Friday, December 14, 2012

Supreme Court lets corporate polluter off the hook.


The Supreme Court of Canada recently released its decision in the case of  Newfoundland and Labrador v. AbitibiBowater Inc. (Q.C.C.A., May 18, 2010)(33797)

“A was involved in industrial activity in Newfoundland and Labrador (the “Province”). In a period of general financial distress, it ended its last operation there, filed for insolvency protection in the United States and obtained a stay of proceedings under the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36 (“CCAA”). The Province subsequently issued five orders under the Environmental Protection Act, S.N.L. 2002, c. E-14.2, requiring A to submit remediation action plans for five industrial sites it had occupied, three of which had been expropriated by the Province, and to complete the remediation actions. The Province also brought a motion for a declaration that a claims procedure order issued under the CCAA in relation to A’s proposed reorganization did not bar the Province from enforcing the environmental protection orders. The Province argued that the environmental protection orders were not “claims” under the CCAA and therefore could not be stayed and subject to a claims procedure order. It further argued that Parliament lacked the constitutional competence under its power to make laws in relation to bankruptcy and insolvency to stay orders that were validly made in the exercise of a provincial power. A contested the motion, arguing that the orders were monetary in nature and hence fell within the definition of the word “claim” in the claims procedure order. The CCAA court dismissed the Province’s motion. The Court of Appeal denied the Province leave to appeal.”

The S.C.C. (7:2) dismissed the Province's appeal.

Justice Deschamps wrote as follows (at paras. 2-4, 61):

“Regulatory bodies may become involved in reorganization proceedings when they order the debtor to comply with statutory rules. As a matter of principle, reorganization does not amount to a licence to disregard rules. Yet there are circumstances in which valid and enforceable orders will be subject to an arrangement under the CCAA. One such circumstance is where a regulatory body makes an environmental order that explicitly asserts a monetary claim.

In other circumstances, it is less clear whether an order can be treated as a monetary claim. The appellant and a number of interveners posit that an order issued by an environmental body is not a claim under the CCAA if the order does not require the debtor to make a payment. I agree that not all orders issued by regulatory bodies are monetary in nature and thus provable claims in an insolvency proceeding, but some may be, even if the amounts involved are not quantified at the outset of the proceeding. In the environmental context, the CCAA court must determine whether there are sufficient facts indicating the existence of an environmental duty that will ripen into a financial liability owed to the regulatory body that issued the order. In such a case, the relevant question is not simply whether the body has formally exercised its power to claim a debt. A CCAA court does not assess claims — or orders — on the basis of form alone. If the order is not framed in monetary terms, the court must determine, in light of the factual matrix and the applicable statutory framework, whether it is a claim that will be subject to the claims process.

The case at bar concerns contamination that occurred, prior to the CCAA proceedings, on property that is largely no longer under the debtor’s possession and control. The CCAA court found on the facts of this case that the orders issued by Her Majesty the Queen in right of the Province of Newfoundland and Labrador (“Province”) were simply a first step towards remediating the contaminated property and asserting a claim for the resulting costs. In the words of the CCAA court, “the intended, practical and realistic effect of the EPA Orders was to establish a basis for the Province to recover amounts of money to be eventually used for the remediation of the properties in question” (2010 QCCS 1261, 68 C.B.R. (5th) 1, at para. 211). As a result, the CCAA court found that the orders were clearly monetary in nature. I see no error of law and no reason to interfere with this finding of fact. I would dismiss the appeal with costs.

... I prefer to take the approach generally taken for all contingent claims. In my view, the CCAA court is entitled to take all relevant facts into consideration in making the relevant determination. Under this approach, the contingency to be assessed in a case such as this is whether it is sufficiently certain that the regulatory body will perform remediation work and be in a position to assert a monetary claim."



The Chief Justice (in dissent) wrote as follows (at paras. 65, 96):

"Remediation orders made under a province’s environmental protection legislation impose ongoing regulatory obligations on the corporation required to clean up the pollution. They are not monetary claims. In narrow circumstances, specified by the CCAA, these ongoing regulatory obligations may be reduced to monetary claims, which can be compromised under CCAA proceedings. This occurs where a province has done the work, or where it is “sufficiently certain” that it will do the work. In these circumstances, the regulatory obligation would be extinguished and the province would have a monetary claim for the cost of remediation in the CCAA proceedings. Otherwise, the regulatory obligation survives the restructuring.…

First, I find myself unable to decide the case on what I think the CCAA judge would have done had he gotten the law right and considered the central question. In my view, his failure to consider that question requires this Court to answer it in his stead on the record before us: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, at para. 35. But more to the point, I see no objective facts that support, much less compel, the conclusion that it is “sufficiently certain” that the Province will move to itself remediate any or all of the pollution Abitibi caused. The mood of the regulator in issuing remediation orders, be it disinterested or otherwise, has no bearing on the likelihood that the Province will undertake such a massive project itself. The Province has options. It could, to be sure, opt to do the work. Or it could await the result of Abitibi’s restructuring and call on it to remediate once it resumed operations. It could even choose to leave the site contaminated. There is nothing in the record that makes the first option more probable than the others, much less establishes “sufficient certainty” that the Province will itself clean up the pollution, converting it to a debt."

Justice LeBel (also in dissent) wrote as follows (at para. 101):

"In my view, the CCAA court was concerned that the arrangement would fail if the Abitibi respondents (“Abitibi”) were not released from their regulatory obligations in respect of pollution. The CCAA court wanted to eliminate the uncertainty that would have clouded the reorganized corporations’ future. Moreover, its decision appears to have been driven by an opinion that the Province had acted in bad faith in its dealings with Abitibi both during and after the termination of its operations in the Province. I agree with the Chief Justice that there is no evidence that the Province intends to perform the remedial work itself. In the absence of any other evidence, an off-hand comment made in the legislature by a member of the government hardly satisfies the “sufficient certainty” test. Even if the evidentiary test proposed by my colleague Deschamps J. is applied, this Court can legitimately disregard the CCAA court’s finding as the Chief Justice proposes, since it did not rest on a sufficient factual foundation."

Regards,

Blair






Thursday, November 29, 2012

Jurisdiction of Canadian Courts over Foreign Subject Matters

In two separate cases that were heard together at the Supreme Court of Canada in 2012, the court ruled that the courts of Ontario had jurisdiction to hear two lawsuits that were brought against tour companies offering vacations in Cuba where Ontario tourists were injured or killed while vacationing in Cuba.

In the first case, Morgan Van Breda suffered catastrophic injuries on a beach in Cuba. In the second case, Claude Charron died while scuba diving in Cuba. The plaintiffs brought actions in Ontario against a number of parties including Club Resorts Ltd., a company incorporated in the Cayman Islands that managed the two hotels where the accidents had occurred. Club Hotels sought to have the Ontario actions stayed on the basis that the courts of Ontario lacked jurisdiction and, alternatively, that Cuban courts would be the more appropriate forum for lawsuits based on the legal principal of forum conveniens.

In both cases, motions judges found that the Ontario courts had jurisdiction to hear the actions against Club Resorts. They also found that the Ontario court was clearly the more appropriate forum. Appeals of the ttwo cases were heard together in the Ontario Court of Appeal which dismissed the appeal of Club Resorts. The Supreme Court of Canada dismissed Club Resorts further appeal for the following reasons.

The court held that the cases concern the elaboration of the "real and substantial connection test (jurisdiction simpliciter)" and whether that test is an appropriate common law rule for the assumption of jurisdiction by a Canadian court. Under the jurisdiction simpliciter test, the Supreme Court held that a court can assume jurisdiction over a certain claim where, relying on a set of specific factors, those factors are given presumptive effect. The court held that it was preferable to have a system that had order and would permit the development of a just and fair approach to resolving conflicts.

To meet the real and substantial connection test, the party arguing that the court should assume jurisdiction over the case has the burden of identifying a presumptive connecting factor that links the subject matter of the case to the forum (Ontario in these appeals). Jurisdiction must be established primarily on the basis of objective factors that connect the legal situation or the subject matter of the litigation with the forum.

In a case concerning a tort, the following factors are presumptive connecting factors that prima facie entitle a court to assume jurisdiction over a dispute:

1. the defendant is domiciled or resident in the province;

2. the defendant carries on business in the province;

3. the tort was committed in the province; and

4. a contract connected with the dispute was made in the province.

Although these factors are considered presumptive, it does not mean that the list of factors is complete and a court can consider when and whether a new connecting factor should be given presumptive effect.

The burden of rebutting the presumption of jurisdiction rests with the party challenging the court's assumption of jurisdiction. That party must negate the presumptive effect of the listed factors or any new factor that the court uses in assuming jurisdiction and convince the court that the proposed assumption of jurisdiction would be inappropriate. The party may accomplish this by establishing facts that demonstrate that the presumptive connective factor does not point to any real relationship between the subject matter of the litigation and the forum or points only to a weak relationship.

If jurisdiction is established, the claim may proceed subject to the courts discretion to stay the proceedings on the basis of forum conveniens.

In Van Breda, the presumptive factor was that a contract had been entered into in Ontario. The Supreme Court held that the existence of a contract made in Ontario entitled the courts of Ontario to assume jurisdiction and Club Resorts had failed to rebut the presumption of jurisdiction.

In respect of whether Cuban courts would be clearly the more appropriate forum, the court held that a trial in Cuba would present serious challenges to the parties and that all things considered, the burden on the plaintiffs would be far heavier if they were required to bring their action in Cuba.

In the Charron case, the presumptive factor was that Club Resorts carried on business in Ontario. It had a fiscal presence in Ontario and had offices in Ontario. Club Resorts did not rebut that presumption of jurisdiction.

It also failed to discharge the burden of showing that a Cuban court would be clearly the more appropriate forum in the circumstances of the case.

