Canadian Appeals Monitor

Information and Commentary on Upcoming and Recent Appeal Court Decisions

The Long Arm of the B.C. Securities Commission

Posted in Case Comments, Securities
Patrick Williams

In McCabe v. British Columbia (Securities Commission), 2016 BCCA 7, the B.C. Court of Appeal upheld the ability of the B.C. Securities Commission (the “Commission”) to penalize a resident of British Columbia for publishing misrepresentations about an American company in the United States. This case confirms the Court’s expansive approach to the Commission’s extraterritorial jurisdiction.

Background

Mr. McCabe is a British Columbia resident who published a monthly stock report through a company he controlled. Guinness Exploration Inc. (“Guinness”) is a company incorporated in Nevada. Its shares are quoted on the Over-the-Counter Bulletin Board in the United States and it is an over-the-counter reporting issue in British Columbia. In 2009 and 2010, Mr. McCabe wrote three reports promoting shares in Guinness (the “Guinness Tout Sheets”).

Mr. McCabe wrote the Guinness Tout Sheets in British Columbia, but they were printed and distributed in the United States. There was no evidence that anyone in British Columbia other than Mr. McCabe was aware of them. Mr. McCabe ultimately received $2.65 million (USD) through his British Columbia bank account for publishing the Guinness Tout Sheets.

The Guinness Tout Sheets were grossly misleading. The Commission found that they were intended to significantly increase trading volumes in Guinness shares in order to inflate its stock price.

In 2012, the Commission alleged that Mr. McCabe made misrepresentations contrary to s. 50(1)(d) of B.C.’s Securities Act, R.S.B.C. 1996, c. 418. Mr. McCabe advanced a preliminary argument that the Commission lacked jurisdiction because the Guinness Tout Sheets were only sent to residents of the United States and Guinness shares were only traded in the United States. The Commission rejected the argument, which Mr. McCabe appealed.

The Commission’s Extraterritorial Jurisdiction

At the outset, the parties disagreed over the appropriate standard of review. Mr. McCabe submitted that the issue was one of “true jurisdiction”, such that the Commission’s decision had to be correct. The Commission responded that the case only concerned the application of s. 50(1)(d) to Mr. McCabe’s conduct and thus a reasonableness standard was appropriate. The Court ultimately declined to decide this issue as it found that the Commission was correct in any event.

Mr. McCabe’s central jurisdictional argument was that the Securities Act was constitutionally inapplicable to his conduct by reason of extraterritoriality. He submitted that there was no meaningful connection between British Columbia and the publication of the Guinness Tout Sheets in the United States and that s. 50(1)(d) should be interpreted as containing language limiting its geographical applicability.

The Court held that the Commission’s jurisdiction depends on a real and substantial connection between the impugned conduct — here Mr. McCabe’s publication of the Guinness Tout Sheets — and British Columbia. The Court also held that the analysis of whether a real and substantial connection exists must reflect the realities of modern securities regulation, including the fact that conduct involving securities will often cross provincial and national borders.

The Court agreed with the Commission that the evidence against Mr. McCabe disclosed a real and substantial connection between his conduct and British Columbia: The Guinness Tout Sheets were written in British Columbia, by a resident of British Columbia, who was paid in British Columbia.

Mr. McCabe, relying on the law of misrepresentation and defamation, also submitted that the wrongful act of publication only occurs where a statement is read or acted upon, not where it is written, because publication is incomplete until a statement is consumed by a recipient.

The Court rejected this analogy based on the purpose and wording of the Securities Act. As the Court noted, a tort generally cannot be committed in a vacuum and requires a victim who has been harmed. Conversely, one of the central functions of the Securities Act is to regulate conduct, not remedy harm to victims. The Court also held that an offence under s. 50(1)(d) is committed when the statement is made; s. 50(1)(d) does not require that a misrepresentation be received or acted upon.

As a result, the Court dismissed Mr. McCabe’s appeal and upheld the Commission’s assumption of jurisdiction.

Implications

McCabe continues the Court’s expansive approach to the extraterritorial scope of the Securities Act. McCabe closely follows the related case of Torudag v. British Columbia (Securities Commission), 2011 BCCA 458. Torudag involved a similar challenge to the Commission’s jurisdiction by a person not resident in British Columbia who engaged in insider trading with respect to a reporting company in British Columbia. As in McCabe, the Court upheld the Commission’s jurisdiction.

At the time, we wrote that Torudag suggests that the Commission possesses jurisdiction over foreign persons trading on foreign exchanges so long as a real and substantial connection to British Columbia exists. McCabe relies on on the residency of the person as a connecting factor, but also confirms the jurisdiction of the Commission to regulate conduct in foreign markets. As a result, it supports a broad view of the Commission’s jurisdictional reach.

