Canadian Appeals Monitor Information and Commentary on Upcoming and Recent Appeal Court Decisions

The Year Ahead: Ten Top Appeals to Watch in 2017

Posted in Features
Kelli McAllisterSara D.N. Babich

2017

The coming year will see our highest court decide a host of appeals of interest to Canadian businesses and professions. The Appeals Monitor is pleased to present our annual forecast of the top ten appeals expected in 2017.

10Remedies for Breach of Modern Treaties: First Nation of Nacho Nyak Dun v Government of Yukon

This case involves a modern treaty known as the Umbrella Final Agreement (“UFA”) between First Nations in the Yukon, the Crown, and the Yukon Government. Under the UFA, the parties are to engage in a collaborate land use planning process. At issue before the SCC is the remedy for breach of modern treaties and the remedy after quashing a flawed decision.

The UFA establishes a land use planning commission (the “Commission”) for First Nations and the Yukon government with each party having decision-making authority in respect of land use plans. The Yukon government, using its decision-making authority, opted to modify the land use plan. These modifications included a number of substantive changes to the Final Recommended Plan. The Yukon Supreme Court concluded that  the Yukon government’s modifications to the Final Recommended Plan did not respect the planning process and remitted the matter for consultation: 2014 YKSC 69. The Yukon Court of Appeal allowed an appeal in part, and held that the appropriate remedy was return the parties to the point at which the failure began: 2015 YKCA 18. At issue before the SCC will be the appropriate remedy for the breach of the UFA.

This case will represent the latest effort by the SCC to address the honour of the Crown with respect to First Nations, here, in the context of modern treaty provisions. This case could have wide-ranging impacts for the ongoing reconciliation of Aboriginal and non-Aboriginal Canadians. It is scheduled to be heard on March 22, 2017.

9The Duty to Consult: Hamlet of Clyde River  v Petroleum Geo-Services Inc

In the appeal from Hamlet of Clyde River v TGS-NOPEC Geophysical Company ASA (TGS), 2015 FCA 179, which was heard by the SCC on November 30, 2016, the SCC is considering whether the Crown discharged its duty to consult despite the failure of the National Energy Board (“NEB”) to refer to Aboriginal rights or the duty to consult in its reasons for its decision to approve a marine seismic survey program. The Federal Court of Appeal had held that the Crown was entitled to rely on the NEB’s regulatory process, which included the requirement to undertake certain Aboriginal consultation activities, in order to help satisfy its duty to consult, which in this case was found by the Federal Court of Appeal to be at the high end of the duty to consult spectrum. This decision will be relevant to future NEB decisions where Aboriginal rights are engaged, and in particular the impact those decisions have on the broader duty on the Crown to consult affected Aboriginal groups.

8A Whole New World to Discover: Attorney General of Canada v Daniel Thouin

In this case, the Québec Superior Court allowed the plaintiffs in a class action to compel the Competition Bureau’s chief investigator to be examined on discovery on facts relevant to the investigation of allegations of price fixing against oil companies and gasoline retailers, despite the common law immunity of the federal Crown, in particular in proceedings to which it is not a party. The plaintiffs argued that the Competition Bureau would have relevant information since it had, in its own prior investigation of the price fixing allegations, collected a significant amount of information and voluminous records involving the same subject matter. The examination for discovery would have resulted in a significant burden both financially and administratively on a third party to the litigation. In its decision in Canada (Attorney General) v Thouin, 2015 QCCA 2159, the Québec Court of Appeal upheld the earlier ruling. The SCC is currently set to hear the appeal on May 24, 2017. The decision could have implications on the scope of federal Crown immunity when it has been involved in other similar investigations which later result in civil litigation.

7Delivering Promised Utility in Patents: AstraZeneca Canada Inc v Apotex Inc

On November 8, 2016, the SCC heard AstraZeneca Canada Inc v Apotex Inc, a case which may bring clarity to issues in patent law including on the controversial “promise doctrine”.  As the Federal Court of Appeal explained in Eli Lilly Canada v Novopharm, 2010 FCA 197, normally, no particular level of utility is required of a patent and even a mere scintilla of utility will suffice. However, the promise doctrine provides that if a patent expressly promises a certain utility and does not deliver, the patent will be void.

