Wednesday, June 26, 2013

Settlement Privilege - Supreme Court Clarifies use of Pierringer Agreements

The Supreme Court of Canada recently clarified the law with respect to the extent of disclosure that must be made in settling multi-party litigation.

In the case of Sable Offshore Energy Inc. v. Ameron International Corp. (2013 S.C.C. 37), the court unanimously held that the settling defendants in a "Pierringer Agreement" did not need to disclose the amounts that they had settled for the non-settling defendants.

In this case, Sable undertook an ocean project and built several offshore structures and onshore gas processing facilities in Nova Scotia. A number of defendants, including Ameron, supplied Sable with paint for parts of the Sable structures. Sable brought three law suits against Ameron and 12 other defendants, alleging that the paint failed to prevent corrosion.

Sable subsequently entered into three Pierringer Agreements with some of the defendants. A Pierringer Agreement allows one or more defendants in a multi-party proceeding to settle with the plaintiff and withdraw from the litigation, leaving the remaining defendants responsible only for the loss they actually caused. As part of the agreements, Sable agreed to amend its statement of claim against the non-settling defendants to pursue them only for their share of liability. All the relevant evidence in the possession of the settling defendants would, in accordance with the agreements, be given to the plaintiff and be discoverable by the non-settling defendants.

Ameron and another defendant, Amercoat Canada, did not settle. All the terms of the Pierringer Agreements were disclosed to Ameron and Amercoat except the amounts that had been agreed upon. The settlement agreements were approved by the court. Ameron brought an application for disclosure of the settlement amounts paid under the Pierringer Agreements. Sable took the position that the amounts were subject to settlement privilege. The application judge agreed. However, the Nova Scotia Court of Appeal overturned that decision and ordered that the amounts be disclosed.

The Supreme Court of Canada unanimously allowed Sable's appeal and ordered that it need not disclose the settlement amounts to Ameron and Amercoat, the non-settling defendants.

Justice Abella, writing for the court, held that the settlement amounts were covered by settlement privilege.

Justice Abella further held - Settlement privilege promotes settlements. Parties will be more likely to settle if they have confidence from the outset that their negotiations will not be disclosed. Settlement privilege covers settlement negotiations whether or not a settlement is reached. Since the negotiated amount is a key component of the "content of successful negotiations", reflecting the omissions, offers and compromises made in the course of negotiations, it too was protected by the privilege.

Justice Abella held that there are, inevitably, exceptions to the privilege. To come within those exceptions a defendant must show that on balance "a competing public interest outweighs the public interest in encouraging settlement". For example, those countervailing interests have been found to include allegations of misrepresentation, fraud or undue influence as well as preventing a plaintiff from being overcompensated.

In this case, the settlements negotiated, i.e. Pierringer Agreements, were developed in the United States to address obstacles in settling complex multi-party litigation. Under a Pierringer Agreement, the plaintiff's claim was only extinguished against those defendants with whom it settled; the claims against the non-settling defendants continued. The settling defendants were assured that they could not be subject to a contribution claim from the non-settling defendants who would be accountable only for their share of liability at trial.

In Canada, the courts have included additional protections for non-settling defendants such as requiring that they be given access to the settling defendants evidence. In addition, the agreements in this case specified that their non-financial terms would be disclosed to the court and the non-settling defendants.

The non-settling defendants received all the non-financial terms of the Pierringer Agreements. They have access to all the relevant documents and other evidence that was in the settling defendants possession. They have also the assurance that they would not be held liable for more than their share of damages. In addition, Sable agreed that at the end of the trial, once liability had been determined, it would disclose to the trial judge the amounts it settled for.

As a result, should the non-settling defendants establish a right to set-off in this case, their liability for damages would be adjusted downwards if necessary to avoid over-compensating the plaintiff. With all those protections in place, Justice Abella did not see how knowledge of the settlement amounts would materially effect the ability of the non-settling defendants to know and present their case.

She held that a proper analysis of the claim for an exception to settlement privilege does not simply ask whether the non-settling defendants derived some tactical advantage from disclosure, but whether the reason for disclosure outweighs the policy in favour of promoting settlement. She found that there was little harm in denying disclosure of the settlement amounts in this case.

Regards,

Blair

Tuesday, June 25, 2013

Express or Implied, Hearsay is Hearsay

Christopher Baldree was a small time drug dealer in Cornwall, Ontario. One night in May of 2006, Baldree and three other people were smoking marijuana in his apartment.  The Cornwall police, responding to a suspected break-in, knocked on the door. Baldree inexplicably allowed them to come into the apartment where the police found an open safe containing cocaine, a large cardboard box containing a Ziploc bag of marijuana, as well as the joints that Baldree and his friends had been smoking.  The police arrested Baldree and his companions and seized a mobile telephone and some cash.

