Executive Receives Prison Term For Bribery Of Foreign Official

In 1998, the Canadian Parliament enacted the Corruption of Foreign Public Officials Act (“Act”) in order to implement Canada’s obligations under the Convention on Combating Bribery in International Business Transactions as a signatory to the Organization for Economic Cooperation and Development.   Sixteen years later, on May 23, 2014, the first person convicted under the Act was sentenced to a three year penitentiary prison term.  In that time, only three other prosecutions were initiated under the Act, all involving corporations and all being resolved by way of guilty pleas.  The case of R. v. Nazir Karigar (2014) ONSC3093 was the first to proceed to trial. 

 

In this case, Mr. Karigar was convicted on a single count indictment of offering a bribe to a foreign public official.  He had conspired with several individuals employed by or associated with Cryptometrics Canada Limited of Ottawa, Ontario to offer bribes to officials of Air India and to an Indian cabinet minister.  The purpose of the conspiracy was to win a tender for a multi-million dollar contract to sell facial recognition software and related products to Air India.   However, Air India awarded the contract to another corporation. 

 

In his sentencing decision, Justice Hackland of the Ontario Superior Court of Justice took into account the following factors:

 

Aggravating Factors

 

1. The bribery scheme was sophisticated, carefully planned and intended to involve senior public officials at Air India and an Indian cabinet minister.  If successful, it would have involved the payment of millions of dollars in bribes and stock benefits over time;
2. Mr. Karigar’s participation in the bidding process involved other circumstances of dishonesty such as entering a fake competitive bid to create the illusion of a competitive bidding process and receiving confidential insider information in preparing the bid;
3. Mr. Karigar behaved throughout with a complete sense of entitlement, candidly relating to a Canadian Trade Commissioner that bribes had been paid and then urging the Canadian government’s assistance in closing the transaction; and
4. Mr. Karigar personally conceived of and orchestrated the bribery proposal and created financial spread sheets concerning the amounts he proposed be paid.   

 

Mitigating Factors

 

1. There was a high level of cooperation on Mr. Karigar’s part.  He exposed the bribery scheme to the authorities following a falling out with his co-conspirators.  He unsuccessfully sought an immunity agreement but avoided a great deal of trial time as a result of his extensive admissions;
2. Mr. Karigar had been a respectable business man all his working life prior to his involvement in the matter.  He had no prior criminal involvement.  He was in his late sixties and not in the best of health;
3. The bribery scheme was a complete failure.  Mr. Karigar and his co-conspirators failed to obtain the contract or any other benefits.  Accordingly, the harm resulting from the scheme was likely restricted to the promotion of corruption among a limited group of foreign public officials.

 

Jurisprudence Under The Act

 

Justice Hackland considered the relevant jurisprudence, i.e. the only three other prosecutions that have come before the courts:

 

1. In R. v. Watts [Hydro Kleen] (2005), Hydro Kleen pleaded guilty to bribing a foreign official.  It operated in Canada and the United States and its employees travelled between the two countries for work.  At times its employees experienced difficulties entering the United States.  Hydro Kleen hired a US immigration officer as a “consultant” and paid him $28,300 to facilitate the passage of its employees into the US.  Unknown to Hydro Kleen, the immigration officer also made it more difficult for employees of its competitors to enter the US.  A joint submission with respect to sentencing was accepted by the court which imposed a fine of only $25,000;
2. In R. v. Niko Resources Ltd. (2011), Niko Resources pleaded guilty to providing improper benefits ($195,984) to a foreign public official in Bangladesh in order to further business objectives.  The court accepted the parties joint submission on penalty which involved a fine in the amount of $9.49 million.  The court considered the seriousness of the crime and the principle sentencing objective of denunciation and deterrence;
3. In R. v. Griffiths Energy International (2013), Griffiths Energy pleaded guilty for paying a $2 million bribe and shares to a corporation owned by the wife of a foreign ambassador.  A new management team at Griffiths discovered that the bribe had been paid by their predecessors.  Current management acted quickly to fully investigate the matter and self-report the crime to authorities and pleaded guilty, saving the cost of a lengthy and complex trial.  A joint submission as to a penalty($10.35 million) was accepted by the court.

