Canadian Appeals Monitor

Information and Commentary on Upcoming and Recent Appeal Court Decisions

The Supreme Court of Canada (Clearly and Expressly) Affirms the Importance of Solicitor-Client and Litigation Privilege

Posted in Case Comments, Privilege
Jessica Laham

In two recent companion decisions, the Supreme Court of Canada affirmed the importance of litigation privilege and solicitor-client privilege to the Canadian legal system. In Lizotte v. Aviva Insurance Company of Canada[1] (Lizotte), the Court recognized litigation privilege as a distinct and fundamental principle of the administration of justice, while in Alberta (Information and Privacy Commissioner) v. University of Calgary[2] (Alberta (Information and Privacy Commissioner)), the Court focused on issues of solicitor-client privilege. These decisions both confirm that for the legislature to abrogate either litigation privilege or solicitor-client privilege, nothing less than clear and express statutory language will suffice.

Lizotte v. Aviva Insurance Company of Canada

The central issue in Lizotte revolved around whether the the syndic of the Chambre de l’assurance de dommages (the “Syndic”) could compel production of an insurer’s entire claim file for an insured as part of an inquiry into a claims adjuster, even where the insurer claimed litigation privilege over a portion of the file.

The Syndic’s request was based upon s. 337 of the Act respecting the distribution of financial products and services (“ADFPS”), which requires insurers to forward “any required document” to the Syndic upon request.[3]

Although the insurer provided most of the claims file, it refused to provide documents over which it claimed litigation privilege. The Syndic proceeded to bring a motion for declaratory judgment.

The Supreme Court of Canada, upholding the decisions of both the Superior Court of Québec and the Québec Court of Appeal, dismissed the Syndic’s appeal, holding that litigation privilege could not be abrogated absent a clear, express statutory provision.

Writing for the Court, Gascon J. clarified the nature and strength of litigation privilege, which protects documents and communications whose dominant purpose is preparation for litigation.[4] While making clear that litigation privilege is distinct from solicitor-client privilege, Gascon J. identified three principal characteristics of litigation privilege:

  • Litigation privilege is a class privilege, meaning that once it is established that it applies to any given document, there is a prima facie presumption the document it protects is inadmissible, and there is no onus on the party asserting litigation privilege;[5]
  • There is no “balancing test” to be applied to determine whether litigation privilege should be applied. Instead, a specific exception to the privilege must be identified, such as public safety; innocence of the accused; criminal communications; or “evidence of the claimant party’s abuse of process or similar blameworthy conduct”;[6] and
  • Litigation privilege can be asserted against third parties, including any third party investigators who have a duty of confidentiality.[7]

Notably, the Court did leave open the possibility of additional specific exceptions to litigation privilege, including a possible exception for “urgency and necessity”. As none of the facts of the case were found to possibly justify such an exception, consideration of such an exception was left for another day.[8]

Having set out the characteristics of litigation privilege, the Court found that none of the recognized exceptions to litigation privilege applied to the documents in issue, and proceeded to consider the issue of whether section 337 of the ADFPS nonetheless required the insurer to produce otherwise litigation privileged documents.

The Court extended its reasoning from Canada (Privacy Commissioner) v.  Blood Tribe Department of Health (Blood Tribe), where the Court had held that in order to abrogate solicitor-privilege by statute, clear, explicit, and unequivocal language must be used,[9] and found that this same requirement applied in equal measure to documents protected by litigation privilege.[10]  Perhaps unsurprisingly, the language of “any required document” in section 337 of the ADFPS was found not to be sufficiently clear to amount to an express abrogation of litigation privilege.

Alberta (Information and Privacy Commissioner ) v. University of Calgary

The central issue in Alberta (Information and Privacy Commissioner) was whether language in the Alberta Freedom of Information and Protection of Privacy Act[11] (“FOIPP”) was sufficient to abrogate solicitor-client privilege.

In this case, a former employee of the University of Calgary (the “University”) sought production of records from the University through the Information and Privacy Commissioner of Alberta. The University produced some records, but refused to produce others on the basis that they were solicitor-client privileged.

After some back and forth between the University and a delegate of the Information and Privacy Commissioner of Alberta (the “Delegate”), ultimately, the Delegate issued the University a notice to produce records to the Commissioner under section 56(3) of FOIPP, which requires that a public body produce documents to the Commissioner “[d]espite…any privilege of the law of evidence”.[12]

On judicial review, the decision of the Delegate of the Commissioner was upheld, however, the Alberta Court of Appeal reversed the decision, finding that “any privilege of the law of evidence” did not include solicitor-client privilege.

Upholding the decision of the Alberta Court of Appeal, the Court concluded that the solicitor-client privileged records in issue should not have been ordered produced under s. 56(3) of FOIPP.

