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Top Appeals of 2012: The Appeals Monitor Looks Back

Posted in Case Comments, Class Actions, Features, Torts
Brandon KainLarissa Moscu

As the year draws to a close, we thought it appropriate to look back at the most significant civil appeals of 2012, and to look forward to the appeals in 2013 that are sure to impact Canadian businesses and professions. In this year-end post – the first of a special two-part series – Canadian Appeals Monitor will review four areas in which appellate courts were particularly active in 2012: (1) class actions; (2) copyright; (3) private international law; and (4) torts. Some of these cases have been written about previously on this blog, whereas others are new. We hope you find these “stocking stuffers” as interesting as we do! In our second post, we will review some areas of the law that are likely to be big stories in 2013. Watch out for it next week.

Class Actions

The year 2012 witnessed several important developments in the field of class actions.

First, appellate courts released multiple decisions involving securities class actions. In one of the most high-profile cases of 2012, the Court in Sharma v. Timminco, 2012 ONCA 107 held that the 3-year limitation period for secondary market misrepresentation claims in s. 138.14 of Ontario’s Securities Act cannot be suspended upon the commencement of a class action pursuant to s. 28 of the Ontario Class Proceedings Act, 1992 unless the plaintiff first obtains leave under s. 138.8 of the Securities Act. The effect of the judgment was to confirm that the s. 138.14 limitation period begins to run and can expire even prior to the time when the plaintiff obtains a leave ruling, setting off a host of debates in lower courts about whether the limitation period is subject to the “special circumstances” doctrine and whether leave can be granted nunc pro tunc. We discussed Sharma in a previous post.

The courts also grappled with the territorial scope of secondary market misrepresentation claims. In Abdula v. Canadian Solar Inc., 2012 ONCA 211, the Court held that the statutory right of action in Part XXIII.1 of the Ontario Securities Act can be asserted against issuers whose securities are listed solely on a non-Canadian exchange. As we noted in a previous post, the Court’s decision is at odds with the approach taken by the U.S. Supreme Court in Morrison v. National Australia Bank Ltd., 130 S. Ct. 2869 (2010), and may be constitutionally suspect. It will be interesting to see whether courts in other provinces follow the Ontario Court of Appeal’s lead.

The B.C. Court of Appeal weighed in on secondary market misrepresentation actions in Round v. MacDonald, Dettwiler and Associates Ltd., 2012 BCCA 456, where it found that the B.C. Securities Act provisions which created the right of action were not retroactive, and so could not be applied to disclosures that pre-dated their enactment. The Court also held that the cause of action was inapplicable to a plaintiff who acquired her securities directly from the issuer’s treasury through her participation in an employee share purchase plan, and not through a secondary market transaction. Finally, in what may prove to be a particularly important development for secondary market class actions procedure in B.C., the Court awarded costs against the plaintiff despite the “no costs” regime in the B.C. Class Proceedings Act, since she brought her unsuccessful motion for leave to commence the claim prior to seeking certification. We provided a more extensive discussion of Round in a previous post.

Another important securities decision was Fischer v. IG Investment Management Ltd., 2012 ONCA 47, a case we also discussed in a previous post. The Court in Fischer affirmed certification of an investor class action against the defendant mutual fund managers, which alleged the latter permitted “market timing” to occur in the funds they managed, resulting in losses to the class members. Notably, the Court rejected the argument that settlement agreements between the defendants and the Ontario Securities Commission, which required the defendants to repay monies into the funds, displaced a class action as the preferable procedure for resolving the claims. This aspect of Fischer is now before the Supreme Court of Canada, which granted the defendants leave to appeal in June of 2012.

Second, the Ontario Court of Appeal released an important trilogy of decisions in the field of employee “overtime” pay class actions: Fulawka v. Bank of Nova Scotia, 2012 ONCA 443; Fresco v. Canadian Imperial Bank of Commerce, 2012 ONCA 444; and McCracken v. Canadian National Railway Company, 2012 ONCA 445. The Fulawka case is particularly notable for clarifying the legal principles that apply to the “common issues” requirement on certification, and in restricting the circumstances in which aggregate damages are available to the class. In addition, the McCracken case – where certification was overturned – contains an extensive review of the plaintiff and defence evidence by the Court. These cases confirm that the plaintiff’s obligation to show “some basis in fact” for the existence and commonality of the alleged common issues is a real one, and suggest that the pendulum is swinging in favour of a more rigorous review of the plaintiff’s record at the certification motion.

