Thursday, December 3, 2009

Wal-Mart beats the Union

Attention Wal-Mart shoppers:

In Plourde v. Wal‑Mart Canada Corp., 2009 SCC 54 the Supreme Court of Canada considered an application by an employee to be reinstated after a Walmart store had been closed ostensibly to defeat union certification.

The union certified to represent the employees of Wal‑Mart in Jonquière, Quebec. The Jonquière store was the first Wal‑Mart store to be unionized in North America. After several fruitless bargaining sessions, the union filed an application under the Quebec Labour Code to establish the provisions of a first collective agreement. On February 9, 2005, the Minister of Labour referred the dispute to arbitration and notified the parties of the referral. That same day, Wal‑Mart informed the employees of its decision to close the store. On April 29, 2005, approximately 190 employees were terminated. Many proceedings were initiated by the Wal‑Mart employees or their union arising out of the store’s closure, which was presented by the union merely as a step taken by Wal‑Mart in a larger employer strategy of hindrance, intimidation and union‑busting. P filed a complaint under ss. 15 to 17 of the Labour Code claiming to have lost his employment because of his union activities and sought an order that he be reinstated in his job.

The Commission des relations du travail (“CRT”) held that P could rely on the presumption under s. 17, since he had engaged in numerous significant union activities that were concomitant with the termination of his employment. However, the CRT found that Wal‑Mart had shown the store’s closure to be genuine and permanent and that in itself, according to a long line of cases from City Buick onwards, is “good and sufficient reason” within the meaning of s. 17 to justify the dismissal. The Superior Court dismissed P’s application for judicial review and held that the CRT was correct in not requiring Wal‑Mart to prove its reasons for closing the store. The Court of Appeal dismissed P’s motion for leave to appeal.

The Supreme Court of Canada dismissed the appeal but was careful in its reasons to limit the effect of the decision to the specific procedural issue presented by the Labour Code. Specifically the court found that the reinstatement remedy which was sought by the appellant was not available where the employer had closed the premises.

The court held that the question raised by the appeal was not whether employees have a remedy against an employer who closes a workplace for anti‑union motives (they do have such a remedy under ss. 12 to 14 of the Code) but whether employees of a closed business can bring their claim within ss. 15 to 17 so as to obtain the advantage of a statutory presumption that they lost their jobs because they exercised their collective bargaining rights. Under ss. 15 to 17, the question before the tribunal relates to the reasons for the employees’ loss of jobs whereas the question that can be put in play under ss. 12 to 14 is the broader issue of why the plant was closed at all, and specifically was it closed as part of an anti‑union strategy.

A finding of an unfair labour practice under ss. 12 to 14 opens up broader redress under the general remedial provisions provided by ss. 118 and 119 of the Code for the benefit of all employees who suffered as a result of the wrongful store closure, including those who where not involved in union activity, and even for those who opposed the union.

In the earlier Place des Arts decision the SCC held that no legislation in Quebec obliged an employer to remain in business and that an employer can close a plant for “socially reprehensible considerations”. In this case the SCC held that the effect of Place des Arts was to exclude in a workplace closure situation the application of s. 17 but not to immunize an employer from any financial consequences for associated unfair labour practices. Nor did it preclude a finding that the closure itself constitutes an unfair labour practice aimed at hindering the union or the employees from exercising rights under the Code. It is open to a union or employees to bring evidence of anti‑union conduct to establish an unfair labour practice under ss. 12 to 14 of the Code.

Therefore the procedural vehicle offered by ss. 15 to 17 of the Labour Code is not available to an employee in circumstances where a workplace no longer exists. The s. 15 reinstatement remedy presupposes the existence of a place to which reinstatement is possible.

Regards,

Blair

Monday, November 23, 2009

Law firm accused of "naked cash grab"

A Report from the Law Times by Tim Shufelt Publication Date: Monday, 23 November 2009

A Toronto litigation boutique possibly will be on the hook for legal costs after its conduct sparked a harsh rebuke by a Superior Court judge in a long-running trusts-and-estates saga. Polten & Hodder, along with lawyer Eric Polten, was the subject of strongly worded condemnation from Justice David Brown, who said the firm ran up “scandalous” legal costs and “attempted to perpetrate a naked cash grab” on two elderly clients. Polten, whose experience includes domestic and international family and estate law matters, also misrepresented himself to the court and was in breach of his professional duties as an officer of the court, Brown said in a judgment in Miksche Estate v. Miksche released this month. According to Sandra Schnurr, counsel for the estate trustee, the legal gossip mill is churning with news of the ruling.“It already seems to be well known. I’ve had numerous lawyers comment to me on it,” she says. On the ruling itself, Schnurr says the judge’s decision speaks for itself. “I’m satisfied but I’m not jubilant. Whenever I see a colleague at the bar being harshly criticized, it makes me uncomfortable,” she says.

In representing Johanna Miksche, a Scarborough woman who died two years ago, and her sister Ursula Lill, Polten racked up more than $1 million in legal fees that he first tried to recover from the Miksche estate and then from the older sister, who was the primary beneficiary, the ruling said.“Having been rebuffed in his effort to have the assets of one vulnerable person satisfy the scandalous costs he ran up, Mr. Polten came before me on this application attempting to poach upon the assets of another vulnerable person. From such conduct, I conclude that Mr. Polten was prepared to use any means to place his financial interests in this proceeding ahead of those of his former clients,” Brown wrote. “Such conduct merits the strongest condemnation by this court.”When reached for comment, Polten would only say that he would be appealing the decision. “The matter will be dealt with in the notice of appeal,” he says in response to questions about specific criticisms in the ruling. “I presently have no other comment.”

Miksche was 78 when she passed away in a long-term care facility in Scarborough. Her husband had died many years prior, and her only living sibling was her sister, who was then 87 and living in Germany.Miksche had previously granted powers of attorney to two friends who were also included as beneficiaries in her will.Then in 2005, Miksche’s three nephews travelled from Germany to visit their aunt in the care facility, accompanied by a member of Polten & Hodder.At that time, Miksche also granted powers of attorney to one of her nephews as well as her sister and signed a retainer for Polten & Hodder. The two groups — Miksche’s two friends on the one hand and her relatives on the other — then filed competing applications for guardianship.Before a decision could be rendered, Miksche died, prompting the parties to submit claims for costs.“The Polten and Hodder firm sought the staggering amount of $1,038,297 . . . against Johanna’s estate,” Brown wrote. Not only did the amount include a success premium but it also exceeded the value of the estate, according to the judgment.

In a separate 2007 ruling on the same matter, Superior Court Justice Nancy Spies called the arguments raised by the law firm “preposterous” and “alarming” and said the legal approach advocated by the firm exploited the elderly woman. The firm had also alleged on behalf of the nephews that Miksche’s two friends had held her as a “prisoner” in the care facility. “I do not understand how Mr. Polten even has the audacity to make this submission,” Spies wrote, adding that the submission demonstrated a “complete detachment from reality and lack of judgment.” The judge awarded the nephews costs of $35,500 but ordered them to first cover $28,000 in legal fees to Miksche’s two friends. Polten & Hodder appealed the ruling on behalf of Lill and the nephews but a few days later made an offer to settle by proposing to drop the matter in return for an agreement on how to distribute the estate to its beneficiaries. The offer, however, “radically changed the flow of estate funds to Ursula Lill,” Brown wrote, noting that all of the residual assets of the estate would be payable to the law firm in trust under the new arrangement.“And it was quite clear from the written and oral submissions made by Mr. Polten what would happen to those funds once in his trust account — there they would stay until he was able to extract from Lill payment of his ‘scandalous’ costs claim.”