As for Mr. McCabe, the Commission found him liable and imposed sanctions including disgorgement of $2.78 million and an administrative penalty of $1.5 million.

Case Information

McCabe v. British Columbia (Securities Commission), 2016 BCCA 7

Docket: CA42515

Date of Decision: January 8, 2016

Ontario Court of Appeal Inspiring Consumer Misrepresentation Class Actions

Posted in Case Comments, Class Actions, Consumer Protection
Laurie Baptiste

The Ontario Court of Appeal is once again making headlines with the case of Ramdath v George Brown College, which has turned out to be a doubly significant case at the intersection of class actions and consumer protection legislation. Continue Reading

The Ontario Court of Appeal Declines to Extend the Doctrine of Unconscionability into the Performance of Contracts

Posted in Case Comments, Civil Litigation, Contracts
Geoff R. HallTrevor Courtis

In the 14 months since the Supreme Court of Canada rendered its landmark decision in Bhasin v. Hrynew, 2014 SCC 71 [1] the general organizing principle of good faith in contract law has been applied in a very restrained manner by courts across Canada. The recent decision of the Ontario Court of Appeal in Bank of Montreal v. Javed, 2016 ONCA 49 is a further example of this trend. Continue Reading

What’s in a Name?: BCCA Holds that a Bid Made in the Name of a Related Company is Non-Compliant

Posted in Case Comments, Civil Litigation
Patrick Williams

The recent case of M.G. Logging & Sons Ltd. v. British Columbia (Forests, Lands & Natural Resource Operations), 2015 BCCA 526 emphasizes the strict standards required for compliance in the tendering context, highlights the benefits and drawbacks of a discretion clause, and holds that owners do not have an obligation to resolve ambiguities in non-compliant bids. Continue Reading

Ontario Court of Appeal Dismisses Pet Valu Class Action, Clarifies the Scope of the Duty of Good Faith and Fair Dealing and Calls for Greater Judicial Restraint

Posted in Case Comments, Civil Litigation, Class Actions, Franchise and Distribution
Helen FotinosAdam ShipAlexandra Aliferis

The recent decision of the Ontario Court of Appeal in 1250264 Ontario Inc. v. Pet Valu Canada Inc., 2016 ONCA 24 clarifies and narrows the scope of the duty of good faith and fair dealing imposed on franchisors under section 3 of the Arthur Wishart Act (Franchise Disclosure) (“AWA”) and expressly cautions against zealous judicial intervention in the framing and amendment of common issues in class action proceedings. Continue Reading

Looking Back – The 10 Most Important Appeals of 2015

Posted in Features
Laurie BaptisteRyan MacIsaacKate Macdonald

 

 

 

 

“Those who cannot remember the past are condemned to repeat it”
– George Santayana

Top 10_2


Over the holidays, many reflect over the past year in search of lessons learned for the coming year. In line with this tradition the Appeals Monitor is, once again, pleased to present our annual review of the most significant appeal decisions of the past year which we should be mindful of and which can be expected to impact Canadian employees and businesses for years to come. Continue Reading

Getting Around the Corporate Veil through Agency

Posted in Case Comments, Contracts
Sara Babich

In the recent decision of 1196303 Ontario Inc v Glen Grove Suites Inc, 2015 ONCA 580, the Ontario Court of Appeal considered to what extent parties not privy to an agreement should be held liable for the obligations it creates.

In that case, 1196303 Ontario Inc. (“119”) entered into a settlement agreement with 1297475 Ontario Inc. (“129”), a shell corporation which was owned by Mrs. Sylvia Hyde. Mrs. Hyde was also the sole owner of Glen Grove Suites Inc. (“Glen Grove”), which owned valuable rental property. Mr. Edwin Hyde, who exercised de facto control over both Glen Grove and 129,  agreed that Glen Grove was to provide guarantees and security obligations as part of the settlement. However, Glen Grove was not a signatory to the settlement agreement. 129 subsequently failed to fulfill its obligations under the settlement and 119 sought to collect from Glen Grove.

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Setting Limits: The Supreme Court Confirms a Robust Gatekeeper Approach to Secondary Market Liability Actions

Posted in Case Comments, Class Actions, Securities
Miranda LamPaul Davis

In a much anticipated decision, the Supreme Court released its rulings in three Ontario securities class actions on December 4, 2015: Canadian Imperial Bank of Commerce v. Green, 2015 SCC 60 (“Green”). This trilogy of secondary market class actions has been discussed extensively in previous postings on this blog (see this blog’s discussion of the Ontario Court of Appeal decisions, in the Top Ten Appeals to Watch in 2015 and in the SCC Monitor after the appeals were argued at the Supreme Court). Continue Reading

Cavendish v Talal and ParkingEye v Beavis: The UK Supreme Court provides a refresher on penalty clauses