In this case, Apotex challenged the validity of AstraZeneca’s patent in respect of a protein-pump inhibitor, esomeprazole (Nexium), including on a phrase to “give an improved therapeutic profile such as a lower degree of interindividual variation”.  This phrase was held to be a promise. The Federal Court agreed that esomeprazole did not deliver on this promise and held the patent invalid: 2014 FC 638. The Federal Court of Appeal upheld the finding that the patent lacked utility: 2015 FCA 158

The SCC will now address whether the “promise doctrine” ought to be used to heighten the utility requirement in patent, including whether it is appropriate to invalidate a patent where the use falls short of the legal claims in the patent itself. In this case, the Federal Court was satisfied that esomeprazole is an effective proton pump inhibitor but nevertheless fell short of the promise on interindividual variation. In other words: the patent had utility – but not as promised. Further clarity in this area of the law will be welcomed by companies seeking patents in Canada.

6A Liability Production? Auditor Negligence Considered in Deloitte & Touche v Livent Inc

As we previously commented, in Deloitte v Touche v Livent Inc, the SCC will consider the liability of auditors for negligence. The facts giving rise to this case involve the collapse of a well-known theatre production company, Livent, which engaged in elaborate accounting fraud. Deloitte was Livent’s auditor. This case is brought by Livent’s court-appointed special receiver for failure to discover the fraud by members of Livent’s senior management.

Twenty years ago, the SCC held in Hercules Managements Ltd v Ernst & Young, [1997] 2 SCR 165 that ordinarily, accountants have no duty to individual shareholders of a corporation. That decision was based, in part, on public policy concerns of indeterminate liability. In Deloitte & Touche v Livent Inc, the SCC will undoubtedly revisit certain of these public policy considerations when determining whether the auditors ought to be held liable.

This appeal is scheduled to be heard on February 15, 2017.

5Privacy in a World Without Borders: Douez v Facebook Inc

In the appeal from Douez v Facebook Inc 2015 BCCA 279, the SCC has been asked to consider the proper forum for a privacy dispute involving social media giant, Facebook. In the proposed class action, it is alleged that Facebook has used individuals’ names and photographs in “Sponsored Stories” sent to the user’s Facebook contacts without their consent, contrary to the statutory tort in section 3(2) of the Privacy Act, RSBC 1996, c 373 (“Privacy Act”). Despite Facebook’s terms of use which select California as the proper jurisdiction for dispute resolution, the BC Supreme Court certified the class action. In the first instance, the Court found that the statutory jurisdiction clause found in the Privacy Act vests exclusive jurisdiction with the BC Supreme Court. On appeal, the BC Court of Appeal held that the forum selection clause ought to be enforced, and granted a stay of proceedings.

The appeal was heard on November 4, 2016. When coming to its decision, the SCC will consider whether the exclusive jurisdiction clause in the Privacy Act overrides a contractual forum selection clause. This will be an important decision not only for actions commenced under the BC Privacy Act, but will also have implications on actions commenced under similar legislation in Saskatchewan, and Newfoundland and Labrador. Given growing concerns for privacy in an increasingly digital age, this case may have even further reaching implications for future iterations of privacy legislation as well as on the types of agreements into which businesses and individuals choose to enter.

4A Forest of Interpretation Issues: Teal Cedar Products Ltd v British Columbia (Ministry of Forests)

In this case, which was heard by the SCC on November 1, 2016, Teal Cedar Products Ltd (“Teal”) appealed British Columbia (Ministry of Forests) v Teal Cedar Products Ltd, 2015 BCCA 263, wherein the BC Court of Appeal set aside an arbitration award on the issue of quantum of compensation owed under the Forestry Revitalization Act, SBC 2003, c 17. The SCC had previously remanded the issue for disposition to the BC Court of Appeal after its decision in Sattva Capital Corp v Creston Moly Corp, 2014 SCC 53. The BC Court of Appeal came to the same conclusion as it had previously, with the majority finding that the arbitrator’s interpretation of the agreement reached between the parties in light of the factual matrix was an error of law, rather than a question of mixed fact and law, resulting in the issue being reviewable pursuant to the Commercial Arbitration Act, RSBC 1996, c 55 (now renamed the Arbitration Act).  The interpretation exercise in this case involved the arbitrator’s interpretation of the statute, rather than simply the agreement between the parties, which the respondent argued is properly a question of law. Arbitration statutes in other jurisdictions across Canada contain similar restrictions on appellate intervention where an arbitrator’s findings are ones of fact or mixed fact and law, making this a case with potentially far-reaching implications in disputes over commercial agreements involving statutory interpretation issues.