At the police station, Baldree's mobile phone rang. The arresting officer answered it. At trial, the police officer described the conversation he had with the caller:

A male voice on the other end of the phone advised that he was at a particular address, that he was a friend of Megan and asked for Chris. The police officer answered, Chris who? The caller answered  "Baldree" and asked for one ounce of weed. The officer asked the caller how much Chris usually charged him.  The caller answered $150. The officer took down the caller's address and said that he would deliver it.

Baldree's lawyer objected to this testimony on the ground that it was inadmissible hearsay. The trial judge disagreed and found that the evidence was "non-hearsay".  He convicted Baldree for trafficking in drugs.

At the Ontario Court of Appeal, two of the three judges on the panel allowed Baldree's appeal and ordered a new trial. One judge found that the officer's evidence was hearsay.  Another judge found that he could not decide whether or not the evidence was hearsay but that it did not matter because the evidence failed on both an assessment of its necessity and reliability and on weighing its probative value against its prejudicial effect. The third judge found that the evidence was admissible as non-hearsay.

The Supreme Court of Canada unanimously dismissed the Crown's appeal and ordered a new trial.

Eight of the nine judges found that the evidence of the police officer was hearsay.  The majority ruling held that the defining features of hearsay are:

1. the fact that the statement is adduced to prove the truth of its contents; and

2. the absence of a contemporaneous opportunity to cross-examine the declarant.

The Court held that hearsay evidence is presumptively inadmissible as a matter of law. The issue in this case was whether this exclusionary rule applied to "express" hearsay only or to "implied" hearsay as well. The court found that an implied assertion intended for the truth of its contents (i.e. that Baldree was a drug dealer)  is no different with respect to the hearsay rule than an explicit assertion to the same effect. The principled reasons for their presumptive inadmissibility apply equally to both.

If the hearsay evidence does not fall under a hearsay exception, it may still be admitted if, pursuant to the principled analysis, sufficient indicia of reliability and necessity are established on a voir dire. In this case, no traditional exception applied and the evidence did not hold up to a principled analysis. This was a single drug purchase call of uncertain reliability. The police did not make an effort to find and interview the caller or to call him as a witness - where the assertion imputed to him could have been evaluated by the trial judge or jury in light of cross-examination, and the benefit of observing his demeanour.

Justice Moldaver, the last of the nine judges, concurred with the other eight justices in the result but wrote his own reasons. He found that the evidence of the drug purchase call was hearsay because it was introduced to prove that Baldree was in fact a drug dealer. Justice Moldaver wrote that in such cases, the real concern under the principled approach is reliability and it should be the focus of the inquiry. Reliability is founded on society's interest in getting at the truth. Justice Moldaver found that the evidence was not reliable.  If the evidence is not reliable, it should be excluded.

Regards,

Blair



Friday, June 21, 2013

Court Orders Anonymous Blogger to Pay Executive $200K in Damages

In a recent decision, the Ontario Superior Court of Justice awarded a corporate executive general damages of $100,000, aggravated damages of $50,000, punitive damages of $50,000 and approximately $50,000 in legal fees against an anonymous  "John Doe" defendant who had persisted in posting defamatory comments about executive on a website hosted by Blogger, a Google web service.

The plaintiff was a lawyer and a director of legal affairs at Quebecor Media Inc. ("Quebecor"). The defendant was unknown.

In 2010, the plaintiff became aware that defamatory statements about him were being posted on the website hosted by Blogger. The Blogger posts stated that the plaintiff was "a lying crook, a Nazi, a pedophile and rapist, a thief and a morally repugnant imbecile". The court found that, "The plaintiff is obviously none of those things".

In May of 2010, the defendant sent emails to senior Quebecor executives with links to the Blogger posts.
In June of 2010, the plaintiff's lawyers commenced the action against "John Doe No. 1". The defendant subsequently posted further defamatory posts.

The plaintiff brought a motion to compel Google to disclose information that would identify the defendant. Although the defendant responded from the same email account that he had used to communicate with Quebecor's management, his identity was never discovered.