Regards,

Blair

Monday, November 16, 2009

Supreme Court clarifies ad hoc fiduciary relationships

In the recent case of Galambos v. Perez, P made voluntary sizeable advances of cash — some $200,000 in total — to her employer, a law firm founded by G, often without informing G beforehand. Although P was hired as the firm’s part‑time bookkeeper she effectively became the office manager, overseeing the firm’s income, expenses and accounting and had unlimited signing authority on the firm’s non‑trust bank accounts. Initially, to resolve a cash flow problem, P obtained a personal loan and deposited $40,000 into the firm’s bank account. G did not ask her to advance this money and he did not even know about the advance until several days later. G instructed P to reimburse herself with interest, instructions she did not follow other than by repaying herself $15,000. As the firm’s financial situation deteriorated, P made several more deposits of her own funds into the firm’s account and covered some firm expenses with her personal credit card. The firm, during the time she worked for it, handled the preparation and execution of new wills for P and her husband as well as two mortgage transactions. The firm did not expect to be and was not paid for these services. When the firm went into receivership and G went bankrupt P found herself an unsecured creditor and recovered nothing. P then sued G and the defunct firm for negligence, breach of contract and breach of fiduciary duty.

The trial judge dismissed P’s claims, finding that her rights were those of a creditor and nothing more. The Court of Appeal set aside that decision and granted P judgment for $200,000. The Court of Appeal concluded that there were ad hoc fiduciary duties owed to P by G and his law firm in relation to the cash advances. It held that: there was a power‑dependency relationship between P and G; it is not necessary that there be any mutual understanding that G had relinquished his self‑interest in favour of P’s for the duty to arise; P was vulnerable; and, the evidence overwhelmingly supported the conclusion that G took advantage of her trust.

The Supreme Court of Canada restored the decision of the trial judge and held that the Court of Appeal had exceeded the limits of appellate review and unduly extended the scope of fiduciary obligations. Absent an error of law or a palpable or overriding error of fact the SCC held that the trial judge’s findings of fact and conclusion that a fiduciary duty did not exist must be upheld on appeal. In this case, the Court of Appeal retried the case on the basis of the written record and substituted its view of the facts and their significance for that of the trial judge.

The SCC held that the Court of Appeal erred in three respects.

1. The conclusion that G was in a position of power and influence relative to P was at odds with the findings of fact at trial that P was not vulnerable in terms of her relationship with G. There was no evidence of any express requests for loans, which makes it illogical to conclude that P was unable to refuse requests when there were in fact none.

2. Not all power‑dependency relationships are fiduciary in nature and identifying a power‑dependency relationship does not, on its own, materially assist in deciding whether the relationship is fiduciary or not. There are no special rules for recognition of fiduciary duties in the case of power‑dependency relationships. The Court of Appeal erred when it held that, in the case of a power‑dependency relationship, a fiduciary duty may arise even in the absence of a mutual understanding that one party would act only in the interests of the other. In both per se and ad hoc fiduciary relationships, there will be some undertaking on the part of the fiduciary to act with loyalty. The Court of Appeal’s analysis went wrong when it found a fiduciary duty without finding an undertaking, express or implied, on the part of G that he would act in relation to the loans only in P’s interests, and based its conclusion that a fiduciary duty existed on P’s expectations alone.

3. The Court of Appeal appears to have accepted the proposition that a fiduciary duty may arise even though the fiduciary has no discretionary power to affect the other party’s legal or important practical interests. The nature of this discretionary power to affect the beneficiary’s legal or practical interests may, depending on the circumstances, be quite broadly defined. It may arise from power conferred by statute, agreement, from a unilateral undertaking or, in particular situations by the beneficiary’s entrusting the fiduciary with information or seeking advice in circumstances that confer a source of power. The presence of this sort of power will not necessarily on its own support the existence of an ad hoc fiduciary duty; its absence, however, negates the existence of such a duty. The findings of the trial judge that the evidence did not establish that P relinquished her decision‑making power with respect to the loans to G, and that G had no discretionary power over P’s interests that he was able to exercise unilaterally or otherwise, were fatal to P’s claim that there was an ad hoc fiduciary duty on G’s part to act solely in her interests in relation to these cash advances.

Finally, the SCC held there had been no conflict of interest. Given the limited nature of the retainers and the unusual nature of the advances G and the law firm did not breach their duty of care arising from the solicitor‑client relationship between them and P. There was no actual conflict of interest between the firm’s duties to her in connection with the limited retainers and its interest in receiving the advances and there was not any reasonable apprehension of conflict. Given the very limited nature of the retainers and the manner in which the advances were made — unsolicited and frequently without advance notice — there was no duty on the firm under negligence principles to give P advice about those advances or to insist that she obtain independent legal advice about them.

Regards,

Blair

Thursday, November 12, 2009

Letters of Credit and the Bank's Duty of Good Faith

In the case of Nareerux Import Co. Ltd. v. Canadian Imperial Bank of Commerce, 2009 ONCA 764 the Court of Appeal held that a Bank owes a duty of good faith to the holders of letters of credit so that the bank cannot act in a manner which would defeat the purpose of the letter of credit.

Robertson was a customer of CIBC, and financed the purchase of shrimp from Thailand Fisheries through a credit facility arranged with the Bank. Upon arrival in the United States, the shrimp were stored in large warehouses where they awaited purchase from various Sam’s Club outlets. Payment was to be made under letters of credit upon presentation to CIBC of purchase orders and receipts showing that the shrimp had been taken down by Sam’s Club.

Although Thai Fisheries had not been paid for all of the shrimp it supplied under the letters of credit, the proceeds of sale from the shrimp were used by Robertson and the Bank to reduce the Robertson line of credit that had been arranged to finance the trade transaction.

Thai Fisheries argued that CIBC and Robertson colluded to reduce Robertson’s line of credit – and therefore CIBC’s exposure – by arranging for shrimp to be sold without documentation from Sam’s Club and then relying on non-compliance with the letters of credit to refuse payments, while at the same time directing the monies received to reduce Robertson’s overdraft instead of ensuring that the monies were used to pay Thai Fisheries under the letters of credit.

CIBC argued that it did nothing improper, that it complied with the provisions of the letters of credit, which were not honoured because the requisite documentation was not presented, and that Thai Fisheries knowingly ran the risk of this eventuality when it accepted the letters of credit.

The trial judge ruled in favour of Thai Fisheries and granted judgment in its favour in the amount of $10,381,035 together with pre-judgment interest and costs. The court of Appeal dismissed the appeal.

CIBC raised one defence only: Thai Fisheries failed to comply with its obligation imposed by the special conditions in the Letters of Credit because receipts from Sam’s Club, through Robertson, were never delivered to CIBC. Since letters of credit must be strictly construed the delivery of the receipts from Sam’s Club was a pre-condition to payment. No receipts were provided for the shrimp in question, and therefore CIBC was not liable to pay.

