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