 

Justice Hackland held that in light of these decisions, it is clear that the bribery of foreign officials must be viewed as a serious crime and the primary objectives of sentencing must be denunciation and deterrence.  The more recent cases, Griffiths Energy and Niko Resources, clearly demonstrated that a substantial penalty is to be imposed by the courts even in circumstances where a guilty plea was entered and the accused has cooperated with authorities. 

 

Cases Of Fraud Under Section 380 Of The Criminal Code

 

Justice Hackland reviewed a number of cases in which the courts discussed the principles of general deterrence and noted that a fraud against a government agency is not a victimless crime as it results in a reduction in resources available to people who rely on government services.  Where the need for general deterrence is particularly pressing, incarceration would normally be preferable and to be effective, usually a conditional sentence must be punitive.

 

Justice Hackland considered the recent Court of Appeal case in R. v. Drabinski where the court allowed sentence appeal reducing the jail time imposed by the trial judge.  The court held that:

 

“The deterrent value of any sentence is a matter of controversy and speculation.  However, it would seem that if the prospect of a long jail sentence will deter anyone from planning on committing a crime, it would deter people like the appellants who are intelligent individuals, well aware of potential consequences, and accustomed to weighing potential future risks against potential benefits before taking action.”

 

Of note in Drabinski, the court held that in fraud cases, traditional mitigating factors such as an accused’s prior good character and the personal consequences of the fraud cannot alone justify departure from the sentencing range. 

 

Cases Of Bribery/Corruption Under The Criminal Code

 

Finally, Justice Hackland considered a number of cases where accused were sentenced under such sections where the courts held that due to the serious public nature of the offences the overwhelming consideration in sentencing is that the sentence be a deterrent to others. 

 

Weighing all of the factors listed above, Justice Hackland sentenced Mr. Karigar to a 3 year prison term in penitentiary.  Commentators argue that such a sentence "sets a clear precedent for future convictions". 

Regards,

Blair   

 

Mandatory Retirement for Law Firm Partners Not Discriminatory

John Michael McCormick became an equity partner at Fasken Martineau DuMoulin LLP (“Faskens”) in 1979.  In the 1980s the equity partners of Faskens voted to adopt a provision in their partnership agreement whereby equity partners were required to retire and divest their ownership shares in the partnership at the end of the year in which they turn 65.  In 2009, when he was 64, Mr. McCormick brought a claim before the British Columbia Human Rights Tribunal (“Tribunal”) alleging that the provision in the partnership agreement constituted age discrimination contrary to the British Columbia Human Rights Code (“Code”).

Faskens applied to have the claim dismissed on the grounds that the complaint was not within the jurisdiction of the Tribunal and that there was no reasonable prospect that that it would succeed.  Faskens argued that McCormick, as an equity partner, was not in the type of workplace relationship covered by the Code. 

The Tribunal  concluded that there was an employment relationship and concluded that Faskens had discriminated against McCormick.  Faskens' application for judicial review was dismissed by the British Columbia Supreme Court.  However, the British Columbia Court of Appeal allowed Faskens’ appeal, concluding that McCormick, as a partner, was not in an employment relationship with Faskens pursuant to the provisions of the Code. 

McCormick ‘s further appeal to the Supreme Court of Canada was dismissed.

The Supreme Court, with reasons written by Justice Abella, unanimously held that the Code was a quasi-constitutional legislation which should be “generously” interpreted to permit it to achieve its broad public purposes.  Those purposes include the prevention of arbitrary disadvantage or exclusion based on enumerated grounds so that individuals deemed to be vulnerable by virtue of a group characteristic can be protected from discrimination.  The Code achieves these purposes by prohibiting discrimination in a context such as employment. 

Deciding who is in an employment relationship for the purposes of the Code means examining the “two synergetic” aspects in the relationship:    control exercised by an employer over working conditions and remuneration, and corresponding dependency on the part of the worker.  The test is who is responsible for determining working conditions and financial benefits and to what extent does a worker have an influential say in those determinations.  The more the work life of individuals is controlled, the greater their dependency and, consequently their economic, social and psychological vulnerability in the workplace. 

Control and dependency are a function of whether the worker receives immediate direction from or is effected by the decision of others and also whether he or she has the ability to influence decisions which critically affect his or her working life.    Ultimately, the key is the degree of control and the extent to which the worker is subject and subordinate to someone else’s decision-making over working conditions and remuneration. 