In July and August of 2010, Google removed the Blogger posts. However, the defendant commenced posting defamatory statements about the plaintiff on another website. In the meantime, the plaintiff continued to attempt to identify the defendant. He obtained an order extending the time for service of the statement of claim. Plaintiff's counsel sent emails to the defendant at the email account that he had been known to use.  The defendant responded by email that "We are not formally served with notice of any impending proceeding with respect to this matter. As far as we are concerned, we have no duty or obligation to meaningful [sic] respond to or appear at any proceeding."

The plaintiff then obtained an order validating service of the statement of claim and ordering that the subsequent defamatory posts be removed. The motions judge also ordered that the defendant identify himself, however he refused to do so. The plaintiff subsequently noted the plaintiff in default.

On February 16, 2012, the registrar of the court administratively dismissed the action. At the end of February 2012, plaintiff's counsel received a copy of the registrar's dismissal order. There had been no previous notice from the registrar. On a motion brought by the plaintiff, the court set aside the administrative dismissal and granted judgment for defamation.

Justice Goldstein of the court held that "there are few things more cowardly and insidious than an anonymous blogger who posts spiteful and defamatory comments about reputable members of the public and then hides behind the electronic curtain provided by the internet". The court found that the posts were defamatory and because the defendant had already been noted in default, granted judgment accordingly.

The court awarded general damages based on the principle that such damages are presumed in a defamation case on the basis that harm automatically and logically follows from the very publication of the false statements.  At the motion the plaintiff sought and the court granted general damages in the amount of $100,000. The court awarded aggravated damages on the basis that the defendant was guilty of high-handed, spiteful and vicious conduct. The court found that the circumstances of this case were particularly egregious. The defendant had never apologized, retracted or in any way sought to justify his statements. Even in the face of a statement of claim, the defendant continued to make defamatory posts. The court awarded $50,000.

The court held that this case was an obvious one for punitive damages. There is no question that the defendant acted maliciously and oppressively. The defendant's actions offended the court's sense of decency and because the court reflected community standards, it sent a strong message of denunciation and deterrence.  The court awarded $50,000.

Finally, the court held that because costs are within the discretion of the court, it awarded substantial indemnity costs because the defendant persisted on driving up the plaintiff's legal costs even in the face of a continuing refusal to comply with a court order.

Regards,

Blair



Thursday, June 20, 2013

Supreme Court Restricts Random Drug and Alcohol Testing of Unionized Employees

Irving Pulp & Paper Limited operates a craft paper mill in Saint John, New Brunswick. In the 15 year period between 1991 and 2006, Irving had no formal policy with respect to alcohol and drug use at the mill. In 2006, it unilaterally adopted a "Policy On Alcohol And Other Drug Use" under the management rights clause of the collective agreement with its workers' union  (Communications, Energy and Paperworkers Union of Canada, Local 30) but without any negotiations with the union. The policy imposed drug or alcohol testing for employees holding positions designated by Irving as "safety sensitive".

The policy contained a random alcohol testing component, whereby 10 per cent of the employees in safety sensitive positions were to be randomly selected for unannounced breathalyser testing over the course of a year. A positive test for alcohol attracted significant disciplinary action, including dismissal. Failure to submit to testing was grounds for immediate dismissal.

One of the employees randomly tested was Perley Day, a member of the Union. Mr. Day was a teetotaler who had not had a drink since 1979. His breathalyser test revealed a blood alcohol level of zero. The Union filed a grievance on his behalf challenging only the random alcohol testing aspect of the policy. The Union did not challenge the rest of the policy which required employees to be subject to mandatory testing if there was reasonable cause to suspect alcohol or other drug use in the workplace.

There were only 8 documented incidents of alcohol consumption or impairment at the workplace over a 15 year period, from April 1991 to January 2006. By December of 2008 (when the arbitration was heard), the testing policy had been in effect for 22 months and not a single employee had tested positively in either a random test or a test for reasonable cause.

The absence of evidence of any real risk related to alcohol led a majority of a labour arbitration board to conclude that there was little benefit to Irving in maintaining the random testing policy. The board measured the employer's interest in random alcohol testing as a workplace safety measure against the harm to the privacy interest of the employees.  The board allowed the grievance and concluded that random testing was unjustified.

On judicial review, a New Brunswick court set aside the board's award as unreasonable because of the dangerousness of the workplace. The New Brunswick Court of Appeal dismissed the union's appeal.