Writing for the majority, Côté J. found that the language of “any privilege of the law of evidence” did not meet the requirement of “clear and unambiguous legislative intent” to abrogate solicitor-client privilege as set out in Blood Tribe, noting that solicitor-client privilege had evolved beyond privilege of the law of evidence to a “substantive right fundamental to the proper functioning of the legal system.”[13] On this basis, the delegate did not have legislative authority to order production of solicitor-client privileged documents.

Interestingly, in concurring reasons, Cromwell J. concluded that the language of s. 56(3) of FOIPP was sufficiently clear and unambiguous to abrogate solicitor-client privilege.[14]  In separate concurring reasons, Abella J. found that the delegate’s decision should have been reviewed on a standard of reasonableness (both Côté and Cromwell JJ. Had determined the standard of review to be correctness), but that the delegate had acted unreasonably.[15]

Conclusion

Lizotte and Alberta (Information and Privacy Commissioner) are important developments in the law of privilege in Canada. Following Lizotte, litigation privilege will be rigorously protected as a distinct class privilege. Both Lizotte and Alberta (Information and Privacy Commissioner) also make clear that if the legislature wishes to abrogate either litigation or solicitor-client privilege, clear and express language will be required to do so.

Although in Lizotte the Court noted that the legislature does not necessarily have to use the term “solicitor-client privilege” in order to statutorily abrogate such a privilege,[16] given the finding in Alberta (Information and Privacy Commissioner) that “any privilege of the law of evidence” was not sufficiently clear, it seems apparent that the language necessary to abrogate either of these privileges will indeed need to be extremely “clear, explicit, and unequivocal.”[17]

Parties faced with an order to produce privileged documents pursuant to statutory authority would do well to consider whether the statutory language in issue does in fact meet the high threshold set out by the Court prior to producing such documents.

_______________________________________

[1] 2016 SCC 52.

[2] 2016 SCC 53.

[3] Act respecting the distribution of financial products and services, CQLR c D-9.2, s. 337.

[4] Blank v. Canada (Minister of Justice), 2006 SCC 39.

[5] Lizotte, supra, paras. 33 and 37.

[6] Ibid., para. 41.

[7] Ibid., para. 47.

[8] Ibid., paras. 43-45.

[9] 2008 SCC 44 at para. 2.

[10] Lizotte, supra, para. 63.

[11] Freedom of Information and Protection of Privacy Act, RSA 2000, c F-25.

[12] Ibid., s. 56(3).

[13] Alberta (Information and Privacy Commissioner), supra, paras. 2, 28, 34, 37.

[14] Ibid., para. 81.

[15] Ibid.,  para. 137.

[16] Lizotte, para. 61

[17] Ibid., para. 5.

Business Realities v. Narrow Legalities: The Supreme Court considers the oppression remedy in Mennillo v. Intramodal Inc., 2016 SCC 51

Posted in Case Comments, Corporate Law
Michael O'Brien

In Mennillo v. Intramodal Inc. 2016 SCC 51, the most recent consideration of the oppression remedy by the Supreme Court of Canada (released on November 18, 2016), the majority confirmed the oppression remedy’s equitable purpose, and held that a corporation’s failure to comply with the CBCA[1] does not, on its own, constitute oppression.

This decision, with particular applicability to small, closely held corporations, reiterated oppression remedy principles set out in the 2008 Supreme Court decision of BCE Inc. v. 1976 Debentureholders,[2] that the remedy is concerned with fairness and business realities, rather than narrow legalities.[3]

Background

In 2004, two friends, Mr. Mennillo and Mr. Rosati, formed an agreement to create a transportation company called “Intramodal”. Mennillo agreed to contribute money to start the business, and Rosati brought skills to ensure its success. From the start, the dealings of the parties were “marked by extreme informality”[4], where the corporation rarely complied with the CBCA and the parties “almost never put anything in writing”. For example, on incorporation in July 2004, Rosati and Mennillo were issued 51 and 49 class “A” shares respectively, though the notices of subscription and the resolution were signed solely by Rosati, neither party paid for his shares (contrary to s. 25(3) of the CBCA), and Mennillo’s share certificate was not signed (contrary to s. 49(4)(a) of the CBCA).[5]

In May 2005, Mennillo sent a letter to Intramodal indicating his resignation as an officer and director of the company. Following this, Intramodal’s lawyer filed an amending declaration with the Registraire des entreprises (REQ) to indicate that Mennillo had been removed as a director and shareholder of the company.

In the early stages of the company’s development, Mennillo advanced $440,000 to Rosati (not Intramodal) for the purposes of financing the business. In July 2007, Mennillo expressed discontent that he had not received any return on his investment, despite the company’s success, and asked that his loan be repaid. Rosati agreed to repay Mennillo the loan plus an additional $150,000, totalling $690,000. It was only after receiving his final payment that Mennillo realized that he was no longer a shareholder of the corporation. At that time, in December 2009, Mennillo applied for an oppression remedy against Intramodal on the basis that Intramodal and Rosati had unduly and wrongfully stripped him of his status as a shareholder of the corporation.

