Canadian Appeals Monitor

Information and Commentary on Upcoming and Recent Appeal Court Decisions

Illegal Contracts Does Not Preclude Discrimination Claims

Posted in Case Comments, Contracts
Marc-Andre Russell

In Hounga v Allen, the U.K. Supreme Court addressed an issue that has not received much attention from the courts recently: the defence of illegality, also called the “ex turpi causa” doctrine. The U.K. Supreme Court had the opportunity to shed light on this defense in the context of employment discrimination towards an illegal immigrant.


The appellant, Ms. Hounga, came from Nigeria to the United Kingdom under a false identity following arrangements made with the respondent, Mrs. Allen.  Pursuant to these arrangements, Mrs. Allen promised Ms. Hounga £50 per month to work as a housekeeper and the opportunity to go to school. After 18 months, Mrs. Allen evicted Ms. Hounga from her home and dismissed her from her employment.

Ms. Hounga initally brought both contract claims and complaints in tort for discrimination, claiming that Mrs. Allen abused Ms. Hounga’s illegal immigration status.

Mrs. Allen claimed that it was unlawful (and indeed a criminal offence under the Immigration Act 1971) for Ms. Hounga to enter into a contract of employment with Mrs. Allen. Unlawful discrimination is, however, a statutory tort, whereby the application of the defense of illegality is “highly problematic” ([25]).

The only claim to reach the Supreme Court was the tort complaint, for which the Court of Appeal had held that the illegality formed a material part of Ms. Hounga’s complaint and that to uphold it would be to condone the illegality.


The Supreme Court came to the unanimous conclusion that Ms. Hounga’s complaint cannot be defeated by the defence of illegality.

The five judges were of the opinion that there was no inextricable link or close connection between Ms. Hounga’s immigration offences and her claim in torts, the illegal contract being “no more than the context in which Mrs Allen then perpetrated the acts of physical, verbal and emotional abuse by which, among other things, she dismissed Ms. Hounga from her employment.” ([40])

As there was no sufficient connection between Ms. Hounga’s illegal conduct and her claim, the Court concluded that allowing her to recover for the tort of discrimination would not amount to the court condoning illegality.

Although reaching the same conclusion, Lord Wilson, writing for the majority, went further in his reasons in addressing the issue from the standpoint of balancing public policy considerations. While the minority, i.e. Lord Hughes, was reluctant to use a “separate trumping test of public policy”, Lord Wilson supported his conclusions by stating that applying the defence of illegality to Ms. Hounga’s claim would run strikingly counter to the public policy against human trafficking.


The majority provide an approach whereby competing public policy interests are balanced, whereas the minority do not think that there should be a  “separate trumping test of public policy” ([55]). Even if Ms. Hounga’s contract claim were not challenged before the Supreme Court, Lord Wilson suggested that her claim could have been upheld for public policy reasons.

It will be interesting to see if this decision echoes in Canada, just as there were recent debates on the enforceability of clauses based on public policy considerations. While the use of the doctrine of ex turpi causa is not a genuine issue in Canadian contract law, Lord Wilson’s words may open the door to a claim seeking the enforcement of an illegal contract in Canada, whereby public policy considerations militate against applying the defense of illegality.

Case Information

Hounga v. Allen, [2014] UKSC 47

Date of Decision: July 30, 2014

This Week at the SCC (24/10/2014)

A Commentary on Recent Legal Developments by the Opinions Group of McCarthy Tétrault LLP

Posted in This Week at the SCC
Anthony Alexander

The Supreme Court this week issued a number of leave-to-appeal rulings likely to be of interest to Canadian businesses and professionals.  Four such leave-to-appeal requests were refused, and one was remanded.

The following applications were refused:

  • Leave-to-appeal from the Alberta ruling in Somji v. Wilson, 2014 ABCA 35, was dismissed.  The Court of Appeal had affirmed the striking of claims against both (i) a trial judge (who had granted default judgment against the appellants), and (ii) the respondents (who were alleged to have acted deceitfully in obtaining the default judgment).
  • Leave-to-appeal from the Ontario ruling in Prince v. ACE Aviation Holdings Inc., 2014 ONCA 285, was likewise dismissed.  The Court of Appeal had stayed a proposed class proceeding — alleging that Air Canada had unlawfully levied U.S. transportation taxes on its customers – pending the completion of the plaintiffs’ efforts to pursue remedies in the United States.
  • Leave-to-appeal from a second class action decision — the Newfound ruling in Sundance Saloon Ltd. v. Newfoundland, 2014 NLCA 15  – was also dismissed.  The Court of Appeal had affirmed the dismissal of a vires challenge to the imposition of a retroactive provincial tax on purchases of wine and spirits.
  • Leave-to-appeal from the B.C. ruling in Sechelt Indian Band v. British Columbia, 2013 BCCA 262, was dismissed.  The Court of Appeal had found that the provincial Manufactured Home Park Tenancy Act was constitutionally inapplicable to landlord-tenant relationships on “Indian lands.”
  • Lastly, leave-to-appeal from the Federal ruling in Couture v. Canada, 2014 FCA 35, was dismissed.  The Court of Appeal had affirmed the decision of the tax authorities, seizing taxpayers’ property for a failure to collect or remit GST on sales of land following the failure of a property development scheme.