Applying the control/dependency test to this case, Justice Abella found that in addition to the right to participate in the management of the partnership, McCormick benefited from other control mechanisms, including the right to vote for and stand for election to the firm's board; the duty that the other partners owed him to render accounts; the right not to be subject to discipline or dismissal; the right on leaving the firm to his share of Faskens' capital account; and the protection that he could only be expelled from the partnership by a special resolution passed by a meeting of all equity partners and a regional resolution in his region.     

The court found that as an equity partner and based on his ownership sharing of profits and losses and the right to participate in management, McCormick was part of the group that controlled the partnership, not a person vulnerable to its control and for over 30 years had benefited financially from the retirement of other partners.  McCormick was not ever in a subordinate relationship with the other equity partners.

Interestingly, the court held that it is not to say that a partner in a firm can never be an employee under the Code but in the absence of any genuine control of McCormick in the significant decisions effecting the workplace, in this case there was no employment relationship between him and Faskens under the provisions of the Code.  Accordingly, the court found that the Tribunal had no jurisdiction over McCormic’s relationship with Faskens.  

Regards,

Blair

"Abdicating" Trustee Found Liable For Loss of Trust Monies

The Ontario Court of Appeal has held that a trustee, who abdicated her discretion and responsibility by improperly delegating those powers to two other trustees, was jointly and severally liable with the other trustees for trust funds that were wrongfully removed from the trust.  See Penman (Litigation Guardian of) v. Penman 2014 ONCA 83

Mary Lou McGillvray, appealed from the decision of Justice L.B. Roberts of the Ontario Superior Court of Justice to the Ontario Court of Appeal.  Justice Roberts had found Ms. McGillvray jointly and severally liable, together with her two nephews, Randal Penman and Mark Penman, for the sum of $453,048.20 plus interest, on account of trust funds that were wrongfully removed from a trust created by Ms. McGillvray’s late brother and her sister-in-law for the benefit of their grandchildren.  At all relevant times, Ms. McGillvray and her nephew Mark Penman were co-trustees of the trust.  Although he was not named as a co-trustee, Randal Penman was a trustee de son tort of the trust.  Ms. McGillvray was also one of the executors of her deceased brother’s estate.

Ms. McGillvray’s central submission on the original application was that she had acted honestly and reasonably, in good faith, and with the benefit of legal advice from her nephew, Randal Penman, an Alberta lawyer.  She maintained that she was “duped” by her two nephews who wrongfully used the trust funds for their own benefit and that no act or omission on her part caused the loss of the trust funds. 

Justice Roberts disagreed.  She held that Ms. McGillvray had breached her obligations as a co-trustee of the trust, including her fiduciary obligations and made adverse findings as to Ms. McGillvray’s credibility and reliability of her testimony.  The finds included:

1. Ms. McGillvray had signed a director’s resolution authorizing Mark Penman to invest funds in the exercise of his unfettered discretion;
2. she failed to make any inquiries regarding the investment of the trust funds or Mark Penman’s dealings with the funds;
3. she was not misled by her nephews regarding the use and investment of the trust funds; and
4. she did not act reasonably in relation to her duties as a co-trustee of the trust and did not comply with her statutory duty of care as a trustee as set out under section 27(1) of the Trustee Act (the “Act”).  To the contrary she abdicated her duties entirely by improperly delegating all her powers, duties and authority as co-trustee to her two nephews.

The application judge found that it was “willful neglect and default” of a trustee to place trust funds in the hands of another (even a co-trustee) and allow it to remain there for years without any inquiry or any assurance that the trust is being properly administered.   

The Court of Appeal found that these findings of fact were available to the application judge on the evidentiary record before her.  Ms. McGillvray had failed to establish that the findings were tainted by "palpable and over-riding" error.  Accordingly, there was no basis for interference with the findings.

