Legally Speaking with Michael Mulligan
Legally Speaking with Michael Mulligan
Secret Decisions and AI Submissions: Civil Resolution Tribunal Challenges
What happens when a legal system designed for small claims is used to tackle complex issues involving international companies and constitutional requirements? Barrister and Solicitor Michael Mulligan takes us inside a fascinating recent case that exposes serious flaws in British Columbia's Civil Resolution Tribunal system.
Originally created to efficiently handle disputes under $5,000 and minor strata disagreements, the CRT has been expanded into areas far beyond its capabilities. The recent decision involving Twitter/X reveals a troubling reality: secret decisions and unenforceable orders against international companies, with no authority to address constitutional challenges, and vulnerability to exploitation through AI-generated submissions. The tribunal found itself ordering a Texas company to mail a $100,000 penalty to a Victoria PO box - an exercise in futility that undermines confidence in our justice system.
The conversation then shifts to a cautionary tale about insurance coverage that every homeowner needs to hear. A family lost hundreds of thousands in coverage when their house burned down from a prayer candle fire - not because of any wrongdoing related to the fire, but because they failed to disclose an abandoned marijuana grow operation in a distant outbuilding. This case demonstrates the critical "utmost good faith" principle in insurance: failing to notify your insurer in writing about any material change in risk can void your coverage completely, even when that change has nothing to do with your claim. Consider all the renovations, changes, or activities on your property that might constitute "material changes in risk" - your financial security may depend on proper disclosure.
Follow this link for a transcript of the show and links to the cases discussed.
It's time for our regular segment, joined as always by Barrister and Solicitor with Mulligan Defence Lawyers. It's Legally Speaking on CFAX 1070 with Michael Mulligan. Good afternoon, Michael. How are we doing?
Michael Mulligan:Hey, good afternoon. I'm doing great. Always good to be here.
Adam Stirling:Up first. Multiple problems, it says here, involving the Civil Resolution Tribunal. It seems to be somewhat of a theme.
Michael Mulligan:Well, first of all, I should say we've talked about the Civil Resolution Tribunal from time to time, and not everything about it is bad. It was originally created for the purpose of dealing with tiny small claims disputes, like amounts less than $5,000, and dealing with things like minor strata disputes Think whether the person should have a barbecue on their patio, that kind of thing and the concept behind it was to create a kind of a more efficient hearing process for small claims, very small claims, which can often be done completely online, with the idea of each party sending in emails or maybe a telephone call or video connection if necessary to allow an adjudicator to make a decision. And insofar as all of that goes, it's a great idea, right? If somebody doesn't have to take the day off work to go to court, you probably don't need to have a provincial court judge spending their day sorting out a $300 dispute over a bicycle or something, or a barbecue with a patio. All good, right. The trouble, however, is that the provincial government has chosen to expand the role of the Civil Resolution Tribunal to deal with things that aren't really amenable to that kind of process, which is appropriate for those barbecue disputes and $300 bike repairs and things like that, which it does just fine, and one of the areas that they expanded it into that's inappropriate from a principled perspective is that they have it deciding disputes involving the government or crown corporations, like ICBC disputes, and that's not appropriate because the people who work at the Civil Resolution Tribunal are just employees of the government on renewable contracts, subject to being fired or not having their contract renewed, and so that's not the sort of person that should be deciding a dispute with ICBC, for example, because if the government doesn't like what some tribunal member is doing, they may just find well, no renewal of your contract next year. So that's not appropriate.
Michael Mulligan:Another area that they've tried to put into the civil resolution tribunal is the issue of dealing with intimate images, and so BC has this thing called the Intimate Image Protection Act, which is intended to allow for somebody to make an application to try to get like intimate naked images themselves removed from the Internet. Now I pause here for a moment to say there's also now a criminal offense of distributing that kind of material, which would be dealt with as a criminal matter. But what the government's done is that they've allowed this process whereby a person can apply to the Civil Resolution Tribunal using like an online form to get an order to, for example, require some pictures to be taken down or to order a service provider to take down images. And that brings us to this recent decision that demonstrates several very serious problems with what's going on over at the Civil Resolution Tribunal trying to implement this Intimate Image Protection Act, and so this decision that just came out recently was a decision dealing with Twitter, or X, and apparently there was an application made through this online form process asking that some images or image or images be taken down, and apparently the Civil Resolution Tribunal made such an order directing X to take down some image or images. Fine, I guess.