The question before the Court

In a trial that hung on the credibility of the witnesses due to the significant lack of documentation, the trial judge found that Mennillo refused to participate in the venture, and when Mennillo asked to be removed as a shareholder and director of Intramodal in May 2005, he became a lender to Rosati, as a friend, only. Given this key finding, the trial judge found that Mennillo’s oppression claim must fail. The trial judgment was upheld by the Court of Appeal for Québec.

Writing for the majority, Justice Cromwell (Abella, Karakatsanis, Wagner, Gascon and Brown JJ. concurring) set out the main question to be decided as whether the trial judge made a reviewable error in finding that in May 2005, Mennillo no longer wished to remain a shareholder because he did not want to be the guarantor of all of Intramodal’s debts and transferred his shares to Rosati.

In accepting the trial judge’s findings of fact, the majority found Menillo’s oppression claim to be groundless. Despite the fact that the corporation failed to comply with legal formalities, the majority found that Mennillo could not have had a reasonable expectation of being treated as a shareholder.[6] In concurring reasons, Chief Justice McLachin (Moldaver J. concurring), noted that the appeal could be disposed of on the basis that Mennillo failed to show a reasonable expectation that he would not be removed as a shareholder from Intramodal’s books.[7]

The majority reiterated the constituent elements that are required for any oppression claim to succeed:

  1. The claimant must “identify the expectations that he or she claims have been violated … and establish that the expectations were reasonably held.”[8]
  2. The claimant must show that “those reasonable expectations were violated by conduct falling within the statutory terms, that is, conduct that was oppressive, unfairly prejudicial to or unfairly disregarding of the interests of any security holder.”[9]

While the corporation failed to comply with the requirements of the CBCA, the failure to comply with the statute, on its own, did not constitute oppression. The majority further held that “the oppression remedy is a discretionary one that is equitable in nature.” In order to trigger the remedy, conduct must frustrate reasonable expectations, not merely run afoul of the CBCA.[10]

Corporate Law issues

While not central to the appeal, the majority also discussed some corporate law issues that will be of interest to corporations operating in Canada, particularly those in Québec.

Can a share transfer be retroactively cancelled?

The CBCA sets out the two ways in which an issuance of shares can be cancelled: (1) if the corporation’s articles are amended or (2) if the corporation reaches an agreement to purchase the shares, which requires a directors’ resolution, the shareholder’s express consent and that the tests of solvency and liquidity be met. The majority stated that it is not possible to retroactively cancel an issuance of shares by way of simple oral consent. [11]

What were the consequences of failing to observe the formalities prescribed by the CBCA?

Intramodal’s failure to comply with the s. 76(1)(a) of the CBCA that a registered security be endorsed when presented for transfer did not in and of itself invalidate any transfer between the shareholders, as Mennillo ceased to be a shareholder in Intramodal as a result of his transfer of shares to Rosati rather than as a result of an improper registration.

The majority took the view that the failure to comply with the endorsement requirement under s. 76(1)(a) of the CBCA resulted in the failure of the share transfer (pursuant to ss. 60(1) and 65(3) of the CBCA) and a nullity of the transfer, pursuant to articles 1414 and 1416 of the C.C.Q.. The majority observed that this could have resulted in an attack on the transfer on the basis of non-compliance with this formality, had Mennillo sought judicial intervention within three years of becoming aware of the cause of nullity, as prescribed by articles 2925 and 2927 of the C.C.Q..[12]

Could the shares have been issued conditionally?

The dissenting judge at the Court of Appeal understood the trial judge’s reasons as holding that the issuance of the shares to Mennillo had been conditional on his remaining as a guarantor to the corporation. The dissenting judge stated that such conditional status is not set out in the CBCA, and even if it were, such status would have to be specified in the corporation’s books. While disagreeing with the dissenting judge’s reading of the trial decision, Justice Cromwell substantially agreed with the dissenting appellate judge’s position regarding conditional share issuances, and explained that conditions attaching to shares need to be specified in the articles of the corporation and in the securities register.

Dissenting reasons

In her dissent, Justice Côté harkened back to the deep roots of corporate law in Canada to and based her lengthy reasons on: (1) the distinct nature of the corporate personality, and (2) the rule of preservation of capital. Using these principles, Justice Côté explained that corporations are required to operate in accordance with the applicable statutes (in this case, the C.C.Q. and the CBCA) in a manner that does not weaken the strict formal requirements of corporate law, nor confuse the business corporation with the partnership. In Justice Côté’s view, had the parties intended their business relationship to be governed by informal dealings, they should have formed a partnership at the outset of their relationship. Once incorporated, Intramodal was required to strictly comply with the formal requirements of the C.C.Q. and CBCA, rather than confuse its interests with its majority shareholder and take a “distrubingly lax” approach to its legal duties.