Regards,

Blair




Wednesday, November 28, 2012

Supreme Court denies Abuse of Authority claim

In a recent decision of the Supreme Court of Canada, the court unanimously affirmed the decision of the Public Service Staffing Tribunal ("Tribunal") which dismissed a federal employee's claim that he had been passed over for a promotion on the basis of "abuse of authority".

The employee was employed by Service Canada in a "Level 5" position. As part of a reorganization, the position of Regional Manager was created at a "Level 6" position. Service Canada decided to fill the Level 6 position through an internal advertised process. The employee applied to the competition but failed a mandatory examination. The employee subsequently filed a complaint with the Tribunal alleging an abuse of authority contrary to the Public Service Employment Act. The Tribunal dismissed the employee's claim because he had not established abuse of authority. The Federal Court affirmed the Tribunal's decision but the Federal Court of Appeal allowed the appeal and sent the case back to the Tribunal.

In reversing the decision of the Federal Court of Appeal and allowing the appeal, the Supreme Court held that there were four reasons to reject the Federal Court of Appeal's decision:

1. The basis of the employee's complaint was that his employer had abused its authority in choosing an advertised internal appointment process. The employee had argued that advertising the position constituted abuse of authority because the Level 6 position was not a new position but rather a reclassification of an old position.  The court agreed with the Tribunal's finding that regardless of whether the position was new or old, Service Canada was entitled to advertise the position with the result that the alleged newness of the position did not give rise to an obligation to advertise the position. The Tribunal held that there was nothing in the regulations that required Service Canada to utilize a particular selection process depending on whether the position was new or reclassified. On the contrary, the regulations clearly provided that the employer had the discretion to use an advertised or a non-advertised appointment process;

2. The Federal Court of Appeal had assessed the decision of the Tribunal against a claim that the employee did not make. The employee had assumed that if he could establish that the Level 6 position was reclassified, he would be entitled to a non-advertised process. He identified the abuse of authority as the "erroneous interpretation of the facts against the employer's own reclassification guideline". On his view, if the position was reclassified, no matter what other reasons the employer might have had for preferring an advertised process, he was owed a non-advertised process. The Tribunal responded to this complaint by finding that given the broad discretion accorded to employers under the regulations, the employee was wrong to argue that he was entitled to any particular process. The Supreme Court agreed and indicated that in its view, the employee was seeking to restrict the discretion of his employer in a way that did not accord with the purpose or wording of the Act;

3. The Federal Court of Appeal's decision to send the case back to the Tribunal was based on its reading of the record that the newness of the Level 6 position was the "principal justification" for the employer's decision. The employer presented evidence before the Tribunal that its regional management board decided to advertise the position in order to have a fair, accessible and transparent process to allow more than one person to apply, especially since this was a new position at a higher level. The Tribunal made no finding as to what the employer's "principal justification" may have been. The Federal Court of Appeal erred by effectively undertaking its own assessment of the record and attributing to the employer a principal justification that the Tribunal did not find; and

4. The Supreme Court disagreed with the Federal Court of Appeal's conclusion that the Tribunal acted unreasonably by failing to give the employee the opportunity to show that there was no rational basis for the employer's position that the Level 6 position was new. There was no realistic possibility based on the record that the Tribunal could find any such rational finding of material fact in this case.

Regards,

Blair







Tuesday, November 27, 2012

Ontario Court ousts Toronto Mayor Rob Ford

Mr. Justice Hackland of the Ontario Superior Court of Justice has handed down his long-awaited decision in Mayor Rob Ford's conflict of interest case (Magder v. Ford).  Justice Hackland found that Mr. Ford had contravened section 5 of the Municipal Conflict of Interest Act ("Act") and declared Mr. Ford's seat on Toronto City counsel vacant.  Justice Hackland delivered a well reasoned judgment that is almost certain to be overturned on appeal.

The charge against Mr. Ford had been that he spoke to, and voted on, a matter on February 7, 2012, in which he allegedly had a pecuniary interest.

The case arose when, on August 12, 2010, the City of Toronto Integrity Commissioner, issued a report to Toronto city council concluding that Mr. Ford (then a member of council) had breached the city's code of conduct. The integrity commissioner found that Mr. Ford had used the city of Toronto logo, his status as a councillor and city of Toronto resources to solicit funds for a private football foundation that he had created in his name. The commissioner recommended that council take steps to require Mr. Ford to reimburse $3,150 in donations made by lobbyists and corporate donors to his foundation and to provide confirmation of such reimbursement.

At the city council meeting on August 5, 2010, the commissioner's report and recommendations were initially approved without debate. Later in the meeting, after a city councillor moved for reconsideration, the motion for reconsideration was defeated. Mr. Ford voted on that motion.

Just before the vote, another councillor alerted Mr. Ford to the fact that voting on the motion would put him in a conflict of interest. Mr. Ford ignored the warning.

Notwithstanding the adoption of the report and recommendations, Mr. Ford failed to reimburse the $3,150.
Accordingly, the commissioner brought the matter back to city council in a report dated January 30, 2012.
On the February 7, 2012 date, Mr. Ford spoke against the motion but did not vote on the matter. The effect of the motion was that counsel rescinded its adoption of the integrity commissioner's findings as to Mr. Ford's violation of the code of conduct as well as the repayment obligation.

The applicant, a Toronto voter, subsequently brought the application.

In his decision, Justice Hackland made, among others, the following findings.

The Act applies to a city of Toronto code of conduct violation. He found that section 5(1) of the Act which clearly states that where a member has "any pecuniary interest…in any matter" and is present at a meeting of council he or she is to disclose his or her interest and must neither take part in the discussion or vote on the matter. There is no authority for implying a right to be heard in the face of a statutory provision which specifically denies such a right. In any event, the right to be heard does not have anything to with providing a justification for voting on a matter (rather than speaking) which was what Mr. Ford chose to do in this case.

The judge held that the justification for the section was related to transparency of the decision making process by municipal councillors and invoked the issue of whether the voting public could be confident in the actions and decisions of those we elect to govern.

Justice Hackland also found that the sum of $3,150 was not so insignificant in nature that it did not influence Mr. Ford. While it was not a huge amount of money, Mr. Ford stated in his remarks at council:

"and if it wasn't for this foundation, these kids would not have a chance. And then to ask for me to pay it out of my own pocket personally, there is no sense to this. The money is gone, the money has been spent on football equipment.".

The judge held that in view of such remarks, Mr. Ford's pecuniary interest in the repayment was of significance to him.

The judge also held that the section of the Act was not contravened through inadvertence or an error in judgment. He allowed that the mandatory removal from office for contravening this section was "a very blunt instrument" and quoted Professor David Mullan, Toronto's former Integrity Commissioner, in describing it as a sledgehammer.

While this was not a case that demonstrated corruption, or pecuniary gain on behalf of Mr. Ford, Justice Hackland held that it did not occur through inadvertence because inadvertence involved "oversight in attention or carelessness". To the contrary, Mr. Ford in his cross-examination admitted that he didn't regret acting in the way he did and that he did so deliberately.

Justice Hackland held that Mr. Ford's conduct did not amount to an error in judgment because the caselaw confirms that an error in judgment must have occurred honestly and in good faith. In this context, good faith involves such considerations as whether a reasonable explanation is offered for Mr. Ford's conduct in speaking or voting on the resolution involved in his pecuniary interest. In this case, Mr. Ford has served on city council for 12 years, the last two as mayor. He acknowledged in his cross-examination that he had never read or familiarized himself with the conflict of interest rules, he never attended any briefings on conflict of interest, nor did he read the councillors' handbook which addressed the issue. The judge held that in his view, the evidence of Mr. Ford that he gave little or no consideration to whether he was lawfully entitled to speak or vote on the motion even after he was warned by Ms. Bussin that he was in conflict of interest does not constitute a good faith error in judgment.

Justice Hackland found:
"In view of the respondent's leadership role in ensuring integrity in municipal government, it is difficult to accept an error in judgment defence based essentially on a stubborn sense of entitlement (concerning his football foundation) and a dismissive and confrontational attitude to the Integrity Commissioner and the Code of Conduct. In my opinion, the respondent's actions were characterized by ignorance of the law and the lack of diligence in securing professional advice, amounting to wilful blindness. As such, I find his actions are incompatible with an error in judgment."

While well reasoned, Justice Hackland's decision does not seem to square with the recent decision of the Supreme Court of Canada in upholding the contested federal election in Etobicoke Centre. In that case there was also no allegation of fraud, corruption or illegal practices. The court held that:

"Given the complexity of administering a federal election, the tens of thousands of election workers involved, many of whom have no on-the-job experience and the short time frame for hiring and training them, it is inevitable that administrative mistakes will be made. If elections can be easily annulled on the basis of administrative errors, public confidence in the finality of and legitimacy of election results will be eroded. Only irregularities that affect the result of the election and thereby undermine the integrity of the electoral process are grounds for overturning an election."
In this case, count on Mr. Ford appealing the judgment on the basis that the court held that there is no question of fraud or corruption. He will be able to argue, (relying on the Supreme Court of Canada decision, as well as the obiter of Justice Hackland in referring to Professor Mullan citing a need for reform in the Act) that the citizens of Toronto should not be so negatively effected as to be required to spend hundreds of thousands of dollars, if not more, in a election for mayor.

Regards,

Blair









Friday, November 16, 2012

Message to the Law Society of Upper Canada - End Articling Now

The following is reprinted from Larry Banack's Bencher News:

The Articling Task Force issued its final report entitled "A ROAD MAP FOR THE REFORM OF LAWYER LICENSING IN ONTARIO".

The report was received by Convocation on October 25, 2012. Because of the importance of the issues the proceedings were webcast and simultaneous twitter feeds were facilitated. During the discussions (which lasted 4.5 hours) there were nearly 1100 posts and 500 tweets with 166 unique comments.

The issue is now scheduled for determination by Convocation on November 22, 2012.

The Task Force has recommended a pilot project that will provide an alternative to articling through a new Law Practice Program (LPP).

