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
Friday, June 21, 2013
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
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
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
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
Thursday, May 23, 2013
No Secondary Market Cause of Action for Prospectus Mispresentation.
In a recent decision, the Ontario Superior Court of Justice confirmed that section 130(1) of the Ontario Securities Act (the "Act") does not provide a statutory cause of action and remedies to purchasers of securities in the secondary market.
In the case of Tucci v. Smart Technologies Inc. (114 O.R.) 3d at 294, the plaintiff, Tucci, brought a proposed class action for damages pursuant to section 130 of the Act. He brought a motion to certify the action as a class proceeding. Except for the contested issue which involved the interpretation of section 130(1) of the Act, the defendants consented to the certification of the action.
Smart Technologies Inc. ("Smart Tech") is incorporated under the Alberta Business Corporations Act. Its business concerned designing, manufacturing and selling interactive technology products. Its Class A Shares are listed for trading on the Toronto Stock Exchange and on the NASDAQ.
For the purposes of an initial public offering on July 15, 2010, Smart Tech filed a prospectus with Canadian Securities Regulators and a registration statement with US securities regulators. The IPO involved the sale to the pubic of 38,830,000 Class A Shares at US$17 per share.
Tucci, who lives in Ontario, purchased 850 Class A Shares at US$17 per share in the IPO. He alleges that the Canadian prospectuses and the American registration statement contained misrepresentations that did not become apparent until a corrective disclosure was made on November 9, 2010.
Although the IPO closed on July 20, 2010, Class A Shares began trading on the TSX and on the NASDAQ on July 15, 2010 in advance of the IPO closing. In other words there was secondary trading in the Class A Shares during the IPO.
In the proposed class action, Tucci alleged that the disclosure in Smart Tech's offering materials was materially deficient and that he and the other proposed class members suffered damages as a result of acquiring the shares of Smart Tech at an inflated price. He advanced a claim for prospectus misrepresentation under section 130 of the Act. There was a parallel class action (McKenna v. Smart Technologies) pending in the United States District Court for the Southern District of New York.
In finding that Tucci's interpretation of section 130(1) was "unnecessary" and "strained", Justice Paul Perell considered that the conventional understanding of section 130(1) of the Act was that it provides a statutory cause of action and remedies to purchasers buying securities in the primary market for misrepresentations in the prospectus used during distribution to the public. The conventional understanding does not provide a remedy for any purchasers in the secondary market. Rather, subject to the court granting leave, purchasers in the secondary market have a statutory cause of action for misrepresentation pursuant to Part XXIII.1 of the Act.
Tucci challenged the conventional understanding of this section and argued that "a purchaser who purchases a security offered by the prospectus during the period of distribution or during distribution to the public" included not only primary market purchasers but also some secondary market purchasers. He argued that as a matter of public policy during the period of distribution of securities in the primary market, purchasers in the primary market and in the secondary market are similarly situated and therefore it was good public policy to treat those people the same rather than imposing a leave requirement on the purchasers in the secondary market.
In dismissing this argument, Justice Perell held that the judgment of the British Columbia Court of Appeal in Pearson v. Boliden Ltd. was persuasive. That judgment held that the statutory rights of action for prospectus misrepresentation were available only to investors who purchased directly from an underwriter, issuer or selling security holder and not to others who purchased "during the period of distribution".
Justice Perell held that a secondary market purchaser does not purchase a security offered by a prospectus. Rather, he or she purchases a security offered by a secondary market vendor. The price of the security being sold and the terms of sale for the secondary market sale may and likely will be different in the primary market from the secondary market. Tucci's interpretation would leave the anomalous result that some of the claimants who purchased in the secondary market would not have the remedy of rescission that would be available to section 130 claimants who purchased in the primary market. This follows because the right to elect rescission is available only against the issuers of the security, the selling security holders and underwriters.