Function over form? Don’t forget good form

This decision will be of particular interest to closely held corporations and fast-growth companies that emphasis function over formality. While this decision may appear to be a win for business function over legal formality, the majority’s clear warning that a corporation needs to adhere to statutory requirements, coupled with Justice Côté’s strong dissent, serves as reminder to businesses to ensure legislative compliance. By the same token, this decision offers an important reminder for large corporations and activist shareholders: failure to adhere to statutory obligations may give rise to statutory claims in addition to, or in lieu of, an oppression claim.

Case Information:

Citation: Mennillo v. Intramodal Inc., 2016 SCC 51

Docket: 36124

Date: November 18, 2016

________________________________

[1] Canada Business Corporations Act (R.S.C. 1985, c. C-44).

[2] 2008 SCC 69 [BCE].

[3] BCE at para. 58.

[4] Para. 10.

[5] Paras. 21 – 22.

[6] Paras. 55 – 58.

[7] Para. 86.

[8] BCE, at para. 70.

[9] BCE, at para. 68; s. 241(2) CBCA.

[10] Para. 11.

[11] Para. 63.

[12] Paras. 71 – 74.

Indeterminate Liability of Auditors and the Dangers of Partial Summary Judgment

Canadian Imperial Bank of Commerce v Deloitte & Touche, 2016 ONCA 922

Posted in Case Comments, Procedure, Professions
William D. BlackEli MogilLeah Ostler

In a decision released on December 8, 2016, the Ontario Court of Appeal allowed an appeal from partial summary judgment, holding that issues of indeterminate auditor liability should proceed to trial.

Facts

In 1998, an accounting fraud was discovered at Philip Services Corp. (“Philip”), a publicly traded company. The Plaintiffs alleged that Philip’s auditors, Deloitte and Deloitte Touche Tohmatsu (“Deloitte”) gave unqualified opinions in connection with its audits of Philip’s consolidated financial statements for the financial years ending December 31, 1995 and 1996.

Canadian Imperial Bank of Commerce (“CIBC”) and High River Limited Partnership (“High River”), together with other lenders (collectively the “Lenders”) advanced approximately US $1,000,000,000 to Philip under a Credit Agreement in 1997. Following their discovery of the material misstatement of Philip’s financial position, the Lenders sued Deloitte for negligence and reckless or negligent misrepresentation. Philip, through its receiver and manager, sued Deloitte for breach of contract and for professional negligence.

Deloitte denied the allegations, asserting that the purpose of the audit was not to guide Philip’s business decisions and that the Lenders were not the intended audience, negating any duty of care.

Motion Judge: Lender claims dismissed

The Motion Judge held the following: Deloitte had a close relationship with Philip and was aware that Philip planned to grow by acquisitions; Deloitte was aware that Philip would disclose the audited financial statements to its lenders in order to obtain financing; and that CIBC, a known prospective lender, would rely on these statements when deciding to enter an agreement with Philip.

Despite these findings, the Motion Judge held that the Lenders’ claim of negligent misrepresentation and duty of care could be severed from the rest of the trial issues without risk of duplicative or inconsistent findings at trial. The question of negligence was dismissed on the basis that Deloitte would face indeterminate liability if it was found to owe a duty of care to the Lenders, a principle entrenched in Canadian law since the SCC decision in Hercules Management.

Appeal Decision: Summary Judgment will Lead to Duplication or Inconsistencies

The Court of Appeal held that based on the procedural and factual requirements of the case the Motion Judge erred by granting a partial summary judgment. Procedurally, the partial summary judgment was long, complex, and did not materially shorten the upcoming trial. Factually, Justice Hoy held that the remaining issues, namely the Lender’s claim for reckless misrepresentation and Philip’s claim for breach of contract, arise from the same factual matrix as the Lender’s negligence claim. To dismiss one portion of claim would result in potential duplication or inconsistencies in the findings made at trial.

In addition, the Court of Appeal took issue with the Motion Judge’s analysis of indeterminate liability in the context of auditors and non-clients who rely on the auditors’ opinions. The Court noted that Deloitte knew how Philip went about obtaining financing for its business plans and that Philip would disclose its audited financial statements to its lenders in order to obtain financing.  Philip had advised Deloitte of its $1.5 billion credit facility to be underwritten by CIBC 15 days before Deloitte finalized the 1996 audit. As such, Deloitte knew the identity of the non-client who might rely on the statements. The Court of Appeal held that the purpose of an audit can change during the course of the engagement and that it was unlikely that the sole purpose of the audit was to provide financial representations to Philip’s shareholders. The Court held that it would be an error of the court to grant substantial weight to Deloitte’s subjective intention as contained in the engagement letter. The appeal was allowed so that the scope of the duty of care owed to the Lenders could be assessed in the broader factual context.