The Court of Appeal held that CIBC was not entitled to rely upon the defence of non-compliance because:
(a) CIBC knowingly contributed to, or acquiesced in, the circumstances that undermined the prospect of strict compliance with the Letter of Credit, then used that non-compliance to justify the refusal of payment. It did so in collaboration with its customer, Robertson, in order to ensure that the proceeds of sale of the shrimp sold under the Letters of Credit were used to reduce the Bank’s exposure on the Robertson line of credit without corresponding payments being made to Thai Fisheries under the Letters of Credit. This conduct was either a direct breach of the principle of autonomy underlying letter of credit transactions or a breach of CIBC’s implied duty of good faith not to act in a manner meant to defeat or eviscerate the purpose of the Letters of Credit, On either scenario CIBC, as issuer of the Letters of Credit, was precluded from raising the defence of non-compliance.
(b) CIBC failed in its obligation to give timely notice of dishonour to Thai Fisheries when it held back on notifying the seller for more than a year that no receipts would be forthcoming and that the Letters of Credit would be cancelled. In doing so, CIBC placed Thai Fisheries in a position where it reasonably believed that the Letters of Credit would be honoured when the problems with the receipts had been resolved. Consequently, Thai Fisheries took no steps to protect itself by seeking return of the shrimp until it was too late and the shrimp had all been sold.

Regards,

Blair

Monday, September 21, 2009

Bell, Telus ordered to give subscribers credits

The Supreme Court of Canada released a recent judgment that provided a much needed boost to many Canadians. The Court upheld a decision of the CRTC that required carriers such as Bell Canada to give their subscribers credits or reduce their rates.

In May of 2002, the CRTC, in the exercise of its rate-setting authority, established a formula to regulate the maximum prices to be charged for certain services offered by carriers such as Bell Canada (the "Price Caps Decision"). Under the formula established by the Price Caps Decision, any increase in the price charged for services in a given year was limited to an inflationary cap, less a productivity offset to reflect the low degree of competition in the marketplace. The CRTC ordered carriers to establish deferral accounts as separate accounting entries in their ledgers to record amounts representing the difference between the rates actually charged and those otherwise determined by the formula.

In December of 2003, Bell Canada sought approval from the CRTC to use the balance in its deferral account to expand high-speed broadband internet services in remote and rural communities. After public consultation, the CRTC decided that the deferral account should be used to improve accessibility for individuals with disabilities and for broadband expansion. Any surplus amounts were to be distributed to residential subscribers either through a one time credit or through rate reductions. This was known as the "Deferral Accounts Decision".

Bell Canada appealed the order of giving one time credits. The Consumer Association of Canada and the National Anti-Poverty Organization appealed the decision that funds be used for broadband expansion. The Federal Court of Appeal dismissed the appeals finding that the Price Caps Decision always contemplated that the use of the deferral accounts would be subject to the CRTC's directions and that the CRTC was acting within its mandate. Telus Communications Inc. joined Bell Canada in appealing this decision to the Supreme Court of Canada.

The Supreme Court unanimously dismissed the appeal. It held that the CRTC's decisions were reasonable based on Canadian telecommunications policy objectives. The CRTC did exactly what it was mandated to do under the Telecommunications Act. It had the statutory authority to set just and reasonable rates, to establish deferral accounts, and to direct the disposition of the funds in those accounts. It was obliged to do so in accordance with the telecommunications policy objectives set out in the legislation and to balance and consider a wide variety of objectives and interests. The Supreme Court held that the CRTC did so in a reasonable way, both in ordering subscriber credits and in approving the use of the funds for broadband expansion.

Regards,

Blair

Friday, September 4, 2009

Supreme Court of Canada to hear Khadr Appeal

Omar Khadr, a Canadian citizen, was taken prisoner in Afghanistan when he was 15 years old and has been detained by U.S. Forces since 2002 at Guantanamo Bay, Cuba, where he is currently facing murder and other terrorism-related charges. During his detention, Mr. Khadr was given no special status as a minor. He was not allowed to communicate with anyone outside Guantanamo Bay until November 2004, when he met with legal counsel for the first time. The Canadian Government has asked, through diplomatic channels, for consular access and other assurances, but it is its policy not to request repatriation until the conclusion of the prosecution.

In 2003, Canadian officials questioned Mr. Khadr, still a minor, at Guantanamo Bay, with respect to matters connected to the charges he is now facing, and shared the product of these interviews with U.S. authorities. In 2006, after formal charges were laid against him, Mr. Khadr sought disclosure in Canada of, notably, the records of the interviews conducted at Guantanamo Bay. The S.C.C. ordered disclosure. After the information was disclosed, it became clear that when the officials interviewed Mr. Khadr, they were aware he had been subjected to a form of sleep-deprivation to make him more amenable and willing to talk.

Mr. Khadr asked the Canadian Government to repatriate him. He sought judicial review of the policy and decision of the Canadian Government not to seek his repatriation. The Federal Court granted the application for judicial review. The C.A. dismissed the appeal.Prime Minister of Canada, Minister of Foreign Affairs, the Director of the Canadian Security Intelligence Service and Commissioner of the Royal Canadian Mounted Police v. Omar Ahmed Khadr (F.C.A., August 14, 2009) (33289) "Granted Without Costs. The application for leave to appeal and the motion to stay the order of the Federal Court of Appeal and to expedite the hearing of the appeal are granted without costs. The appeal is to be heard on November 13, 2009, and the schedule for serving and filing the material and any application for leave to intervene shall be set by the Registrar.

Regards,

Blair

Tuesday, July 21, 2009

Parent Corporation Liable for Debt of Subsidiary

In a recent decision (City of Guelph v. Super Blue Box Recycling Corp.) the Ontario Court of Appeal held that a parent corporation was liable to indemnify a party who entered into a contract with the subsidiary corporation even though the parent was not a party to the contract. Eastern Power Limited ("Eastern") is a company that conducts laboratory testing for a technology that transforms municipal solid waste into recyclable products. Eastern was looking for a municipal partner willing to demonstrate the new technology and where it could build a demonstration plant in order to take the technology to the next step and show that it was workable and economically viable. The City of Guelph was interested in becoming a partner because it had a wet-dry facility that could accommodate Eastern's proposed plant.

Eastern made a formal proposal to the City and after a period of negotiation, persuaded Guelph to enter into an agreement with Eastern's wholly-owned subsidiary, Super Blue Box Recycling Corp. ("Super Blue"). Super Blue held the patents for the technology in question but otherwise had no assets.

Guelph and Super Blue subsequently entered into an agreement which contained a lease granting Super Blue an interest to the site on which the facility was to be built and which set out the respective rights and obligations of Guelph and Super Blue with respect to the project. Eastern was not a party to the agreement, however its proposal to the City contained an undertaking that Eastern would indemnify Guelph against liability that may arise as a result of the pilot demonstration project.

A dispute arose between Guelph and Super Blue as to whether the automatic three year extension in the agreement was triggered in January of 2000 leading to a termination of the agreement in January of 2003. The trial judge held in favour of the City.

The Court of Appeal considered, among other things, whether Eastern would be required to indemnify the City even though Eastern was not a party to the agreement and the parties had deliberately excluded a guarantee from Eastern in the agreement. The Court of Appeal accepted the trial judge's view that Eastern was "involved in the indemnity undertaking through its involvement in a larger transaction". In effect, Eastern asked the City to accept its proposal and enter into an agreement with its subsidiary to put the proposal into effect. In exchange, Eastern held out that it would give substance to the proposal and that the City would be indemnified from all costs and liabilities associated with the project. The City accepted the proposal by entering into the agreement with Super Blue.