In addition to the foregoing dismissals of leave-to-appeal applications, the Court issued an order remanding an application back to the British Columbia Court of Appeal:

The McCarthy Tétrault Opinions Group consists of members of the firm’s litigation department whose practices focus on written advocacy and the provision of strategic advice and opinions in the context of complex business disputes and transactions.  The members of the Opinions Group are Anthony Alexander, Martin Boodman, Brandon Kain and Hovsep Afarian.

What’s “New” and What to Do About it? Supreme Court Sets High Bar to Appellate Courts Exercising Discretion to Raise New Issues

Posted in Case Comments, Charter of Rights, Criminal, Procedure
Lisa Jorgensen

In R. v. Mian, the Supreme Court provided extensive comment on when an “appellate court can disrupt the adversarial system and raise a ground of appeal on its own” initiative.

The Court established a new test for the exercise of appellate courts’ discretion to raise a new issue on appeal. Appellate court judges will now ask themselves three questions when deciding whether to raise a new issue: 1) is the issue actually “new”?; 2) would failing to raise the issue “risk an injustice”?; and 3) can the new issue be raised in a way that will be fair to both parties?

While the Court has previously addressed the issue of when counsel may raise a new issue on appeal, this decision marks the first time the Court has clearly delineated the scope of an appellate court’s discretion to do so.


Police were investigating a number of gang-related homicides and attempted-homicides. In the course of their investigation, a wiretap authorization was obtained. Through the wiretap and surveillance of one of the homicide suspects, police became aware of a drug transaction between the target and an unknown man, who turned out to be Mian. Constables not involved in the homicide investigation were instructed to make a routine stop of Mian’s vehicle.

During the routine stop, one of the constables reported by radio that Mian was reaching under the passenger seat and doing something with his hands. The homicide officer, following in a separate car, authorized the constables to arrest Mian and search his car. A substantial quantity of drugs and cash was retrieved. Mian was not told he was under arrest for the possession of cocaine for the purpose of trafficking, or advised of his Charter rights to retain and instruct counsel, until twenty-two minutes after he was pulled over.

At trial, Mian applied to exclude all evidence on the basis that he has been arbitrarily detained, subjected to an unreasonable search and seizure, denied his right to know the reason for his detention, and denied his right to counsel contrary to ss. 8, 9, 10(a) and 10(b) of the Charter. On the voir dire to exclude the evidence, the constable who pulled over Mian testified that he had reported his observation of Mian reaching to the passenger side, but had not made any comment about concerns regarding officer safety. The homicide officer testified that the arrest was justified by concerns for officer safety.

Judicial History

On the voir dire, the trial judge rejected the homicide officer’s evidence that there was a valid concern for officer safety justifying the arrest. He further concluded that the homicide officer “intentionally mis[led] the Court with a view to justifying his instructions” to arrest Mian. However, he found no breach of Mian ss. 8 and 9 Charter rights as there had been other valid grounds for arrest.

The trial judge found that Mian’s ss. 10(a) and (b) rights were breached as there were no exceptional circumstances justifying the twenty-two minute delay. After weighing the Grant factors, the trial judge excluded the evidence. Mian was acquitted.

The Crown appealed Mian’s acquittal.

On appeal, after parties had filed their written submissions, the Court of Appeal provided counsel with a list of cases and requested submissions on two additional issues during oral argument: 1) what is a question of law on an appeal from acquittal, and 2) whether Mian had conducted an improper cross-examination of one of the officers by asking him to comment on the veracity of another officer’s testimony, and if so, what the consequences should be.

Counsel for both parties made submissions on the Court’s new issues in oral argument and provided further written submissions after the hearing.

The Court of Appeal found that the cross-examination was improper, and that the trial judge materially relied upon the improper cross-examination in reaching his verdict. On that basis, the Court of Appeal allowed the appeal and ordered a new trial.

Mian appealed to the Supreme Court of Canada arguing that the Court of Appeal erred in raising a new ground of appeal and in ordering a new trial on the basis of the improper cross-examination issue.


What is a “new issue”?

An issue will only be considered “new” when the issue “was not raised by the parties, cannot reasonably be said to stem from the issues as framed by the parties, and therefore would require that the parties be given notice of the issue in order to make informed submissions”.