Third, other types of class actions against financial institutions also loomed large in 2012. In two decisions -Fédération des Caisses Desjardins du Québec v. Marcotte, 2012 QCCA 1395 and Amex Bank of Canada v. Adams, 2012 QCCA 1394 – the Quebec Court of Appeal granted judgment in authorized class actions alleging that the defendant financial institutions breached Quebec consumer protection legislation by invoicing credit card consumers with foreign currency conversion charges. Interestingly, the Court rejected arguments by the defendants that the provincial legislation was constitutionally inapplicable since the conduct in question concerned matters within exclusive federal jurisdiction, such as bills and exchanges, and the federal banking power. The defendants have sought leave to appeal from both judgments to the Supreme Court of Canada.

McCann v. Canada Mortgage and Housing Corp., 2012 ONCA 243 is another important class action decision relating to a financial institution, albeit in the field of pension law. The Court of Appeal affirmed the refused to certify claims by former employees of Canada Mortgage and Housing Corp. (“CMHC”), which alleged that CMHC contravened the conflict of interest provisions of the Pension Benefits Standards Act by failing to partially terminate its pension plan, and by misrepresenting the amount of benefit enhancement packages it would give. The Court not only held that it lacked jurisdiction to grant the plaintiffs the partial termination and consequential damages orders they sought, but also that the misrepresentation claims lacked commonality given: (a) the individual issues associated with p the element of reliance; and (b) the plaintiffs’ failure to establish an evidentiary basis for common as opposed to individual misrepresentations. The McCann decision will be significant not only in future pension class actions, but in other class actions involving proposed common issues for misrepresentation.

Fourth, in a decision that will have reverberations for several types of class actions, the B.C. Court of Appeal in Koubi v. Mazda Canada Inc., 2012 BCCA 310 held that claims based on waiver of tort cannot be founded upon alleged breaches of certain statutes. In particular, the Court held that waiver of tort cannot be used to remedy the breach of a statute which either serves as an “exhaustive code” for regulating the statutory rights it creates, or creates an “exclusive” remedy in respect of those rights. The Koubi ruling reflects a growing trend towards greater scrutiny of waiver of tort claims in the class actions context. We discussed it more extensively in a previous post.

Fifth, 2012 gave rise to several appellate rulings relevant to class actions procedure more generally. Two such cases – Campbell v. Canada (A.G.), 2012 FCA 45 and Medvid v. Alberta (Health and Wellness), 2012 SKCA 49 – concerned the award of costs in jurisdictions whose class actions legislation imposes a “no costs” regime. In Campbell, the Federal Court of Appeal held that the “no costs” regime under the Federal Courts Rules applied even to pre-certification proceedings, once the motion for certification is filed. However, in Medvid, the Saskatchewan Court of Appeal observed that the approach taken in Campbell was at odds with the rule adopted in British Columbia (where the “no costs” regime applies only post-certification and to the certification hearing itself), and declined to adopt one approach in preference to the other under Saskatchewan’s “no costs” regime. Should courts in other “no costs” jurisdictions follow the B.C. approach, it could increase the number of class actions filed in the Federal Court.

The Ontario Court of Appeal’s little-noted decision in Curactive Organic Skin Care Ltd. v. Ontario, 2012 ONCA 81 may also prove important. The Court held that a proposed class action against the Toronto Transit Commission on behalf of businesses affected by the lengthy construction of the St. Clair streetcar project was “in substance” one which alleged a claim for injurious affection. As a result, the claim fell within the exclusive jurisdiction of the Ontario Municipal Board rather than the courts under the Ontario Expropriations Act and Ontario Municipal Board Act. The limited jurisdiction of the courts in relation to class actions was again at issue in Telus Mobilité v. Comtois, 2012 QCCA 170, where the Quebec Court of Appeal relied upon an arbitration and class action waiver clause to decline jurisdiction over claims by corporate customers, relating to the defendant’s billing practices for mobile phone roaming charges. The Telus case confirms that arbitration clauses remain a potent defence to proposed class actions after Seidel v. TELUS Communications Inc., [2011] 1 S.C.R. 531.

A final class action ruling of interest is Bellan v. Fillmore Riley LLP, 2012 MBCA 84. In Bellan, the Manitoba Court of Appeal held that an action brought on behalf of the shareholders of a company placed into receivership, against parties who signed the company’s prospectus, could proceed as a representative action under Rule 10 of the Manitoba Queen’s Bench Rules, and need not be pursued as a class action under Manitoba’s Class Proceedings Act, 1992. The Court held that representative proceedings under Rule 10, which has analogous provisions in other provinces (e.g., Rule 10 of Ontario’s Rules of Civil Procedure), could serve as the preferable procedure to class actions, and that representative and class proceedings are not mutually exclusive but are instead alternatives to one another. It will be interesting to see whether courts will begin to pay greater attention to representative actions as a potentially preferable procedure in future class certification motions.