The recommendation contemplates a 5 year transitional plan which provides:

The pilot project is to begin in the 2014-2014 licensing year;

The current ten month articling program will continue;

The LPP expected to be about 8 months long, will be an alternative path for those unable or uninterested in engaging in the traditional articling program;

A "final assessment" is to be introduced to test that candidates who either articled or took the LPP have the required practice competencies before being licensed;

The two paths to licensing will be monitored, assessed, compared and a final report for Convocation's consideration is due by the end of the fifth year.

MINORITY REPORT

Four Benchers released a minority report. Their dissent should be carefully reviewed and remembered by the Profession. The minority view called for the end of articling and dismissed the two tier licensing process on the basis that it is unfair and unworkable.

UNFAIR FOR THE FOLLOWING REASONS:

A disproportionate number of person who are unable to obtain articling positions appear to be from equality-seeking groups.

The Two tier system will create two classes of lawyers with the preferred group being those who articled.

Candidates in the lengthy LPP must be able to support themselves and thereafter work for free at a co-op type placement which may require temporary relocation and possibly be of limited or no value.

The cost of the new two tiered licensing process will increase substantially, but will be payable on an equal basis by the LPP candidates who will not be receiving articling income. As well, some law firms pay those costs for their articling students.

UNWORKABLE FOR THE FOLLOWING REASONS:

The pilot project simply puts off needed change;

The Law Society has numerous prior reports and examples of past bar admission programs and evaluations that could be adapted and provided online.

The ten month articling program and eight month LPP could be replaced with a comprehensive transitional pre-licensing program of two to three months with objective, measurable standards that assess substantive legal knowledge and business, professional and ethical issues.

Newly licensed lawyers who practice on their own will be better assisted in their first years through mentoring and other regulatory oversight to ensure public protection than can ever be provided in the prolonged, uneven and uncertain articling or LPP.

Convocation was not provided with a realistic estimate of the significant costs to be incurred to administer two streams of licensing candidates instead of one.

The minority report agrees with a Law Society Committee that considered the issues 40 years ago and concluded that articling be abolished at that time. Although the Articling Task Force majority recognizes that changes are required it is not ready to accept the reality recognized long ago that articling be abolished.

THE OBVIOUS

The LPP creates a cumbersome and costly licensing requirement that will do little to enhance the competence of newly licensed lawyers and will itself amount to another bar to entry to the profession.

Everyone knows that articling has inherent limitations based on individual articling experiences. Most articles train practitioners to work in sophisticated areas of practice supported by large firms in urban centres. Articling experiences simply do not generally equip young lawyers with the skills needed to successfully and ethically maintain small firm legal practices.

The profession which has been a strong proponent for articling as evidenced by the numerous submissions made during the consultation process has simply failed to provide sufficient articling positions to meet the demand.

There is no verifiable basis upon which to assert that articling achieves for the majority of the licensees, an experience satisfying the Law Society's regulatory responsibilities.

The assessment report to Convocation is not due until the end of the 2019 licensing year. We can expect that significant time will be needed to consider whether the pilot project has been a success, should be continued, modified or if the entire road map for reform, should be scrapped and reconsidered. That process may take Convocation into the year 2020 if not beyond. The grim reality is that there will be no final decision for the next 7 or 8 years.

In that period we will have processed about 2000 lawyers through a two tier licensing program. The profession and the public will conclude whether the tiers are equivalent or the lawyers are somehow to be distinguished because of their training experience. There also remains unanswered, serious questions raised by our Ontario Law Schools who have significant experience in the teaching of law and whether the Australian LPP experience is one we should model.

Perhaps the most astounding and egregious aspect of the Task Force report is its reliance upon a yet to be issued request for proposals. The Law Society will be seeking "interested parties" who for profit will provide the alternative pathway to licensing - the LPP. Convocation will be asked to approve the report without knowing the capacity of outside providers or the cost. There has not been any significant consideration given to outsourcing the second tier of the licensing process which somehow is to be equivalent to that of articling.

Bencher Julian Falconer has given notice of his intention to bring a motion reinstating a financial contribution by every lawyer as part of our annual dues to defray the significant increased costs to licensee applicants. Such a contribution had regularly been made by the profession up to 2011.

Perhaps an enlightened compromise can be reached to reflect the strengths of both the majority and minority reports as well as the many concerns coming from the profession.


This is undoubtedly the most important Law Society decision in years because it will impact on the recruitment and training of all future lawyers. IF we get this truly wrong we may invite questions about the profession's ability to self regulate.


The answer - End the requirement for articling.

Regards,

Blair




Wednesday, October 31, 2012

Supreme Court upholds results of contested election


The Supreme Court of Canda recently handed  down its decision in Ted Opitz et al. v. Borys Wrzesnewskyj et al.  It upheld the results of a closely-decided federal election that was contested by the loser on the basis of administrative "irregularities".  The Court refused to disenfranchise voters on that basis.  Here are exerpts from the decision.

“O was the successful candidate in the electoral district of Etobicoke Centre for the 41st Canadian federal election, with a plurality of 26 votes. The runner‑up, W, applied to have the election annulled, on the basis that there were “irregularities. . . that affected the result of the election” (s. 524(1)(b) of the Canada Elections Act (the “Act”)). The Ontario Superior Court of Justice granted the application, finding that 79 votes amounted to such irregularities and that, since this number exceeded the plurality of 26 votes, the election could not stand. O appealed to the Supreme Court of Canada as of right, and W cross‑appealed (s. 532(1) of the Act). The Chief Electoral Officer and the returning officer for Etobicoke Centre also brought a motion for directions, seeking to adduce fresh evidence, pursuant to s. 62(3) of the Supreme Court Act. ”

The S.C.C. held (4:3) the appeal is allowed, the cross-appeal dismissed, the motion to adduce fresh evidence also dismissed.

Justice Rothstein and Moldaver wrote as follows in joint reasons (at paragraphs 1-2, 44-50, 74-75):

“A candidate who lost in a close federal election attempts to set aside the result of that election. We are asked to disqualify the votes of several Canadian citizens based on administrative mistakes, notwithstanding evidence that those citizens were in fact entitled to vote. We decline the invitation to do so. The Canadian Charter of Rights and Freedoms and the Canada Elections Act, S.C. 2000, c. 9 (“Act”), have the clear and historic purposes of enfranchising Canadian citizens, such that they may express their democratic preference, and of protecting the integrity of our electoral process. Following these objectives and the wording of the Act, we reject the candidate’s attempt to disenfranchise entitled voters and so undermine public confidence in the electoral process.

At issue in this appeal are the principles to be applied when a federal election is challenged on the basis of “irregularities”. We are dealing here with a challenge based on administrative errors. There is no allegation of any fraud, corruption or illegal practices. Nor is there any suggestion of wrongdoing by any candidate or political party. Given the complexity of administering a federal election, the tens of thousands of election workers involved, many of whom have no on-the-job experience, and the short time frame for hiring and training them, it is inevitable that administrative mistakes will be made. If elections can be easily annulled on the basis of administrative errors, public confidence in the finality and legitimacy of election results will be eroded. Only irregularities that affect the result of the election and thereby undermine the integrity of the electoral process are grounds for overturning an election.
Central to the issue before us is how willing a court should be to reject a vote because of statutory non-compliance. Although there are safeguards in place to prevent abuse, the Act accepts some uncertainty in the conduct of elections, since in theory, more onerous and accurate methods of identification and record-keeping could be adopted. The balance struck by the Act reflects the fact that our electoral system must balance several interrelated and sometimes conflicting values. Those values include certainty, accuracy, fairness, accessibility, voter anonymity, promptness, finality, legitimacy, efficiency and cost. But the central value is the Charter-protected right to vote.

Our system strives to treat candidates and voters fairly, both in the conduct of elections and in the resolution of election failures. As we have discussed, the Act seeks to enfranchise all entitled persons, including those without paper documentation, and to encourage them to come forward to vote on election day, regardless of prior enumeration. The system strives to achieve accessibility for all voters, making special provision for those without identification to vote by vouching. Election officials are unable to determine with absolute accuracy who is entitled to vote. Poll clerks do not take fingerprints to establish identity. A voter can establish Canadian citizenship verbally, by oath. The goal of accessibility can only be achieved if we are prepared to accept some degree of uncertainty that all who voted were entitled to do so.

The practical realities of election administration are such that imperfections in the conduct of elections are inevitable. As recognized in Camsell v. Rabesca, [1987] N.W.T.R. 186 (S.C.), it is clear that “in every election, a fortiori those in urban ridings, with large numbers of polls, irregularities will virtually always occur in one form or another” (p. 198). A federal election is only possible with the work of tens of thousands of Canadians who are hired across the country for a period of a few days or, in many cases, a single 14-hour day. These workers perform many detailed tasks under difficult conditions. They are required to apply multiple rules in a setting that is unfamiliar. Because elections are not everyday occurrences, it is difficult to see how workers could get practical, on-the-job experience.

The provision for contesting elections in Part 20 of the Act serves to restore accuracy and reliability where it has been compromised. However, tension exists between allowing an application to contest an election on the basis of irregularities and the need for a prompt, final resolution of election outcomes. The Act provides, in s. 525(3):

(3) An application shall be dealt with without delay and in a summary way.

It should be remembered that annulling an election would disenfranchise not only those persons whose votes were disqualified, but every elector who voted in the riding. That voters will have the opportunity to vote in a by-election is not a perfect answer, as Professor Steven F. Huefner writes:

. . . a new election can never be run on a clean slate, but will always be colored by the perceived outcome of the election it superseded. New elections may also be an inconvenience for the voters, and almost certainly will mean that a different set of voters, with different information, will be deciding the election. Moreover, there can be no guarantee that the new election will itself be free from additional problems, including fraud. In the long term, rerunning elections might lead to disillusionment or apathy, even if in the short term they excite interest in the particular contest. Frequent new elections also would undercut democratic stability by calling into question the security and efficiency of the voting mechanics.