Michael Mulligan:Now the response, though, from X was well, you have no authority outside of British Columbia, certainly outside of Canada, and so their response to this civil resolution tribunal order was to block anyone in Canada from being able to access the images, but their view was we have no authority to order what's going on in other countries, sorry, no.
Michael Mulligan:And that then led to this decision where there was an application made by the applicant, led to this decision where there was an application made by the applicant for a penalty against X for not blocking these things worldwide, and also a request for money compensation. So that brings us to this interesting decision. It came out on September the 4th, so just recently. Now, the first thing that's notable about it and this is a serious principled problem the adjudicator who wrote this decision confirmed accurately that the Civil Resolution Tribunal Act, which ordinarily requires that decisions that the Civil Resolution Tribunal make be published online so people can read them. It's kind of a you know, there is no physical place to go and watch what the Civil Resolution Tribunal is doing. It's just somebody sitting at home and their bunny slippers are in an office somewhere, I guess, right.
Adam Stirling:I don't know.
Michael Mulligan:There's no courtroom. Yeah, one would hope they're wearing bunny slippers. You want to be comfortable when you're making these kind of calls. And so the adjudicator points out that the legislation has been amended so that the Civil Resolution Tribunal does not publish these orders about taking down or not taking down images, because the legislation has been amended to not require that. Problematic, because when you have decisions being made by adjudicative tribunals or courts, particularly when there's absolutely no way to watch them or go down there and walk down to the courthouse and go in there and watch what's going on any day, you like right, and so it should be right.
Michael Mulligan:We don't live in China where you get dragged out some secret courtroom. It's public, it's open, it's transparent and that's good. This isn't. That's not good and just not acceptable. From a principled perspective. It would be entirely appropriate, as with this decision, which they did choose to publish, although they had no obligation to and they say in this decision they don't usually do so. There's no problem with, for example, using initials in this case initials that aren't real initials so that you're not drawing attention to the person. That's completely appropriate. Courts do that routinely, right, but that doesn't interfere with your ability to read the decision or go down there and watch if you wanted to. So there are ways to deal with it that don't require complete secrecy, which is apparently how this has been operating. So that's problem, one identified by this recent decision. We've got secret decisions from an administrative tribunal that no one can know about. That's not good.
Michael Mulligan:The next problem which is apparent here is what I alluded to, which was X's argument was well, look, they're not in breach of this order in the sense that from their perspective and they had authority for this dealing with a Google decision that the Civil Resolution Tribunal, in fact the province of British Columbia, has no authority to order things to happen in other parts of the world. It's sort of your authority runs to the border and that's about it. And so their position was look, we've complied with your order insofar as you have jurisdiction to make such an order. And I must say, there's disputes going on in other parts, like in Southeast Asia at the moment, with various authoritarian regimes ordering social media companies to take down material that is critical of the government, for example, and the social media company's response has been sorry, no, we're not doing that, we're not a censorship organ of your country. And so the problem on that front in terms of using the Civil Resolution Tribunal, and again the adjudicator's correct.
Michael Mulligan:The Civil Resolution Tribunal is not a court of competent jurisdiction to determine constitutional disputes. Just think about it right it's a system whereby people are filling out forms and uploading pictures and stuff like that Not really a forum to deal with serious constitutional disputes. So the adjudicator in this case, when X said well, look, you don't have any authority to do this. The provincial government doesn't have any authority to do this. They certainly couldn't delegate it to you. We're a Texas company and we have absolutely nobody in British Columbia or Canada. You just can't order us around all over the world. The response from the adjudicator was we have no authority to decide this, so I just must assume it's constitutional and proceed. That's not really satisfactory. No, no, it's not.
Adam Stirling:I'm sorry, I just I wasn't ready for that, okay.
Michael Mulligan:Yeah, so that's, that's what. That's the second problem this identifies. The third problem identified by this decision, unrelated to these other problems, is that the adjudicator points out that the quote complainant in this case, who's identified only by initials, of course, there's secret has was found to have, uh, provided misleading submissions generated by artificial intelligence and doing things like quoting cases inaccurately or decisions that didn't exist, and the adjudicator found that they were repeatedly doing that, despite being warned to stop. And so the person whoever this initials are is sending in misleading, ai-generated submissions and they're seeking money from X. Now think about that. First of all, that's very problematic.
Michael Mulligan:Next, of course, this is some online process. It's unclear whether there's even an actual human being here, right? If you were an enterprising criminal, you might think great, we've got this online process to make application for things. It's also trivial, of course, to create. Think great, we've got this online process to make application for things. It's also trivial, of course, to create images, right? So you just put that together.