The Court of Appeal held that these circumstances were sufficient to create an offer, acceptance and consideration to make the undertaking to indemnify enforceable even though Eastern was not a party to the agreement.

Regards,

Blair

Monday, July 6, 2009

Hunting at night an offence despite aboriginal Treaty rights

In R. v. Jacob, aboriginal defendants were hunting moose from a van on a gravel road at night. They were charged with hunting at night contrary to a provision of the Fish and Wildlife Conservation Act, 1997 ("Act") and one of them was also charged with discharging a firearm across a road contrary to another provision of the Act. The Justice of the Peace before whom the trial was heard rejected the defendants argument that they had a defence to the charges because they were exercising their right to hunt under Treaty 9 at the relevant time. They were convicted and their conviction was affirmed by the summary conviction appeal judge. They appealed their convictions further to the Ontario Court of Appeal.

The Court of Appeal dismissed their appeal and upheld the convictions on the following grounds:

The Court held that section 17(1)(e) of the Act makes it an offence to "discharge a firearm in or across the travelled portion of a right of way for public vehicular traffic". In order to establish that the land in question is a "right of way for public vehicular traffic" the Crown is not required to provide that the provincial government or someone else with legal authority has granted the public the right to use the land by way of dedication or other legal process. One of the purposes of section 17(1)(e) is to prevent members of the public who are travelling in vehicles from the dangers arising from the discharge of firearms. That purpose can best be achieved by interpreting the phrase "a right of way for public vehicular traffic" broadly so as to protect member of the public driving on all lands that are open to public use in vehicles. There is evidence in this case that the road was a roadway used by the public. Accordingly, the Court held that the defendant was properly convicted of the offence under section 17(1)(e) of the Act.

The Court further held that the aboriginal right to fish and hunt in Treaty 9 is subject to an exception for "such tracts as may be required or taken up from time to time for settlement, mining, lumbering, trading or other purposes". The test for determining whether lands are "taken up" is whether the use being made of the land is visibly incompatible with the exercise of the treaty right. Whether or not land has been taken up is a question of fact and must be resolved in a case-by-case basis. Hunting on the road in question in this case was visibly incompatible with the use to which the road had been put for many years. The Court held that it was a well-established primary haul road used by both lumber company employees and the public. Roadways used by the public are incompatible with hunting. The defendants knew about the uses to which the road was put. As a result, the Court found that they were properly convicted of hunting at night.

Regards,

Blair

Friday, July 3, 2009

Denial of hearing upheld by Court of Appeal

The Ontario Court of Appeal recently ruled on the issue of whether a not-for-profit professional regulatory corporation had dealt fairly with one of its members against whom a complaint had been made.

In an appeal brought by the Appraisal Institute of Canada, the entity that regulates and sets standards of practice for real estate appraisers, the Court of Appeal overturned a trial judgment that awarded damages to a member of the Institute on the basis that its discipline committee had not dealt fairly with him. In the case, a hearing of the institute's adjudicating committee determined that certain charges had been proven against the member. The committee imposed a private reprimand, ordered the member to re-do the appraisal in issue in compliance with current standards and assessed costs of $2,500 against him.

The member appealed to the Ontario Superior Court of Justice and succeeded at trial. The trial judge found that the Institute had an implied contractual obligation to treat the member fairly in conducting its discipline process. The trial judge found that the process had become fatally flawed at the investigating committee stage because the member had been denied a right to a hearing.

The Court of Appeal overturned the decision for the following reasons:

1. The implied contractual obligation of fairness must be informed by the regulation which the Institute's by-laws empower it to make governing the investigating stage of the discipline process. In other words, the regulation sets out how members can expect to be treated. In this case, the regulation provided that the investigating committee was not required to hold a hearing.

2. The investigating committee could impose no sanction or substantive consequence on the member. It could do no more than cause a hearing before the adjudicating committee. As a result, the requirements of the duty to treat the member fairly at the investigating stage were extremely minimal. The member was afforded the opportunity to know what the complaint was against him and to respond in writing about the questions the complaint raised. The Court held that fairness requires no more than that.

The Court concluded that the absence of a hearing before the investigating committee did not deprive the member of any element of procedural fairness.

Regards,

Blair

Thursday, June 18, 2009

Supreme Speed

Statistics show that the Supreme Court of Canada decided cases and leave to appeal applications faster last year than at any time in the past decade. However, the number of completed leave to appeal applications submitted to the Court for decision in 2008 dropped dramatically by 19% to 509.

The Court reduced the time that it took to decide leave to appeal applications to an average of 3 months, the fastest time in at least 10 years. The court also heard and decided appeals at record speed - an average total of less than 17 months between the filing and the leave to appeal application and final judgment.

The downside of these indicators is that it appears to be getting harder for litigants to have their cases heard by the Supreme Court. Over the past 10 years, the percentage of leave applications granted by the Court has fluctuated between 11% and 15%. Based on trends so far in 2009, it appears that the Court will hear about 70 appeals, well below the average of 82 appeals it heard annually in the previous decade. Expert Court watchers say that the number of interesting and important applications has not changed in any respect over the past 3 decades - what has changed is the threshold - it is much harder to get leave now than ever before.

In respect of the types of cases the Court heard in 2008, 39% were criminal, 10% were charter (civil), 7% were charter (criminal). Litigators like me should take note that commercial law cases heard by the court comprised only 6% of its docket.

As to the appeals heard by the Supreme Court of Canada by province of origin, fully 20% originated from the province of British Columbia, 17% from Quebec and 12% from the Federal Court of Appeal. Only 11% of the Court's cases originated from the province of Ontario.

Stay tuned for more news on this front.

Regards,

Blair

Wednesday, May 27, 2009

Limitation Act amended for Demand Promissory Notes

Many in the Ontario business community were surprised when the Ontario Court of Appeal held in 2006 that the limitation period for demand promissory notes began to run as soon as the note was issued and not following a default after a demand for payment. This meant that demand notes issued after January 1, 2004 (when the basic limitation period was changed from 6 years to 2 years) became statute-barred 2 years from the date they were issued unless the debtor paid interest or principal or acknowledged the debt in writing. In those cases, the clock on the limitation period restarted after that event.

However, there were many situations, where payments of interest or principal would not be made for many years. For example, in the case of Hare v. Hare, a mother was unable to sue her son on a demand note when her statement of claim was issued more than 6 years after her son's last payment, although it was only a few months after she had demanded payment.

As a result, lawyers were forced to revise their demand notes to draft around the Court's decision. But such creative drafting did not resolve the problem that existed with notes that were already outstanding. As a result of intensive lobbying by various groups, the Ministry of the Attorney General enacted amendments to the Limitations Act which took effect on November 27, 2008.

The amendments make 2 significant changes directed at the decision in Hare. First, for demand obligations, the 2 year limitation period starts to run on "the first day on which there is a failure to perform the obligation, once a demand for the performance is made".

Second, the amendments apply "in respect of every demand obligations created on or after January 1, 2004" thus giving the amendments retroactive effect to the date that the new Act came into force. Now, until there is a default following a demand for payment, the limitation period doesn't start to run.