Finally, Justice Perell held that Tucci's interpretation was not necessary to serve the purposes of the Act which offered a section 130 cause of action for purchasers in the primary market and, with leave, a Part XXIII.1 cause of action for purchasers in the secondary market. There was no legislative purpose to be served by adding a special class of secondary market purchasers whose purchases happen to occur during the primary market's operation.
Regards,
Blair
In the case of Tucci v. Smart Technologies Inc. (114 O.R.) 3d at 294, the plaintiff, Tucci, brought a proposed class action for damages pursuant to section 130 of the Act. He brought a motion to certify the action as a class proceeding. Except for the contested issue which involved the interpretation of section 130(1) of the Act, the defendants consented to the certification of the action.
Smart Technologies Inc. ("Smart Tech") is incorporated under the Alberta Business Corporations Act. Its business concerned designing, manufacturing and selling interactive technology products. Its Class A Shares are listed for trading on the Toronto Stock Exchange and on the NASDAQ.
For the purposes of an initial public offering on July 15, 2010, Smart Tech filed a prospectus with Canadian Securities Regulators and a registration statement with US securities regulators. The IPO involved the sale to the pubic of 38,830,000 Class A Shares at US$17 per share.
Tucci, who lives in Ontario, purchased 850 Class A Shares at US$17 per share in the IPO. He alleges that the Canadian prospectuses and the American registration statement contained misrepresentations that did not become apparent until a corrective disclosure was made on November 9, 2010.
Although the IPO closed on July 20, 2010, Class A Shares began trading on the TSX and on the NASDAQ on July 15, 2010 in advance of the IPO closing. In other words there was secondary trading in the Class A Shares during the IPO.
In the proposed class action, Tucci alleged that the disclosure in Smart Tech's offering materials was materially deficient and that he and the other proposed class members suffered damages as a result of acquiring the shares of Smart Tech at an inflated price. He advanced a claim for prospectus misrepresentation under section 130 of the Act. There was a parallel class action (McKenna v. Smart Technologies) pending in the United States District Court for the Southern District of New York.
In finding that Tucci's interpretation of section 130(1) was "unnecessary" and "strained", Justice Paul Perell considered that the conventional understanding of section 130(1) of the Act was that it provides a statutory cause of action and remedies to purchasers buying securities in the primary market for misrepresentations in the prospectus used during distribution to the public. The conventional understanding does not provide a remedy for any purchasers in the secondary market. Rather, subject to the court granting leave, purchasers in the secondary market have a statutory cause of action for misrepresentation pursuant to Part XXIII.1 of the Act.
Tucci challenged the conventional understanding of this section and argued that "a purchaser who purchases a security offered by the prospectus during the period of distribution or during distribution to the public" included not only primary market purchasers but also some secondary market purchasers. He argued that as a matter of public policy during the period of distribution of securities in the primary market, purchasers in the primary market and in the secondary market are similarly situated and therefore it was good public policy to treat those people the same rather than imposing a leave requirement on the purchasers in the secondary market.
In dismissing this argument, Justice Perell held that the judgment of the British Columbia Court of Appeal in Pearson v. Boliden Ltd. was persuasive. That judgment held that the statutory rights of action for prospectus misrepresentation were available only to investors who purchased directly from an underwriter, issuer or selling security holder and not to others who purchased "during the period of distribution".
Justice Perell held that a secondary market purchaser does not purchase a security offered by a prospectus. Rather, he or she purchases a security offered by a secondary market vendor. The price of the security being sold and the terms of sale for the secondary market sale may and likely will be different in the primary market from the secondary market. Tucci's interpretation would leave the anomalous result that some of the claimants who purchased in the secondary market would not have the remedy of rescission that would be available to section 130 claimants who purchased in the primary market. This follows because the right to elect rescission is available only against the issuers of the security, the selling security holders and underwriters.
Finally, Justice Perell held that Tucci's interpretation was not necessary to serve the purposes of the Act which offered a section 130 cause of action for purchasers in the primary market and, with leave, a Part XXIII.1 cause of action for purchasers in the secondary market. There was no legislative purpose to be served by adding a special class of secondary market purchasers whose purchases happen to occur during the primary market's operation.