Permitting elections to be lightly overturned would also increase the “margin of litigation”. The phrase “margin of litigation” describes an election outcome close enough to draw post-election legal action: Huefner, at pp. 266-67.

The current system of election administration in Canada is not designed to achieve perfection, but to come as close to the ideal of enfranchising all entitled voters as possible. Since the system and the Act are not designed for certainty alone, courts cannot demand perfect certainty. Rather, courts must be concerned with the integrity of the electoral system. This overarching concern informs our interpretation of the phrase “irregularities . . . that affected the result”.

The following approach should be followed in determining whether there were “irregularities . . . that affected the result of the election”: An applicant must prove that a procedural safeguard designed to establish an elector’s entitlement to vote was not respected. This is an “irregularity”. An applicant must then demonstrate that the irregularity “affected the result” of the election because an individual voted who was not entitled to do so. In determining whether the result was affected, an application judge may consider any evidence in the record capable of establishing that the person was in fact entitled to vote despite the irregularity, or that the person was not in fact entitled to vote.

If it is established that there were “irregularities . . . that affected the result of the election”, a court may annul the election. In exercising this discretion, if a court is satisfied that, because of the rejection of certain votes, the winner is in doubt, it would be unreasonable for the court not to annul the election. For the purposes of this application, the “magic number” test will be used to make that determination."


Regards,

Blair






Tuesday, October 9, 2012

No Duty to Mitigate Where Notice Period Fixed

In Bowes v. Goss Power Products Ltd., a unanimous panel of five judges of the Ontario Court of Appeal confirmed that an employee has no duty to mitigate damages (unless the employment agreement stipulates such obligation) when the employment agreement fixes the notice period or termination pay in lieu of notice.

In this case, the employee signed an employment agreement for the position of executive vice president of sales and marketing for the employer. The agreement fixed his entitlement to six months’ notice or pay in lieu of notice if the employee’s employment was terminated. The agreement was silent on mitigation.

On April 13, 2011, the employer terminated the employee’s employment without cause and advised that he was entitled to salary continuance for the contractually fixed six month period. Shortly after termination, the employee secured a new job with an equivalent salary. The employer took the position that the employee had mitigated his damages and was only entitled to receive the minimum statutory entitlement under the Employment Standards Act.  The  employee disagreed and commenced an application in the Ontario Superior Court of Justice seeking a declaration that he was entitled to the full six months base salary in accordance with the agreement and that such payment was not subject to a duty to mitigate.

The applications judge held that simply because the parties agreed on the period of reasonable notice did not mean that the obligation to mitigate is ousted by agreement.

The Court of Appeal allowed the appeal. The Court held that by contracting for a fixed sum of termination/severance pay, the parties displaced the common law regime thereby contracting out of the Bardal “reasonable notice” approach or damages in lieu of notice.

The Court of Appeal gave the following reasons to support its conclusion:

a)  the duty to mitigate is not applicable if the damages are either liquidated or a contractual sum;

b)  It would be unfair to permit an employer to opt for certainty by specifying a fixed amount of damages and then allow the employer to later seek to obtain a lower amount at the expense of the employee by raising an issue of mitigation that was not mentioned in the employment agreement;

c)  It is counter-intuitive for the parties to contract for certainty and finality, and yet leave mitigation as a live issue with the uncertainty, risk and litigation that would ensue as a consequence; and

d)  A broad release in an employment agreement demonstrates an intention to avoid resort to the courts, confirms a desire for finality, and bolsters a finding that the parties intended that mitigation would not be required unless the agreement expressly stipulates to the contrary.

Bowes v. Goss Power Products Ltd., 2012 ONCA 425

Regards,

Blair



Wednesday, October 3, 2012

Sex Workers Challenge Criminalilty of Prostitution

In a recent Supreme Court of Canada decision - Canada (Attorney General) v. Downtown Eastside Sex Workers United Against Violence Society (B.C.C.A. October 12, 2010)(33981), an organization called
A Society whose objects include improving conditions for female sex workers in the Downtown Eastside of Vancouver and K, who worked as such for 30 years, launched a Charter challenge to the prostitution provisions of the Criminal Code. The chambers judge found that they should not be granted either public or private interest standing to pursue their challenge; the British Columbia Court of Appeal, however, granted them both public interest standing.”

The SCC (unanimously) dismissed the appeal.

Justice Cromwell wrote as follows (at paragraphs 1-3, 42, 51):

“This appeal is concerned with the law of public interest standing in constitutional cases. The law of standing answers the question of who is entitled to bring a case to court for a decision. Of course it would be intolerable if everyone had standing to sue for everything, no matter how limited a personal stake they had in the matter. Limitations on standing are necessary in order to ensure that courts do not become hopelessly overburdened with marginal or redundant cases, to screen out the mere “busybody” litigant, to ensure that courts have the benefit of contending points of view of those most directly affected and to ensure that courts play their proper role within our democratic system of government: Finlay v. Canada (Minister of Finance), [1986] 2 S.C.R. 607, at p. 631. The traditional approach was to limit standing to persons whose private rights were at stake or who were specially affected by the issue. In public law cases, however, Canadian courts have relaxed these limitations on standing and have taken a flexible, discretionary approach to public interest standing, guided by the purposes which underlie the traditional limitations.

In exercising their discretion with respect to standing, the courts weigh three factors in light of these underlying purposes and of the particular circumstances. The courts consider whether the case raises a serious justiciable issue, whether the party bringing the action has a real stake or a genuine interest in its outcome and whether, having regard to a number of factors, the proposed suit is a reasonable and effective means to bring the case to court: Canadian Council of Churches v. Canada (Minister of Employment and Immigration), [1992] 1 S.C.R. 236, at p. 253. The courts exercise this discretion to grant or refuse standing in a “liberal and generous manner” (p. 253).

In this case, the respondents the Downtown Eastside Sex Workers United Against Violence Society, whose objects include improving working conditions for female sex workers, and Ms. Kiselbach, have launched a broad constitutional challenge to the prostitution provisions of the Criminal Code, R.S.C. 1985, c. C-46. The British Columbia Court of Appeal found that they should be granted public interest standing to pursue this challenge; the Attorney General of Canada appeals. The appeal raises one main question: whether the three factors which courts are to consider in deciding the standing issue are to be treated as a rigid checklist or as considerations to be taken into account and weighed in exercising judicial discretion in a way that serves the underlying purposes of the law of standing. In my view, the latter approach is the right one. Applying it here, my view is that the Society and Ms. Kiselbach should be granted public interest standing.

It may be helpful to give some examples of the types of interrelated matters that courts may find useful to take into account... This list, of course, is not exhaustive but illustrative.

• The court should consider the plaintiff’s capacity to bring forward a claim. In doing so, it should examine amongst other things, the plaintiff’s resources, expertise and whether the issue will be presented in a sufficiently concrete and well-developed factual setting.

• The court should consider whether the case is of public interest in the sense that it transcends the interests of those most directly affected by the challenged law or action. Courts should take into account that one of the ideas which animates public interest litigation is that it may provide access to justice for disadvantaged persons in society whose legal rights are affected. Of course, this should not be equated with a licence to grant standing to whoever decides to set themselves up as the representative of the poor or marginalized.

• The court should turn its mind to whether there are realistic alternative means which would favour a more efficient and effective use of judicial resources and would present a context more suitable for adversarial determination. Courts should take a practical and pragmatic approach. The existence of other potential plaintiffs, particularly those who would have standing as of right, is relevant, but the practical prospects of their bringing the matter to court at all or by equally or more reasonable and effective means should be considered in light of the practical realities, not theoretical possibilities. Where there are other actual plaintiffs in the sense that other proceedings in relation to the matter are under way, the court should assess from a practical perspective what, if anything, is to be gained by having parallel proceedings and whether the other proceedings will resolve the issues in an equally or more reasonable and effective manner. In doing so, the court should consider not only the particular legal issues or issues raised, but whether the plaintiff brings any particularly useful or distinctive perspective to the resolution of those issues.

• The potential impact of the proceedings on the rights of others who are equally or more directly affected should be taken into account. Indeed, courts should pay special attention where private and public interests may come into conflict. As was noted in Danson v. Ontario (Attorney General), [1990] 2 S.C.R. 1086, at p. 1093, the court should consider, for example, whether “the failure of a diffuse challenge could prejudice subsequent challenges to the impugned rules by parties with specific and factually established complaints”. The converse is also true. If those with a more direct and personal stake in the matter have deliberately refrained from suing, this may argue against exercising discretion in favour of standing.”

Regards,

Blair







Tuesday, October 2, 2012

Supreme Court of Canada on harmful effects of Cyberbullying

Here is a synopsis of a recent decision of the Supreme Court of Canada on cyberbullying:

A 15‑year old girl found out that someone had posted a fake Facebook profile using her picture, a slightly modified version of her name, and other particulars identifying her. The picture was accompanied by unflattering commentary about the girl’s appearance along with sexually explicit references. Through her father as guardian, the girl brought an application for an order requiring the Internet provider to disclose the identity of the person(s) who used the IP address to publish the profile so that she could identify potential defendants for an action in defamation. As part of her application, she asked for permission to anonymously seek the identity of the creator of the profile and for a publication ban on the content of the profile. Two media groups opposed the request for anonymity and the ban. The Supreme Court of Nova Scotia granted the request that the Internet provider disclose the information about the publisher of the profile, but denied the request for anonymity and the publication ban because there was insufficient evidence of specific harm to the girl. The judge stayed that part of his order requiring the Internet provider to disclose the publisher’s identity until either a successful appeal allowed the girl to proceed anonymously or until she filed a draft order which used her own and her father’s real names. The Court of Appeal upheld the decision primarily on the ground that the girl had not discharged the onus of showing that there was evidence of harm to her which justified restricting access to the media.