Regards,

Blair

Tuesday, May 26, 2009

Freelance Writers Settle for Big Bucks

CTVglobemedia Inc., Thompson Reuters Canada and The Gale Group have recently agreed to pay an $11 million settlement in a class-action lawsuit commenced in 1996 by freelance writer Heather Robinson. The case originated with Robinson, who disputed the fact that the Globe & Mail newspaper had included articles she submitted to the Globe's print edition into electronic databases without paying her what she felt was paid proper compensation for doing so.

Robinson, a founding member of the Professional Writers Association of Canada, submitted articles to the Globe for the newspapers print edition that were then included in three electronic data bases: InfoGlobe Online; an electronic version of the Canadian Periodical Index; as well as in a CD ROM that contained a years' worth of several Canadian newspapers. Robertson filed the class action lawsuit over the unauthorized reproduction of her work as well as that of thousands of other freelance writers.

In 2006, the Supreme Court of Canada ruled that newspapers and magazines do not have the right to transfer articles from their print editions into electronic databases without the consent of the writers, ruling that the databases resulted in "a different product that infringes" the creator's copyright. However, the Court did make an allowance for CD ROMs that present articles in the same overall look of the printed newspapers or magazines.

The Supreme Court of Canada held, in a 5 - 4 decision, that newspaper publishers are not entitled to republish freelance articles acquired for publication in their newspapers in electronic databases without compensating the authors and obtaining their consent. Newspaper publishers have a copyright in their newspapers pursuant to the Copyright Act to "reproduce the work or any substantial part thereof in any material form whatever". The court held that a substantial part of a newspaper may consist only of the original selection so long as the "essence" of the newspaper is preserved. In online databases, the originality of the freelance articles is reproduced but the originality of the newspaper is not. The resulting collective work is of a different nature than the original newspaper.

By contrast, the Court held that CD ROMs, which were essentially a compendium of daily newspaper editions, remained faithful to the essence of the original work - (that line could be a direct quote from Colonel Jack Ripper in Dr. Strangelove).

Regards,

Blair

Thursday, May 7, 2009

Letters of Intent may be Binding Contracts

The Ontario Court of Appeal has awarded a spurned purchaser of a business damages equivalent to his loss of financial benefit for the first seven months in which he would have operated the business. In doing so, the Court increased the trial judge's award by four months.

In the case of Wallace v. Allen, the parties after some weeks of negotiation, entered into a "letter of intent" for the purchase by Mr. Wallace of four companies owned by Mr. Allen and his wife. During the next few months, Mr. Wallace began to attend at the business premises daily with a view to learning the business, getting to know the customers and staff of the business and doing everything necessary to provide a smooth transition of the ownership of the business from Mr. Allen.

The parties signed a letter of intent which read in part:

It is also agreed by the parties that there will be much legal work to be done upon acceptance by both sides and that the wording of this agreement may alter somewhat...

This letter of intent must be reduced into a binding agreement of purchase and sale by the parties within the next 40 days.

Within weeks of signing the letter of intent, Mr. and Mrs. Allen held a special employee meeting where Mr. Allen announced his retirement and the fact that he had sold his company and that the deal was "solid". Mr. Allen introduced Mr. Wallace to his employees, customers and business contacts as the "new owner" of the business. However, on the morning that the transaction was set to close, Mr. and Mrs. Allen refused to complete the transaction.

The trial judge fixed Mr. Wallace's damages at $240,000.00 representing his loss of financial benefit for the first three months of operation of the business. The trial judge found that Mr. Wallace had mitigated his damages by purchasing another business, although his evidence was that he had ample resources to fund both deals.

On appeal, the Ontario Court of Appeal increased Mr. Wallace's damage award to seven months. The Court found that the clauses referred to in the letter of intent contemplated and expressed an intention on the part of the parties to be bound by its terms which were to be incorporated into a more formal document.

The parties used the language of contract - they used terms such as "it is agreed" and "upon acceptance" and "this agreement" which indicated an intention to be bound upon the signing of the letter of intent.

In addition, the conduct of the parties after signing the letter of intent clearly demonstrated that they considered themselves legally bound to its terms . For several months, the parties conducted themselves as though they had a deal and the parties showed up at the lawyer's office prepared to sign the share purchase agreement.

The Court rejected Mr. Wallace's claim for specific performance of the share purchase agreement. It held that while the company itself may be unique in what it does (the argument can be made that every business is unique) Mr. Wall,ace's acquisition of the business was not - he acquired business for a living. In any event, it was nearly four years after the deal was scheduled to close and that delay in time made damages a more appropriate remedy.

In awarding seven months damages, the Court found that three months was simply not enough time for a business person to search out and find another opportunity, negotiate a new agreement of purchase and sale and close that transaction.

Regards,

Blair

Monday, April 27, 2009

Do we have a Privacy Interest in our Garbage?

Residents of Toronto are familiar with the debate that can be generated by garbage, but not necessarily this kind of debate. In a case recently decided, the Supreme Court of Canada held that it was lawful for the police to use evidence of criminal activity taken from the contents of a person's garbage to obtain a warrant to seize the person's house and garage. As a result of the search, the police uncovered evidence that the defendant was operating an ecstasy lab in his home. He was subsequently convicted of several criminal offences.

The defendant appealed his conviction on the basis that by taking the garbage bags from his property, the police breached his right, guaranteed by section 8 of the Canadian Charter of Rights and Freedoms, to be free from unreasonable search and seizure. The Supreme Court of Canada dismissed the defendant's appeal and upheld his conviction. The Court's reasoning was as follows.

Mr. Justice Ian Binnie, writing for the majority of the Court, commented that labels are sometimes misleading. To describe something as "garbage" tends to presuppose the point in issue, namely whether the homeowner had any continuing privacy interest in what he had thrown out. The Court concluded that it is possible that the homeowner might have no further interest in physical possession of the garbage but a very strong interest in keeping private the information contained in the garbage. The question was whether he dealt with the garbage in such a way as to forfeit any reasonable expectation of keeping its contents confidential.

The Court concluded that this is an objective test to be determined considering the following factors:

1. The subject matter of the alleged search - Justice Binnie held that the subject matter is not simply garbage. He observed that residential waste includes an enormous amount of personal information about what is going on in our homes. The Court agreed with counsel for the Canadian Civil Liberties Association that a garbage bag may more accurately be described as a bag of "information" whose contents paint a fairly accurate and complete picture of a householder's activities and lifestyle. According to the Supreme Court, many of us may not wish to disclose those things to the public generally or to the police in particular. As a result, it concluded that the defendant had a continuing direct interest in the "information" that was in his garbage.

2. Concealing illegal objects - The Court held that the issue ought to be framed in terms of privacy of the area or thing being searched and the potential impact of the search on the person being searched, and not in terms of the nature or the identity of the concealed items. The seized garbage bags contained a lot of personal items other than drug making paraphernalia. Accordingly, the physical search was not confined to evidence of criminal activity, but to other activity as well.

3. Subjective expectation of privacy - The Court held that this is not a high hurdle - obviously, subjectively the defendant expected that the contents of the garbage bags would remain private.