Regards,
Blair
Monday, April 29, 2013
Issue Estoppel - its not over until the Supreme Court says its over
The Supreme Court of Canada recently tackled the difficult issue of issue estoppel - again.
There has long existed a tension between a litigant's desire for finality and the often competing requirement that a judge or administrative tribunal exercise its discretion to ensure that no injustice results. In a close (4 to 3) decision, the Supreme Court of Canada came down in favour of permitting the exercise of discretion by decision makers. This decision will undoubtedly result in more litigation and see many more litigants apply for stays of proceedings on the basis of issue estoppel.
In the case of Penner v. Niagara (Regional Police Services Board), Penner was arrested for disruptive behaviour in an Ontario courtroom. He filed a complaint against two police officers under the Police Services Act ("PSA") alleging unlawful arrest and unnecessary use of force. He also started a civil action claiming damages arising out of the same incident.
The Niagara Chief of Police appointed a hearing officer under the PSA who found the police officers not guilty of misconduct and dismissed Penner's complaint. The hearing officer's decision was reversed on appeal by the Ontario Civilian Commission on Police Services on the basis that the arrest was unlawful. On further appeal, the Ontario Divisional Court concluded that the officers had legal authority to make the arrest and restored the hearing officer's decision. The police officers then successfully moved in the Ontario Superior Court of Justice to have Penner's claims in the civil action struck on the basis of issue estoppel.
While finding that several factors weighed against the application of issue estoppel, the Ontario of Appeal concluded that applying the doctrine would not work an injustice in this case and dismissed Penner's appeal.
In allowing Penner's appeal and holding that his civil action could proceed, the majority of the Supreme Court of Canada held as follows:
The doctrine of issue estoppel allows for the exercise of discretion to ensure that no injustice results. There must be a case-by-case review of the circumstances to determine whether it would be unfair or unjust to apply issue estoppel or whether the preconditions for applying it have been met. In the circumstances of this case it was unfair to Penner to apply issue estoppel.
While finality is important to the judicial system unfairness in applying issue estoppel may still arise. In this case there was a significant difference between the purposes, processes or stakes involved in the two proceedings. Where the legislative scheme contemplates multiple proceedings and the purposes of those proceedings are widely divergent, to apply the doctrine might upset the parties legitimate and reasonable expectations and might also undermine the policy goals of the administrative proceedings. This would result in encouraging more formality and protraction in proceedings or discouraging access to the administrative proceedings all together. In each case, the court has to consider the parties' reasonable expectations about what is at stake in the proceedings or the fundamentally different purposes between them.
In this case, nothing in the legislative text gave rise to an expectation that the disciplinary hearing would be conclusive of Penner's legal rights in a civil action: the standards of proof required and the purposes of the two proceedings are significantly different; and unlike a civil action, the disciplinary process provided no remedy or costs for Penner. In short, the Court of Appeal did not take into account important considerations which included the procedural protections afforded to Penner by the administrative process.
Finally, applying issue estoppel had the effect of using the decision of the Chief of Police's designate to exonerate the Chief in the civil action and was therefore a serious affront to basic principles of fairness.
Not surprisingly, the three dissenting judges held that the more important principle in the case was the finality of litigation which in their view assured the fairness of the justice system in Canada. The dissenting judges held that the principles underlying the doctrine of the issue estoppel - that there should be an end to litigation - and that the same party should not be harassed twice for the same cause, are core principles which focus on achieving justice and preventing injustice by preserving the finality of litigation.
The dissenting judges held that in this case, issue estoppel should apply. The difference between the standard of proof required to establish misconduct under the PSA and that required in a civil trial were irrelevant in this case. The hearing office (appointed by the Chief of Police) made unequivocal findings that there was virtually no evidence to support Penner's claims. That means that there was no evidence to support his claims whatever standard of proof was applied and a civil action would inevitably yield the same result.
The dissenting judges referred to the arguments of potentially inconsistent results in re-litigating matters to support their conclusion.
