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