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Category Archives: Corporate Law

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The U.K. Supreme Court revisits equitable compensation in commercial transactions

Posted in Bankruptcy and Debt, Case Comments, Contracts, Corporate Law, Financial Services

Trusts are widely used in commercial transactions. But, as creatures of equity, trusts raise issues that may not be immediately familiar to everyone who relies on them in the commercial world. Indeed, the interrelationship between equitable doctrines and remedies and common law principles and remedies is complicated. Fortunately, the U.K. Supreme Court has revisited the issue in its recent decision in AIB Group (UK) Plc v. Mark Redler & Co Solicitors, [2014] UKSC 58.

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

Posted in Case Comments, Corporate Law, Securities

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

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Class, Do Your Homework: Causation and Damages Methodologies at Certification

Posted in Case Comments, Class Actions, Corporate Law, Procedure, Torts

Overview

In Andriuk v. Merrill Lynch Canada Inc., the Alberta Court of Appeal affirmed a certification judge’s decision that an action, commenced pursuant to Alberta’s Class Proceedings Act, did not meet the requirements for certification of a class proceeding, based on a failure to demonstrate a viable methodology for establishing causation and damages on a class-wide basis.… Continue Reading

Is your standard form release contrary to public policy? The British Columbia Court of Appeal provides guidance

Posted in Case Comments, Contracts, Corporate Law, Torts

Clauses that exclude, or “release”, liability are widespread and critical to risk management for many businesses. Typically, such clauses stipulate that the signee waives the right to sue if they are injured while participating in certain activities. Inevitably, in the event that the signee is injured, a variety of arguments are put forward as to why the particular exclusion clause is unenforceable in the particular circumstances.

Recently, in 2010, the Supreme Court set out a new approach to the analysis of whether an exclusion clause is unenforceable in Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), 2010 SCC … Continue Reading

Caution: An Entire Agreement Clause May Have Greater Implications Than Expected

Posted in Case Comments, Contracts, Corporate Law

At issue in One West Holdings Ltd. v Greata Ranch Holdings Corp. et al. was whether an entire agreement clause which referred to multiple contracts could be used to incorporate an arbitration clause from one of the other contracts. The British Columbia Court of Appeal held that it could despite the fact that the contracts involved different parties.

Decisions

A number of parties, including Concord Okanagan Developments Ltd., entered into a limited partnership agreement (LPA) to form Greata Ranch Developments Limited Partnership. The LPA described a project management agreement (PMA) that was to be entered into between the Limited … Continue Reading

Are pre-contractual representations “continuing”? Even if the contracting parties change?

Posted in Case Comments, Contracts, Corporate Law

Circumstances change and what is true today may not be true tomorrow. For that reason, some representations carry with them the obligation to advise the representee if the relevant circumstances change. These are usually referred to as “continuing” representations.

But can a continuing representation carry with it the obligation to update a third party, to whom the representation was not even made? The UK Supreme Court says it can in Cramaso LLP v Ogilvie-Grant, Earl of Seafield and Others, a case with a peculiar set of facts which may have broad implications for parties engaged in pre-contractual negotiations.

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Piercing the corporate veil may be easier than you think

Posted in Case Comments, Contracts, Corporate Law

How do corporate and personal liability intersect in a corporation that has only one officer, director and shareholder?  In the recent Shoppers Drug Mart v. 6470360 Canada Inc. case, the Court of Appeal helped to clarify when the person behind the corporation will be found liable.

Background

In October 2005, Shoppers Drug Mart (“Shoppers”) contracted with Energyshop Consulting Inc. (“Energyshop”) to manage and pay its utility bills on a nationwide basis.  Michael Wayne Beamish (“Beamish”) negotiated the contract on behalf of Energyshop, which had not yet been incorporated.  Beamish later incorporated 6470360 Canada Inc. … Continue Reading

“Stop and Identify” Yourself, to Avoid Personal Liability when Acting on Behalf of a Company

Posted in Case Comments, Contracts, Corporate Law

Third parties must know exactly who they are entering into a contract with, especially when dealing with a limited liability company. That said, the identity of the true contracting party may not be clear when an officer, director or employee of a company is negotiating on behalf of the company. Indeed, third parties are generally entitled to believe that these individuals are dealing on their own behalf, rather than on behalf of a company to which they are outsiders.… Continue Reading

The UK Supreme Court clarifies: no marshalling without an underlying debt, and maybe no marshalling in any event

Posted in Bankruptcy and Debt, Contracts, Corporate Law, Financial Services

The doctrine of marshaling has existed for centuries and was developed to address inequitable circumstances in which secured parties were unable to realize on their security. The UK Supreme Court has recently considered the doctrine in a case, Szepietowski (nee Seery) (Appellant) v The National Crime Agency (formerly the Serious Organised Crime Agency) (Respondent), which provides helpful guidance concerning the limits of the doctrine.