Copyright

Copyright law is assuming an increasingly important place in the Supreme Court of Canada’s private law docket. The Court released no less than six rulings in 2012 that focus upon Copyright Act (and, as reported in a previous post on snIP/Its, also granted leave to appeal in four other copyright cases which will be heard in 2013). These decisions, many of which were discussed extensively in a previous post on our colleague Barry Sookman’s blog, address a broad range of issues, while also focusing upon a handful of central themes (e.g., the difference between communicative and reproductive rights, the principle of technological neutrality and the importance of user rights).

In Entertainment Software Association v. Society of Composers, Authors and Music Publishers of Canada, 2012 SCC 34, the issue was whether video game publishers and distributors, who had previously paid royalties to the copyright owners of musical works incorporated into their games for the “reproduction” of those works under s. 3(1) of the Copyright Act, could be required by the Copyright Board to pay additional fees for the “communication” of those works to the public “by telecommunication” under s. 3(1)(f) of the Copyright Act when they sold permanent copies of the videogames through internet downloads rather than physical stores. The majority of the Supreme Court held that no additional fees were payable for the internet downloads. In its view, the internet delivery of a permanent copy of a video game containing musical works did not amount to a “communication” of those musical works “by telecommunication”, under s. 3(1)(f) of the Copyright Act. Rather, a “communicat[ion] [of] the work to the public by telecommunication” within the meaning of s. 3(1)(f) must be an activity akin to a performance of the work that creates only a temporary copy of it, rather than one akin to a reproduction of a permanent copy of the work. To impose additional fees upon the sale of games containing copyrighted works merely because they were downloaded rather than sold through a physical store was to confuse the method of delivering a work with the “communication” of it, and violated the important principle of technological neutrality.

The Court also focused upon the distinction between communicative and reproductive activities in the companion case of Rogers Communications Inc. v. Society of Composers, Authors and Music Publishers of Canada, 2012 SCC 35, where the majority held that on-demand music streams offered by online music services did amount to performance-based “communication[s]” under s. 3(1)(f) capable of attracting copyright fees, in contrast to downloads of permanent copies of the musical works. As well, the Court held that streaming could effect a communication “to the public” pursuant to s. 3(1)(f) even though the music is streamed to recipients in different times and places through individual communications, provided the stream is indiscriminately made available to an aggregation of individuals. In reaching this conclusion, the Court once again emphasized the principle of technological neutrality, finding that “pull” and interactive technologies such as streaming (where the communication is initiated at the request of the recipient) could not be excluded from s. 3(1)(f).

In another case, Re: Sound v. Motion Picture Theatre Associations of Canada, 2012 SCC 38, the Court held that pre-existing individual sound recordings incorporated into a cinematographic work amounted to a “soundtrack” excluded from the definition of “sound recording” in of s. 2 of the Copyright Act. The Court rejected the argument that only the aggregate of the sounds accompanying a cinematographic work, as opposed to its constituent parts, was a “soundtrack”. As a result, the Court concluded that a pre-existing individual sound recording incorporated into a cinematographic work could not be the subject of a “sound recording” tariff requiring the payment of fees for its performance in public or its communication to the public by telecommunication, under s. 19 of the Copyright Act.

Two other copyright cases decided by the Supreme Court this year considered the scope of the “fair dealing” exception to copyright infringement: Society of Composers, Authors and Music Publishers of Canada v. Bell Canada, 2012 SCC 36 and Alberta (Education) v. Canadian Copyright Licensing Agency (Access Copyright), 2012 SCC 37. In the Bell Canada case, the Court affirmed that 30-90 second previews of musical works, made available by online music stores to consumers prior to their purchase of the works themselves, constituted “fair dealing” for the purpose of “research” under s. 29 of the Copyright Act, and hence not an something that would otherwise amount to infringement so as to require the payment of royalties. The Court strengthened the fair dealing exception by holding that, for the purposes of s. 29, “research” need not be for creative purposes alone, and emphasized that the fair dealing exception should not be interpreted restrictively. As well, the Court held that the questions of whether an activity qualified under the allowable purpose of “research”, and whether the dealing in question was “fair”, should be assessed from the perspective of the consumer rather than the service provider.