The Court of Appeal considered whether Ms. McGillvray could be relieved of liability by operation of law or under the terms of the trust indenture.  In this regard, it also upheld the decision of the application judge.  Justice Roberts held that McGillvray could not rely on the protection of section 35(1) of the Act which excuses trustees from liability for breaches of trust and failure to seek direction of the court where it is found that they acted honestly and reasonably.   This relief was not available to Ms. McGillvray because the alleged loss arose out of investment of the trust property and subsection 35(2) of the Act expressly provides that subsection (1) does not apply in those circumstances.  Moreover, the Court of Appeal held that Ms. McGillvray had not acted reasonably and therefore would be unable to rely on that section of the Act.

As to the trust indenture, the relevant section of it read that the trustees would not be responsible for the acts or defaults of each other or for any error in judgment or any act of omission or commission not amounting to actual fraud in the management and administration of the trust property.  Justice Roberts held that this paragraph did not apply to immunize Ms. McGillvray from personal liability because an exculpatory clause will not protect a trustee when it is found that the trustee improperly delegated the power or discretion in question.  Each trustee must actively consider his or her discretion and will not be exonerated for passively acquiescing in the actions of a co-trustee.   The law does not distinguish between passive and active trustees.  In accepting a trusteeship, the trustee assumes a duty to the beneficiaries of the trust.

Again the Court of Appeal agreed with the application judge and added that clauses of that kind will not protect the trustee when it is found that she improperly delegated her power or discretion.

In dismissing Ms. McGillvray’s appeal, the Court of Appeal commented that she remained free to pursue indemnification from Randal and Mark Penman for their wrongdoing in relation to the trust, should she be so advised.   

Regards,

Blair

    

Supreme Court Rules in Favour of Roadside Police Searches

In September of 2006, two police constables were in a marked police cruiser monitoring traffic on the Trans-Canada highway just west of Caronport, Saskatchewan.  They observed a car driven by Benjamin MacKenzie traveling toward them.  The police radar indicated that the car was traveling at a speed of 112 km per hour, only 2 km per hour over the posted limited.  However, the constables saw that the front end of the car was “pitching forward like it was slowing down very fast”.  They attributed this to a sudden and rapid deceleration of the car from 112 km per hour to 89 km per hour – the speed at which the car was traveling when it passed their police cruiser. 

The officers pursued Mr. MacKenzie.  Two kilometers down the road they spotted his car parked on the side of the highway.  They had not signaled for him to stop.  They wanted to give him a warning about speeding, even though they were unsure how fast he had been driving. 

Mr. MacKenzie was the only occupant of the car.  As one of the constables approached his window, Mr. MacKenzie, unprompted, said he was sorry, he knew he was speeding  and that he would slow down in future.  When Mr. MacKenzie handed over his license and registration documents the police noticed that his hands were shaking.  Mr. MacKenzie appeared to be sweating, with beads of sweat forming on his forehead and his breathing was very rapid.   His carotid artery was pulsing very rapidly.  In addition, the police noted that Mr. MacKenzie’s eyes had a pinkish colour to them.  

Mr. MacKenzie’s level of nervousness was extremely high.  When questioned about the details of his trip he gave contradictory answers in a short period of time.  As a result, the police asked him to step out of the car on the basis that they believed that he was under the influence of drugs.   They then advised Mr. MacKenzie of his Charter rights, including his right to counsel.  Mr. MacKenzie said he understood his rights but declined to call a lawyer.  

The police asked Mr. MacKenzie if he would consent to a search of his car.  When Mr. MacKenzie refused to consent, the police used Levi, a “single-profile” narcotic detector dog, who had been assigned to them.  Levi conducted a perimeter search of the car and by his actions indicated the scent of drugs was in the rear hatch area.  The police arrested Mr. MacKenzie and began a manual search of the car.  They found several gift-wrapped boxes in the rear hatch which ultimately led to the discovery that they contained marijuana.  The police arrested Mr. MacKenzie for possession for the purpose of trafficking.

At trial, the police testified that there were a number of factors that led them to believe that Mr. MacKenzie might be involved in trafficking marijuana:

1. his erratic driving;
2. his extreme nervousness;
3. physical signs consistent with the use of marijuana; and
4. Mr. MacKenzie was traveling on a known drug pipeline.

Mr. MacKenzie’s case did not proceed to  trial.  In a pre-trial motion he moved to have the marijuana excluded from evidence on the basis of arguments grounded in his right under Section 8 of the Canadian Charter of Rights and Freedoms (“Charter”) against unreasonable search and seizure.  Mr. MacKenzie argued that the police lacked reasonable suspicion that he was involved in a drug-related offence when they had their dog sniff his vehicle.