Held: The appeal should be allowed in part.



The critical importance of the open court principle and a free press has been tenaciously embedded in the jurisprudence. In this case, however, there are interests that are sufficiently compelling to justify restricting such access: privacy and the protection of children from cyberbullying.



Recognition of the inherent vulnerability of children has consistent and deep roots in Canadian law and results in the protection of young people’s privacy rights based on age, not the sensitivity of the particular child. In an application involving cyberbullying, there is no need for a child to demonstrate that he or she personally conforms to this legal paradigm. The law attributes the heightened vulnerability based on chronology, not temperament.



While evidence of a direct, harmful consequence to an individual applicant is relevant, courts may also conclude that there is objectively discernable harm. It is logical to infer that children can suffer harm through cyberbullying, given the psychological toxicity of the phenomenon. Since children are entitled to protect themselves from bullying, cyber or otherwise, there is inevitable harm to them — and to the administration of justice — if they decline to take steps to protect themselves because of the risk of further harm from public disclosure. Since common sense and the evidence show that young victims of sexualized bullying are particularly vulnerable to the harms of revictimization upon publication, and since the right to protection will disappear for most children without the further protection of anonymity, the girl’s anonymous legal pursuit of the identity of her cyberbully should be allowed.



In Canadian Newspapers Co. v. Canada (Attorney General), [1988] 2 S.C.R. 122, prohibiting identity disclosure was found to represent only minimal harm to press freedom. The serious harm in failing to protect young victims of bullying through anonymity, as a result, outweighs this minimal harm. But once the girl’s identity is protected through her right to proceed anonymously, there is little justification for a publication ban on the non‑identifying content of the profile. If the non‑identifying information is made public, there is no harmful impact on the girl since the information cannot be connected to her. The public’s right to open courts –and press freedom – therefore prevail with respect to the non‑identifying Facebook content.


Regards,

Blair


Tuesday, August 28, 2012

Moore v Bertuzzi - Settlement Privilege

This case involed an appeal from the decision of Master Dash of the Ontario Superior Court of Justice. Master Dash ordered the defendant, Todd Bertuzzi and the defendants Orca Bay Hockey Limited Partnership, Orca Bay Hockey Inc., Vancouver Canucks Limited Partnership and Vancouver Hockey General Partners Inc. (collectively "Orca Bay") to disclose their settlement agreement to the plaintiffs, Steve Moore and his parents.
In February 16, 2004, when Moore was playing with Colorado Avalanche, in a game between the Avalanche and the Vancouver Canucks, Moore checked Markus Nasland, the Canucks' team captain and the league's leading scorer. Nasland was injured but there was no penalty on the play and after the NHL's review Moore was not disciplined. NHL officials warned Canucks' management against any retaliation against Moore.
However, unfortunately for the Vancouver Canucks their General Manager was Brian Burke. Marc Crawford, the Vancouver coach, called the hit by Moore a "cheap shot". Three weeks later on March 8, 2004, in a game in Vancouver between the two teams Bertuzzi jumped on Moore from behind, drove him into the ice. Moore broke his neck and suffered a brain injury. Bertuzzi was suspended by the NHL.
Bertuzzi subsequently pleaded guilty to a criminal charge of assault causing bodily harm. On February 14, 2006, Moore and his parents commenced a civil action against Bertuzzi and Orca Bay. Initially Moore sued Bertuzzi directly and sued Orca Bay for being vicariously liable for Bertuzzi's conduct. Moore sued Bertuzzi for assault and punitive damages claiming $41.5 million. Bertuzzi and Orca Bay delivered statements of defence and cross-claimed against the other for contribution and indemnity.
At discovery, Bertuzzi testified that Crawford told the Canucks players that Moore had to "pay the price". As a result, in February of 2008, the Moores were granted leave to amend the statement of claim to sue Orca Bay directly and not just vicariously. After the amendments, Bertuzzi issued a third party claim against Crawford. Crawford defended the third party claim but did not defend the main action.
On November 17, 2007, Master Dash was assigned as Case Management Master.
On January 26, 2010, the main action was set down for trial and on September 29, 2010, the third party action was set down for trial.
Between July 13 and July 18, 2011, Bertuzzi, Orca Bay and Crawford, signed a settlement agreement to settle the cross-claims and third party claim. They did not advise the Moores that they had settled the claims against each other.
On July 21, 2011, a case conference was held to set trial dates. The defendants did not bring their settlement to the Moores' attention or to the attention of the case conference judge.
Moore and his parents did not find out about the settlement until the defendants obtained an order dismissing the third party action without costs. On September 22, 2011, Moore's lawyer wrote to the lawyers for the other parties and asked them to produce the details of the settlement. The lawyers for Orca Bay and Bertuzzi ignored the letter.
At the motion before Master Dash, Master Dash ordered that the settlement agreement be produced. He concluded that the defendants were disqualified from asserting settlement privilege because their settlement agreement was akin to a Mary Carter agreement. He also concluded that settlement agreements were subject to a case by case privilege with the onus being on the party claiming privilege to show that the "Wigmore" criteria were satisfied.
Justice Perell of the Ontario Superior Court heard the appeal. Justice Perell found that the Master had erred in treating settlement privilege as a case by case privilege rather than as a categorical or class privilege. However, he agreed with the Moores that it was not necessary to decide this point because in either event the defendants were disqualified from asserting privilege for their settlement agreement. He found that there are exceptions to settlement privilege. Mary Carter agreements are just one example of an exception to settlement privilege. In Justice Perell's opinion, Master Dash was correct in ordering that the settlement agreement be disclosed.
Justice Perell's reasons were as follows:
There are certain types of agreements, such as Mary Carter Agreements and Pierrenger Agreements, that the courts have held must be disclosed to the court and to the other parties to avoid an abuse of process.
Mary Carter Agreements
Mary Carter agreements originated in the Florida case of Booth v. Mary Carter Paint Co. (1967). The features of such an agreement are:
1. the settling defendant settles with the plaintiff but remains in the lawsuit and may pursue cross-claims against the non-settling defendants;
2. the settling defendant guarantees the plaintiff a specified monetary recovery;
3. the exposure of the settling defendant is capped at the specified amount;
4. the settling defendant's liability can be decreased in direct proportion to any monetary recovery above the amount that it is offering to pay to the plaintiff; and
5. the non-settling defendants are exposed only to several liability and no longer to joint and several liability.
The structure of a Mary Carter agreement provides an incentive for the plaintiff and the settling defendant to cooperate to maximize the quantum of the plaintiff's recovery because the defendant's liability is capped and the amount it pays to the plaintiff may be reduced in direct proportion to the amount above the capped amount determined at trial to be owed to the plaintiff. The practical effect of this is that the settling defendant shares in the plaintiff's recovery. As a result, Mary Carter agreements must be disclosed because, if undisclosed, these types of agreements distort the "adversarial orientation of the litigation". The abuse is that if the agreement is not disclosed, the judge or jury will have a misleading basis for understanding the evidence since parties that appear to be adversaries are really allies.
In the Canadian case of Pettey v. Avis Car Inc., Justice Ferrier of the Superior Court of Justice held that Mary Carter Agreements were legal in Ontario but they had to be disclosed to the parties and to the court as soon as the agreement was made. The non-settling defendants must be advised immediately because the agreement may well have an impact on the strategy and line of cross-examination to be pursued and evidence to be led by them. The non-settling parties must also be aware of the agreements so that they can properly assess the steps being taken from that point forward by the plaintiff and the settling defendants. Justice Ferrier held that procedural fairness requires immediate disclosure. Most importantly, the court must be informed immediately so that it can properly fulfil its role in controlling its process in the interest of fairness and justice to all parties.
Pierrenger Agreements
Pierrenger Agreements are named after the Wisconsin case of Pierrenger v. Hoger (1963). The features of a Pierrenger Agreement are:
1. the settling defendant settles with the plaintiff;
2. the plaintiff discontinues its claim or action against the settling defendant;
3. the plaintiff continues it action against the non-settling defendants but limits its claim to the non-settling defendants several liability (also called a bar order);
4. the settling defendant agrees to cooperate with the plaintiff by making documents and witnesses available for the action against the non-settling defendants;
5. the settling defendant agrees not to seek contribution and indemnity from the non-settling defendants; and
6. the plaintiff agrees to indemnify the settling defendant against any claims over by the non-settling defendants.
A Pierrenger agreement allows the settling defendant to extract itself from participating in litigation in whole or in part. The practical effect is that there is little reason for the settling defendant to participate. Usually he has settled with the plaintiff and obtained a release and since the plaintiff agrees to sue the non-settling defendants only for their several liability, the settling defendant does not have to be worried about a claim for contribution and indemnity because he is protected by the plaintiff's undertaking to indemnify him from that sort of thing.
In the Canadian case of Noonan v. Alpha-Vico, Master McLeod held that these types of agreements in Canada were legal but that there were several reasons for disclosing them.
First, the amounts received by the plaintiff were relevant to the quantification of the plaintiff's damages and whether the plaintiff had mitigated its loss or received double recovery.
Secondly, non-settling defendants needed to be told about the settlement in order to update their litigation planning and strategy including whether to make their own offer to settle.
Thirdly, the court immediately needed to know the extent to which, if at all, the settlement agreement influenced the adversary system. The court must be able to properly fulfil its role in controlling the adversary process in the interests of fairness and justice to all parties.
Justice Perell held that a case called Aecon Building was an example of the vigour and rigour of the court's insistence on disclosure. The necessity of disclosing the reality of the adversarial orientation of the parties is not confined to the circumstances of Mary Carter agreements or Pierrenger agreements. Other cases have held that non-settling defendants have a right to review the settlement agreements to the extent that the agreements have an impact on litigation strategy, the design of cross-examinations and the evidence to be led at trial.
Caselaw from across Canada suggested there is an over-arching general principle that establishes an exception to the privilege and confidentiality of settlement agreements and is not confined to circumstances of Mary Carter agreements and Pierrenger agreements.
Justice Perell held that the court needs to understand the precise nature of the adversarial orientation of the litigation in order to maintain the integrity of its process, which is based on a genuine not a sham adversarial system in which maintenance of integrity may require the court to have an issue–by –issue understanding of the positions of the parties.
The caselaw establishes that settlement privilege is not absolute and that it admits exceptions where settlement agreements must be disclosed to non-settling parties. Disclosure must be made immediately when the agreement changes the adversarial orientation of the lawsuit or the court needs to know about the settlement in order to maintain the fairness and integrity of the process.
In this case he saw no reason not to disclose the complete details of the settlement agreement between Bertuzzi, Orca Bay and Crawford.