Although it arises infrequently, the doctrine does apply in Canada. For that reason, Szepiotwski will be of interest to holders of secured debt (and their lawyers) both for the particular holdings and the court’s general … Continue Reading

Attribution of Knowledge: Does it depend on the identity of the victim?

Posted in Administrative, Bankruptcy and Debt, Corporate Law

In Jetivia SA & Anor v Bilta (UK) Ltd & Ors, the England and Wales Court of Appeal confirmed and clarified the circumstances in which a director’s knowledge of fraudulent conduct will be attributed to the company. In particular, it explained that a director’s knowledge will not be attributable to the company in the context of a claim made by the company against the director and its associates who engaged in unlawful conduct with negative consequences to the company.

Background

This appeal was brought with leave by Jetivia S.A. and Urs Brunchschweiler from an Order of the Chancellor of

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Lost in Contractual Interpretation: No Agreement at ABCA on Interpretation of Multiple Contracts Within a Single Transaction

Posted in Contracts, Corporate Law, Labour and Employment

In a very recent decision of the ABCA, Benfield Corporate Risk Canada Limited v. Beaufort International Insurance Inc, 2013 ABCA 200, the Court attempted to address a host of interesting contract issues, some with potentially wide implication, such as how to interpret multiple contracts within a single transaction, including the effect of entire agreement clauses and the ability to benefit from a breach of one of the related contracts. Also mentioned are general duties of good faith, the role of fairness and implying terms. However, unique circumstances and a lack of agreement in the Court leaves us, unfortunately, without

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The Rascal Returns: The Supreme Court Reaffirms Doctrine of Constructive Trust in Nishi v. Rascal Trucking Ltd.

Posted in Case Comments, Class Actions, Construction and Real Estate, Contracts, Corporate Law, Manufacturing, Municipal

The Supreme Court has issued its decision in the case of Nishi v. Rascal Trucking Ltd., 2013 SCC 33, clarifying the scope of the resulting trust doctrine, in the commercial context. The Court reaffirmed its own precedent and refused to abolish well-established doctrine in the absence of a “compelling” reason for doing so, strong dissents in prior decisions or other inconsistent appellate jurisprudence.

Background

We have previously discussed the decision here.

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What is Market Manipulation?: The High Court of Australia Weighs In.

Posted in Case Comments, Corporate Law, Securities

In a recent decision, the High Court of Australia adopted an expansive approach to the market manipulation provision in that country’s corporations statute. In particular, the High Court rejected the notion that market manipulation is restricted to the misuse of monopolistic or dominant market power. The High Court instead held that purchasing shares for the sole or dominant purpose of creating or maintaining a specific price amounts to market manipulation, even in the absence of proof that the transaction affected the behaviour of genuine market participants. The High Court’s decision will likely make it easier to prosecute market manipulation

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UK Supreme Court Confirms – No Breach of Confidence without a Breach… or Confidence

Posted in Case Comments, Contracts, Corporate Law, Intellectual Property, Manufacturing

Introduction

In a knowledge economy protection of trade secrets is critical to a corporation’s continued success and profitability. The misuse of trade secrets by competitors can be devastating to a corporation’s position in the marketplace. That is particularly true when it is ex-employees who are misusing trade secrets to compete against their former employer. In such circumstances, numerous remedies are available to employers including a civil action for breach of confidence.

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Full Disclosure: Share Price Is Not Enough

Posted in Case Comments, Class Actions, Corporate Law, Securities

If disclosure of information has no effect on a company’s share price, was that information really material to investors? A recent Ontario Divisional Court ruling suggests that the answer may be “Yes” if the information is of the kind that a reasonable investor would want to rely on in making an investment decision. In Cornish, the Court considers the test for when a “material change” has occurred and concludes that the market impact test for materiality can be satisfied even if the share price is not impacted following disclosure of the information. The case is an important one about

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The Second Opinion: BCCA Finds Limited Partners Not Purchasers of Property Sold to Limited Partnership

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

Posted in Corporate Law, Tax

When a limited partner sells property to the limited partnership, is the limited partner itself a purchaser of that property, or is the only purchaser the general partner on behalf of the limited partnership?  That is the question which the British Columbia Court of Appeal recently addressed in Edenvale Restoration Specialists Ltd. v. British Columbia (Finance), 2013 BCCA 85.

The Edenvale appeal concerned a sale of personal property by Edenvale to an Ontario limited partnership (“EWLP”) that also carried on business in British Columbia.  The signatories to the sale agreement were Edenvale and the general partner of EWLP … Continue Reading

The Second Opinion: Restrictive Covenants at the Ontario Court of Appeal

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

Posted in Competition, Contracts, Corporate Law, The Second Opinion

The Ontario Court of Appeal has released an important new judgment concerning the enforceability of restrictive covenants: Martin v. ConCreate USL Limited Partnership, 2013 ONCA 72.  The decision provides guidance about when a restrictive covenant will be unenforceable owing to its duration and the scope of its prohibited activities, and suggests that a different test for unenforceability will apply where the existence of the covenant is linked to the covenantor’s interest in a limited partnership as opposed to a corporation.