By a 6 - 3 majority, the Supreme Court of Canada allowed the union's appeal. Justice Abella, writing for the majority, held as follows:

The scope of management's unilateral rule-making authority under a collective agreement is that any rule or policy unilaterally imposed by an employer, and not subsequently agreed to by the union, must be consistent with the collective agreement and be reasonable. Under a balancing of interests and the collective bargaining tenet that an employee can only be disciplined for reasonable cause, an employer can impose a rule with disciplinary consequences only if the need for the rule outweighs the harmful impact on the employee's privacy rights. For example, an employer can test an individual employee if there is reasonable cause to believe that the employee was impaired while on duty. However, a unilaterally imposed policy of mandatory random testing is an unjustified affront to the dignity and privacy of employees unless there is evidence of enhanced safety risks such as evidence of a general problem with substance abuse in the workplace.

In this case, the expected safety gains to the employer ranged from uncertain to minimal while the impact on employee privacy was severe. The number of alcohol related incidents in the 15 year period did not reflect the requisite problem with workplace alcohol use. Consequently, the employer had not demonstrated the requisite safety concerns that would justify universal, random testing. As a result, the employer exceeded the scope of its rights under the collective agreement.

Justice Abella held that the applicable standard for reviewing the decision of the labour arbitrator is reasonableness. She held that the board's decision "must be approached as an organic whole, not as a line by line treasure hunt for error". In this case, based on the findings of fact and the relevant jurisprudence, the decision was a reasonable one.

Regards,

Blair





Tuesday, June 18, 2013

Resulting Trust - The Gift that Stopped Giving

In 1996, Kismet Enterprises Ltd. ("Kismet") owned approximately 2 acres of land in Nanaimo, British Columbia. In April, 1996, Kismet leased the property to Rascal Trucking Ltd. ("Rascal"). Rascal began operating a topsoil processing facility on the property.


Rascal's topsoil operation generated significant complaints from the neighbourhood. As a result, the City of Nanaimo (the "City") passed resolutions declaring that the facility was a nuisance and authorizing the City to remove the topsoil if neither Kismet nor Rascal did so. The City subsequently removed the topsoil and lodged the costs incurred (approximately $110,000) against the property as tax arrears. Rascal brought an action challenging the City's authority to pass these resolutions but in 2000, the Supreme Court of Canada ruled in favour of the City.

Rascal's lease included provisions that required it to hold Kismet harmless from any and all liabilities resulting from Rascal's operations on the property. However, Rascal did not reimburse Kismet or the City for the cost of removing the top soil.

Kismet determined that as a result of the tax arrears and existing mortgage to CIBC there was no equity left in the property. It stopped making mortgage payments and in December, 1997, CIBC began foreclosure proceedings. Throughout the foreclosure proceedings, Hans Heringa, the principal of Rascal, tried in a number of ways to acquire the property but was ignored by CIBC.

CIBC eventually sold the property to Edward Nishi for $237,500. Before selling the property to Mr. Nishi, CIBC paid the tax arrears owing to the City.

Rascal assisted Mr. Nishi in buying the property by providing $85,000 in cash and assuming responsibility for paying $25,000 on the mortgage. Mr. Heringa acted as guarantor of the mortgage. Subsequent to Mr. Nishi's purchase of the property, Rascal contributed another $25,679.74 to the mortgage. In the result, Rascal's total contribution towards purchase of the property was $110,679.74, the exact amount of the tax arrears lodged on the property by the City due to Rascal's topsoil activities.

Mr. Heringa sent Mr. Nishi several faxes containing offers to acquire an interest in the property on different terms. None were accepted. In November of 2008, Rascal commenced an action claiming a one-half undivided interest in the property.

The court noted that it was relevant that Mr. Heringa and Cidalia Plavetic, the principal of Kismet, had a long-standing business and personal relationship. Ms. Plavetic and Mr. Nishi were common law partners and had lived on the property since 1997.

Rascal lost its claim at trial. However, the British Columbia Court of Appeal allowed Rascal's appeal. It held that a presumption of resulting trust arose because of a gratuitous transfer between unrelated parties. It held that there was no issue of a gift because it was the intention of the person who advanced the funds and not the intention of the recipient that was relevant.

Mr. Nishi appealed that decision to the Supreme Court of Canada. In a recently released decision, the Supreme Court (Justice Rothstein writing for the majority) allowed Mr. Nishi's appeal based on the factual findings of the trial judge that no resulting trust was created in this case.

Purchase Money Resulting Trust

The court held that a purchase money resulting trust is a species of gratuitous transfer resulting trust, where a person advances a contribution to the purchase price of property without taking legal title. Gratuitous transfer resulting trusts presumptively arise any time a person voluntarily transfers property to another unrelated person or purchases property in another person's name.