The Court also expanded the fair dealing exception in Access Copyright, where it held that photocopies of textbook excerpts by school teachers on the teachers’ initiative, with instructions to students that they read the material, were exempt from copyright royalties as fair dealing for “research or private study” in s. 29 of the Copyright Act. Among other things, the Court held that in considering whether the dealing was “fair”, the purpose of the dealing could not be viewed from the perspective of the copier alone (i.e., instruction), but must also be viewed from the perspective of the ultimate (i.e., research or private study), particularly since the teacher who copied the works did not attempt to shield a separate purpose behind the research or study purposes of the student, but had an instruction purpose that was “symbiotic” with the student’s research/private study purposes.

The robust approach to user rights taken in Bell Canada and Access Copyright is also evident in the Court’s more recent decision in Reference re Broadcasting Regulatory Policy CRTC 2010‑167 and Broadcasting Order CRTC 2010‑168, 2012 SCC 68, a case we discussed in a previous post. The Broadcasting Reference establishes that the Canadian Radio-television and Communications Commission lacks jurisdiction under the Broadcasting Act to create a market-based “value for signal” regime, which would enable private local television stations (“broadcasters”) to negotiate direct compensation for the retransmission of their signals by broadcast distribution undertakings (“BDUs”), such as cable and satellite companies, and prohibit the BDUs from retransmitting their signals if the negotiations were unsuccessful. Among the reasons the Court gave for this conclusion was that such a jurisdiction would conflict with the Copyright Act, which only permits broadcasters to prohibit other broadcasters – as opposed to BDUs – from simultaneously retransmitting their signals (s. 21(1)(c)), and which creates an exception to copyright infringement for the simultaneous retransmission by BDUs of a “work” carried in local signals (s. 31(2)). This decision stands as an important affirmation of the user rights enjoyed by BDUs under the Copyright Act in relation to the local and distant signal regime. The Court also held that the CRTC was incapable of giving broadcasters a right that was functionally equivalent to a copyright, since under s. 89 of the Copyright Act the right to copyright can only be found in an Act of Parliament rather than in subordinate legislation (e.g., a regulation or licensing condition).

Private International Law

The spotlight was on conflicts of law in a much anticipated “trilogy” of cases in Club Resorts Ltd. v. Van Breda et al. [2012] 1 S.C.R. 572. The Van Breda trilogy is the Court’s first attempt to completely and comprehensively consider private international law rules in two decades. Suffice to say that Justice LeBel’s conclusions regarding jurisdiction simpliciter, forum non conveniens, choice of law and the constitutionalization of private international law have been dissected, deliberated and discussed at great lengths (see previous posts here: Part I, Part II, Part III, Part IV and Part V.)

Briefly put, Justice LeBel held that a party arguing in favour of jurisdiction simpliciter bears the burden of identifying a “presumptive connecting factor” between the subject matter of the litigation and the forum. Unlike the Ontario Court of Appeal, Justice LeBel did not draw these connecting factors from the categories of ex juris service in Rule 17.02 of the Ontario Rules of Civil Procedure, but instead recognized only four presumptive factors in relation to tort claims:

(a) the defendant is domiciled or resident in the province;

(b) the defendant carries on business in the province;

(c) the tort was committed in the province; and

(d) a contract connected with the dispute was made in the province.

Justice LeBel also noted once a court has assumed jurisdiction, it ought to do so over all aspects of the case – splitting causes of action is unfair. Once the plaintiff has proved that jurisdiction should be established on the basis of a presumptive connecting factor, then the onus shifts to the defendant to argue that the factor may be rebutted such that jurisdiction should not be assumed. The Court also drew a clear distinction between the “existence and the exercise of jurisdiction” and forum non conveniens; the latter only applies once the jurisdiction has been established. Forum non conveniens does not play a role in the analysis of determining jurisdiction.

Van Breda is an enormously influential decision: the framework set out in the case was applied in two cases of cross-border defamation that were decided on the same day: Éditions Écosociété Inc. et al. v Banro Corp., [2012] 1 S.C.R. 636 and Breeden v Black, [2012] 1 S.C.R. 666. Without a doubt, the trilogy of these three cases will have an incredible impact in years to come.

Torts

2012 also proved to be a significant year in the development of tort law.

In Clements v. Clements, 2012 SCC 32 (discussed in a previous post), the Supreme Court provided clarity and consensus on the correct test to determine causation. Writing for the majority, the Chief Justice reiterated that the “but for” test is the appropriate test to determine causation in tort cases: the plaintiff must show, on a balance of probabilities, that “but for” the defendant’s negligence the injury would not have occurred. That said, as the Chief Justice acknowledged at paragraph 13: “Exceptionally, however, courts have accepted that a plaintiff may be able to recovery on the basis of ‘material contribution to risk of injury’, without showing factual ‘but for’ causation.”