Michael Mulligan:Somebody anywhere in the world could decide well, what I'm going to do is post on X intimate image generated by AI, and then I'm going to have my alter ego generate some AI submissions asking the civil resolution tribunal to order that I get some compensation. I never have to appear anywhere. I can't appear anywhere. It's a form I fill out and, frankly, if you succeed, the decision isn't even being published anywhere For all we know. This is going on all day long. There's no way of knowing. It's all happening in secret, and so that's just completely unacceptable. That you have a circumstance where you've got AI-generated misleading submissions from a person who may or may not be a real person seeking financial compensation from. It could be individuals here or, in this case, some company in some other country. That's just completely not appropriate and terribly thought out, and so that should not exist. There must be some process whereby you can properly. I mean, I appreciate why they want to make this quick and easy. Everyone likes what's the three things? It's cheap, fast or good.
Michael Mulligan:You know, they've got cheap and fast. The good part is seriously lacking. The final serious problem that this case identifies at the end of it is that the adjudicator eventually decides that, because they just have to assume this is constitutional and they're assuming this complainant's a real person and not an AI seeking money to I don't know, buy more CPUs and take over the world or something they have decided that they were going to impose the maximum possible punishment per day of $100,000. And then, kind of embarrassingly, at the end of it it says that the ex should mail the administrative penalty to a post office box in Victoria, which is you know, come on.
Adam Stirling:It's a Texas company.
Michael Mulligan:You know you've got this decision from the Civil Resolution Tribunal saying please submit payment to the via PO Box 9220, provincial Station, victoria BC. Come on, it's unenforceable right. The law in Texas, as I understand it, they do not enforce judgments for penalties period from other jurisdictions, and you can imagine why that is right. I mean, just think about this from the perspective of I don't know. Let's say, the provincial court of Zimbabwe has ordered some I don't know CFACs to take down some article on their website on pain of paying $100,000, right, just think about that. Right? The response is going to be I don't think so. Zimbabwe Provincial Civil Resolution Online Tribunal. Very unlikely that's going to be responded.
Michael Mulligan:Nor would you want a circumstance where the Civil Resolution Tribunal from the province of Zimbabwe is somehow ordering that you know a media outlet or online service starts mailing checks to them, as if that's ever going to happen, and you shouldn't have a process which is, you know, meaningless in terms of making these kinds of orders. That just undermines general confidence in the administration of the justice system. So this single decision identifies for, to my mind, fatally problematic elements to what the provincial government has created here. It's taken a process the Civil Resolution Tribunal very well suited for what it was originally intended to do. And, in the interest of being cheap, they bolted on these things to it which it just has no meaningful capacity to deal with. And just like it should not be dealing with disputes where the government is one party and the adjudicators are not independent of the government.
Michael Mulligan:That is inappropriate. It's inappropriate to have secret decisions. It's inappropriate to have a circumstance where you may not be able to identify whether somebody is a real person. It's not appropriate to have an entity that can't figure out, has no authority to decide whether what it's doing is constitutional, or to be making unenforceable orders by yelling into the ether that you should mail a check to a post office box. So this one, to my mind, this single decision makes clear why this needs to be completely rethought, and maybe the answer is that of course, this is now criminal, and perhaps that's a better way to deal with this, rather than having chatbots potentially trying to get money out of X by applying to the Civil Resolution Tribunal in an online form. By applying to the Civil Resolution Tribunal in an online form. So that's the latest decision of the CRT on the Intimate Image Protection Act in British Columbia.
Adam Stirling:Michael Mulligan with Mulligan Defence Lawyers, legally speaking on CFAX. Continues right after this Legally speaking continues with Michael Mulligan from Mulligan Defence Lawyers, on CFAX. 1070. Michael up next it says not advising an insurance company of a marijuana grow operation. Back to 1070. Michael up. Next it says not advising an insurance company of a marijuana grow operation is a breach of duty to inform of changes in risk and not doing so is a valid reason for cancelling coverage and not paying for a house fire. Seems reasonable, but the courts are grappling with it.
Michael Mulligan:All the same, you're quite right and I must say. Here's the interesting thing about it and why I think this is a very important decision and thing for people to know about. So it would seem obvious to people. I think if you were running a giant grow operation in your house, you didn't tell your insurance company about it and the house burned down because of the grow operation, I think most people would probably intuitively say, yeah, probably that wasn't covered, right.
Adam Stirling:Yeah.