The court found that Rascal's contribution to the purchase of the property was made without consideration and because Rascal and Mr. Nishi were not related, the legal presumption of resulting trust applied. This is because in such circumstances, equity presumes bargains rather than gifts. In the context of a purchase money resulting trust, the presumption is that the person who advanced purchase money, intended to assume the beneficial interest in the property in proportion to his or her contribution to the purchase price.

However, the presumption of resulting trust, can be rebutted if the recipient of the property proves, on a balance of probabilities, that the person who advanced the funds intended a gift. The relevant intention is the intention of the person who advanced the funds at the time of the contribution to the purchase price. Therefore, for Mr. Nishi to rebut the presumption, in this case, he needed to prove that Rascal intended to make a gift at the time that Rascal made a contribution to the purchase price in May 2001.

Justice Rothstein held that the trial judge was correct to conclude that the presumption was rebutted in this case. In May 2001, Mr. Heringa indicated that the contribution to the purchase price and his intention to pay $25,000 of the mortgage was made "without any conditions or requirements" and these instructions are irrevocable. A contribution to the purchase price without any intention to impose conditions or requirements is a legal gift.

Justice Rothstein found that in their full context, the trial judge's reasons confirmed that he understood that Rascal's intention at the time of the advance was to make a legal gift, i.e. to contribute to the purchase price without taking a beneficial interest in the property. Rascal's contribution was motivated by recognition of the cost that it had imposed on Kismet, the company owned by Mr. Heringa's friend, Ms. Plavetic. In addition, it was clear from the May 2001 facts, that Rascal's stated intention was to make the advance without any conditions such as obtaining a beneficial interest in any portion of the land.

Regards,

Blair





Monday, June 3, 2013

Judicial Plagiarism or Simply Lack of Originality?

Is it acceptable for a judge to copy large sections of his or her reasons for judgment from the written submissions of one of the parties?  The Supreme Court of Canada has said that it is. 

In the case of Cojocaru v. British Columbia Women's Hospital and Health Center, a child who suffered brain damage during his birth at the hospital and his mother brought an action in negligence against the hospital, the attending nurses and doctors. At trial, the defendants were found liable in negligence and damages were awarded to the plaintiffs in the amount of $4 million.

The defendants appealed, in part because the trial judge's reasons reproduced large portions of the plaintiffs' submissions. However, the trial judge did not accept all of the plaintiffs' submissions. He discussed a number of issues and stated his final conclusions in his own words.

The British Columbia Court of Appeal held that the trial judge's decision should be set aside because of the extensive copying from the plaintiffs' submissions and ordered a new trial. This case was further appealed to the Supreme Court of Canada.

The Supreme Court held that as a general rule, it is good judicial practice for a judge to set out the contending positions of the parties on the facts and the law and explain in his or her own words, his conclusions on the facts and the law. However, the court conceded that judicial copying is a long-standing and accepted practice although if carried to excess, may raise problems.

A complaint that a judge's decision should be set aside because the reasons for judgment incorporate materials from other sources is essentially a procedural complaint. Judicial decisions benefit from a presumption of integrity and impartiality - a presumption that the judge has done the job that he is sworn to do. The party seeking to set aside a judicial decision because the judge's reasons incorporated the material of others, bears the burden of showing that the presumption (of integrity and impartiality) is rebutted. The threshold for rebutting that presumption is high and requires "cogent" evidence. The question is whether the evidence presented by the party challenging the judgment convinces the reviewing court that a reasonable person would conclude that the judge did not perform his sworn duty to review and consider the evidence with an open mind.

The fact that a judge attributes copied material to the author tells us nothing about whether he put his mind to the issues addressed in the copying. Lack of originality is not a flaw in judgment writing. On the contrary, it is part and parcel of the judicial process. Lack of originality and failure to attribute sources do not in themselves rebut the presumption of judicial impartiality and integrity. This only occurs if the copying is of such a character that a reasonable person apprised of the circumstances would conclude that the judge did not put his mind to the evidence and the issues and did not render an impartial and independent decision.

In this case, taking into account the complexity of the facts and accepting that it would have been preferable for the trial judge to discuss the facts and issues in his own words, the court could not conclude that the judge failed to consider the issues and make an independent decision on them. On the contrary, the reasons demonstrated that the judge addressed his mind to the issues that he had to decide. He rejected some of the plaintiffs' key submissions, demonstrated that he considered the issues independently and impartially.

However, the court found that other aspects of the reasons disclosed palpable and over-riding errors and should be set aside. For example, the court found that there was no evidence to support the trial judge's findings of liability against one of the nurses, the hospital and two doctors and set aside those findings.

Regards,

Blair