The trial judge agreed with Mr. MacKenzie and excluded the evidence and directed that a verdict of not guilty be entered against him.   The Saskatchewan Court of Appeal reversed the decision, finding that “the constellation of objective factors” was sufficient to meet the reasonable suspicion standard.  The Court of Appeal set aside the acquittal and remitted the matter to trial.

In a 5 – 4 decision, the Supreme Court of Canada agreed with the Court of Appeal and dismissed Mr. MacKenzie’s appeal.  The majority decision was written by Mr. Justice Moldaver.  

Justice Moldaver found that reasonable suspicion for the police must be grounded in objectively discernible facts.  While it is critical that the line between a hunch and reasonable suspicion be maintained to prevent the police from engaging in indiscriminate or discriminatory practices, it is equally vital that the police be allowed to carry out  their duties without undue skepticism or the requirement that their every move be placed under a "scanning electron-microscope".

Officer training and experience can play an important role in assessing whether the reasonable suspicion standard has been met.  Therefore in assessing whether a case for reasonable suspicion has been made out, the court should analyze the objective reasonableness through the lens of a reasonable person standing in the shoes of the police officer.  Police training and experience should not be accepted uncritically by the courts.  The courts don’t owe deference to a police officer’s view of the circumstances because of his or her training or experience in the field.  Essentially a trial judge must appreciate the significance  of police training and experience when evaluating the worth of the factors considered in forming the belief that the accused might be involved in a drug-related offence.   

In this case, the trial judge accepted the that the police officers' testimony was credible.  The factors identified by the officers provided the objective basis needed to support his belief that Mr. MacKenzie might be involved in a drug-related offence.  Looking at the totality of the evidence through the lens of an officer with training and field experience in the transportation and detection of drugs, the officers’ subjective belief that Mr. MacKenzie might be involved in a drug-related offence was objectively substantiated.

The dissenting judges held a much difference view.  They held that judges must scrutinize dog-sniff searches and that courts must remain vigilant and not shirk their role in evaluating police conduct for Charter compliance, particularly where the only effective check on that action is after the fact independent judicial assessment.   

The dissenters (decision written by Justice LeBel) held that police cannot simply draw on their experience in the field to create broad categories of “suspicious” behaviour into which almost anyone could fall.  Such an approach risks transforming the already flexible standard of reasonable suspicion into the generalized suspicion standard that has been rejected in the past.  The "constellation of facts" grounding reasonable suspicion must be based in the evidence tied to the individual and capable of supporting a logical inference of criminal behaviour.  While undertaking an objective assessment of the evidence from the police officers perspective, a court should not show that police officer’s testimony any particular deference.  The danger of placing undue emphasis on an officer’s testimony is that a court may inadvertently subvert the objective component of the reasonable suspicion standard.

Justice LeBel, held that in this case the police lacked the requisite reasonable suspicion to conduct the dog-sniff search.   Specifically, the police lacked objective grounds on which to justify deploying a sniffer dog to search Mr. MacKenzie’s car.  He found that the trial judge had not committed an error of law or a palpable and over-riding error of fact.   He understood the reasonable suspicion standard.  The police in this case relied on markers that applied broadly to innocent people or markers only of generalized suspicion that were at best highly equivocal.  The dissenting judges would have allowed Mr. MacKenzie's appeal and restored the decision of the trial judge.

Regards,

Blair

Court Orders Mistrial Due to Poor Jamaican Patois Interpretation

Section 14 of the Canadian Charter of Rights and Freedoms (“Charter”) provides a constitutional right to the assistance of an interpreter for a party or witness who does not understand or speak the language in which the proceedings are being conducted or who is deaf. 

In a recent decision of the Ontario Superior Court of Justice, Justice Conlan allowed a defence application and declared a mistrial where an accused who was charged with the offence of importing cocaine had not been provided with an accredited interpreter of Jamaican Patois.  Justice Conlan declared the mistrial on the basis that the accused, Michael Bryan’s right to make full answer and defence and his right to a fair trial were compromised by the deficiency in interpretation services provided at the Brampton, Ontario court.