Comment

The Court’s findings are fact-specific. The long-established principle of avoiding indeterminate liability appears to have been watered down on the basis that Deloitte was advised about the pending credit facility.  Further, and of particular concern to auditors, the Court of Appeal made clear that the “purpose” of the audit can change during the engagement, in turn possibly changing obligations the auditor might have, and certainly making such obligations less predictable. However, the Court of Appeal did not finally decide the issue; rather, it ordered the issue of whether Deloitte owed the Lenders a duty of care to be determined at trial.

Taken together with the Court of Appeal’s Livent decision, currently pending in the SCC, the decision in this case has put in play precepts on which auditors have relied since the Hercules decision. It is not yet clear just how much ground will shift as a result of these cases, but the trial decision in this case, and the further appeal(s) (if any) will be of considerable ongoing interest to the audit community.

Case Information

Canadian Imperial Bank of Commerce v Deloitte & Touche, 2016 ONCA 922

Docket: C61569

Date of Decision: December 8, 2016

English Court of Appeal Rejects the “Organizing Principle of Good Faith”

Posted in Case Comments, Contracts
Paul Davis

The Supreme Court of Canada’s decision in Bhasin v. Hrynew[1] – on which this blog has commented – marked a sea change in Canadian contract law. In Bhasin, the Court recognized an “organizing principle of good faith” in contractual relations that underpins numerous specific doctrines, including, for example, unconscionability and the treatment of discretionary contractual powers.

Continue Reading

Key Banking Decisions of 2016: The Supreme Court of Canada releases its decision in Royal Bank of Canada v. Trang

Posted in Case Comments, Privacy
Daniel G.C. GloverCharles MorganRenee ReicheltBarry SookmanKirsten ThompsonAnna-Marie Manley

A recent article, published by McCarthy Tetrault LLP may be of interest to readers of the Canadian Appeals Monitor blog.

The Supreme Court of Canada released a landmark decision on November 17, 2016 giving important guidance on how Canada’s federal privacy law, the Personal Information Protection and Electronic Documents Act, should be interpreted in Royal Bank of Canada v. Trang, 2016 SCC 50.

Policyholders stay tuned: final word on the LEG 2/96 defective workmanship exclusion yet to come

Posted in Case Comments, Contracts, Insurance
Ariel DeJongLindsay Burgess

As we reported here, the BC Court of Appeal in Acciona Infrastructure Canada Inc. v. Allianz Global Risks US Insurance Company grappled with the proper interpretation of the LEG 2/96 defective workmanship exclusion common in many builder’s risk insurance policies. Applying general principles of contract interpretation the Court held that the exclusion is restricted to denying only those costs that would have been incurred to prevent the damage from happening. Having been unsuccessful on the appeal, the Insurers filed an application for leave to the Supreme Court of Canada. Continue Reading

The Supreme Court of Canada Clarifies the Test and Procedure for Joint Submissions on Sentencing

Posted in Case Comments, Criminal
David PorterAndrew MathesonTrevor Courtis

In R. v. Anthony‑Cook, 2016 SCC 43, the Supreme Court of Canada recently confirmed that trial judges should only depart from a joint submission in very limited circumstances, where the sentence proposed would bring the administration of justice into disrepute, or is otherwise not in the public interest.

Resolution negotiations are a prevalent and necessary feature of our criminal justice system. They allow the Crown and the accused to avoid the uncertainty, stress and legal costs associated with trials where the accused admits guilt and is not exercising his right to make full answer and defence. Resolutions also save the court system precious time, resources, and expenses. Indeed, without resolutions the criminal justice system would collapse under its own weight.[1] Continue Reading

Hamilton City’s Attempt to Stamp Out Community Mail Delivery Ruled Unconstitutional (Sort of)

Posted in Case Comments, Constitutional
Byron ShawHakim Kassam

In response to Canada Post’s announcement that it was restructuring its mail delivery and doing away with home delivery services, the City of Hamilton passed a by-law giving the City control over the installation of equipment on municipal roads, including Canada Post’s community mailbox (“CMB”) delivery systems. Last week, the Ontario Court of Appeal held[1] that the by-law was constitutionally inoperative to Canada Post since it conflicted with the federal Canada Post Corporation Act[2] and the Mail Receptacles Regulations.[3] The Court of Appeal’s decision highlights a tension in the pith and substance jurisprudence between the principle of colourability on the one hand and the motive and purpose of the enacting body on the other. Furthermore, the decision reveals a preference for resolving division of powers disputes through the paramountcy doctrine, which gives rise to a narrower constitutional remedy. Continue Reading

The Ontario Court of Appeal Weighs in on the Jordan Framework for Trial Within a Reasonable Time

Posted in Case Comments, Criminal
Trevor CourtisPeter BradyMichael Rosenberg

As discussed in our previous post, the Supreme Court of Canada recently dramatically altered the framework applicable to the right to a criminal trial within a reasonable time in R. v. Jordan, 2016 SCC 27. This decision has already had a significant impact on the operation of criminal courts in Ontario.

