail chairman Jean Pelletier, the Federal Court of Appeal has overturned a lower court decision ordering Pelletier's reinstatement following a second firing after his first dismissal by the federal government was nullified because of a denial of procedural fairness.

The appellate court ruled that the lower court judge erred both in finding that the government improperly failed to consult VIA's board of directors prior to the dismissal and in holding that the firing could not stand because public comments made by Transport Minister Jean Lapierre before hearing Pelletier's arguments for keeping his job raised a reasonable apprehension of bias. The Court ruled that there was no statutory requirement to consult the board, and the applicable standard of procedural fairness was not reasonable apprehension of bias, but rather absence of a "closed mind," which Lapierre had not demonstrated.

Pelletier's first firing quashed by courts

Previously Prime Minister Jean Chrétien's chief of staff, Pelletier was appointed by cabinet order of the Chrétien government as chairman of VIA Rail, to serve at pleasure – a term that means the appointee can be removed at any time by another cabinet order – for a five-year term beginning September 1, 2001.

After former Olympic gold medalist Myriam Bédard publicly alleged in late February 2004 that Pelletier had forced her out of her job at the railway in 2002 as part of improper machinations related to the Adscam scandal, the VIA Rail chairman denied the allegations in a newspaper interview in which he said of Bédard that "I do not want to be mean. This is a poor girl who deserves pity, who doesn't have a spouse, as far as I know. She is struggling as a single mother with economic responsibilities. I pity her, in the end." Bédard's allegations against Pelletier were later determined in April 2004 by Arbitrator Michel Picher, acting as an independent inquiry officer appointed by VIA, to have been totally unfounded.

However, on March 1, 2004, three days after Pelletier's comments were published, Pelletier was fired by the government of Paul Martin, who had succeeded Chrétien as prime minister. On November 18, 2005, a judge of the Federal Court nullified the dismissal and ordered Pelletier's reinstatement: see Pelletier v. Canada (Attorney General), [2005] F.C.J. No. 1891 (QL). The judge ruled that Pelletier had been denied procedural fairness because he was never told explicitly that his dismissal was being contemplated for the statements he had made about Bédard and was not given a proper chance to defend himself. This reinstatement order was upheld by the Federal Court of Appeal in January 2007.

Pelletier's second firing quashed by lower court…

Three days after the Federal Court decision reinstating Pelletier, Transport Minister Jean Lapierre began steps to fire him a second time. He informed Pelletier by letter on November 21 that his published comments in February 2004 regarding Bédard "lead me to believe that there are grounds for me to recommend to the Governor in Council that your appointment be terminated for loss of confidence in you...." Lapierre invited Pelletier to provide written reasons as to why he should not be dismissed.

The same day, in response to an inquiry during Question Period, Lapierre stated in the House of Commons that "the grounds on which Mr. Pelletier was dismissed in March 2004 are as valid as ever. That is why this morning I have initiated a process which will allow Mr. Pelletier to be heard and to provide us with reasons why he ought not to be dismissed on those grounds. Obviously, Mr. Pelletier no longer has our confidence to chair the board at VIA Rail."

Pelletier provided his written arguments against dismissal on November 30, 2005, and requested a meeting with Lapierre. That meeting took place on December 1. At its conclusion, Pelletier's lawyer pressed Lapierre as to when a decision would be made, and the latter replied: "I don't know; I will have to reflect on everything I have heard. I would imagine after a reasonable delay…. I have to do this with a clear head; I have to consider the whole question." On December 22, 2005, Pelletier was dismissed for a second time. Again, Pelletier applied to the Federal Court for judicial review of the government's action, and on March 30, 2007 a Federal Court judge set aside the dismissal on grounds of procedural unfairness, finding that the government had improperly failed to consult VIA's board of directors about the proposed dismissal and that the government's handling of the matter, including particularly Lapierre's comments in the House of Commons, raised a reasonable apprehension of bias. The government appealed this decision to the Federal Court of Appeal.

… but upheld by appellate court

On January 9, 2008, writing a unanimous decision on behalf of a three-member panel of the Court, Justice Robert Décary ruled that an obligation to consult VIA Rail's board of directors prior to firing its chairman could not be inferred from the requirement under the Financial Administration Act to consult the board before appointing a chairman. Justice Décary held that "[i]mposing an obligation to consult at the time of termination of a person appointed during pleasure in the absence of clear wording, even if only symbolic, would change the very nature of their appointment, i.e. their intrinsically precarious status." He noted, moreover, that in Pelletier's case, "[i]t would also be a strange interpretation of the provision (in the absence of clear wording to the contrary) that the Chairman, who is a member of the Board of Directors, would be consulted regarding his own termination."

With regard to the lower court judge's finding of a reasonable apprehension of bias, Décary determined that this was the wrong standard of review for procedural fairness, because a person appointed to an "at pleasure" position was entitled only to the much lower standard of absence of a "closed mind" on the part of the decision-maker who was considering dismissal.