Regards,
Blair
There has long existed a tension between a litigant's desire for finality and the often competing requirement that a judge or administrative tribunal exercise its discretion to ensure that no injustice results. In a close (4 to 3) decision, the Supreme Court of Canada came down in favour of permitting the exercise of discretion by decision makers. This decision will undoubtedly result in more litigation and see many more litigants apply for stays of proceedings on the basis of issue estoppel.
In the case of Penner v. Niagara (Regional Police Services Board), Penner was arrested for disruptive behaviour in an Ontario courtroom. He filed a complaint against two police officers under the Police Services Act ("PSA") alleging unlawful arrest and unnecessary use of force. He also started a civil action claiming damages arising out of the same incident.
The Niagara Chief of Police appointed a hearing officer under the PSA who found the police officers not guilty of misconduct and dismissed Penner's complaint. The hearing officer's decision was reversed on appeal by the Ontario Civilian Commission on Police Services on the basis that the arrest was unlawful. On further appeal, the Ontario Divisional Court concluded that the officers had legal authority to make the arrest and restored the hearing officer's decision. The police officers then successfully moved in the Ontario Superior Court of Justice to have Penner's claims in the civil action struck on the basis of issue estoppel.
While finding that several factors weighed against the application of issue estoppel, the Ontario of Appeal concluded that applying the doctrine would not work an injustice in this case and dismissed Penner's appeal.
In allowing Penner's appeal and holding that his civil action could proceed, the majority of the Supreme Court of Canada held as follows:
The doctrine of issue estoppel allows for the exercise of discretion to ensure that no injustice results. There must be a case-by-case review of the circumstances to determine whether it would be unfair or unjust to apply issue estoppel or whether the preconditions for applying it have been met. In the circumstances of this case it was unfair to Penner to apply issue estoppel.
While finality is important to the judicial system unfairness in applying issue estoppel may still arise. In this case there was a significant difference between the purposes, processes or stakes involved in the two proceedings. Where the legislative scheme contemplates multiple proceedings and the purposes of those proceedings are widely divergent, to apply the doctrine might upset the parties legitimate and reasonable expectations and might also undermine the policy goals of the administrative proceedings. This would result in encouraging more formality and protraction in proceedings or discouraging access to the administrative proceedings all together. In each case, the court has to consider the parties' reasonable expectations about what is at stake in the proceedings or the fundamentally different purposes between them.
In this case, nothing in the legislative text gave rise to an expectation that the disciplinary hearing would be conclusive of Penner's legal rights in a civil action: the standards of proof required and the purposes of the two proceedings are significantly different; and unlike a civil action, the disciplinary process provided no remedy or costs for Penner. In short, the Court of Appeal did not take into account important considerations which included the procedural protections afforded to Penner by the administrative process.
Finally, applying issue estoppel had the effect of using the decision of the Chief of Police's designate to exonerate the Chief in the civil action and was therefore a serious affront to basic principles of fairness.
Not surprisingly, the three dissenting judges held that the more important principle in the case was the finality of litigation which in their view assured the fairness of the justice system in Canada. The dissenting judges held that the principles underlying the doctrine of the issue estoppel - that there should be an end to litigation - and that the same party should not be harassed twice for the same cause, are core principles which focus on achieving justice and preventing injustice by preserving the finality of litigation.
The dissenting judges held that in this case, issue estoppel should apply. The difference between the standard of proof required to establish misconduct under the PSA and that required in a civil trial were irrelevant in this case. The hearing office (appointed by the Chief of Police) made unequivocal findings that there was virtually no evidence to support Penner's claims. That means that there was no evidence to support his claims whatever standard of proof was applied and a civil action would inevitably yield the same result.
The dissenting judges referred to the arguments of potentially inconsistent results in re-litigating matters to support their conclusion.
Regards,
Blair
Friday, April 26, 2013
Police need to obtain wiretap authority to access future text messages.