Regards,

Blair

Friday, August 10, 2012

Supreme Court overrules its own decision

In a recent tax case, the Supreme Court of Cananda discussed the circumstances in which it would overrule one of its own prior decisions:

Canada v. Craig (F.C. January 21, 2011)(34144)

"Section 31(1) of the Income Tax Act limits deductible losses “[w]here a taxpayer’s chief source of income for a taxation year is neither farming nor a combination of farming and some other source of income”.

In Moldowan v. The Queen, [1978] 1 S.C.R. 480, the Court found that a predecessor to s. 31(1) contemplated three classes of taxpayer involved in farming. In the first class are taxpayers for whom farming provides the bulk of income or the centre of work routine. Loss deductions are not limited for this class. In the second are taxpayers who do not look to farming, or to farming and some subordinate source of income, for their livelihood, but carry on farming as a sideline business. For this class, s. 31(1) limits loss deductions. The third class consists of taxpayers who carry on some farming activities as a hobby, not as a business, and whose losses are not deductible in any amount.

In Gunn v. Canada, 2006 FCA 281, [2007] 3 F.C.R. 57, the Federal Court of Appeal adopted a more generous interpretation of what could constitute a combination of farming and some other source of income.In this case, C’s primary source of income came from his law practice. He also had income from investments, stock options, and farming (buying, selling, training and maintaining horses for racing). He deducted losses from the horse‑racing business from his other income in 2000 and 2001. Based on Moldowan, the Minister reassessed and limited the deductions on the grounds that the combination of the law practice and the horse‑racing business was not C’s chief source of income. Following Gunn, the trial judge allowed C’s appeal, finding that the loss deduction limitation in s. 31(1) did not apply. The Federal Court of Appeal dismissed the Minister’s appeal, holding that it was required to follow its prior decision in Gunn."

The SCC held (unanimously) that the appeal should be dismissed.

Justice Rothstein wrote as follows (at paragraphs 24-25, 27-30, 37-47):
“The question of whether this Court should overrule one of its own prior decisions was addressed recently in Ontario (Attorney General) v. Fraser, 2011 SCC 20, [2011] 2 S.C.R. 3. At para. 56, Chief Justice McLachlin and LeBel J., in joint majority reasons, noted that overturning a precedent of this Court is a step not to be lightly undertaken. This is especially so when the precedent represents the considered views of firm majorities (para. 57).Nonetheless, this Court has overruled its own decisions on a number of occasions. (See R. v. Chaulk, [1990] 3 S.C.R. 1303, at p. 1353, per Lamer C.J., for the majority; R. v. B. (K.G.), [1993] 1 S.C.R. 740; R. v. Robinson, [1996] 1 S.C.R. 683.)

However, the Court must be satisfied based on compelling reasons that the precedent was wrongly decided and should be overruled. (See R. v. Salituro, [1991] 3 S.C.R. 654, at p. 665; Minister of Indian Affairs and Northern Development v. Ranville, [1982] 2 S.C.R. 518, at p. 527; Hamstra (Guardian ad litem of) v. British Columbia Rugby Union, [1997] 1 S.C.R. 1092, at paras. 18-19; R. v. Henry, 2005 SCC 76, [2005] 3 S.C.R. 609, at para. 44.)… The vertical convention of precedent is not at issue with respect to the decision as to whether the Supreme Court should overrule one of its own precedents. Rather, in making this decision the Supreme Court engages in a balancing exercise between the two important values of correctness and certainty. The Court must ask whether it is preferable to adhere to an incorrect precedent to maintain certainty, or to correct the error. Indeed, because judicial discretion is being exercised, the courts have set down, and academics have suggested, a plethora of criteria for courts to consider in deciding between upholding precedent and correcting error. (See R. v. Bernard, [1988] 2 S.C.R. 833, at pp. 850-61, Chaulk, at p. 1353, Henry, at paras. 45-46.)

In this case, I am of the opinion that relevant considerations justify overruling Moldowan. First, Moldowan essentially read the combination test out of s. 31(1). In finding that taxpayers in the second class were subject to the loss deduction limitation where farming as a source of income was a sideline or subordinate to another source of income, the necessary inference was that farming had to be the taxpayer’s chief source of income. However, the section provides two distinct exceptions to its loss deduction limitation. One is where farming is the taxpayer’s chief source of income. The second is where the taxpayer’s chief source of income is a combination of farming and some other source of income. By requiring that the second exception apply only where the other source of income was subordinate to the farming source of income, Moldowan collapsed the second exception into the first. Having regard to the words of the provision, these are two separate exceptions to the loss deduction limitation and each must be given meaning.

Second, there has been significant judicial, academic and other criticism of Moldowan from its issuance in 1977. In light of this criticism, it is appropriate for this Court to take notice and acknowledge the difficulties identified with the Moldowan interpretation of s. 31(1).

Third, since Moldowan, this Court has held on a number of occasions that unexpressed legislative intention under the guise of purposive interpretation is to be avoided (Shell, at para. 43).
There is no doubt that s. 31(1) is, as Dickson J. recognized, an awkwardly worded and intractable section and the source of much debate. Nonetheless, the section is clear that two distinct exceptions to the loss deduction limitation can be identified. A judge-made rule that reads one of the exceptions out of the provision is not consistent with the words used by Parliament.… s. 31(1) does not contemplate a simple aggregation of two sources of income, but requires a wider inquiry into the amount of capital, time, effort, commitment and general emphasis on the part of the taxpayer with respect to the sources of income.

There is no requirement that the two sources of income must be connected in order to meet the combination test.However, before going further, two considerations must be borne in mind. First, it is necessary to interpret the provision having regard to its text, context and purpose (Canada Trustco Mortgage Co. v. Canada, 2005 SCC 54, [2005] 2 S.C.R. 601, at para. 55). Nonetheless, purposive interpretation cannot justify finding unexpressed legislative intentions. See Shell, at para. 43. Second, the question as to whether the combination of farming and some other source of income constitutes the taxpayer’s chief source of income is a fact-based determination. I see nothing in the words or context in s. 31(1) to support the proposition that farming must be the predominant source of income when viewed in combination with another source, in order to avoid the loss deduction limitation of the section.

It is also not possible to relegate s. 31(1) to applying only to “hobby” or “gentleman” farmers because, for a loss to be deductable at all, farming must be a source of income. A taxpayer who is engaged in farming in a non-commercial manner, with no profit or intention to profit, does not have a source of income from farming and therefore no loss for income tax purposes, limited or not (Stewart v. Canada, 2002 SCC 46, [2002] 2 S.C.R. 645, at paras. 51-54).The provision is addressed to losses from farming businesses.

There is no loss deduction limitation where farming is the taxpayer’s chief source of income. That implies that such a taxpayer is investing significant funds and spending considerable time in that business. Otherwise, it is difficult to see such a business as a chief source of income.I do not think that characterization of farming changes under the combination test. The provision still contemplates that the taxpayer will devote significant time and resources to the farming business, even if he or she will also devote significant time and possibly resources to another business or employment. It seems to me that, as long as the taxpayer devotes considerable time and resources to the farming business, the fact that another source of income produces greater income than the farm does not mean that such a combination is not a chief source of income for the taxpayer.

The approach to the combination question described by Mr. Felesky, Dickson J. and Sharlow J.A., makes sense. It is grounded in the words of s. 31(1), which limits only a taxpayer’s losses “from all farming businesses”. where the taxpayer’s chief source of income for a taxation year is neither farming nor a combination of farming and some other source of income. With respect to the combination, a simple aggregation of income from two sources cannot have been contemplated by the section, meaning that factors other than two sources of income alone must be taken into account.

The factors identified by Sharlow J.A., namely, the capital invested in farming and the second source of income, the income from each of the two sources of income, the time spent on the two sources of income, and the taxpayer’s ordinary mode of living, farming history, and future intentions and expectations, are all factors involved in running a farming business together with another source of income. If these factors tend to show that the taxpayer places significant emphasis on both his farming and non-farming sources of income, there is no reason that such a combination should not constitute a chief source of income, avoiding the application of the loss deduction limitation of s. 31(1). The determination is a factual one for the trial judge.Such an interpretation is consistent with the general policy of the Income Tax Act that, subject to specific exceptions, taxpayers may offset losses from one business or source of income against profits from another without limitation (Gunn, at para. 20, citing Canderel Ltd. v. Canada, [1998] 1 S.C.R. 147, at para. 53).

The only restriction in the case of farming losses is that the combination must constitute the taxpayer’s chief source of income. This does not imply that either source of income by the taxpayer need be the predominant source. But it does imply that they must be significant endeavours of the taxpayer.For s. 31 to apply and for a farming loss to be deductible at all, farming must be a source of income. At trial, the Crown conceded that Mr. Craig’s horse-racing operation was a business, as opposed to a personal endeavour, on the test articulated in Stewart. Accordingly, the trial judge did not have to engage in a Stewart analysis of the facts to determine whether Mr. Craig’s horse-racing operation was a source of income, but accepted that it was a business and not a personal endeavour (paras. 41-42). I see no reason to disturb this conclusion.Since the horse-racing activities were a source of income, it remains to determine whether to apply the loss deduction limitation in s. 31(1). Taking a contextual approach to the combination question, the relevant factors to consider are the capital invested in farming and the second source of income; the income from each of the two sources of income; the time spent on the two sources of income; and the taxpayer’s ordinary mode of living, farming history, and future intentions and expectations.