Mr. Bryan and his co-accused, Ryan Douglas, were tried jointly before a jury on a single-count indictment alleging the offence of importing cocaine.  The allegation was that the two accused has ingested cocaine and brought the drug into Canada on an airplane from Jamaica.

The primary defence for each accused was duress – that their families had been threatened by thugs in Jamaica and that such threats caused them to swallow pellets of cocaine before flying from Jamaica to Toronto’s Pearson International Airport.   

During the course of the trial, an accredited interpreter who was attending the trial brought to the defence counsel’s attention that there had been several deficiencies with the interpretation of Mr. Bryan’s testimony.  The defence applied for a mistrial.

The interpreter who testified in a voir dire at the trial, was 33 years old.  He had lived in Jamaica for the first 25 years of his life, had worked as a youth ambassador for the United Nations and worked for three years as an interpreter for the United States Peace Corp.  The interpreter pointed out numerous inconsistencies and  mistakes in the Patios interpretation provided to Mr. Bryan, some of which amounted to a paraphrasing of his evidence.  Even Mr. Bryan had to stop the trial interpreter on two occasions to correct mistakes

Justice Conlan, allowed the mistrial application.  He held that, while there was no requirement or even an expectation that the interpretation be perfect, the minimum constitutional threshold to meet the obligation under section 14 of the Charter requires that the interpretation must be continuous, precise, impartial, competent and contemporaneous.  While poor interpretation can be accepted, it is not appropriate for the court to second-guess and speculate as to whether there has been a breach of section 14 of the Charter.  The accused is entitled to the minimum constitutionally protected threshold afforded by section 14. . 

Justice Conlan found that the trial was too far along to stop and start again with the same jury.  Accordingly, even though it was a joint trial with Mr Douglas, Justice Conlan found that nothing short of the remedy of a mistrial would suffice in those circumstances.

Regards,

Blair 

SCC Clarifies Test For Civil Fraud

Albert Bruno was the principal of an American company called Bruno Appliance and Furniture, Inc.  In late 2001, Bruno met with Robert Cranston, the principal of a Panamanian company, Frontline Investments Inc.  As a result of those meetings, Bruno signed a number of investment documents in favour of Frontline.

 

In February of 2002, Bruno met with Cranston and Gregory Pebbles, a lawyer at the Toronto offices of Cassels Brock and Blackwell.  Robert Hryniak did not attend this meeting.  However, Hryniak's company, Tropos Financial Corp., received and paid a bill for Pebbles'  attendance. 

 

In early March of 2002, Bruno Appliance wired US$1 million to Cassels Brock who assigned the funds to an account associated with its client, Hyrniak's company, Tropos.  Bruno Appliance's funds were then "bundled" with other funds totalling US$3.5 million and paid to Tropos in a bank draft.  At the end of April 2002, Tropos paid US$2.5 million to a company called Southern Equity Investors Inc. and in June 2002, Tropos transferred approximately US$550,000 to an individual named Reinhard.  By the end of September 2003, the balance in Cassels Brock's  Tropos account had dwindled to US$19,000. 

 

Bruno Appliance's money was not invested and it never received a return on its investment. 

 

Bruno Appliance joined with other plaintiffs in a civil fraud action against Hryniak, Peebles and Cassels Brock.  The plaintiffs brought motions for summary judgment.  The motion judge found that Bruno Appliance had established its claim against Hryniak.  He found that despite his absence from the early meeting, Hryniak knew that the meeting was occurring and that his company Tropos paid for Pebbles' attendance.  The motion judge found that Hryniak was aware that US$1 million was placed in the Tropos account and that he gave instructions regarding those funds. 

 

On appeal to the Ontario Court of Appeal, the court allowed Hyrniak's appeal and held that there were two genuine issues that required a trial:  whether Hryniak induced Bruno Appliance to invest; and whether some of the funds were misappropriated by Cranston rather than Hryniak.

 

The Court of Appeal also found that the motion judge failed to address the issue of whether Hryniak knowingly made any misrepresentation that induced Bruno Appliance to invest, a necessary element of fraud. 

 

The Court of Appeal ordered that the Bruno Appliance action proceed to trial.  The plaintiff further appealed to the Supreme Court of Canada.