4. Objective expectation of privacy - The Court held that the defendant had no objective expectation of privacy because the garbage was put out for collection in a customary location, it was at or near the property line, there was no manifestation of any continuing assertion of privacy or control (such as a locked receptacle) and the police took the bags to search for information as part of a continuing criminal investigation. However, it held that apart from the key issue of abandonment, the circumstances favoured the defendant.

5. The place where the search occurred - The essence of the defendant's complaint was the intrusion by the police into activities taking place inside his home rather than the fact that the police invaded the air space at the foot of his garden by reaching across the lot line for the bags. Accordingly, the Court concluded that the implication of focusing privacy protection is on people not places. But because the garbage at the property line was accessible to passers by, the Court found that the physical intrusion by the police was relatively peripheral.

6. Whether the subject matter of the search was in public view - The garbage bags were in plain view, but their contents were not.

7. Whether the subject matter of the search had been abandoned - Clearly the defendant intended to abandon his proprietary interest in the physical objects themselves. The question is whether he had a reasonable and continuing privacy interest in the information which the contents revealed to the police.

8. Whether the information was already in the hands of third parties - The Court held that it was not necessary to defer a finding of abandonment until the garbage had been picked up by garbage collectors because this step did not depend on any act of the defendant and would add little in the way of protection.

9. Was the police conduct intrusive in relation to the privacy interest - Given that the act of abandonment occurred prior to the police gathering the garbage bags there was no privacy interest in existence at the time of the police intervention which therefore did not constitute an intrusion into an existing privacy interest.

The Court found that having regard to all of these factors, that the defendant had abandoned his privacy interest in the contents of the garbage bag when he placed them at his property line for collection. The taking of the bags did not constitute a search and seizure within the scope of section 8 of the Charter and the evidence found by the police was admissible.

Regards,

Blair

Friday, April 3, 2009

Pension Reform in the Ontario Budget

My pension law partner, Priscilla Healy reports:

The Ontario budget promises some welcome flexibility for both pension plan members and employers, although at the expense of benefit security on retirement.
Pension plan members who have transferred their pension monies into LIFs or LRIFs will be able to immediately withdraw 50 % of their locked-in monies from these accounts, an increase from 25%., effective January 1, 2010. There will also be a temporary waiver of fees for unlocking those accounts on the grounds of financial hardship, effective for applications made on or after April 1, 2009. However, without amendments to the tax rules, once monies are withdrawn, there will be no ability to replenish those accounts on a tax deferred basis.
Employers will welcome the ability to extend solvency payments over ten years instead of the current five year requirement, starting with valuation reports on or after September 30, 2008. The new ability to consolidate existing solvency payment schedules and to defer new going concern and solvency special payments for one year will also help temporarily cash-strapped employers.
The ten year extension of solvency payments may be illusory for any but jointly governed plans, because it will not be available if more than one-third of the aggregate of plan members object. It is not clear why retirees or deferred vested plan members would not object to a reduction in the security of their pensions. Employers may have to depend upon the inertia of retirees and deferred vested plan members preventing a flood of objections, or upon the concern of retirees or those close to retirement as to the possible insolvency of the employer which could leave them with no retiree medical benefits.
On the flip side, to protect member security the budget proposes restrictions on employer contribution holidays for fiscal years ending in 2010 to 2012.
There are a number of other budget proposals arising from the November, 2008 Report of the Expert Commission on Pensions, and there is reference to the passage of Bill 133 that simplifies pension splitting on marriage breakdown. The intent is also expressed to adopt a new multi-jurisdictional agreement that will simplify the administration of registered pension plans with members in more than one jurisdiction.
This is the first time since the abortive Bill 198 in 2002 that an Ontario government has attempted significant reforms of the Pension Benefits Act.

Regards,

Blair

Bank Liability for Forged Cheques

My insolvency law partner John Varley reports:

Companies victimized by forgery routinely get no support from their bankers, unless they have reported the discrepancy within the usual 30-day "monthly statement objection" period. A recent court decision may cause banks to reassess that stance, depending on the language used in the relevant account operating agreement.

In a recent case before a judge of the Ontario Superior Court of Justice, an office manager forged $186,488 of cheques and the employer company sued to recover that amount after the bank cleared all those cheques and debited the company's account.

The Court held that the bank was strictly liable for honouring the forged cheques, and that no defence was available to it. The bank's honouring of the cheques was not a mere "error, omission or irregularity", but a violation of section 48 of the Bills of Exchange Act. If (as is the case with language used by other bank agreement forms) the account agreement in this case had been more broadly worded, or had specifically mentioned forgeries, a defence would have existed, but none was available here.

Nor did the mutual negligence (of both the bank and the company) resolve the matter. The Court held that the company owed the bank no duty (at the level of due care that would have detected the forgeries) to examine the monthly bank statements and report discrepancies within the 30-day notification period stipulated by the account operating contract. Nor did it owe the bank any duty to maintain internal accounting controls to minimize or prevent forgery losses.

Regards,

Blair

Women in Private Legal Practice

The Law Society of Upper Canada, the body that regulates lawyers and paralegals in Ontario, has introduced an initiative called "The Justicia Project" designed to support the retention and advancement of women lawyers in private practice. The initiative is the first of its kind in Canada and is a 3 year pilot project involving a group of law firms who have committed to sharing best practices and adopting programs to support women lawyers within their firms. The participants in the project have pledged to recognize the value of women lawyers in their firms and the importance of "balance, flexibility, mentorship, leadership and strong business management practices and skills".

More than half of lawyers called to the bar in Ontario are women. As a result, the law firms see the project as a practical way to structure their environments to attract and retain the best law students and lawyers.

More than 50 medium and large law firms have pledged to support The Justicia Project (including my firm Fogler, Rubinoff LLP). Each firm has committed to participate in the project for 3 years, from 2009 to 2011. All participants have signed written commitments to achieve goals in the following core areas:
- maternity and parental leave policies and flexible work arrangements;
- networking and business development;
- mentoring and leadership skills development for women; and
- monitoring progress.

More information is available about The Justicia Project and other initiatives to retain and advance women in private practice on the Law Society's website.

Regards,

Blair

Friday, March 27, 2009

Social Networking Profiles May Not Be Private

For all of those who warn their teenagers to be careful and prudent about the content that they post on their Facebook sites, a recent decision of an Ontario Superior Court judge underscored that advice in the context of civil litigation. The judge ordered a plaintiff in a personal injury lawsuit to be cross-examined on the nature of the content that he had posted on his Facebook profile, even though he had marked his profile as "private" and had restricted access to his Facebook pages only to his Facebook "friends".

In the case, the plaintiff alleged that he was injured in a car accident as a result of the defendant's negligent driving. He claimed damages as a result of what he alleged to be his loss of enjoyment of life and claimed that the accident had caused limitations to his personal life.

When the plaintiff was examined for discovery in the action, the defendant's lawyer did not ask him any questions about whether he maintained an active Facebook profile. Several months later, during the course of a psychiatric evaluation by the defendant's doctors, the plaintiff disclosed that he had "a lot" of friends on Facebook. However, his publicly available Facebook profile showed only his name and picture. He had restricted access to his site only to his Facebook friends. As a result, the defence made a motion to the court for an order requiring the plaintiff to preserve and produce all information on his Facebook profile.