The facts in Martin were as follows.  The plaintiff/appellant Martin acquired  minority interests in the two defendant/respondent companies … Continue Reading

This Week at the SCC (07/12/2012)

Posted in Aboriginal, Bankruptcy and Debt, Corporate Law, Environmental, Labour and Employment, Securities, This Week at the SCC

Cases Decided

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

In Newfoundland and Labrador v. AbitibiBowater Inc., 2012 SCC 67, the majority of the Court held that environmental protection orders issued under provincial legislation, which required an insolvent company to undertake remediation measures but which were not expressed in monetary terms, nonetheless amounted to “claims” under the Companies’ Creditors Arrangement Act (“CCAA“) that could be stayed and subject to a claims procedure order in the context of CCAA proceedings.  The Court observed that not all environmental protection orders will … Continue Reading

Round and Round We Go: BCCA Declines Opportunity to Shape Leave Test in Secondary Market Class Actions

Posted in Case Comments, Class Actions, Corporate Law, Procedure, Securities, Torts

In a decision released this month, the British Columbia Court of Appeal has declined to enter the national fray on the question of how courts should interpret statutory leave requirements adopted throughout Canada in recent securities legislation amendments.  These leave requirements impose a preliminary hurdle for plaintiffs seeking to advance statutory secondary market class action claims, requiring them to demonstrate a reasonable possibility of success at trial.  Thus far, no appellate court in Canada has yet pronounced on how courts should apply this standard.  In Round v. MacDonald, the motions judge suggested that the appropriate standard in British Columbia … Continue Reading

The Penalty Doctrine: Focus on Substance Not Form Says The High Court of Australia

Posted in Case Comments, Class Actions, Contracts, Corporate Law, Financial Services

When is a contractual term a penalty? Traditionally, a penalty has been characterized as a provision that results in unconscionable and disproportionate compensation for breach of contract. The recent decision of Australia’s High Court in Andrews v. Australia and New Zealand Banking Group Ltd (“Andrews”) has widened the scope of the common law penalty doctrine to include a fee payable regardless of whether the event triggering its enforcement constitutes a breach of contract. This is a case to watch for its potential impact on contract drafting and interpretation.

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UK Supreme Court to Pierce the Issue of the Corporate Veil

Posted in Case Previews, Conflict of Laws, Contracts, Corporate Law

The UK Supreme Court has granted permission to appeal in a case that raises important issues regarding the legal doctrine of “piercing the corporate veil”.  The decision in VTB Capital Inc. v. Nutritek International Corp. will give the Court an opportunity to clarify when the veil should be pierced, and whether the legal effect of doing so is to constitute the company’s controlling minds as actual parties to its agreements in derogation from the privity of contract doctrine.  Given the many contexts in which veil-piercing is relevant, and the lack of definitive guidance about it from the Canadian Supreme Court, … Continue Reading

Back to Basic: US Supreme Court to Hear Amgen and Clarify “Fraud-on-the-Market” Reliance Presumption in Class Actions

Posted in Case Previews, Class Actions, Corporate Law, Securities, Torts

The Supreme Court of the United States has announced it will hear the appeal in Amgen Inc. v. Connecticut Retirement Plans and Trust Funds, setting the stage for an important clarification of the use of the “fraud-on-the-market” reliance presumption in U.S. securities class actions. The Court first set out the presumption in its 1988 landmark decision in Basic Inc. v. Levinson, 485 U.S. 224 (1988). The Amgen decision will have an impact in Canada, where courts have grappled with the question of reliance in such cases. Generally, Canadian courts have been sceptical about importing a “fraud-on-the-market” approach, but … Continue Reading

U.S. Supreme Court Refuses to Adopt a Bright-Line Rule on Limitation Periods for Corporate Insider Profit Claims

Posted in Case Comments, Corporate Law, Procedure, Securities

There is little law in Canada regarding if and how limitation periods applicable to statutory causes of actions in securities legislation can be tolled. For many public companies, this can create uncertainty regarding whether investor lawsuits are statute-barred.

For example, the limitation period in s. 138 of the Ontario Securities Act, which covers causes of action brought in respect of misrepresentations in prospectuses, offering memoranda and circulars, is the earlier of 180 days after the plaintiff first had knowledge of the facts giving rise to the cause of action, or three years after the date of the transaction that

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The UK Supreme Court to Decide: Whither the Risk Free Injunction?

Posted in Case Previews, Corporate Law

The United Kingdom Supreme Court recently granted permission to Barclays Bank plc to appeal the decision of the Court of Appeal that the Financial Services Authority (the “FSA”) need not provide a cross-undertaking for damages in favour of third-parties impacted by an injunction requested by the FSA. This hearing promises to be closely watched by Canadian regulators and Courts alike, both of whom rely heavily on English injunction jurisprudence.

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