Justice Rothstein, writing for the court, clarified that not all questions asked by an appellate court constitute new issues. The following types of questions are not considered “new issues”:

  • Questions posed during the oral hearing to understand the context, statutory background or larger implications of an issue raised on appeal
  • Questions that are rooted in, or are components of, an existing issue on appeal
  • Questions that form the “backdrop of appellate litigation”, such as those regarding jurisdiction, the standard of review, or available remedies

When a court seeks to gain a more complete understanding of the issues on appeal by asking such questions, the only limitation to its broad jurisdiction is that questions may not be “raised in a manner which suggests bias or partiality on the part of the appeal court”.

What factors must be considered in determining whether a new issue may be raised?

Justice Rothstein identified the two “potentially competing considerations” that animate the issue of when an appellate court may raise a new issue: 1) the adversarial system, a “fundamental tenet of our legal system”, with its reliance on party presentation and the courts as neutral arbiters, and 2) the role of the courts to ensure that justice is done.

When a panel of judges intervenes in a case and departs from the submissions and strategic choices of the parties, there is a risk that the intervention could create an apprehension of bias and impugn the impartiality of the court. On the other hand, courts are truth-seeking bodies that must, at times, intervene in the adversarial debate to ensure that justice is done.

To strike a balance between these two competing principles, appellate courts should have the discretion to raise a new issue, but such discretion must be rarely exercised.

The central question a panel of appellate justices must ask themselves when determining whether to raise a new issue is whether the failure to do so would “risk an injustice”. Justice Rothstein commented that the test must be “sufficiently flexible while also providing for an appropriate level of restraint”.

Determining whether a failure to raise an issue “would risk an injustice” requires the appellate court to perform a preliminary assessment of issue. This assessment is not a “full-fledged review”, as it would be inappropriate for the court to conduct an in-depth review of the merits of an issue without input from the parties. The court must satisfy itself that there is “good reason to believe” that a failure to raise a new issue “would risk an injustice”. Justice Rothstein observed that it is likely that many issues identified by appellate courts would fail to meet the “risk an injustice” standard.

Justice Rothstein identified several additional factors that may guide appellate courts when determining whether it would be fair and appropriate to raise a new issue:

  • Is there a sufficient record on which to raise the issue?
  • Would raising the issue result in prejudice to either party?
  • Would raising the issue suggest bias or partiality on the part of the court?
  • Does the court have jurisdiction to raise the issue?


When it comes to how courts may raise new issues on appeal, the Supreme Court has established a flexible case-by-case procedure. The underlying requirement is that the procedure be fair.

Justice Rothstein acknowledged that “no single model” would appropriately suit all circumstances and contexts.

Timing and Content of Notice

It is essential that counsel for both parties be given notice of the new issue and provided with an opportunity to respond. While it is desirable that notice been given as soon as possible, the nature and timing of the notice will vary depending on the circumstances of each case.

Notification of the new issue may be given prior to the oral hearing. Depending on the timing of the notice and the nature of the issue, it may or may not be necessary to grant an adjournment of the hearing, or extend timelines in which parties may make supplementary submissions.

Where the new issue is raised for the first time at the oral hearing, it may be necessary to grant an adjournment to ensure a full and fair hearing.

The notice to the parties should contain enough information to allow the parties to respond, but not contain too much detail or indicate that the court has taken a position on the issue.

Nature of Submissions

The parties must be given an opportunity to respond to the issue raised by the court.

How the court chooses to receive submissions may vary on a case-by-case basis. Depending on the timing of the notice and the nature of the issue, written submissions, oral submissions, or both may be preferable. Justice Rothstein commented that if a party requests the opportunity to make written submissions prior to the hearing, there should be a presumption in favour of granting the request.

While it is preferable that the appellant be required to file submissions before the respondent, a reversal of that order does not necessarily result in prejudice.

The Same Panel May Hear the Appeal

Justice Rothstein held that there is no requirement for a panel that has raised a new issue to recuse itself from hearing the appeal on its merits.

The Court of Appeal erred in raising a new issue

In this case, Justice Rothstein held that the Court of Appeal erred in raising the new issue of the improper cross-examination, and in allowing the appeal on that basis. He found that the impugned cross-examination did not “risk an injustice” as the trial judge’s error did not have a material bearing on the outcome.

Justice Rothstein went on to uphold the trial judge’s finding of a breach of Mian’s ss. 10(a) and (b) rights and his decision to exclude the evidence pursuant to s. 24(2).

Accordingly, the appeal was allowed and the trial judge’s verdict acquitting Mian was restored.


