Western Canada Business Litigation Blog

One Remedy or More? The Supreme Court of Canada Clarifies Contractors’ Rights Under Builders’ Lien Legislation

Posted in Real Estate

On September 18, 2015, the Supreme Court of Canada issued its reasons in Stuart Olson Dominion Construction Ltd. v. Structural Heavy Steel, 2015 SCC 43.  Although the judgment concerned the interpretation of the Manitoba Builders’ Lien Act, it has implications for owners, contractors and others in the construction industry across Canada, including remedies available to industry participants in British Columbia under the BC Builders Lien Act.  The decision will no doubt have an important procedural impact on how liens ought to be discharged during the currency of a project where the claim is disputed.

The facts of the case were rather unremarkable.  A dispute arose between a contractor and subcontractor on the construction of a stadium at the University of Manitoba.  The dispute was not resolved and the subcontractor filed a claim of builders’ lien.  In order to ensure funds did not cease to flow on the project, the contractor secured the discharge of the lien by posting a lien bond in court for the full amount of the claim.  As the claim was still not resolved in a timely fashion, the contractor subsequently sought a declaration that it was entitled to use further funds it received from the owner disregarding any trust claim the subcontractor may have, given that the lien bond had already been posted in court securing the subcontractor claim.  In other words, the contractor took the position the lien bond was security for not only the lien claim but also any trust claims that may arise.  The Manitoba Court of Queen’s Bench initially sided with the contractor but that decision was overturned at the Court of Appeal.  The Supreme Court of Canada dismissed the appeal, essentially holding that the lien bond was not posted as security for both the lien claim and any trust obligations.  The remedies available to the subcontractor – i.e., a lien claim and a trust claim, could co-exist and the mere fact of securing of one did not discharge the other.

The result serves to confirm that contractors and subcontractors have a variety of remedies available to them to ensure payment on a construction project – that proposition, in and of itself, is not controversial.  However, perhaps the most surprising aspect of the decision was the court also confirmed that if trust money had been posted into court as opposed to a lien bond, the result may have been different.  This is because the court expressly acknowledged that payment of trust funds into court as security for a claim will not result in a breach of trust and, therefore, such a payment could secure not only a lien claim but also any trust obligations.  The court reasoned that the subcontractor would not recover twice on a lien claim and on a trust claim and that if for a variety of reasons the lien claim was not successful, the trust claim would still be available.

As a result of this decision, the manner in which lien claims are secured pending their determination by a court may result in a change of practice.  Previously, either lien bonds or letters of credit have been posted as security to discharge liens during the currency of a project.  However, if actual funds are posted instead, such funds may also stand in the place of trust rights or trust obligations that a contractor may have.  What remains to be seen is whether other trust claimants may then complain that their trust rights ought to be secured in the same fashion.  Regardless, it is clear that the protection afforded to contractors’ and subcontractors’ in builders’ lien legislation across Canada have been fortified by this decision.

What happens in Ecuador… no longer stays in Ecuador. The Supreme Court of Canada eliminates a jurisdictional barrier to cross-border enforcement action

Posted in Commercial

On September 4, 2015, the Supreme Court of Canada issued its decision in Chevron Corp v Yaiguaje, 2015 SCC 42. In a unanimous decision, the Court dismissed Chevron’s appeal, holding that Canadian courts have jurisdiction to enforce a foreign judgment whether or not the original dispute or the parties to it had any connection to Canada.  The decision will have far-reaching implications for multi-nationals with subsidiaries in Canada.  In effect, the Supreme Court of Canada has ruled that Canadian courts have jurisdiction to enforce valid judgments of foreign courts, whether or not the underlying dispute or the defendant relates to Canada.

In the case, the plaintiffs (a group of indigenous Ecuadorian villagers) sought enforcement of a $9.51 billion judgment made against Chevron Corp. by the Ecuadorian courts. The judgment sum consisted of environmental and punitive damages relating to oil extraction activities. The action was brought in Ontario against Chevron Corp. and its indirect Canadian subsidiary, Chevron Canada Limited (which has significant assets in Canada but which was not a party to the Ecuadorian judgment).

Chevron Corp. brought a motion to set aside service and stay the action for lack of jurisdiction, arguing that, following the Supreme Court of Canada’s decision in Club Resorts Ltd v Van Breda, 2012 SCC 17, a ‘real and substantial connection’ between the court in which enforcement is sought (in this case the Ontario court) and the parties or the subject matter of the original dispute is required to establish jurisdiction. The Supreme Court of Canada rejected this argument and confirmed that its decision in Van Breda applies only to first instance cases and not to actions for enforcement.

The decision made it clear that the sole requirement for the Canadian court’s jurisdiction in enforcement actions is that the original foreign court had valid jurisdiction. The jurisdiction of the Ontario court over Chevron Corp. derives from the existence of the foreign judgment, not from any connection between Ontario and the dispute. The judgment emphasized the generous and liberal approach traditionally taken by Canadian courts to the recognizance and enforcement of foreign judgments.

One aspect which remains unsettled is the effect of the Court Jurisdiction and Proceedings Transfer Act (CJPTA), which is in force in a number of provinces, notably British Columbia, Nova Scotia and Saskatchewan. The CJPTA explicitly states that a foreign judgment will create a rebuttable presumption of jurisdiction for the enforcing court. The Supreme Court of Canada recognised that the CJPTA, or a similar act, might change the position. As Ontario had not enacted any such legislation, the Court did not need to rule on the point. Therefore, there remains a possibility of enforcement action in provinces in which a version of the CJPTA is in force for a judgment debtor to mount a jurisdictional challenge.