The approach must be flexible, recognizing that not each factor need be significant. The question is whether, looking at these factors together, the taxpayer places significant emphasis on each of the farming business and other earning activity, and if so, the combination will constitute a chief source of income and avoid the loss deduction limitation of s. 31(1).Hershfield T.C.C.J. found that the relevant factors, other than demonstrated profitability, clearly pointed to Mr. Craig’s farming business being more than a sideline business (para. 76). Even though Mr. Craig derived his principal income from the practice of law and the total hours spent at his law practice exceeded that devoted to the farming business, he devoted both a material amount of capital and a very significant part of his daily work routine to the farming business (para. 76).

Hershfield T.C.C.J. found that the horse-racing business was pursued as a major business preoccupation. Mr. Craig’s mornings, evenings and weekends were consumed by a dedication to enhancing the potential profitability of the operation, which was more than a distraction from his normal mode of living or an entertainment or sport (para. 76). Further, Mr. Craig was involved in his farming business beyond the stable and track. Hershfield T.C.C.J. gave weight to the fact that Mr. Craig was an active member of and contributor to the community of standard-bred racing (para. 77). He worked to improve the integrity of standard-bred racing so as to improve the potential profitability of his operation. His knowledge of the horse-racing competitions that were important for profitability was sufficient to place him as chairperson of the industry’s appeal board (para. 77). For these reasons, Hershfield T.C.C.J. determined that the horse-racing operation was a chief source of income on the basis of its contribution to the combination test in s. 31(1).Having considered the relevant factors, Hershfield T.C.C.J. found that farming, in combination with Mr. Craig’s law practice, was a chief source of income, and that the loss deduction limitation in s. 31(1) did not apply to the facts. There is no basis for this Court to disturb Hershfield T.C.C.J.’s factual conclusion and his finding that the loss deduction limitation was not applicable.”

Regards,

Blair

Tuesday, July 31, 2012

Judge Requires Dissident Shareholders to "Help Themselves" First

Continental Precious Minerals Inc. ("Continental" or the "Company") is a junior natural resource and mining company whose shares are traded on the Toronto Stock Exchange. The Company owns a number of mineral exploration licenses in Sweden. Continental has filed several technical reports containing estimates of the resources in its main project. However, to date, Continental's mineral exploration licenses have not earned any revenues and are still in the development stage.
Continental was founded in 1987 by Edward Godin, a retired commercial airline pilot. Mr. Godin has been President, CEO and a member of Continental's board of directors ("Board") since that date. Mr. Godin is the only executive of the Company who is employed on a full-time basis. He is 69 years old and has no plans to retire.
When the Company was formed, Mr. Godin and his friends and family held the majority of its shares. At that time, the Company's by-laws provided that two shareholders, personally present or represented by proxy would constitute a quorum for any meeting of any class of shareholders.
However, as the Company issued more shares to other investors, and Mr. Godin's position became diluted, he became increasingly concerned about his ability to maintain control of the Company. In 1996, at Mr. Godin's request, the Board initiated an amendment to the ordinary quorum ("Ordinary Quorum") for the purposes of considering any matter that related to removing directors from office, electing or appointing directors, changing the number of directors, or later amending or appealing this provision of the by-laws from two or more persons, personally present or represented by proxy, to two or more persons representing not less than 50 per cent of the outstanding voting shares of the Company ("Special Quorum"). As a result, the bylaws provided for two separate quorums: the Special Quorum for electing directors and the Ordinary Quorum for all other business.
According to the circular for the 1996 AGM, the Board's rational for adopting the Special Quorum was that "only a significant number of shareholders ought to be able to change the board, since change in the board will effect the overall direction of the Company". The amendments were ratified at the 1996 AGM, apparently by no more than 5 per cent of the total shares of the Company.
The Board enacted the Special Quorum with the knowledge that it was unlikely that the Special Quorum would be achieved, given the historically low attendance at meetings of shareholders. In fact, the Special Quorum has never been achieved for 15 years – since the 1996 amendment. The effect of the amendment has been to entrench Mr. Godin and his friends on the Board: Patricia Sheahan was appointed to the Board in 1998, Gerard Osika in 2005 and Herb Dhaliwal in 2008. Neither Mr. Osika's or Mr. Dhaliwal's appointment was ratified by shareholders as a result of the Company's failure to achieve the Special Quorum.
The applicants are a group of shareholders who challenged the Special Quorum on the basis that it was not only impractical because its effect was to prevent the election of directors, but taken together with Mr. Godin's conduct at the Company's last AGM (held October 24, 2011), the Special Quorum was "oppressive" to their interests as shareholders of Continental.
The applicants (the Ebrahim family, Jatinder Dhillon and Rita Hoff) are the beneficial owners of approximately 22.5 per cent of the outstanding shares of Continental.
On August 19, 2011, the Company announced that the 2011 AGM would be held on October 24, 2011. The management information circular indicated that the four nominees for election to the Board were all the incumbent directors, Godin, Sheahan, Osika and Dhaliwal.
At the October 2011 AGM there were approximately 51,750,000 issued and outstanding common shares of which the Board owned approximately 3.25 per cent.
The applicants had been dissatisfied with the performance of the Company for some time. Prior to the 2011 AGM, arrangements were made through Gary Singh, their investment advisor at Canaccord Genuity Corporation ("Canaccord"), for a meeting between Mr. Godin, Sajjad Ebrahim and Jatinder Dhillon. Godin failed to show up for the meeting and shortly thereafter, certain of the shareholders including the applicants retained Grant Sawiak of Fogler, Rubinoff to advise the Company that he was acting for a number of concerned shareholders and to request changes to the composition of the Board.
The applicants and other shareholders authorized Canaccord to deliver proxies to Mr. Sawiak to vote their shares at the 2011 AGM. They gave 12,755,630 proxies (approximately 24.5 per cent of the Company's shares) to Mr. Sawiak in the form of omnibus proxies signed by Canaccord. The Company received from Canaccord another omnibus proxy permitting Mr. Singh to vote a total of 993,600 shares owned by his family and his business partner (about 2 per cent).
At the AGM a representative of the Company's transfer agent, Equity Financial Trust ("Equity"), advised Mr. Sawiak that 83 per cent of his proxies had been disallowed on the instructions of Mr. Godin who took on the role of chairman of the meeting. The majority of Mr. Singh's proxies were also disallowed. Mr. Godin refused to give a reason for disallowing the proxies.
Mr. Godin refused Mr. Sawiak's request to adjourn the meeting for 30 days in order to challenge the disallowance of the proxies.
As a result of that disallowance, only about 21.6 per cent of the issued shares were represented at the meeting. Of these, only 4 million shares voted for the incumbent board, the remaining votes were withheld. In any event, no election of directors occurred because the 50 per cent Special Quorum had not been met.
Upon subsequent investigation it was determined that in the 15 years since the Company's by-laws had been amended, the average attendance at shareholders meeting was only 27 per cent.
The applicants brought an application claiming that the acts of the Company and the Board constituted oppression within the scope of subsection 248(2) of the OBCA. The applicants asked the court to make an order pursuant to section 106 of the OBCA for a new meeting of shareholders to be called for the purpose of electing directors and dispensing the with Special Quorum for the purposes of the meeting. S. 106 of the OBCA provides that: "if for any reason it is impracticable to call a meeting of shareholders or to conduct the meeting in the manner prescribed by the by-laws, or if for any other reason the court thinks fit, the court may order that a meeting be held and conducted in such manner as the court directs or otherwise as the court deems fit".
In response, the Company brought a counter-application alleging that the respondents, as well as the family company operated by the Ebrahims – Par-Pak Companies Inc. ("Par-Pak") had been acting jointly or in concert and had acquired shares of the Company contrary to part XX of the Securities Act (takeover bid provisions). Prior to the return of the application, the Ebrahims sold their shareholdings in excess of the 20 per cent ownership threshold and the Company abandoned its argument that Singh was a joint actor with the Ebrahims.
The application was heard before Mr. Justice D. Brown of the Superior Court of Justice – Commercial List on March 28 and 29, 2012. Justice Brown released his decision on May 22, 2012.
Justice Brown dismissed the application for the following reasons.
Justice Brown, first reviewed what he called the " governing legal principles" in the case. He held that the oppression remedy contained in section 248 of the OBCA is an equitable remedy which seeks to ensure fairness and "which gives courts a broad jurisdiction to enforce not just what is legal but what is fair".
The applicants argued that the Board's conduct of:
1. relying on the Special Quorum at the 2011 AGM;
2. failing to actively solicit proxies for the meeting; and
3. excluding non-management proxies from voting at the meeting effected a result that was oppressive to them.
With respect to the Board's failure to actively solicit proxies, Justice Brown held that the evidence disclosed that the Board had complied with its obligations under corporate and securities law. He found that a shareholder of an offering corporation had a reasonable expectation only that management will:
(a) give proper notice of a shareholders meeting;
(b) solicit proxies as required by section 111 of the OBCA; and
(c) send out a management information circular. Continental met those obligations imposed by law. Impliedly he found that shareholders would have no expectation that management would do any more than meet the minimum under the legislation.
Justice Brown found that if the applicants thought that something more was required to secure a "large turnout at the AGM" it was open to the applicants to make suggestions to management about what to do. They made none. Brown also found that it was also open to the applicants to solicit proxies and issue a dissident information circular but they did not do so.
With respect to the exclusion of proxies, Justice Brown held that the applicable section of the OBCA provides that a proxy must be signed, in writing or by electronic signature, by the shareholder or an attorney who is authorized by a document that is signed in writing or by electronic signature. Those requirements were reproduced by Continental in its management information circular. The applicants did not deposit with Continental signed copies of the form of proxy the Company had distributed. Instead, they signed a short form of letter addressed to Mr. Singh at Canaccord. The letter included the words, "I have lost my original proxy, therefore needing you to take my instructions above and have Mr. Sawiak vote on my behalf". The letters signed by the applicants were not deposited with Continental. Instead, Continental received a form of proxy signed by Canaccord (not by the beneficial shareholders) designating Mr. Sawiak as the proxy holder.
Justice Brown noted that at the AGM Mr. Godin gave no reason for his disallowance of the applicants’ proxies notwithstanding that prior to the meeting Equity had advised him that it could only accept the proxies if they were executed by the beneficial holders.
He held that the duty under which the Chairman of such meetings operates is one of honesty and fairness to all individual interests and directed generally towards the best interests of the company. Courts are reluctant to find a chair to be in dereliction of his responsibility barring proof of bad faith. He found that it would have been "sensible, or the better practice", for Mr. Godin to have disclosed the reason for disallowing the proxies but he saw nothing in the evidence to support a suggestion that Mr. Godin acted in bad faith by disallowing the proxies.
Justice Brown held that, in any event, the disallowance of the proxies was not oppressive because even if the proxies had been counted the Special Quorum would not have been met. Causation remains a necessary element of any oppression claim and in the present case no cause and link existed between the disallowance of the proxies and a lack of a vote for the election of directors at the 2011 AGM.
Justice Brown also found that there was reason to doubt the correctness of Mr. Godin's ruling not to allow an adjournment of the meeting for 30 days. He should have sought the views of those present to ascertain whether the "consent of the meeting" existed for an adjournment. But he saw nothing oppressive or unfair in that ruling. He found that management had (a) given proper notice of the meeting, and (b) had sent out required information circular. It was open to any shareholder to attempt to seek proxies opposing management through a dissident information circular. In light of the Company having taken all necessary steps before the meeting, the judge did not regard as unfair Mr. Godin's ruling to refuse an adjournment.
With respect to the Special Quorum the judge held as follows.
In forming their reasonable expectations, shareholders must take into account the public pronouncements and documents issued by the Company. The Special Quorum had been disclosed in materials posted on SEDAR. The by-law had been publicly available since May of 2006. The Special Quorum had been described in management information circulars since 1996, all of which were available on SEDAR. Accordingly, it was not reasonable for the applicants to expect some other Special Quorum because at the time a simple search of SEDAR would have disclosed the existence of the Special Quorum.
Secondly, Justice Brown found that there was no evidence that the Board had acted in any way to frustrate the attendance at meetings to meet the Special Quorum. To the contrary, management had complied with its proxy solicitation and MIC obligations. If shareholders were dissatisfied with the Special Quorum, they were free to submit a change to management for inclusion in the management information circular or to requisition a special meeting of shareholders. The applicants did neither.
Thirdly, it was true that historically turnouts at the AGM were low. However, the applicants did not avail themselves of the tools contained in the OBCA by which displeased shareholders can attempt to effect change in the management of a corporation. Specifically, the applicants did not conduct a solicitation of proxies or distribute a dissident information circular. Brown held that, "Common sense suggests that the more one acts as a squeaky wheel, the more likely that one's message will attract some attention". Accordingly, he could not accept that the Special Quorum acted as an "insurmountable barrier to effecting management change when the applicants haven't really tried that hard to bring about such change".
He then dismissed the application for oppression. Note that he used the work insurmountable rather than impractical which is the language of the OBCA.
With respect to the section 106 of the OBCA argument, he found that the majority of the cases dealt with varying the Ordinary Quorum only in "exceptional circumstances" and that judicial discretion should be exercised cautiously. Where there is a corporate remedy still open to a shareholder under the legislative scheme, the court should be reluctant to step into the fray and impose its own solution. The courts role is to decide issues of a procedural or substantive nature which need to be determined to enable the process to proceed in a proper and timely fashion, but otherwise to remain apart from the battle.
He reiterated that the reluctance of a court to call a meeting where the shareholder has not availed itself of the procedure to requisition a meeting was well mentioned in the precedents.
He found that the evidence did not reveal any matter which would make it impracticable to call a shareholder meeting. The Special Quorum mirrors the default quorum provision in the OBCA and management had not impeded the solicitation of proxies by dissident shareholders.
Instead the dissidence did not make use of the proxy fight devices available under the corporate legislation to effect change in Continental's management nor have they attempted to requisition a special meeting notwithstanding that they hold over 5 per cent of the issued and outstanding shares. Accordingly, he declined to exercise his discretion in the circumstances.