Michael Mulligan:But that's not what happened here and it's important to know just how broad the circumstances can be that can result in you effectively being uninsured. And the starting point for the analysis it comes from this proposition that an insurance contract is what's referred to sometimes as a contract of utmost good faith, meaning both the insurance company and the person buying the insurance need to act with good faith towards the other. Ok, and in BC we actually have a provision in the Insurance Act that has like statutory conditions that are made part of policies pursuant to how that act works. And one of the requirements there and it flows from that general idea of this being a contract of utmost good faith is that where there is a material change in risk, the insured must promptly give notice in writing to the insurer or its agent of the change if it's a material change of risk. Now here's why that matters in this particular case.
Michael Mulligan:The house fire here had absolutely nothing to do with the marijuana. The fact pattern was that there's a house on a very large property, big acreage, and the house had an outbuilding which was some 200 meters away from the main house. You could see it, but it's this old, dilapidated building, and in the main house a fire started in one of the kids' rooms. In fact it was sparked by a prayer cabinet candle. I guess the prayer cabinet candle wasn't working very well on several levels, including the capacity to catch things on fire, and the dad smelled smoke and wound up trying to put the fire out, running back and forth using a salad bowl, trying to throw water in it but wasn't able to put it out, and the whole house burned down, destroying all kinds of things. Very, very large, tragic fire. Absolutely nothing to do with the marijuana in the bar or in the outbuilding. But what happened is that the insurance adjuster showed up and they said well, what's over there in that outbuilding? And the homeowner said well, what's over there in that outbuilding? And the homeowners well, what are you talking about? Does that have to do with anything? And indeed there was even a dispute about whether the outbuilding was insured. The homeowner said he'd asked that it not be insured to save money on the policy because it was falling down and dilapidated. But nonetheless the insurance adjuster went over and looked in there and found what was not an active marijuana grow operation. In fact it took some pictures and it was clear to the judge that this was kind of an abandoned marijuana grow operation in this outbuilding, like a bunch of dead plants, basically right, no lights on, nothing was actually going on. It certainly didn't cause the fire in the bedroom bedroom and it wasn't even active at the time. But the judge found that indeed this had been active since they had lived in, since they purchased this property several years earlier. I must say the homeowner said no, we didn't even know about what was in this old outbuilding. But judge didn't believe that. And so the decision was based on the fact that having a marijuana grow operation in an outbuilding on the property is a material change in circumstances in terms of the risk, material change to the risk because that could have caught fire when it was operating and because the homeowner didn't notify the insurance company in writing about that. The net result was it was a breach of the statutory provision to provide notice in writing and as a result, wal-mart Insurance Company was permitted to cancel the policy and not pay. And so that outcome unlike the actual thing catching fire and spreading to the house I don't think many people would appreciate that.
Michael Mulligan:You may find you are, despite paying your premiums for years and years, you may find out that you in fact have no insurance. If something occurred on your property that amounted to a material change of risk it need not be a marijuana grow operation. It could be all kinds of things that you might do what amounts to a material change of risk. It need not be a marijuana grow operation. It could be all kinds of things that you might do what amounts to a material change of risk. And even if you did that and then stopped doing it, you may still be in breach of your policy. Right, and I should say here, interestingly, these people they actually had in the past at a prior property the judge referred to this they actually had a permit to grow marijuana. Oh wow, so it wasn't the fact that that might have been illegal, it was just that you didn't tell the insurance company about it. And so just think about that, think about all the things that somebody might do in their home that might have at some point created some increased fire risk. Right, maybe you've you know something. Say you're parking some kind of a vehicle in your garage, or maybe you made some change to your house, or maybe you did some renovations, or you can just imagine all kinds of things.
Michael Mulligan:There are even cases here that were referred to, and there's some differing authority for when the owner that's got the insurance doesn't even know about the increased risk, like what happens if you have a property and you rent it out and your tenant does something that increases risk, like starts growing marijuana in it. There's conflicting authority about that, and so what is your duty? To know about that and inform the insurance company. So, cautionary tale, that's the outcome here. That is the law, and so you'd be well advised that if you make any kind of a material change to your property that could impact the risk, even if it doesn't, and even if you're well advised to send notice, do it in writing, send an email, and that way, if your house does catch fire, because your prayer candle in your kid's room catches fire, you're not going to find out that you're uninsured for, in this case, $300,000 or $400,000. Wow, so that's the latest on the Walman East Insurance Company.
Adam Stirling:Michael Mulligan, mulligan, fence Lawyers, legally speaking, second half of our second hour every Thursday. Thank you so much. Pleasure as always. Thanks so much. It's always great to be here. All right, talk to.