The Supreme Court’s new test, while flexible, sets a high bar for appellate court judges to meet if they wish to raise new issues on appeal. This decision confirms the strength of the Court’s belief that the adversarial process, and the neutrality of judicial decision-makers, is the heart of our legal system. Only where failing to raise an issue would “risk an injustice” may an appellate court wade into the fray and propose a new issue on its own motion.

Case Information

R. v. Mian, 2014 SCC 54

Docket: C35132

Date of Decision: September 12, 2014

This Week at the SCC (17/10/2014)

A Commentary on Recent Legal Developments by the Opinions Group of McCarthy Tétrault LLP

Posted in This Week at the SCC
Brandon Kain

The Supreme Court of Canada released one judgment this week of interest to Canadian businesses and professions.

In Imperial Oil v. Jacques, 2014 SCC 66, the Court held that a private litigant can request the disclosure of recordings of private communications from third parties to the civil action, which were intercepted by the government during a criminal investigation, without the consent of either of the communicating parties.

The recordings in Imperial had been obtained by the Competition Bureau pursuant to judicial authorizations under Part VI of the Criminal Code as part of its investigation into an alleged price-fixing conspiracy.  The disclosure was ordered in response to the plaintiffs’ motion brought under art. 402 of the Quebec Code of Civil Procedure to obtain disclosure of the intercepted communications from the Competition Bureau and the federal Director of Public Prosecutionsregardless of the fact that the communications had not been filed in criminal proceedings and the validity of the authorizations had not been determined.  The majority judgment of LeBel and Wagner JJ. held that the recordings could be disclosed despite the fact that s. 193 of the Criminal Code makes it an offence to disclose intercepted communications without the consent of the communicating parties, since they fell within the exception to this in s. 193(2)(a), which applies where the disclosure is made “in the course of or for the purpose of giving evidence in any civil… proceedings”.  This exception applied even though the disclosure was sought prior to the hearing of the civil trial, while the class action remained at the exploratory phase, since the communications were being requested for the purpose of testifying at the hearing.

Importantly, the majority also held that judges possess the discretion to deny disclosure based on relevance and privacy concerns, though it observed that disclosure is generally to be favoured.  As well, the majority emphasized that judges have discretion over the disclosure process itself, and may impose conditions and limits on disclosure through a balancing of interests approach (e.g., by limiting disclosure solely to the lawyers and experts participating in the civil proceedings, and screening the recordings to protect third party privacy interests).

The McCarthy Tétrault Opinions Group consists of members of the firm’s litigation department whose practices focus on written advocacy and the provision of strategic advice and opinions in the context of complex business disputes and transactions.  The members of the Opinions Group are Anthony Alexander, Martin Boodman, Brandon Kain and Hovsep Afarian.

The Second Opinion: “The Class Action…is Frequently Abused” — Judge Posner Provides Unvarnished Commentary on Class Proceedings

A Commentary on Recent Legal Developments by the Opinions Group of McCarthy Tétrault LLP

Posted in The Second Opinion
Anthony Alexander

For the Canadian class actions defence bar — which must occasionally feel disheartened by the unwavering enthusiasm with which our courts have championed class proceedings — the recent ruling in Eubank v. Pella Corporation (7th Cir. June 2, 2014) represents a breath of fresh air from south of the border.

Judge Richard Posner, speaking for a unanimous panel of the Seventh Circuit Court of Appeal, uses blunt and forthright language — alien to a Canadian ear — in acknowledging the risks to justice created by such proceedings.  He places particular emphasis on the inherent conflicts faced by plaintiffs’ class counsel.

To place this candid judicial language in a domestic context, it is necessary to acknowledge that many Canadian judges have embraced class actions with what sometimes appears to be an uncritical and unquestioning enthusiasm.  The bench has exhibited great inventiveness in ensuring that substantive and procedural hurdles are overcome in the interests of permitting proposed class actions to proceed.  Claims which have (at best) marginal merit have received certification.  The fact that almost all such claims are initiated — not by a genuinely aggrieved plaintiff or group of plaintiffs — but rather by a highly motivated and entrepreneurial plaintiffs’ bar, is rarely acknowledged or addressed by Canadian courts.

Refreshingly, Judge Posner exhibits no such reticence, and refuses to treat class actions (or class counsel) with politically correct “kid gloves.”

The Seventh Circuit’s ruling in Eubank commences in an even-handed fashion, with Judge Posner acknowledging that, in the case of meritorious claims, class proceedings are “an ingenious procedural innovation” and ”a worthwhile supplement to conventional litigation procedure.”