This case will see the SCC revisit, and potentially clarify, the principles set out Sattva, in particular with respect to the judicial review of arbitration awards in light of those principles where the arbitrator’s decision also involves an element of statutory interpretation.

3Unhappily Ever After:  Perpetual Contracts in Uniprix inc v Gestion Gosselin et Bérubé inc

On January 12, 2017, the SCC heard  Uniprix inc v Gestion Gosselin et Bérubé inc, a case involving a contract of affiliation with a one-sided renewal provision. The SCC will consider whether it is appropriate for contracts to contain automatic and perpetual renewal clauses. In the courts below, the Quebec Superior Court held that the renewal provision was enforceable: 2013 QCCS 6251. The majority of the Court of Appeal upheld this decision, while Chief Justice Duval Hesler disagreed and held that the parties could terminate the agreement subject to a reasonable notice period: 2015 QCCA 1427.

The SCC is now considering whether such perpetual renewal clauses are appropriate, including whether they ought to be upheld on the basis of freedom to contract or whether they ought to be struck down on the basis of indeterminacy or under the Quebec Civil Code. While the latter aspect of the appeal will be particularly relevant in Quebec, the SCC has relatively recently revisited contract law including in Sattva Capital Corp v Creston Moly Corp, 2014 SCC 53 and Bhasin v Hrynew, 2014 SCC 71. This may be yet another case in which the SCC refines contract law in a meaningful way in the commercial sphere.

2Orders with Global Reach – A New Meaning to “The Long Arm of the Law”: Google Inc v Equustek Solutions Inc

On December 6, 2016, the SCC heard the appeal from Equustek Solutions Inc v Google Inc, 2015 BCCA 265. In this case, Equustek Solutions Inc. (“Equustek”) alleged that one of its former employees conspired with a distributor to create a product using Equustek’s intellectual property. Following the repeated failure of certain defendants to comply with court orders, and their adoption of a virtual business using the Internet to sell the product from unknown locations outside Canada, the BC Supreme Court granted an interlocutory order which required Google Inc., who was not a party to the litigation, to refrain from indexing or referencing the websites in search results on its Internet search engines globally. That decision was upheld by the BC Court of Appeal.

This case has garnered significant international attention for its implications on the enforcement of intellectual property rights, the inherent power of courts to control their processes, the responsibilities of Internet intermediaries, and access to information. It is also expected to clarify how far Canadian courts may go in granting relief with cross-border implications against non-parties to litigation.

1Personal Liability of Directors in Oppressive Corporations: Andrus Wilson v Ramzi Mahmoud Alharayeri

On November 29, 2016 the SCC heard Andrus Wilson v Ramzi Mahmoud Alharayeri (“Andrus Wilson”) which raised the question when personal liability may be imposed on a director for an oppressive act of the corporation under the Canada Business Corporations Act (the “CBCA”).

This case involves a claim for oppression under s. 241 of the CBCA brought by a director and shareholder of a company as against the company and certain other directors personally. At trial, the Quebec Superior Court concluded that the corporation had engaged in oppressive conduct in two instances. The Court then ordered certain directors to personally pay damages because they played lead roles in the Board of Directors discussions and personally benefitted from one of the oppressive decisions: 2014 QCCS 180. The Quebec Court of Appeal agreed and dismissed the appeal: 2015 QCCA 1350.

The SCC will decide what is the appropriate test for personal liability of directors in cases of oppression. It is not uncommon for directors of public companies to receive incidental benefits from decisions of the board and it may be that the Supreme Court will hold that this alone is insufficient to ground a personal liability. It will be instructive what importance the Court places on the factual finding that the two defendant directors had played “lead roles” in the discussions at the board level.

Andrus Wilson has the potential either to help to insulate individual directors within a unanimous board of directors or to discourage open discourse among directors concerned by any heightened risk of personal liability in the event the corporation is ultimately found to have acted in an oppressive manner.