Regards,

Blair

Friday, June 1, 2012

Retroactive Pension Legislation

Here is a reprint of a Pension Alert from my colleague Priscilla Healy:

Buried deep within the federal Omnibus Budget Implementation Bill is a provision
amending the Pension Benefit Standards Act, 1985 (PBSA). Section 483 of the
Bill gives retroactive effect to July 27, 2004 to two sections of the PBSA. Those
provisions have the effect of legitimizing regulations made under those sections
almost eight years ago.
Presumably there is some specific situation or situations that section 483 seeks
to address. What it/they might be, I have no idea. It was eight years ago. Section
483 may be, and probably is, totally innocuous.
Why does this apparently minor matter merit our attention? Because we should
all be concerned with legislation that has retroactive effect that is introduced without
clear or obvious explanations or justification given, and should be particularly
concerned when regulations are given retroactive effect in this indirect manner.
First, retroactive legislation can obviously be simply unfair to those who relied on
the former legislation. Secondly, the reasons for retroactive legislation should be
transparent. Thirdly, legitimizing existing regulations by way of amendments to
empowering statutes having retroactive effect leads to confusion. If regulations
have retroactive effect, they are expected to state so clearly within the regulation
itself.
Section 483 is a bad legislative precedent. Law should not be made in this way.
PENSION ALERT
Priscilla H. Healy
phealy@foglers.com
416.941.8828
Priscilla

Wednesday, May 2, 2012

Supreme Court of Canada - Conrad Black can sue for defamation in Ontario

Breeden v. Black, 2012 SCC 19

Conrad Black ("B") is a well‑known business figure who established a reputation as a newspaper owner and publisher in Canada and internationally. While B served as the chairman of a publicly traded U.S. company, the legitimacy of certain payments that had been made to B were questioned. A special committee formed to conduct an investigation concluded that the company had made unauthorized payments to B. The committee’s report was posted on the company’s website, which was accessible worldwide, along with press releases containing contact information directed at Canadian media. Statements were also published in the company’s annual report summarizing the committee’s findings.
B commenced six libel actions in the Ontario Superior Court against the ten appellants, who are directors, advisors and a vice‑president of the company. B alleges that the press releases and reports issued by the appellants and posted on the company’s website contained defamatory statements that were downloaded, read and republished in Ontario by three newspapers. He claims damages for injury to his reputation in Ontario.

The appellants brought a motion to have the actions stayed on the grounds that there was no real and substantial connection between the actions and Ontario, or, alternatively, that a New York or Illinois court was the more appropriate forum. The motion judge dismissed the motion, finding that a real and substantial connection to Ontario had been established and that Ontario was a convenient forum to hear the actions. The Court of Appeal unanimously dismissed the appeal. It found that a real and substantial connection was presumed to exist on the basis that a tort was committed in Ontario, and that the appellants had failed to rebut this presumption. It also found that there was no basis on which to interfere with the motion judge’s exercise of discretion with regard to forum non conveniens.

Applying the Van Breeda analysis, the SCC dismissed the appeal. The issue of assumption of jurisdiction was determined based on a presumptive connecting factor ― the alleged commission of the tort of defamation in Ontario. It is well established in Canadian law that the tort of defamation occurs upon publication of a defamatory statement to a third party, which, in this case, occurred when the impugned statements were read, downloaded and republished in Ontario by three newspapers. It is also well established that every repetition or republication of a defamatory statement constitutes a new publication, and that the original author of the statement may be held liable for the republication where it was authorized by the author or where the republication is the natural and probable result of the original publication. The republication in the three newspapers of statements contained in press releases issued by the appellants clearly falls within the scope of this rule. In the circumstances, the appellants have not displaced the presumption of jurisdiction that results from this connecting factor.

Having found that a real and substantial connection exists between the action and Ontario, the court considered whether the Ontario court should decline to exercise its jurisdiction on the ground that the court of another jurisdiction was clearly a more appropriate forum for the hearing of the actions. Under the forum non conveniens analysis, the burden is on the party raising the issue to demonstrate that the court of the alternative jurisdiction is a clearly more appropriate forum. The factors to be considered by a court in determining whether an alternative forum is clearly more appropriate are numerous and will vary depending on the context of each case. The forum non conveniens analysis does not require that all the factors point to a single forum, but it does require that one forum ultimately emerge as clearly more appropriate. The decision not to exercise jurisdiction and to stay an action based on forum non conveniens is a discretionary one, and the discretion exercised by a motion judge will be entitled to deference from higher courts, absent an error of legal principle or an apparent and serious error on the determination of relevant facts.

The Court found that both the courts of Illinois and Ontario are appropriate forums for the trial of the libel actions. The factors of comparative convenience and expense for the parties and witnesses, location of the parties, avoidance of a multiplicity of proceedings and conflicting decisions and enforcement of judgment favour the Illinois court as a more appropriate forum, whereas the factors of applicable law and fairness to the parties favour the Ontario court. In the end, however, considering the combined effect of the relevant facts, and in particular the weight of the alleged harm to B’s reputation in Ontario, and giving due deference to the motion judge’s decision, the Illinois court did not emerge as a clearly more appropriate forum than an Ontario court for the trial of the libel actions.

Here is a link to the decision http://scc.lexum.org/en/2012/2012scc19/2012scc19.html

Regards,

Blair