However, the Court of Appeal goes on to recognize — and unsparingly describes — the inherent conflicts which accompany such proceedings.  As noted by Judge Posner, the concern begins with class counsel’s self-serving selection of a malleable representative plaintiff (emphasis added):

…Normally only a few of the claimants are named as plaintiffs (sometimes only one, though there are several in this case). The named plaintiffs are the representatives of the class—fiduciaries of its members—and therefore charged with monitoring the lawyers who prosecute the case on behalf of the class (class counsel). They receive modest compensation, in addition to their damages as class members, for their normally quite limited services—often little more than sitting for a deposition—as class representatives. Invariably they are selected by class counsel, who as a practical matter control the litigation by the class. The selection of the class representatives by class counsel inevitably dilutes their fiduciary commitment.


The class action is a worthwhile supplement to conventional litigation procedure…, but it is controversial and embattled…, in part because it is frequently abused…. The control of the class over its lawyers usually is attenuated, often to the point of nonexistence. Except for the named plaintiffs, the members of the class are more like beneficiaries than like parties; for although they are authorized to appeal from an adverse judgment…., they have no control over class counsel. In principle the named plaintiffs do have that control, but as we’ve already hinted this is rarely true in practice. Class actions are the brainchildren of the lawyers who specialize in prosecuting such actions, and in picking class representatives they have no incentive to select persons capable or desirous of monitoring the lawyers’ conduct of the litigation.

The Eubank v. Pella appeal arose out of a disputed settlement.  As Judge Posner explained, the settlement of class actions represents one area where class counsel run the risk of abusing their authority (emphasis added):

…The reasons that class actions invariably are settled are twofold. Aggregating a great many claims (sometimes tens or even hundreds of thousands—occasionally millions) often creates a potential liability so great that the defendant is unwilling to bear the risk, even if it is only a small probability, of an adverse judgment. At the same time, class counsel, ungoverned as a practical matter by either the named plaintiffs or the other members of the class, have an opportunity to maximize their attorneys’ fees—which (besides other expenses) are all they can get from the class action—at the expense of the class. The defendant cares only about the size of the settlement, not how it is divided between attorneys’ fees and compensation for the class. …

Thus, the natural self-interest of the parties leads to a settlement amount that is as low as possible, “but heavily tilted toward attorneys’ fees.”

The settlement that had been proposed in the Eubank case was described by Judge Posner as “inequitable — even scandalous,” with class counsel blatantly enriching himself at the expense of his “clients.”  Not surprisingly, it was rejected by the Seventh Circuit Court of Appeal.  Judge Posner’s recitation of class counsel’s misconduct provides a salutary object lesson for any reader.

It is sometimes said that “bad facts make bad law.”  In contrast, the “bad facts” of the Eubank ruling were the catalyst for “very good law.”  Judge Posner’s unvarnished criticism valuably underlines the drawbacks and vulnerabilities that are inherent in every class action, but which are almost never acknowledged by the courts.

The McCarthy Tétrault Opinions Group consists of members of the firm’s litigation department whose practices focus on written advocacy and the provision of strategic advice and opinions in the context of complex business disputes and transactions. The members of the Opinions Group are Anthony Alexander, Martin Boodman, Brandon Kain and Hovsep Afarian.

Dead Again: Court of Appeal makes Clear that Certification of Misclassification Overtime Class Actions Remains as Hard as Ever

Posted in Case Comments, Class Actions
Elder MarquesKosta Kalogiros

Last week, the Ontario Court of Appeal released its decision in Brown v. Canadian Imperial Bank of Commerce, upholding the Divisional Court’s decision affirming the dismissal of a certification motion in a proposed “misclassification” overtime class action (previously blogged about in the spring and fall of 2013). The appeal decision is of particular interest as “misclassification” overtime class actions (i.e. class actions alleging that an employer has misclassified employees and managers to avoid overtime pay obligations) were thought, by many observers, to have already been dealt a fatal blow by the Court in its prior decision in McCracken v. Canadian National Railway Company, but a recent certification decision had raised questions about whether that was right.

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This Week at the SCC (03/10/2014)

A Commentary on Recent Legal Developments by the Opinions Group of McCarthy Tétrault LLP

Posted in Case Comments, This Week at the SCC
Hovsep Afarian

The Supreme Court of Canada issued a judgment in one case and denied leave to appeal in another case of interest to Canadian businesses and professions.

In Trial Lawyers Association of British Columbia v. British Columbia (Attorney General), a majority of the Court ruled that a provincial rule requiring the payment of court hearing fees, with limited exemptions, was unconstitutional, as it infringed litigants’ right to access to justice.  The majority of the Court ruled that, in order to pass constitutional muster, such fees cannot be so high as to cause litigants to “sacrifice reasonable expenses in order to bring a claim.”

In Fédération des médecins spécialistes du Québec v. Conseil pour la protection des malades, the Court refused to grant leave to appeal a decision of the Quebec Court of Appeal which had awarded moral damages to a class comprised of patients whose surgeries had been postponed as a result of employment-related protest actions taken by the Federation of Medical Specialists of Quebec against the Minister of Health and Social Services.