 

The Supreme Court of Canada dismissed the plaintiff's appeal and ordered that the action proceed to trial.  

 

At the Supreme Court the parties disagreed as to the elements of the tort of civil fraud, in particular whether proof was required that Hryniak induced Bruno Appliance to invest its money.  The judgment of the court was delivered by Justice Karakatsanis.  

 

The Supreme Court held that a classic statement of the elements of civil fraud stems from an 1889 decision of the British House of Lords, Derry v. Peek: 

 

First in order to sustain an action of deceit, there must be proof of fraud, and nothing short of that will suffice.  Secondly, fraud is approved when it is shewn that a false representation has been made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false... Thirdly, if fraud be proved, the motive of the guilty person of it is material.  It matters not that there was no intention to cheat or injure the person to whom the statement was made.

Since that statement was made, the Supreme Court of Canada has added two additional requirements - the false statement must actually induce the plaintiff to act upon it and proof of loss is required.

 

Accordingly, Justice Karakatsanis summarized the following four elements of the tort of civil fraud:  (1)  a false representation made by the defendant; (2)  some level of knowledge of the falsehood of the representation on the part of the defendant (whether through actual knowledge or recklessness); (3)  the false representation caused the plaintiff to act; and (4)  the plaintiff's actions resulted in a loss.

 

In dismissing the appeal, the SCC found that there was a genuine issue requiring a trial.  Civil fraud required a finding that Hryniak made a misrepresentation which induced Bruno Appliance to invest.  The motion judge did not identify the need for a misrepresentation and did not find that Hryniak had made one.  Since Hryniak was not present at the important meeting, he could only be liable for any misrepresentations made by Peebles or Cranston if their statements could be attributed to him.  However, the Court of Appeal considered and rejected the possibility that Pebbles or Cranston was acting as Hryniak's agent. 

 

While the motion judge found that the evidence clearly demonstrated that Hryniak was aware of the fraud and may have in fact benefited from the fraud, whether Hryniak perpetrated the fraud by inducing Bruno Appliance to contribute the US$1 million to a non-existent scheme was a genuine issue that required a trial. 

 

Regards,

 

Blair

Supreme Court Rejects Prime Minister's Appointment

In a rebuke to Canada's Prime Minister, the Supreme Court of Canada ruled that his attempt to appoint a judge from the Federal Court of Appeal to the country's highest court was unconstitutional.  

 

On September 30, 2013, Stephen Harper, the Prime Minister of Canada, announced the nomination of Justice Marc Nadon, a supernumerary judge of the Federal Court of Appeal to the Supreme Court of Canada.  On October 3, 2013, Justice Nadon was named as a judge of the Supreme Court of Canada by Order in Council.  He replaced Justice Morris Fish as one of the three judges appointed from Quebec pursuant to section 6 of the Supreme Court Act ("Act").   He was sworn in as a member of the court on the morning of October 7, 2013. 

 

On the same day, Justice Nadon's appointment to the SCC was challenged by Rocco Galati, a Toronto lawyer.  Mr. Galati brought an application before the Federal Court of Canada arguing that the Act does not permit Federal Court judges to be appointed to the SCC.  As a result of Mr. Galati's legal challenge, Justice Nadon decided not to participate in any cases that were before the SCC. 

 

In an attempt to confirm its choice of Justice Nadon and cut short Mr. Galati's challenge, the government referred two questions to the Supreme Court for hearing and consideration :

 

1.    Can a person who was, at any time, an advocate of at least 10 years standing at the Barreau du Quebec (Quebec Bar) be appointed to the Supreme Court of Canada as a member of the Supreme Court from Quebec pursuant to sections 5 and 6 of the Act?  (Justice Nadon was a former advocate of the Quebec bar.)

 

2.    Can Parliament enact legislation that requires that a person be or has previously been a barrister or advocate of at least 10 years standing at the bar of a province as a condition of appointment of a judge of the Supreme Court of Canada or enact the annexed declaratory provisions as set out in clauses 471 and 472 of the Bill entitled "Economic Action Plan 2013 Act, No. 2"?  (This was the government's omnibus budget bill.)