In light of this decision, the Ontario Court of Appeal requested further submissions on two s. 11(b) appeals that had already been argued before the Court under the previous framework. On September 28, 2016, the Court released its decisions in R. v. Manasseri, 2016 ONCA 703 and R. v. Coulter, 2016 ONCA 704. These decisions provide some helpful guidance on how the Courts of Ontario will apply the new framework to “transitional” cases in the system, particularly cases where 1) the delay is just below the presumptive ceilings established in Jordan, and 2) the delay is primarily caused by a co-accused. Continue Reading

Short-Term Parking vs. Long-Term Interests: Applying the Business Judgment Rule to Decisions of Condominium Boards

Posted in Case Comments, Condominium Act, Corporate Law, Securities
Jordan V. Katz

The Ontario Court of Appeal recently considered the application of the oppression remedy provision in the Ontario Condominium Act, 1998, SO 1998, c 19 (the “Act”). In doing so, it engaged in a useful – and rare – discussion of the “business judgment rule” outside of the corporate law context, while reinforcing the basic elements of the rule familiar to corporate and securities law practitioners.

Background Continue Reading

Insureds Score a Big Win at the SCC

Posted in Case Comments, Contracts, Insurance
Ariel DeJongGeoff R. HallHovsep AfarianLindsay Burgess

Policyholders recently won a key victory at the Supreme Court of Canada in Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co. as the Supreme Court clarified the interpretation of a standard form faulty workmanship exclusion clause common in builder’s risk policies.  The decision has wide-reaching significance to other insurance coverage disputes and to contract law generally.

The Supreme Court confirmed that only the cost to redo the faulty work is precluded from coverage by such an exclusion. Builder’s risk, or “course of construction” insurance policies seek to insure against certain defined risks which may occur during the construction process. Such policies generally provide coverage for the owner of the property under construction, the general contractor, and all contractors and subcontractors working on the project. The exclusion at issue in this decision excluded from coverage “the cost of making good faulty workmanship”, but provided an exception for resultant damage (the “Exclusion Clause”). Continue Reading

The Supreme Court of Canada rules that Québec’s farm income stabilization program is not an insurance contract subject to public law rules

Posted in Administrative, Case Comments, Contracts, Supreme Court of Canada
Renée Zatzman

Overview

Two companion decisions of the Supreme Court of Canada were recently released in cases included on our Appeals to Watch in 2016 list, Ferme Vi-Ber inc. v. Financière agricole du Québec, 2016 SCC 34, and Lafortune v. Financière agricole du Québec, 2016 SCC 35.

Both cases involved the interpretation of the same Québec farm producer income stabilization program (the “ASRA Program”) administered by La Financière agricole du Québec (“La Financière), a statutory authority. The appeals focused on whether the ASRA Program should be governed by public administrative law principles or the private rules of contract law. Continue Reading

Ontario Court of Appeal Implies New Prohibition Into Rules of Civil Procedure: Pre-Trial Conference Judges Cannot Decide Summary Judgment Motions in the Same Action

Posted in Case Comments, Procedure
Trevor Courtis

The purpose of a pre-trial conference is to provide parties with a forum to obtain an appraisal from a judge of their respective positions on the outstanding issues between them, and provide an opportunity to openly negotiate a resolution of these issues. The ability of the parties to speak freely without concern that their positions in the litigation will be prejudiced is protected by Rules 50.09 and 50.10 of the Rules of Civil Procedure, which provide that (i) the statements made at a pre-trial conference cannot be used in the proceedings, and (ii) the pre-trial conference judge cannot preside at the trial of the matter: Continue Reading

Procedure Trumps Substance: Alberta Court of Appeal Grants Certification in Warner v Smith & Nephew Inc, 2016 ABCA 223

Posted in Class Actions
Kelli McAllisterRenee Reichelt

A recent article, Procedure Trumps Substance: Alberta Court of Appeal Grants Certification in Warner v Smith & Nephew Inc, 2016 ABCA 223 (“Warner”), published on McCarthy Tétrault’s Canadian Class Actions Monitor blog may be of interest to readers of the Canadian Appeals Monitor blog. Kelli McAllister and Renee Reichelt explore the ongoing tension in certification motions where courts are to provide a meaningful screening device but refrain from assessing the merits of the claim.