Preliminary Dismissal of Meritless Case: A Second Message of Encouragement from the Supreme Court

Posted in Case Comments, Procedure
Pierre-Jerome BouchardAlexandre Boulé

The Supreme Court of Canada recently released an important decision regarding the preliminary dismissal of cases, this time through the doctrine of stare decisis, which dictates that a precedent case rendered by a higher court binds a lower court’s decision.  In Attorney General of Canada v. Confédération des syndicats nationaux, 2014 SCC 49 (“CSN 2014”), Justices Lebel and Wagner, writing for a unanimous Court, confirmed that the action of the plaintiffs unions had no reasonable chance of success and should be dismissed based on stare decisis.  The Court’s decision, in a case originating from Quebec, echoes its earlier ruling in Hryniak v. Mauldin, 2014 SCC 7 (“Hryniak”)[1], promoting procedural tools which can lead to preliminary dismissal of actions.

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This Week at the SCC (26/09/2014)

A Commentary on Recent Legal Developments by the Opinions Group of McCarthy Tétrault LLP

Posted in This Week at the SCC
Anthony Alexander

The Supreme Court of Canada granted leave to appeal in one case, and refused leave in several other cases, likely to be of interest to Canadian businesses and professions.

The Court granted leave from the ruling of the Saskatchewan Court of Appeal in Lemare Lake Logging Ltd v 3L Cattle Company Ltd, 2014 SKCA 35.  That constitutional law decision had addressed the alleged operational conflict between the federal Bankruptcy and Insolvency Act and the Saskatchewan Farm Security Act, regarding the appointment of a receiver.   The Court of Appeal had found the provincial enactment to be inoperative pursuant to the doctrine of federal paramountcy.

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Insider Trading: Securities Commission to Think Twice About Excessive Sanctions and Speculation

Posted in Case Comments, Securities
Kate Findlay

In a rare appellate court decision, the Court of Appeal in Walton v. Alberta (Securities Commission), 2014 ABCA 273, has set aside a decision by the Alberta Securities Commission and has held that any monetary penalties levied must be proportionate to the circumstances of the offender and supported by reasons. The Court also held that findings cannot be based upon speculation and that the Commission had improperly interpreted the “recommending or encouraging” provisions of the Alberta Securities Act (the “Act”) in a decision that is certain to give pause to Securities Commissions across Canada.

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This Week at the SCC (19/09/2014)

A Commentary on Recent Legal Developments by the Opinions Group of McCarthy Tétrault LLP

Posted in This Week at the SCC
Brandon Kain

The Supreme Court of Canada released judgment this week in a trilogy of cases of interest to Canadian businesses and professions.

In Bank of Montreal v. Marcotte, 2014 SCC 55, Amex Bank of Canada v. Adams, 2014 SCC 56 and Marcotte v. Fédération des caisses Desjardins du Québec, 2014 SCC 57, the Court upheld class action trial judgments against several financial institutions in which consumers recovered conversion charges that the defendants imposed upon credit card purchases made in foreign currencies.  The defendants were found not to have complied with certain disclosure required in the Quebec Consumer Protection Act (the “CPA”) with respect to conversion charges assessed by them.  The Court rejected arguments that the relevant CPA provisions were constitutionally inapplicable or inoperative under the doctrines of interjurisdictional immunity and paramountcy, based on their impairment of the federal banking power or conflict with the Bank Act.  As well, the Court clarified that a class action may be authorized even where the representative plaintiff does not have a direct cause of action against each named defendant, so long as he or she is an adequate representative of the class and the actions against each defendant involve identical, similar or related questions of fact.  The Court also addressed the threshold for awarding punitive damages in the class actions context.

For more extensive discussions of the Marcotte trilogy, please see the blog post prepared by my colleague Shaun Finn (focusing on its implications for class actions law), and the legal update prepared by my colleagues James Archer, Ana Badour and Robert Metcalfe (focusing on its implications for constitutional law and financial institutions).

The McCarthy Tétrault Opinions Group consists of members of the firm’s litigation department whose practices focus on written advocacy and the provision of strategic advice and opinions in the context of complex business disputes and transactions.  The members of the Opinions Group are Anthony Alexander, Martin Boodman, Brandon Kain and Hovsep Afarian.

SCC Maintains Permissive View of Quebec Class Actions and confirms the Consumer Protection Act applies to Bank Conversion Charges

Posted in Case Comments, Class Actions
Shaun Finn

The following post of the Canadian Class Actions Monitor blog may be of interest to readers of this blog: SCC Maintains Permissive View of Quebec Class Actions and confirms the Consumer Protection Act applies to Bank Conversion Charges.