Posted in Case Comments, Contracts
Sam Rogers

The common law penalty rule is poorly understood but can have disastrous consequences for contracting  parties who do not consider it when setting out remedies for contractual breach. The UK Supreme Court recently brought some much needed clarity to the rule and articulated a revised test in a pair of decisions: Cavendish v Talal and ParkingEye v Beavis. The two decisions consider the rule in very different contexts: Cavendish in the valuation of assets in a share sale and ParkingEye in the imposition of a charges for violating parking lot time limits. Continue Reading

Enforcing Limits: British Columbia Court of Appeal Weighs in on Limitation of Liability Clauses in Agency Context

Posted in Case Comments, Torts
Kelli McAllister

The ability to contractually limit liability, such as tort liability, continues to be an area ripe for appellate courts to clarify.[1] There remains a degree of uncertainty about whether and when a limitation of liability clause will be enforceable. The latest development comes from the British Columbia Court of Appeal (“BCCA”) in Felty v Ernst & Young, which considered a limitation of liability clause in the context of an agency relationship.[2] In that case, the BCCA called the question of enforceability of so-called exclusion clauses “vexed”[3] but ultimately concluded that the clause in that case was enforceable: recovery was limited to the fees paid to a tax advisor. Continue Reading

Supreme Court Revisits Test for Federal Paramountcy

Posted in Bankruptcy and Debt, Case Comments
Byron Shaw

The principle of federal paramountcy provides that valid provincial legislation will be rendered inoperative to the extent it conflicts with valid federal legislation where: (1) there is an operational conflict such that it is impossible to comply with both laws; or (2) operation of the provincial law frustrates the purpose of the federal law.[1]

Like many constitutional principles, the paramountcy test is easy to state yet more difficult to apply. According to the minority of the Supreme Court in Alberta (Attorney General) v. Moloney,[2] decided together with the companion case of 407 ETR Concession Co. v. Canada (Superintendent of Bankruptcy),[3] the “two branches have been confused” in the jurisprudence.[4] One of the potential sources of the confusion may stem from differences in how the provincial and federal laws are characterized by the Court and what it means for a citizen to be “compelled” to act by either level of government. Continue Reading

Builders take note: BCCA upholds interpretation of common defective workmanship exclusion

Posted in Case Comments, Insurance
Ariel DeJongJordanna CytrynbaumLindsay Burgess

A unanimous panel of the B.C. Court of Appeal recently upheld a 2014 B.C. Supreme Court decision which interpreted, for the first time, the “LEG 2/96” exclusion clause for defective workmanship common in some Course of Construction insurance policies.

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The SCC Monitor (27/11/2015)

A Commentary on Recent Legal Developments by the Canadian Appeals Monitor

Posted in The SCC Monitor
Ryann Atkins

Since our last post, the Supreme Court has released a significant trilogy of judgments involving issues of federal paramountcy and the Bankruptcy and Insolvency Act (the “BIA”).

The Court’s decision in Alberta (Attorney General) v. Moloney, dealt with an alleged operational conflict between section 178(2) of the BIA and section 102 of Alberta’s Traffic Safety Act. The TSA provision applies where an uninsured person is found liable for damages arising from a motor vehicle accident. It allows the province to suspend that person’s driver’s license until the judgment against him or her is satisfied (which often means repaying the province for compensation distributed under the Motor Vehicle Accident Claims Act). The BIA, on the other hand, releases the bankrupt upon discharge from all debts that are claims provable in bankruptcy (which would include the province’s claim for repayment of compensation). The debtor in this case challenged the province’s constitutional authority to suspend his license after he was discharged from bankruptcy.

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The Supreme Court clarifies the role and nature of the “prudence” test in Canadian utility regulation

Posted in Case Comments, Energy
Héloïse Apestéguy-ReuxRenée Zatzman

Background

The Supreme Court of Canada recently released its highly anticipated decisions on utility regulation in Ontario Energy Board v. Ontario Power Generation Inc., 2015 SCC 44 (noted as an Appeal to Watch in 2015 here) and ATCO Gas and Pipelines Ltd. v. Alberta (Utilities Commission), 2015 SCC 45 . These regulatory decisions analyzed a utility’s ability to recover operating and capital costs from consumers through rate-setting, and the methodology to be used in approving rate increases. Continue Reading

Can you be contractually bound to another party forever?

