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Equity - Clean Hands. Sierra Club Canada Foundation v. Canada (Environment and Climate Change)
In Sierra Club Canada Foundation v. Canada (Environment and Climate Change) (Fed CA, 2026) the Federal Court of Appeal dismissed an appeal, this brought against the earlier dismissal of a JR respecting a project "to tap oil and gas reserves far under the ocean floor and transport them to market".
Here, Stratas JA, makes observations that "will be of practical assistance to parties in future environmental assessments and Indigenous consultation processes" regarding the discretionary nature of JR, the rule of law and the equitable doctrine of 'clean hands':[50] At the end of the August 2020 session and in a follow-up email, the Agency offered to have further discussions with MTI to discuss the environmental impact statement. But MTI did not request any additional meetings with the Agency to discuss the marine transshipment issue.
[51] Based on this, Equinor says this Court should exercise its discretion to dismiss the appeal. It says that remedies on judicial review are always discretionary and the Court has the discretion to dismiss any application for judicial review for this sort of delay or lack of responsiveness.
[52] The Federal Court did not agree with Equinor. The Federal Court found that the appellants raised the issue before the Agency finalized the scope of the Project, and that was good enough. Whether the issue was raised in a meaningful, truly responsive way is open to question.
[53] In this Court, Equinor says that the Federal Court erred on this. At best, it says, the issues were raised late and, to some extent, in a general, fleeting way without supporting submissions. Equinor stresses that the purpose of the environmental assessment process under the Act is to allow for a meaningful assessment of environmental concerns and Indigenous concerns, but also to ensure that assessments are efficient and timely. In its memorandum and in oral argument, Equinor suggests that delay or lack of responsiveness in raising and pressing an issue can be a ground for the Court to dismiss an application for judicial review, in whole or in part, depending on the issue.
[54] What legal basis does Equinor assert for this? Equinor says that relief on judicial review is discretionary. In particular, it relies on this Court’s comments in Makivik Corporation v. Canada (Attorney General), 2021 FCA 184, [2022] 1 F.C.R. 311. At paragraph 60, this Court said that "“remedies on judicial review…are discretionary”" and "“[t]he categories of cases in which courts may exercise the discretion not to undertake judicial review are not closed”".
[55] Supporting this are the wide words of the Supreme Court in Strickland v. Canada (Attorney General), 2015 SCC 37, [2015] 2 S.C.R. 713. There, the Supreme Court (at para. 37) states briefly and in passing that "“even if [an] applicant makes out a case for review on the merits, the reviewing court has an overriding discretion to refuse relief”".
[56] There is no doubt that relief on judicial review is discretionary. But that alone leaves out much of the story.
[57] Makivik Corporation and Strickland — and many other cases for that matter — do not stand for the proposition that the Court can deny a party relief just because the Court is unhappy, offended or annoyed with a party’s conduct. The Court’s discretion is not that open-ended.
[58] Nor could it be. If it were, then the results of cases would depend on the sensibilities of a judge, or, as the English jurist and scholar John Seiden once memorably put it back in the seventeenth century, relief would depend on "“the length of the Chancellor’s foot,”" a very "“uncertain measure”" indeed: John Seiden, Table-Talk: Being the Discourses of John Selden, Esq. (ed. Richard Milward, 1689); see also Lord Denning, Landmarks in the Law (London: Butterworths, 1984). That would be the rule of whim, not the rule of law.
[59] Under the rule of law — a concept enshrined in the preamble to the Canadian Charter of Rights and Freedoms (Part I of the Constitution Act, 1982, above) — judges must exercise discretions on stable legal standards, not idiosyncratic personal whims, feelings or vibes.
[60] In accordance with the rule of law, stable categories and rules have developed over time and regulate the reviewing court’s discretion to withhold relief in a judicial review. While the categories of judicial discretion are not ossified and can develop in response to modern considerations (for recent examples, see, e.g., Benison v. Canada (Royal Canadian Mounted Police External Review Committee), 2026 FCA 53 and Canada (Public Safety and Emergency Preparedness) v. LeBon, 2013 FCA 55), equitable doctrines themselves do have operative rules and limits, and the Court obeys them.
[61] Equinor’s submission appears to invoke the equitable "“clean hands”" doctrine: a party that has engaged in misconduct is not entitled to relief. But that doctrine does have a threshold: only truly reprehensible conduct of a certain sort qualifies: see, e.g., Canada (Minister of Citizenship and Immigration) v. Thanabalasingham, 2006 FCA 14. For example, a party seeking to set aside an administrative decision for unreasonableness may be caught by the doctrine if, in the prosecution or defence of the administrative proceedings, it has conducted itself immorally, fraudulently or beyond the pale in something connected with the judicial review. As Thanabalasingham instructs us, this is a high threshold, one far from met in this case.