 

On the same day that the government referred these two questions to the court, it introduced Bill C-4, Economic Action Plan 2013 Act, No. 2 ("Bill C-4") into the House of Commons.  Clauses 471 and 472 of Bill C-4 proposed to amend the Act by adding sections 5.1 and 6.1.  These provisions were subsequently passed and received Royal Assent on December 12, 2013.  The new provisions were designed to clear the way for Justice Nadon's appointment. 

 

Section 5 of the Act reads:  "Any person may be appointed a judge who is or has been a judge of a Superior Court of a province or a barrister or advocate of at least 10 years standing at the bar of a province." 

 

Section 5.1, added by Bill C-4, reads:  "For greater certainty, for the purpose of section 5, a person may be appointed a judge if at any time, they were a barrister or advocate of at least 10 years standing at the bar of a province."

 

Section 6 of the Act reads:  "At least three of the judges shall be appointed from among the judges of the Court of Appeal or of the Superior Court of the Province of Quebec or from among the advocates of that Province ."

 

Section 6.1, added by Bill C-4, reads:  "For greater certainty, for the purpose of section 6, a judge is from among the advocates of the Province of Quebec if, at any time, they were an advocate of at least 10 years standing at the bar of that Province."

 

Seven judges of the Supreme Court of Canada heard this reference.  

 

In a six to one decision (Justice Moldaver dissenting), the Supreme Court answered the first question in the negative and determined that Justice Nadon did not meet the criteria set out in sections 5 and 6 of the Act and was therefore ineligible to join them on the Supreme Court of Canada.  

 

The Court answered the second question in the negative with respect to the three seats on the court reserved for Quebec and held that Parliament could not enact legislation to make Justice Nadon eligible without the unanimous consent of Parliament and the provincial legislatures because to do so amounted to a amendment to the Constitution Act, 1982.

 

The majority decision, written by all the majority justices, held that reading section 5 and section 6 of the Act together, means that the pool of eligible candidates from the four groups of people that are eligible under section 5 are narrowed by section 6 to two groups, i.e. current members of the Quebec bar or current judges of the courts of Quebec.  The plain meaning of section 6 has remained consistent since the original version of that provision was enacted in 1875 and it has always excluded former advocates.  By specifying that three judges shall be appointed "from among" the judges and advocates of the identified institutions impliedly excludes former members of those institutions and imposes a requirement of current membership.  Reading sections 5 and 6 together, the requirement of at least 10 years standing at the bar applied to appointments from Quebec.  

 

The Court held that this analysis is consistent with the underlying purpose of section 6 and reflects the historical compromise that led to the creation of the Supreme Court as a general court of appeal for Canada and as a federal and bijural institution.   Section 6 seeks to ensure civil law expertise and the representation of Quebec's legal traditions and social values on the Court and to enhance the confidence of Quebec in the Court.  

 

Accordingly, Justice Nadon, as a former but not current advocate, was not eligible.

 

With respect to the second question, the justices held that Parliament's unilateral power to provide for a general court of appeal for Canada found in section 101 of the Constitution Act, 1867, has being overtaken by the Supreme Court's evolution in the structure of the Constitution as recognized in Part V of the Constitution Act, 1982.   The Court's constitutional status arose from its historical evolution into an institution whose continued existence and functioning engaged the interests of both Parliament and the provinces.  As a result, Parliament is now required to maintain the essence of what enables the Supreme Court to perform its current role.  While Parliament has the authority to enact amendments necessary for the continued maintenance of the Court, it cannot unilaterally modify the composition or other essential features of the Court.  

 

Part V of the Constitution Act, 1982, expressly makes changes to the Supreme Court and to its composition subject to constitutional amending procedures.  Accordingly, such changes require the unanimous consent of Parliament and the provincial legislatures.  Any substantive change in relation to the court's eligibility requirements is an amendment to the Constitution in relation to the composition of the Supreme Court and triggers the application of Part V.  Accordingly, section 6.1 of the government's omnibus Economic Act was unconstitutional of Parliament since it substantively changed the eligibility requirements for appointments to the Quebec seats on the court under section 6.  The court found however, that section 5.1 does not alter the law as it existed in 1982 and was therefore validly enacted under the Constitution Act, although it is redundant.  

 

Despite this decision, the government has indicated that it hasn't ruled out re-appointing Justice Nadon to the Court.

 

Regards,

 

Blair