The Supreme Court of Canada recently released a decision which held that the police could not rely on the general warrant provisions of the Criminal Code (Code) to compel Telus Communications Company (Telus) to provide them with copies of future text messages sent or received by two Telus subscribers. Rather, if the police wanted to obtain access to these text messages, they would have to obtain a specific wiretap authorization under Part VI of the Code.
Unlike most mobile telephone providers, Telus routinely makes electronic copies of all text messages sent or received by its subscribers and stores them on a computer database for a brief period of time. In the case decided by the court, the police obtained a general warrant which required Telus to produce on a daily basis any future messages which would be sent or received during a two week period. Telus applied to quash the general warrant arguing that it constituted an interception of private communications and therefore required authorization under the wiretap authorization provisions in Part VI of the Code.
The Ontario Superior Court of Justice dismissed Telus' application and the appeal went directly to the Supreme Court of Canada. The majority of the court allowed the appeal and ordered that the general warrant be quashed.
Justice Abella wrote that, "The only practical difference between text messaging and traditional voice communications is the transmission process. This distinction should not take text messages outside the protection to which private communications are entitled under Part VI of the Code. The general warrant provision of the Code should be broadly construed to ensure that it is not used to circumvent the more specific or rigorous pre-authorization requirements for warrants, such as those found in Part VI". Justice Abella then embarked on interpreting the meaning of the word "intercept" and held that the word must be broadly interpreted and must focus "on the acquisition of informational consent and the individual's expectation of privacy at the time the communication was made".
Finally, the learned judge held that text messages are private communications and even if they are stored on a service provider's computer, their production requires authorization under Part VI of the Code. If Telus did not maintain its computer database there is no doubt that the police would be required to obtain an authorization under Part VI of the Code to secure the prospective production of text messages. Most service providers do not routinely copy text messages to a computer database. Accordingly, if the police wanted to target an individual who used a different service provider, they would have no option but to obtain wire tap authorization under Part VI of the Code to compel the production. This creates a "manifest unfairness" to individuals who are unlikely to realize that their choice of telecommunication service provider can dramatically effect their privacy. Using Telus should not deprive it subscribers of the protection of the Code to which every other Canadian is entitled.
Regards,
Blair
Unlike most mobile telephone providers, Telus routinely makes electronic copies of all text messages sent or received by its subscribers and stores them on a computer database for a brief period of time. In the case decided by the court, the police obtained a general warrant which required Telus to produce on a daily basis any future messages which would be sent or received during a two week period. Telus applied to quash the general warrant arguing that it constituted an interception of private communications and therefore required authorization under the wiretap authorization provisions in Part VI of the Code.
The Ontario Superior Court of Justice dismissed Telus' application and the appeal went directly to the Supreme Court of Canada. The majority of the court allowed the appeal and ordered that the general warrant be quashed.
Justice Abella wrote that, "The only practical difference between text messaging and traditional voice communications is the transmission process. This distinction should not take text messages outside the protection to which private communications are entitled under Part VI of the Code. The general warrant provision of the Code should be broadly construed to ensure that it is not used to circumvent the more specific or rigorous pre-authorization requirements for warrants, such as those found in Part VI". Justice Abella then embarked on interpreting the meaning of the word "intercept" and held that the word must be broadly interpreted and must focus "on the acquisition of informational consent and the individual's expectation of privacy at the time the communication was made".
Finally, the learned judge held that text messages are private communications and even if they are stored on a service provider's computer, their production requires authorization under Part VI of the Code. If Telus did not maintain its computer database there is no doubt that the police would be required to obtain an authorization under Part VI of the Code to secure the prospective production of text messages. Most service providers do not routinely copy text messages to a computer database. Accordingly, if the police wanted to target an individual who used a different service provider, they would have no option but to obtain wire tap authorization under Part VI of the Code to compel the production. This creates a "manifest unfairness" to individuals who are unlikely to realize that their choice of telecommunication service provider can dramatically effect their privacy. Using Telus should not deprive it subscribers of the protection of the Code to which every other Canadian is entitled.
Regards,
Blair
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