Posted in Case Comments, Contracts
Louis Fouquet

In Uniprix v. Gestion Gosselin et Bérubé Inc., 2015 QCCA 1427, the Quebec Court of Appeal addressed the previously unanswered question of whether the non-renewal clause in a fixed term contract may be stipulated to be for the benefit only of one of the contracting parties, such that in the eyes of the other contracting party the contract may in effect become perpetual. Continue Reading

Defamation Law – Quebec Court of Appeal Reiterates the Fine Line Between Defamatory and Reasonably Fair Comments

Posted in Case Comments, Charter of Rights, Labour and Employment
Marc-Andre Russell

Today we comment on a recent judgment of the Quebec Court of Appeal adding to the infinite quest for a fair balance between freedom of speech and protection of reputation. This case reiterates the fine line between a reasonably fair and a defamatory comment. Clients questioning the appropriateness of comments they are about to make in the public sphere are welcome to seek our opinion. As one of the parties in this case submitted a leave application to the Supreme Court of Canada, this case is being closely monitored. Continue Reading

Waiver of Privilege: The Danger of Pleading Lack of Informed Consent

Posted in Case Comments, Civil Procedure/Evidence
Timothy Froese

In a case that highlights the importance of carefully drafted pleadings, the Alberta Court of Appeal recently split over the question of whether pleading a lack of informed consent to an agreement resulted in the waiver of privilege over legal advice received during the negotiation of that agreement.  In Goodswimmer v Canada (Attorney General), the majority of the Court of Appeal found that the appellant had waived solicitor-client privilege by voluntarily placing its reliance on legal advice into issue in its Statement of Claim and by selectively disclosing certain privileged communications.  The dissenting Justice engaged in an interesting analysis of the requirements to imply a waiver of privilege and would have characterized the appellant’s claim in a way that would not put the content of the legal advice that it received into issue. Continue Reading

The SCC Monitor (21/10/2015)

A Commentary on Recent Legal Developments by the Canadian Appeals Monitor

Posted in The SCC Monitor
Kosta Kalogiros

Since our last post, the Supreme Court has released a number of judgments and granted leave to appeal in a number of cases of interest.

In September, the Court released two of the Canadian Appeal Monitor’s “Top Ten” Appeals to Watch in 2015; the much anticipated Chevron Corporation et al. v. Yaiguaje et al. and Ontario (Energy Board) v. Ontario Power Generation Inc. et al.. Continue Reading

A Tale of Two Citruses: BCCA weighs in on when an abuse of process claim is ripe for determination

Posted in Case Comments, Civil Litigation, Intellectual Property
Ryann Atkins

When will seeking injunctive relief against a non-party amount to abuse of process? At what stage in a proceeding should that determination be made? The British Columbia Court of Appeal addressed these questions in Tangerine Financial Products Limited Parternship v. The Reeves Family Trust, the result being that it is easier, both substantively and procedurally, for non-parties to oppose such remedies on a preliminary basis. Continue Reading

ABCA Cements Limitation Period for Third Party Contribution Claims and Weighs in on Still Unsettled Test for Summary Dismissal

Posted in Case Comments, Civil Litigation
Laurie Baptiste

There has been a longstanding dispute, or at least uncertainty, about the limitation period for third party claims for contribution in Alberta stemming back over 40 years or so, despite numerous efforts of the courts and the Alberta legislature to remedy it. The judgment in Whitecourt Power Limited Partnership v Elliott Turbomachinery Canada Inc, has ended all uncertainty, hopefully for good. This decision affects litigation of all variety and is very important as it provides firm confirmation of the limitation period for third party claims for contribution, which are common and important to many actions. Continue Reading

Chevron Corp v. Yaiguaje: SCC Decision Highlights Increased Litigation Risk for Canadian Companies for Misdeeds of their Foreign Affiliates

Posted in Case Comments, International rights
Neil FinkelsteinBrandon KainMarc-Andre RussellDharshini SinnaduraiShea Small

The Supreme Court of Canada’s most recent decision in Chevron Corp. v. Yaiguaje has significantly increased the litigation risk for companies with assets in Canada from plaintiffs seeking to enforce foreign judgments obtained against the foreign affiliates of such companies. The SCC decision in Chevron will have significant cross-border implications, as enforcement in Canada can now be pursued against foreign companies and their Canadian affiliates even if neither party to the original dispute has a “real and substantial” connection to Canada. Continue Reading

You Only Get to Eat What You Kill: Real Estate Brokers as Hunters and Brokerage Contracts as Hunting Licences

Posted in Case Comments, Civil Litigation, Real Property
Laurie Baptiste

Anyone involved or interested in commercial real estate should be aware of the relatively recent decision of the Supreme Court of Canada (SCC) in Société en commandite Place Mullins v Services immobiliers Diane Bisson inc, mentioned briefly in two prior blog posts, here and here. Although the Supreme Court reviewed a decision of the Quebec Court of Appeal involving a standard brokerage agreement in Quebec, the decision may arguably have wider application, including in Alberta.

In a unanimous decision authored by Wagner J. the Court explains well what constitutes an “agreement to sell” in the context of a conditional real estate deal and some of the circumstances in which a brokerage will be entitled to be paid its commission.

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