In Bank of Montreal v. Marcotte, 2014 SCC 55, the Supreme Court dismissed appeals brought by various banks contesting the applicability of the Quebec Consumer Protection Act (“CPA”) to conversion charges charged by banks of foreign currency transactions. The Court concluded that certain disclosure provisions of the CPA did apply to the conversion charges in issue.  The Court rejected the applicability of the doctrines of inter-jurisdictional immunity and paramountcy invoked by the banks.  The Court concluded that section 12 CPA had been breached (giving rise to a reduction in obligations and punitive damages). The Court also held that a representative plaintiff need not have a cause of action against each of the named defendants, that collective recovery and punitive damages are both available, and that punitive damages may be awarded if the impugned behaviour was “lax, passive or ignorant with respect to consumers’ rights.” Read more

Die Another Day: SCC Adjourns Appeal of National Class Actions Decision Sine Die

Posted in Case Comments, Class Actions, Conflict of Laws, Constitutional
Katherine Booth

Followers of Canadian class actions law will have longer to wait for a decision in the much anticipated appeal from the Manitoba Court of Appeal’s decision in Meeking v. Cash Store Inc. et al., 2013 MBCA 81. The appeal, which was scheduled to be heard on January 12, 2015 and expected to bring clarity on the issue of “national” class actions in Canada, was recently adjourned sine die.

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The Crucial Distinction Between Carrots and Sticks: Incentives and Penalties in the Interpretation of the Interest Act

Posted in Real Property
Timothy Froese

Do incentives for prompt payment in a mortgage, which would be lost on default, run afoul of the prohibition against penalties for non-performance contained in s.8 of the Interest Act? The Alberta Court of Appeal recently split over this question, with the majority saying no. This case could affect the structure of mortgages in Alberta, encouraging the use of “non-penal” devices to ensure performance that may be difficult to distinguish, in operation, from penalties.

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Ontario Court of Appeal Turns Against Cross-Border Securities Class Actions

Posted in Case Comments, Class Actions, Securities
Michael RosenbergSapna Thakker

The following post on the Canadian Class Actions Monitor blog may be of interest to readers of this blog: Ontario Court of Appeal Turns Against Cross-Border Securities Class Actions.

In the recent decision of Kaynes v. BP, PLC, 2014 ONCA 580, the Ontario Court of Appeal stayed a proposed secondary market securities class action on the basis of forum non conveniens.  Writing for a unanimous Court of Appeal, Sharpe J.A. found that Ontario could assume jurisdiction over claims by Canadian residents who purchased their shares on foreign exchanges.  Nevertheless, he held that Ontario should decline jurisdiction on the basis that foreign courts were better positioned to decide claims arising from transactions on foreign exchanges. Read more


Time to Leave: Supreme Court to Determine Securities Class Action Limitation Period

Posted in Case Comments, Class Actions, Securities
Elder MarquesMichael O'Brien

The Supreme Court of Canada has granted leave to appeal in a case that will determine how to apply the statutory limitation period for investors in Ontario who decide to sue public issuers and their executives under the Securities  Act.  Given similar legislation in other provinces, the case will be significant for investors and public issuers across Canada.

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A Costly Choice (of law): Determining the damages available for an extra-territorial tort

Posted in Case Comments, Conflict of Laws
Brooke MacKenzie

The recent UK Supreme Court decision in Cox v Ergo Versicherung AG, [2014] UKSC 22, provides helpful commentary and a potentially persuasive precedent for Canadian courts on issues of choice of law, the distinction between substance and procedure in the conflict of laws, and legislative extraterritoriality in circumstances where a cause of action is governed by a foreign law.

Consistent with Canadian law, the UK Supreme Court held in Cox that issues of substance are governed by the law of the place where the injury was sustained, but issues of procedure must be determined by the law of the forum where the case is tried.

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A blockbuster decision in contractual interpretation

Posted in Case Comments, Contracts
Geoff R. Hall

In the world of contractual interpretation, the decision of the Supreme Court of Canada in Sattva Capital Corp. v. Creston Moly Corp. is a blockbuster. Sattva does three significant things. First, it determines that contractual interpretation generally involves a mixed question of fact and law, not a question of law alone. That holding has major implications for appellate review of decisions involving issues of contractual interpretation, and represents the resolution of an issue that had previously divided provincial appellate courts. Second, Sattva emphasizes the importance to contractual interpretation of evidence of the surrounding circumstances or the factual matrix in which a contract is formed. In doing so, Sattva implicitly overrules a 1998 Supreme Court of Canada precedent to the extent that it had downplayed the importance of the factual matrix. Third, Sattva reaffirms a number of principles of contractual interpretation which are well established in Canadian jurisprudence.