In Warner, the Alberta Court of Appeal disagreed on whether to consider if a plaintiff can prove her claims at the certification stage. Justice Slatter, in dissent, noted at paragraph 112 that neither side could prove certain allegations relating to long-term effects of a hip-resurfacing device – neither science nor medicine had resolved the issue: “[i]f the scientists and doctors have been not been able to resolve this issue using the usual scientific methods (lab experiments, long term blind studies, etc.) how is it realistic to think that a trial judge is going to find the answer in a civil trial? A trial judge has no laboratory.” The majority was unmoved. The plaintiff did not need to establish the strength of her claim or whether expert evidence could prove it. Certification is a procedural motion only. Whether leave to appeal to the Supreme Court of Canada will be sought in Warner remains to be seen. However, in Pro-Sys Consultants Ltd v Microsoft Corporation, 2013 SCC 57 the Supreme Court of Canada reaffirmed that certification is a meaningful screening device. How a court can meaningfully screen propose class actions without some consideration of the merits remains a divisive issue in class actions and a fertile ground for further appellate consideration.

Is There a Duty to Renegotiate Contracts in Cases of Hardship?

Posted in Case Comments, Contracts
Gabriel Faure

In Churchill Falls (Labrador) Corporation Ltd c Hydro-Québec, 2016 QCCA 1229 (English translation here), the Quebec Court of Appeal seemed to contemplate that there may exist a duty to renegotiate a long-term contract where unforeseen circumstances arise which amount to hardship; however, the Court found the facts of the case did not give rise to such a situation so there could be no obligation to renegotiate the contract at issue.

The dispute related to a power contract signed in 1969 between Hydro-Québec and the Churchill Falls (Labrador) Corporation Limited (“CFLCo”) whereby CFLCo agreed to supply, and Hydro-Québec agreed to purchase, substantially all of the power produced by the Churchill Falls Generating Station for a total term of 65 years. Following the execution of the contract, the price paid by Hydro-Québec turned out to be markedly lower than the commercial value of the power generated, as a result of increases in energy prices and the emergence of competitive energy markets in North America, although the contract remained marginally profitable for CFLCo. Continue Reading

The SCC Monitor (July 2016)

A Commentary on Recent Legal Developments by the Canadian Appeals Monitor

Posted in Charter of Rights, Civil Procedure/Evidence, Constitutional, Contracts, Insurance, Labour and Employment, The SCC Monitor
Katherine BoothRyan MacIsaac

We may be into the lazy days of midsummer, but the Supreme Court of Canada (“SCC”) has been busy, releasing a number of important decisions in the areas of insurance, contract, labour & employment, constitutional, property, evidence and administrative law.

 

Judgment

Since our last SCC Monitor post, the SCC has released the following judgments of interest: Continue Reading

The SCC Monitor (02/08/2016)

A Commentary on Recent Legal Developments by the Canadian Appeals Monitor

Posted in Intellectual Property, Oil and Gas, Professions, The SCC Monitor
Kosta KalogirosKelli McAllisterSam Rogers

Since our last post, the Supreme Court has granted and denied leave in a few significant cases that will be of interest to our readers.

Leave to Appeal Granted

Auditor Liability: Livent Inc v Deloitte & Touche

The SCC granted leave to appeal from the judgment of the Ontario Court of Appeal in Livent Inc v Deloitte & Touche, 2016 ONCA 11, which is an important decision concerning the liability of auditors for negligence. Continue Reading

Where the Charter Ends: Supreme Court Will Not Hear Appeal on International Cooperation by Securities Regulators

Posted in Case Comments, Charter of Rights, Criminal, International rights, Securities
Adam Goldenberg

If there’s one thing that most non-lawyers know about being questioned by the authorities, it’s that “anything said can and will be used against [you] in court”.[1] And, if you’re already in court, then you can “take the Fifth” and refuse to answer a question whose answer may incriminate you.

Right? Not quite.

The privilege against self-incrimination operates differently in Canada than it does in the United States. Here, there is no “Fifth” for a witness to “take”. Unlike the Fifth Amendment to the U.S. Constitution, the Canadian Charter of Rights and Freedoms does not permit a witness to answer some questions but not others. Instead, it protects the accused from being compelled to testify in a criminal proceeding and prevents a witness’ evidence in one proceeding from being used to incriminate him in another.[2] Continue Reading

Whose Courtroom Is It Anyway – The Latest Instalment of Groia v The Law Society of Upper Canada

Posted in Administrative, Case Comments, Charter of Rights, Constitutional, Professions
Ryan MacIsaac

In a decision of interest to barristers, the Ontario Court of Appeal held that the Law Society of Upper Canada is entitled to deference when regulating a lawyer’s in-court conduct in Groia v The Law Society of Upper Canada, 2016 ONCA 471 (“Groia”). The Court of Appeal affirmed the Law Society’s holding that it is professional misconduct to make allegations of prosecutorial misconduct or that impugn the integrity of opposing counsel, unless the allegations are made in good faith and with a reasonable basis.