Décary based this determination on three Supreme Court of Canada decisions. He cited, first, Imperial Oil Ltd. v. Quebec (Minister of the Environment), [2003] 2 S.C.R. 624, in which the Supreme Court held that "[t]he appellant's reasoning thus treats the Minister, for all intents and purposes, like a member of the judiciary, whose personal interest in a case would make him apparently biased in the eyes of an objective and properly informed third party. This line of argument overlooks the contextual nature of the content of the duty of impartiality which, like that of all of the rules of procedural fairness, may vary in order to reflect the context of a decision maker's activities and the nature of its functions."

Décary relied, next, on the Supreme Court's statement in Newfoundland Telephone Co. v. Newfoundland (Board of Commissioners of Public Utilities), [1992] 1 S.C.R. 623, that "a member of a board which performs a policy formation function should not be susceptible to a charge of bias simply because of the expression of strong opinions prior to the hearing." Finally, he pointed to Old St. Boniface Residents Assn. Inc. v. Winnipeg (City), [1990] 3 S.C.R. 1170, in which the Supreme Court established that the test of whether such a decision-maker had an unacceptably "closed mind" was whether an "irreversible" decision had already been made, and that "[s]tatements by individual members of Council while they may very well give rise to an appearance of bias will not satisfy the test unless the court concludes that they are the expression of a final opinion on the matter, which cannot be dislodged."

Applying this jurisprudence to Pelletier's case, Décary observed that "[w]e are here in the heart of the political sphere, which is a sphere that courts, aside from the minimal procedural fairness requirements described above, avoid interfering in." He did not find Lapierre's expression of enthusiasm in the House of Commons for Pelletier's re-firing to be evidence of a closed mind, because "[t]he test for a 'closed mind' is not applicable at this early stage of the process." Determining, rather, that "[t]he hearing [at which Lapierre met with Pelletier] is the proper moment to apply the closed mind test to the Minister," Décary found that "[t]he transcription of the hearing reveals that the Minister excused himself for some of his earlier statements, asked questions about the incidents leading to the first termination of Mr. Pelletier, and promised to consider the matter with a clear head before making a decision."

Given these statements and the fact that during what amounted to an informal hearing regarding the firing of an "at pleasure" appointee "[t]he Minister, no matter how well founded the explanations of the person concerned, is not required to change his decision, or to explain why he refuses to change his decision," Justice Décary ruled, "I do not see how, in the circumstances, it is possible to conclude that the Minister had a closed mind." The Court therefore allowed the government's appeal and set aside the lower court's decision ordering Pelletier's second reinstatement.

Damages award now in question?

The decision casts a question mark over the fate of the Quebec Superior Court's November 21, 2007 decision in Pelletier v. Canada, [2007] J.Q. 13166 (QL), in which Judge Hélène Langlois awarded Pelletier damages for unpaid salary and benefits from the date of his first dismissal on March 1, 2004 to the expiry of his five-year term at the end of August 2006, plus $100,000 for damages to his reputation resulting from the first dismissal. This damages decision has been appealed by all parties, including Pelletier, the federal government, and VIA Rail.

In her November 21, 2007 decision, the trial judge rejected the federal government's argument that Pelletier's claim for damages was premature because its appeal against the second reinstatement order had not yet been decided by the Federal Court of Appeal, and ruled that it was not necessary to wait. On the one hand, this is consistent with Pelletier's argument before that Court – which was apparently not contested by the government or VIA at the time – that under Pelletier's contract, while the government had the power to terminate without cause, Pelletier was entitled to damages in this circumstance. Moreover, it would appear that neither the government nor VIA Rail argued before the Court that Pelletier's comments, however inappropriate they were felt to be, were such that they amounted to cause for dismissal at common law. On the other hand, in ruling as she did on Pelletier's claim for damages, Judge Langlois appeared to base her award of damages for unpaid salary and benefits at least in part on the two Federal Court reinstatement orders, ruling that since the Court twice quashed the federal Cabinet's dismissals of Pelletier, he had in fact legally remained under contract as chairman for the full duration of his five-year term.

Based on this reasoning, and with the second dismissal now deemed by the Federal Court of Appeal to have been valid, the door may be open to the government to challenge the damages award. However, even if the current Court of Appeal decision does result in a reconsideration of Pelletier's damages for the period following the second dismissal, which took place on December 22, 2005, the actual amount in issue may be less significant than would first appear, since the period following the second dismissal for which damages were awarded was only 8 months, i.e.  until the end of August, 2006, when Pelletier's five-year contract ended, in contrast to the award of 22 months' damages in respect of the first firing, which occurred on March 1, 2004. Moreover, the order awarding damages in respect of the 8-month period following the second dismissal called for a substantial reduction based on Pelletier's mitigation of his damages during that period. Thus, what effect, if any, the Federal Court of Appeal decision will have on the earlier damages award remains unclear. Readers will be kept apprised of future developments.

Federal Court of Appeal
Justices Robert Décary, Gilles Létourneau and Marc Noël

January 9, 2008

View the full text of the decision in Attorney General of Canada v. Pelletier.