The motion was made before a Master of the Ontario court who held that, while the Facebook profile pages were "documents" since they contained data and information that could be produced by him, the defence had produced no evidence that any information on the Facebook profile was relevant to the issues in the action. The Master held that the request for production of the Facebook productions was clearly a fishing expedition. The Master concluded that it would be speculative to infer from the various applications available to a Facebook user what content might exist on a specific Facebook site. He was not prepared to conclude that one head shot of the plaintiff was indicative of what else might be on his site.

The defendant appealed the decision to a judge of the Superior Court of Justice. The judge hearing the appeal stated, correctly, that it is now beyond any controversy that relevant documents, including photographs that are posted on a Facebook profile are producible in the course of litigation. In fact, a previous case in Ontario held that one can infer from the nature of the Facebook service, the likely existence of photographs on a party's private profile.

Ontario's Rules of Civil Procedure impose an obligation on a party's lawyer to certify that he has explained to his or her client what kinds of documents are likely to be relevant to the allegations in the lawsuit and therefore must be produced to the other side. Given the pervasive use of Facebook and other social networking sites and the large volume of photographs typically posted on such sites, the courts have held that it is now incumbent on the lawyer to explain to the client in appropriate cases that documents posted on the party's personal profile may be relevant to allegations made in the lawsuit.

If, in addition to a publicly-accessible profile, a party maintains a private profile viewable only by the party's friends, Ontario courts have held that it is reasonable to infer from the presence of content on the party's public profile that similar content likely exists on the private profile. A court can then order the production of relevant postings on the private profile.

In this case, the court went even further. It held that where a party maintains only a private Facebook profile, and his public page posts nothing other than information about his identity, the court can still infer from the social networking purpose of Facebook and the applications it offers to users such as the posting of photographs, that the users intend to take advantage of Facebook's applications and make their personal information available to others. Accordingly, the court disagreed with the Master that the defendant's request was a fishing expedition. It held that the plaintiff exercised control over his social networking information site to which he allowed access to designated friends and therefore it was reasonable to infer that his Facebook site likely contained content relevant to the issue of how he was able to lead his life since the car accident. Accordingly, such content was relevant to his claim for damages.

Even though the defence did not ask the plaintiff any questions about his Facebook profile on his examination for discovery, the court held that fairness dictates that a party who discovers a Facebook profile should have an opportunity to test whether or not the profile contains content relevant to the issues in the lawsuit. The court held that the defendant should be permitted to cross-examine the plaintiff on a supplementary affidavit of documents that the plaintiff had served in order to learn whether any of the content on his Facebook profile was relevant.

Regards,

Blair

Tuesday, March 17, 2009

Access to Justice

The Ontario government appears committed to reforming the civil justice system, albeit in a minor way, in order to increase access to justice for the people of Ontario. The government's proposed reforms are also designed to make the civil court system easier to use and to resolve disputes quicker.

For example, the province is increasing the monetary limit of the Small Claims Court from $10,000.00 to $25,000.00 effective January 1, 2010. This change, while needed, is not bold enough. The monetary jurisdiction of Small Claims Court should be at least $50,000.00. Very few cases involving lawyers can resolved through litigation for legal fees that would less than such an increased limit.

In addition, the reforms promise 25 significant changes to Ontario's Rules of Civil Procedure, including raising the monetary limit for Simplified Procedure cases from $50,000.00 to $100,000.00 effective January 1, 2010, reducing pretrial costs and delays and by limiting examinations for discovery to one day unless the parties or the court decide that more time is needed.

The Civil courts will now also be subject to the general principle of proportionality. This means that the time and expense devoted to any case must reflect the amount in dispute and the importance of the issues at stake in the proceeding.

These reforms are a response to the Osborne Report.

In June of 2006, the Attorney General for Ontario asked the Honourable Mr. Justice Coulter A. Osborne, a former judge of the Ontario Superior Court of Justice, to review potential areas of reform and make recommendations in order to make the civil justice system more accessible and affordable. Justice Osborne presented his report in November of 2007.

The report contains some 81 findings and recommendations relating to such matters as judicial resources, small claims court, simplified procedure, civil juries, the discovery process, case management and trial scheduling. It also reviewed such matters as the need for civility and ethical behaviour in the legal profession and the use of technology in the civil justice system.

Highlights of the Osborne Report are:

unrepresented litigants - improving information resources for unrepresented civil litigants; encouraging lawyers to commit to more legal services on a pro bono basis; creating a self-help centre at Toronto's Superior Court of Justice to be staffed by a full-time facilitator and a part-time lawyer; revisiting the review for civil legal aid in the province;

discovery - amending the Rules of Civil Procedure to provide that each party have up to a maximum of one day (7 hours) to examine parties adverse in interest; encouraging parties to voluntarily answer questions at an examination for discovery that are objected to on the basis of relevance and to encourage the court to consider making appropriate costs awards on refusals motions; encouraging parties to consider, and to the extent reasonable, apply the E-Discovery guidelines and The Sedona Canada Principles and in particular the requirement to meet and confirm regarding identification, preservation and production of electronically stored information;

litigation management - ordering that a case be subject to case management if appropriate; allowing telephone or in-person case conferences or a simplified process for motions to be made in writing with or without affidavits;

motion and trial scheduling - eliminating the requirement of personal attendance at assignment court and permitting trial dates to be set by use of a form jointly submitted by the parties; the use of teleconference hearings or internet for fixing tentative trial dates; the use of 9:00 a.m. or 9:30 a.m. chamber hearings to deal with ex parte scheduling, consent or other motions that need less than 10 minutes; the use of more specific time slots for the hearing of motions, i.e. morning or afternoon motions to reduce wasted waiting time in court; greater use of teleconferencing for short motions.

The Report's findings and recommendations can be found on-line on the website of the Ontario Ministry of the Attorney General.

Regards,

Blair

Tuesday, March 10, 2009

Departing Employees owe duties to Employers

The Supreme Court of Canada has sent a strong message to a group of employees who orchestrated their departure from their employer, resulting in serious harm to the employer's economic interests.

A recent decision released by the Court involved RBC Dominion Securities and Merrill Lynch Canada, competitors in the investment brokerage business. In a move coordinated by RBC's branch manager, virtually all of the investment advisers at RBC left their jobs and went to work for Merrill Lynch. As a result of the departure, only two very junior investment advisors , who Merrill Lynch had not sought to recruit, and two administrative staff members remained at the RBC branch. The employees gave RBC no advance notice and in the weeks preceding their departure they copied RBC's client records and transferred them to Merrill Lynch. The Court found that RBC's office was effectively hollowed out and all but collapsed.

In a 6 to 1 ruling, the Supreme Court restored a trial award of $225,000 against Merrill Lynch, and its manager which were held jointly and severally liable for inducing the breach of the employees' contracts and for unfair competition, as well as $250,000 in punitive damages against Merrill Lynch. The Merrill Lynch manager was individually found liable for punitive damages in the sum of $10,000.

The court awarded $40,000 total damages to RBC against its former employees for failing to give RBC adequate notice of their departure as well as punitive damages of $5,000 each. It awarded over $1.4 million against the former RBC branch manager who had orchestrated the operation for breaching his duty of good faith and $5,000 in punitive damages. The damage award represented five years of lost profits for RBC.

The Court found that damages arising in respect of a breach of contract should arise either naturally, or as reasonably contemplated by both parties at the time they made the contract. In organizing the mass exit, RBC's manager breached his contractual duty of good faith, as an implied term of his employment contract was the retention of RBC employees who were under his supervision. The damages for that breach were the amount of loss it caused to RBC.