[62] However, there is some merit to Equinor’s submission that the appellants’ delay in raising certain issues disqualifies them from advancing issues that should have been raised earlier, not for reasons founded in equity, but for other reasons.
[63] Judicial review of an administrative decision is shaped by the standards set out in the legislation, here the Act, that governs and shapes the administrative decision. Absent a constitutional concern, the Act, properly interpreted, is the law of the land. The Act binds and applies to everyone, including all participants in the administrative process—and reviewing courts too.
[64] Here, the purpose of the Act matters. As judges, we do not determine the purpose of legislation by adopting what we would like to see in it. We cannot use our own view of the Act’s purposes by "“[creating] an unexpressed exception to clear language”": Placer Dome Canada Ltd. v. Ontario (Minister of Finance), 2006 SCC 20, [2006] 1 S.C.R. 715 at para. 23; Hunt v. Canada, 2026 FCA 88 at para. 13; and see also M. Mancini, "“The Purpose Error in the Modern Approach to Statutory Interpretation”" (2022), 59 Alta. L. Rev. 919 at p. 927, which the Supreme Court relied upon in the seminal case of Québec (Commission des droits de la personne et des droits de la jeunesse) v. Directrice de la protection de la jeunesse du CISSS A, 2024 SCC 43, 498 D.L.R. (4th) 316. . Shanthakumar Estate v RBC
In Shanthakumar Estate v RBC (Div Court, 2023) the Divisional Court adds an unusual 'equitable' factor ('clean hands') to the typical 'balance of convenience' of the RJR-MacDonald 'stay pending appeal' test:Additional Observation: “Clean Hands” Doctrine
[32] Although the RBC respondents’ arguments respecting the appellant’s litigation misconduct do not tip the balance of harm/convenience in favour of refusing a stay of the Subject Orders, they are relevant to the “clean hands” doctrine. In addition, the fact, timing and circumstances of the appellant’s transfer of the Property out of the estate and into Mr. Mylabathula hands are also relevant to the question of whether the appellant has “come to equity with clean hands”.
[33] I am mindful that the “clean hands” doctrine is not a strict rule that functions to automatically disentitle a party from relief, but, rather, is applied in the court’s discretion considering the specific circumstances of each case (see: Hrvoic v Hrvoic, 2023 ONCA 508, at para. 18).
[34] In the specific circumstances of the case-at-bar, I find that the appellant’s litigation conduct and its transfer of the Property render its hands “unclean”. . Hrvoic v. Hrvoic
In Hrvoic v. Hrvoic (Ont CA, 2023) the Court of Appeal usefully considered the equitable 'clean hands' doctrine:[14] The “clean hands doctrine” comes from the 18th century maxim that “he who comes to equity must come with clean hands”: see e.g., Pro Swing Inc. v. Elta Golf Inc., 2006 SCC 52, [2006] 2 S.C.R. 612, at para. 22; Bolianatz Estate v. Simon, 2006 SKCA 16, 264 D.L.R. (4th) 58, at para. 116; Dering v. Earl of Winchelsea (1787), 1 Cox 318, 2 E.R. 1184, at pp. 319-320.
[15] Doug submits that Melissa’s improper withdrawals should therefore have disentitled her to the equitable remedy granted by the trial judge. We disagree that the “clean hands” doctrine applies in the circumstances of this case.
[16] First, the trial judge did not grant equitable relief. As we earlier concluded, the trial judge made no error in finding that there was an agreement between Doug and Melissa to increase Melissa’s common shareholdings to 50%. This was not the granting of equitable relief but the finding by the trial judge of the existence of an agreement between the parties and the granting of the relief that flowed from that agreement.
[17] Moreover, because Melissa’s withdrawals from the company and from Doug’s line of credit are unrelated to the proper division of the shares, Melissa’s conduct would not fall within the application of the “clean hands” doctrine: see e.g., BMO Nesbitt Burns Inc. v. Wellington West Capital Inc. (2005), 2005 CanLII 30303 (ON CA), 77 O.R. (3d) 161 (C.A.), at para. 27; Toronto (City) v. Polai, 1969 CanLII 339 (ON CA), [1970] 1 O.R. 483 (C.A.), at pp. 493-494, aff’d 1972 CanLII 22 (SCC), [1973] S.C.R. 38.
[18] In any event, the “clean hands” doctrine does not automatically disentitle a party with “unclean hands” from obtaining any relief. Equitable principles are not based on the application of strict rules but are applied at the judge’s discretion and are “crafted in accordance with the specific circumstances of each case”: Pro Swing Inc., at para. 22. As this court observed in Sorrento Developments Ltd. v. Caledon (Town), 2005 CanLII 2549 (Ont. C.A.), at para. 5: “It is a matter of discretion for the trial judge whether to refuse to grant equitable relief on the basis that a litigant has not come to court with clean hands”. Here, the trial judge carefully considered the circumstances surrounding both withdrawals.
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