Facts

Joseph Groia defended John Felderhof against securities charges brought by the Ontario Securities Commission (“OSC”). Felderhof had been a senior officer and director of Bre-X, a mining company that fraudulently claimed to have discovered a large gold deposit in the 1990s. At the end of his trial, Felderhof was acquitted of all charges (R v Felderhof, 2007 ONCJ 345). Continue Reading

The Supreme Court Protects Accounting Records of Lawyers from the CRA

Posted in Case Comments, Charter of Rights, Privacy, Quebec Court of Appeal, Solicitor-Client Privilege, Tax
Sam Rogers

Solicitor-client privilege is nearly sacrosanct in Canada. The circumstances in which it can be breached are limited and specific. Courts will not abide attempts by the Government to do away with privilege for expediency’s sake or overreach when limiting the application of the privilege. This was recently reinforced by the Supreme Court of Canada in two decisions that considered the CRA’s powers to compel information from lawyers and notaries: Canada (Attorney General) v. Chambre des notaires du Quebec and Canada (National Revenue) v. Thompson. Continue Reading

R. v. Jordan – The Supreme Court of Canada Dramatically Alters the Framework Applicable to the Right to a Criminal Trial Within a Reasonable Time

Posted in Case Comments, Criminal
Peter BradyMichael RosenbergTrevor Courtis

For decades members of the judiciary have publicly raised concerns about the swelling length and complexity of criminal cases. In October 2005, Justice Michael Moldaver, then of the Ontario Court of Appeal, stated:

Am I worried? You bet I am. Long criminal trials are a cancer on our criminal justice system and they pose a threat to its very existence. You see, ladies and gentlemen, if the criminal justice system does not enjoy the support and respect of those whom it is meant to serve; if criminal trials are seen by the public as little more than interminable games; if the public comes to view the system with distain and contempt, then the system will have lost its reason for being. And the consequences, I fear, will be serious.[1]

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Right Back Where You Came From: Does the law of your birthplace govern your estate without you even knowing it?

Posted in Case Comments, Conflict of Laws
Trevor CourtisBreanna Needham

If an individual is born in Alberta, lives and works in BC for more than a decade, then lives and works in Saskatchewan for more than a decade, then moves back to BC temporarily, while simultaneously searching for a residence in Costa Rica, where is this person domiciled?

If you answered Saskatchewan (where the individual had lived and worked for the past decade), British Columbia (where the individual was currently laying his head), or Costa Rica (where the person intended to live and work for the remainder of his days), your common sense has indeed betrayed you. The answer is actually Alberta (the place where the individual had not lived for several decades and had no intention of returning to). Welcome to the antiquated law of domicile. Continue Reading

Northern Superior Appeals Dismissal of Aboriginal Consultation Claim Against Ontario

Posted in Aboriginal, Case Previews, Mining
Bryn GrayAdam Goldenberg

A recent article, published on McCarthy Tétrault LLP’s Canadian ERA Perspectives blog may be of interest to readers of the Canadian Appeals Monitor blog.

Northern Superior Resources Inc. v. Ontario, now on its way to the Ontario Court of Appeal, raises the question of whether a resource company, rather than a First Nation, may bring a claim against the Crown arising out of an alleged breach of the Crown’s duty to consult Aboriginal peoples pursuant to s. 35 of the Constitution Act, 1982. Though the Court of Appeal is likely to limit its decision to the facts in this case, its reasoning could provide important guidance for both project proponents and governments as they work with each other and with First Nations to develop Canada’s natural resources.

When is a Settlement Agreement Reached? Federal Court of Appeal Provides Guidance in Apotex Inc v Allergan Inc, 2016 FCA 155

Posted in Case Comments, Intellectual Property
Kelli McAllister

In today’s litigation landscape 95% to 97% of all civil cases are settled without a trial.[1] Settlement negotiations increasingly happen informally, over email, through a back-and-forth dialogue between counsel. What happens when one party steadfastly believes a settlement was reached and moves to enforce that settlement and the other party disagrees? This was the situation before the Federal Court of Appeal in Apotex Inc v Allergan Inc, where a collection of “without prejudice” letters and emails formed the basis for Allergan Inc (“Allergan”) to argue that Apotex Inc (“Apotex”) had agreed to settle a patent infringement case. It was against this backdrop the Federal Court of Appeal clarified the objective test for when a settlement agreement is reached, cautioning:[2]

The requirement of an objective, mutual intention to create legal relations does not mean that there must be formality. Settlements need not be reached through counsel or in pre-planned, formal negotiations….Sometimes much to the surprise of clients and lawyers alike—seemingly idle conversations can have binding, legal consequences. Binding settlements can arise from impromptu, informal communications in relaxed, non-business settings.

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