After canvassing case law both in Canada and abroad, the Court concluded that the “material contribution” test may be considered in cases of multiple tortfeasors, if the plaintiff can prove that “but for” the negligent act of one or more of the tortfeasors the injury would not have occurred, but is unable (through no fault of her own) to identify which specific tortfeasors were the “but for” cause. Nonetheless, the Chief Justice also pointed the Court has never actually applied a “material contribution” test. After reviewing the seminal torts causation cases, McLachlin C.J.C. held that Cook was decided on a reverse onus basis and Snell Athey Walker Estate and Resurfice were all resolved on a robust and common sense application of the “but for” test of causation. Therefore, while the “but for” test must be applied in a robust, common sense fashion, and is subject to the “exceptional” reversion to the material contribution test, it nonetheless remains the appropriate test to determine causation in most instances.

CONGRATULATIONS‼! YOU HAVE WON MILLIONS‼! Well, not quite. But we caught your attention, didn’t we? The Supreme Court caught the attention of merchants and consumers alike when it released its landmark decision in Richard v. Time [2012] 1 S.C.R. 265 (discussed in a previous post). In this case, the Court clarified when a commercial representation may be false or misleading. The Court concluded that the general impression of an advertisement should be assessed through the perspective of “ordinary hurried purchasers”, i.e., individuals who are “not very sophisticated” and “not particularly experienced at detecting the falsehoods or subtleties found in commercial representations.” This “general impression” test is one of first impression, and the entire advertisement must be reviewed in its entirety – the words on the page must be analyzed, but the way the text is displayed is also a relevant factor in determining whether the general impression is true to reality. If a court finds that the general impression, through the eyes of a credulous and inexperienced person, is not true to reality, then the merchant is engaging in a prohibited practice.

While this case specifically engaged Quebec’s Consumer Protection Act, the “general impression” test articulated by the Court should inform how courts across the country analyze whether a commercial advertisement is false and misleading under other legislation creating “statutory torts” (e.g., s. 52 of the Competition Act). Richard will guide courts, certainly, but merchants should also take note of this decision.  While advertisements are designed for the sole purpose of catching a consumer’s attention, companies should not assume that consumers will necessarily take the time to read the entire advertisement or understand small or fine print. Of course, graphics, large print, bold letters, strategic spacing and certain punctuation (‼!) will always attract the eye. In light of Richard, though, companies should be alert to the first impression that an advertisement will make to a harried and busy customer, and assess whether this impression is true to reality.

Finally, 2012 witnessed the birth of an entirely new common law tort by the Ontario Court of Appeal (with a catchy name!): “intrusion upon seclusion”, a particular kind of breach of privacy (see previous post; and the decision at the ONCA: 2012 ONCA 32).

Writing for a unanimous Court, Justice Sharpe found that “it is appropriate for this Court to confirm the existence of a right of action for intrusion upon seclusion. Recognition of such a cause of action would amount to an incremental step that is consistent with the role of this Court to develop the common law in a manner consistent with the changing needs of society” (para 65). Justice Sharpe concluded that has privacy long been recognized at common law and under the Charter as a fundamental value worthy of fierce protection; citing legal scholar Peter Burns, Justice Sharpe iterates that in today’s modern world, there is a pressing need to preserve ‘privacy’ “which is being threatened by science and technology to the point of surrender” (para 67).

Justice Sharpe outlines the key features of this cause of action (at para 71, emphasis added) as:

first, that the defendant’s conduct must be intentional, within which I would include reckless;

second that the defendant must have invaded, without lawful justification, the plaintiff’s private affairs or concerns;

and third, that a reasonable person would regard the invasion as highly offensive causing distress, humiliation or anguish. However, proof of harm to a recognized economic interest is not an element of the cause of action…. I state here that I believe it important to emphasize that given the intangible nature of the interest protected, damages for intrusion upon seclusion will ordinarily be measured by a modest conventional sum.

Despite limiting the ultimate damages available if an intrusion upon seclusion is found, Jones is still a landmark decision in Ontario. In other Canadian provinces however, like British Columbia, Manitoba, Saskatchewan, Newfoundland and Québec, the case may be of less interest as these provinces currently have legislation allowing for a civil cause of action for a violation of privacy. For example, under the BC Privacy Act, the plaintiff must show that her privacy had been unreasonably invaded in all of the circumstances. Arguably, this is a lower standard than having to show that the intrusion was “highly offensive, causing distress, humiliation or anguish.” Nonetheless, it will be interesting to see how this newly recognized common law cause of action in Ontario is pursued.