Generally individual employees who terminated employment are not prevented from competing with the employer during the notice period. The employer is confined to damages for failure to give reasonable notice. However, a departing employee might be liable for specific wrongs, such as improper use of confidential information during the notice period.

This case is an important one for employees who are concerned about whether they may really be found liable for damages for failing to provide reasonable notice of their departure and the fiduciary obligations of managerial employees and employers who consider hiring employees away from their competitors.

Regards,

Blair

Monday, March 9, 2009

Be wary of Foreign Abitrations

The Ontario Court of Appeal recently upheld the decision of a lower court judge who refused to permit an Ontario company to back out of arbitration proceedings in Russia even though the President of the Russian company had allegedly threatened to kill an executive of the Ontario company. As a result of the alleged threats, the Ontario company's executive was unwilling to travel to Moscow, as were its witnesses.

In the case of Donaldson International Livestock Ltd. v. Znamensky Selekcionno - Gibridny Center LLC, the Court held that by the time the case came before it, the issue of whether the death threats constituted cause to back out of the arbitration agreement in the commercial contract between the two parties was moot because the arbitration had already been held. In doing so, the Court held that the time to have a trial of the issue concerning the death threats was when the parties were before the motion judge. The case was argued on the basis of a paper record and the motion judge found that it fell short of establishing that the threats were made.

In this case, the Ontario company, a producer of pure-bred pigs, had entered into a contract to sell pigs to the Russian company. The contract contained an arbitration clause which included that any dispute, controversy or claim, which arose out of or was connected to the contract would be settled by the International Commercial Arbitration Court. The contract was governed by and construed in accordance with the law of the Russian Federation; the place of arbitration was agreed to be Moscow, Russia, the language to be used in the arbitral proceedings would be Russian; and the law of the contract would be the law of the Russian Federation.

A dispute arose about the health of the pigs that were sold to the Russian company. One morning at about 5:00 a.m. the Ontario company's executive was awakened by a telephone call from the Russian executive. The Russian executive spoke in Russian, and one of his colleagues was on the line acting as an interpreter.

The Ontario executive alleges that the discussions became increasingly hostile and that the Russian executive shouted twice: "What happens to people that cross me" followed by "I will kill you".

The Ontario company commenced an action in Ontario seeking an injunction prohibiting the Russian company from proceeding with the arbitration in Moscow and declaring that the arbitration clause in the contract was null and void because of the Russian company's "misconduct". By the time the motion was heard, the Russian company had obtained an award in Russia. The Ontario company argued that the arbitral award should not be recognized or enforced in Ontario because of the Russian company's misconduct and that damages for tort of intimidation were outside of the scope of the arbitration agreement.

However, the motion judge denied the injunction and granted the Russian company a stay of the Ontario action.

The Court of Appeal held that the arbitration clause was extremely broad. It included any dispute, controversy or claim, which may arise out of or in connection with the contract. Given the direction that courts have been taking in respect of approach to arbitration clauses, the clause was broad enough to conclude virtually all of the claims advanced in the Ontario action. The fact that one of the claims was against a no-party to the agreement, i.e. the individual who made the alleged threat, was not sufficient to oust the jurisdiction of the arbitration tribunal in Moscow when the entire focus of the action related to issues arising out of the contractual relationship between the parties. Accordingly, the Court refused to interfere with the motion judge's decision to stay the Ontario action.

Accordingly, the lesson here is that at the point of negotiating an agreement with a foreign trading partner, a Canadian company must give careful thought about agreeing to arbitrate a dispute in a foreign country and language using foreign laws.

Regards,

Blair

Wednesday, March 4, 2009

Employers must be clear in restrictive covenants

The Supreme Court of Canada has held that employers should not draft overly broad restrictive covenants in the hope that a court will sever any part of it that is unreasonable or "rewrite" the covenant to what the courts may consider reasonable. The Court held that doing this would change the risks assumed by the parties and unduly increase the risk that an employee will be forced to abide by an unreasonable covenant. The Court held that restrictive covenants contained in employment contracts should be scrutinized more carefully than restrictive covenants in the sale of a business because there is often an imbalance in power between employers and employees and because the sale of a business often involves a payment for goodwill, whereas no similar payment is made to an employee who leaves his or her employment.

In the recent case of Shafron v. KRG Insurance Brokers, the Court held that a restrictive covenant prohibiting an employee of an insurance brokerage firm from working within "the Metropolitan City of Vancouver" was unenforceable because the term "Metropolitan City of Vancouver" was uncertain and ambiguous.

There was nothing contained in the evidence of the case that demonstrated a mutual understanding of the parties at the time they entered into the employment contract as to what geographic area the restrictive covenant covered. Accordingly, it was inappropriate for the British Columbia Court of Appeal to rewrite the covenant.

The Court held that restrictive covenants generally are restraints of trade and therefore contrary to public policy. Freedom to contract, however, requires an exception for reasonable restrictive covenants. Normally, the reasonableness of a covenant will be determined by its geographic and temporal scope as well as the extent of the activities sought to be prohibited. Reasonableness cannot be determined if a covenant is ambiguous in the sense that what is prohibited is not clear as to activity, time or geography.

The court held that an ambiguous restrictive covenant is by definition on its face unreasonable and unenforceable. The onus is on the party seeking to enforce the covenant to show that it is reasonable. A party seeking to enforce an ambiguous covenant will be unable to demonstrate reasonableness.

If you have any questions, please don't hesitate to email me.

Regards,

Blair

Tuesday, March 3, 2009

Standard of Proof in Civil Cases

There has been a debate for some time among lawyers and judges in Canada as to whether there is a standard of "enhanced proof" required for civil claims involving acts of fraud or what some describe as acts of "morale turpitude".

The Supreme Court of Canada recently put this debate to rest and held that there is one standard of proof required for all civil matters - i.e. proof on a balance of probabilities. In all civil cases, the trial judge must scrutinize the relevant evidence with care to determine whether it is more likely than not that an alleged event occurred.

In the case of F.H. v. McDougall, 2008 SCC 53, the Court held:

It is time to say, once and for all in Canada, that there is only one civil standard of proof at common law and that is proof on a balance of probabilities. Of course, context is all important and a judge should not be unmindful, where appropriate, of inherent probabilities or improbabilities or the seriousness of the allegation or consequences. However, these considerations do not change the standard of proof.

In contrast to criminal cases where the standard of proof is proof beyond a reasonable doubt, in civil cases there is no presumption of innocence. The Supreme Court acknowledged that there may be serious consequences to a finding of liability in a civil case that continue past the end of the case. However, it concluded that a civil case does not involve the government's power to penalize or take away the liberty of the individual.

The Court reasoned that the only practical way in which to reach a factual conclusion in a civil case is to decide whether it is more likely not that the event occurred. To suggest that depending upon the seriousness of the allegations, the evidence in a civil case must be scrutinized with greater care, implies that in less serious cases the evidence need not be scrutinized with such care. As a result, the Court found that it is inappropriate to say that there are legally recognized different levels of scrutiny of the evidence depending upon the seriousness of the case. There is only one legal rule and that is in all cases, evidence must be scrutinized with care by the trial judge.

Regards,

Blair