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Pay Me Now: Court of Appeal Delivers Lessons on fiduciary duties, the business judgment rule, and executive compensation

Posted in Case Comments, Corporate Law, Securities
Elder MarquesShane C. D'SouzaRobert Glasgow

The business judgment of directors setting executive compensation was front and centre in the Ontario Court of Appeal’s recent decision in Unique Broadband Systems, Inc. (Re), 2014 ONCA 538 (UBS). Although the decision is based on unique underlying facts, it offers several important lessons on corporate governance.

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Deemed Reliance in the U.S. Supreme Court

Posted in Case Comments, Class Actions, Securities
Eric BlockAndrew MathesonDana PeeblesStephanie Sugar

The following post on the Canadian Securities Regulatory Monitor blog may be of interest to readers of this blog: Deemed Reliance in the U.S. Supreme Court.

On June 23, 2014 the United States Supreme Court issued its much-anticipated decision in Halliburton Co. v. Erica P. John Fund (“Halliburton”), as issuers and investors in the U.S. (and Canada) wanted to see if the landscape for securities class actions in both countries would be fundamentally changed. The U.S. Supreme Court made only an uneventful change in U.S. law and so our Courts are not likely to see a sudden shift of class actions against cross-listed companies to Canada. The U.S. Supreme Court specifically held that defendants in securities class actions could rebut the presumption of investor reliance on public and material misrepresentations prior to class certification, by mounting evidence that the alleged misrepresentations did not, in fact, affect the issuer’s share price.  Read more

Halliburton: Deepening the Divide Between Certification of US and Canadian Securities Class Actions

Posted in Case Comments, Class Actions, Securities
Laurie Baptiste

Everyone has been talking about the recent decision from the US Supreme Court in Halliburton Co v Erica P. John Fund Inc (Halliburton) and its rulings regarding the “fraud on the market” doctrine in US securities class action litigation (previously reported on here and here). In Canada, many are likely wondering about the potential impact of the decision here.  However, what this case shows is a deepening divide between the certification process of such actions in the US and Canada. In the US, the process is becoming more difficult for investors, while Canada remains a very pro-certification jurisdiction.

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US Supreme Court Clarifies Law on Warrantless Cell Phone Searches. Will the Supreme Court of Canada Follow?

Posted in Case Comments, Charter of Rights, Criminal
Marlon Hylton

Lower courts in both Canada and the US have been deeply divided on the application of their respective Supreme Courts’ precedents on whether the police need a warrant to search the contents of a smart/cell phone seized during a lawful arrest.  On June 25, 2014, the US Supreme Court unanimously settled US law in Riley v. California, No. 13-132.  The court found that privacy interests at stake outweigh any legitimate governmental interest, absent any “exigent circumstances”.

The Fourth Amendment of the US Constitution provides protection against unreasonable search.  A common law exception to the protection under the Amendment is where the search is incident to a lawful arrest.

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Grassy Narrows First Nation v. Ontario (Natural Resources) – SCC affirms Ontario’s taking up of treaty lands for resource development purposes

Posted in Aboriginal, Mining

The following Mining Prospects blog post by Sam Adkins and Stephanie Axmann may be of interest to our readers:

Grassy Narrows First Nation v. Ontario (Natural Resources) – SCC affirms Ontario’s taking up of treaty lands for resource development purposes


Nine Years Too Late, Wal-Mart’s First Unionized Employees Win at the Highest Court

Posted in Labour and Employment
Elder Marques

The saga of North America’s first unionized Wal-Mart has taken a significant turn in favour of its former employees, nine years after they lost their jobs when the store in Jonquière, Quebec was permanently shut.  Much ink has been spilled telling the story of the Jonquière store, its successful unionization in 2004, and its closure in 2005, which was announced on the very day that an arbitrator had been appointed in relation to the what was to have been the store’s first collective agreement.  Now, the Supreme Court of Canada in United Food and Commercial Workers, Local 503 v. Wal-Mart Canada Corp., 2014 SCC 45  has, for a second time, considered the rights of the store’s employees in the context of that store closure.  This time, however, the Court issued a significant victory in favour of the employees which may have implications across the country.

In 2009, the Court dismissed a pair of appeals – Plourde 2009 SCC 54  and Desbiens 2009 SCC 55 – in which former employees sought remedies after the store closure.  On June 27, 2014, the Court released the decision of a seven-member panel’s consideration of a grievance claiming that Wal-Mart’s closure of the store violated the “freeze” provisions of Quebec’s Labour Code.  Similar to provisions elsewhere, the s. 59 “freeze” restricts the employer’s ability to “change the conditions of employment of his employees” during certain phases of collective bargaining.  In a 5-2 ruling, the Court upheld an arbitrator’s award which had found that the closure of the store constituted an impermissible change in the employees’ employment conditions in the absence of evidence that the closure was made in the ordinary course of the company’s business. Continue Reading