The decision has undoubtedly increased litigation risk for mining, commodities and other multi-national companies operating through affiliated companies in foreign jurisdictions. Such companies will need to be prepared for the risk of being held liable in Canada for the actions of their subsidiaries or parent companies in other jurisdictions. Any assets in Canada may potentially be the target of enforcement actions and the companies may face increased public scrutiny in Canada as a result of such actions.

The ruling dealt only with jurisdiction, and the corporate structure separating the two Chevron entities should ultimately prevent enforcement. Other defences, such as forum non conveniens, may still apply. However, the Supreme Court of Canada’s decision clearly eliminates jurisdiction arguments with regard to enforcement of valid foreign judgments.

The decision is in keeping with a continuing trend in Canada towards multi-nationals facing actions from foreign plaintiffs in their home jurisdiction, which I blogged about in December last year. Two cases which have not yet proceeded to trial (Adolfo Garcia v. Tahoe Resources Inc. and Araya v. Nevsun Resources Ltd.) concern claims brought against a parent company for the activities of its foreign subsidiary. Both cases will be important and will be closely watched by commodities companies operating in multiple jurisdictions.

The statutory tort of Breach of Privacy

Posted in Privacy

Privacy is important. It is a matter of much current debate as changes in technology and the law arguably makes it more difficult to maintain and protect. Does the internet make privacy impossible? Is the passage of Bill C-51 a threat to individual privacy? Is the escalating use of drones a privacy concern? The answers to these questions are varied and uncertain. But how does the law treat privacy?

To begin, there is no common-law claim for breach of privacy. As a result, in B.C. the Legislature enacted the Privacy Act which came into force in December 2007. The Privacy Act is short, running to only five sections.  It creates a “statutory tort” making it unlawful for anyone “wilfully and without a claim of right, to violate the privacy of another.” However, the nature and degree of privacy a person is entitled to is only “that which is reasonable in the circumstances, giving due regard to the lawful interests of others.” Further, in determining if there has been a breach of privacy, the court will look at “the nature, incidence and occasion of the act or conduct and to any domestic or other relationship between the parties.” This seems simple enough but, in practice, is very difficult to assess given the myriad situations and the individual sensitivities that could give rise to a privacy concern.

As with many areas of the law, assessing whether a breach of privacy has taken place often involves looking at past cases and how the courts dealt with them. Of particular importance are decisions from appeal courts which define the law and its application. The Privacy Act has not had a lot of appellate consideration to date. However, a recent appellate decision, Fouad v. Wijayanayagam, does provide some guidance. The decision establishes that a person’s motive in seeking information will not turn an otherwise lawful information request into a breach of privacy. Put another way, if the impugned conduct was not itself a privacy breach, the fact it was undertaken for “nefarious” motives is irrelevant.

In this case, Dr. Fouad sued Dr. Wijay for invasion of privacy relying on the Privacy Act. Within the context of a wider dispute among a number of doctors, Dr. Wijay called the local hospital and sought information about Dr. Fouad’s qualifications. This was done, in part, to sow doubt about Dr. Fouad. The trial judge found this conduct to be a violation of the Privacy Act. He reasoned that simply asking for access to private information about Dr. Fouad with such a motive was a breach of privacy. The Court of Appeal disagreed on two grounds.

First, an unfulfilled request for private information does not amount to a privacy breach. In other words, simply asking for information which you are not given is not a privacy breach. Second, a lawful request for otherwise publicly available information, whatever the motive of the person asking, cannot be turned into a breach of privacy.

If you are seeking sensitive personal information about someone, you should be mindful of the limits imposed by the Privacy Act. Before you go too far, it may be wise to consider what a court would make of your request. If there is any doubt about it, you would be better not to make the request and invite a lawsuit.

Exercise Caution: Lease Renewal Clauses and Standard Form Leases in Gurudutt

Posted in Real Estate

A recent Ontario Superior Court case will be of interest to commercial landlords and tenants alike.

In 1251614 Ontario Ltd v. Gurudutt, the tenant signed a 10 year lease that granted the tenant the right to renew the lease for 2 further terms of 5 years each, with rental rates to be negotiated at the time of renewal and settled by arbitration, if necessary. In addition, the lease stated:

“Any such renewal to be on the same terms and conditions as are contained in this Lease except…the form of the renewal Lease shall be, at the landlord’s option, a lease extension agreement or a new lease in the landlord’s then standard form.” (emphasis added)

To read more, click here.

The Tricky Question of Drafting an Enforceable Restrictive Covenant

Posted in Real Estate

Restrictive covenants are commonly used for a wide variety of reasons.  They can ensure access across property or be part of a wider community plan.  They can define the use land can be put to or protect it for a singular purpose.   They are intended to be a commitment that runs with the land rather than just an obligation or benefit for the current owners.  There is no standard form of covenant for the very reason that they are generally drafted for particular reasons with specific properties in mind.  In each case, the covenant must be clear as to its scope and purpose and be capable of application into the future whoever the land owners are and whatever changes take place in the nature of the surrounding area.  As a result, while it may be easy to envision what a covenant is intended to do, it can be quite another thing to properly articulate it in a written document.

The risk of not properly drafting a covenant is that it will, at some future date, be challenged by someone who does not like it and risk being found invalid by the courts.  A recent Court of Appeal decision illustrates this very outcome.  A developer with a vision built a hotel strata on the shores of Lake Okanagan.  The idea was simple.  Units could be purchased as either primary residences or holiday spots for families.  The hotel would provide services such as housekeeping, maintenance, food and beverages and a front desk.  Units that were not occupied full time were to be put into a rental pool operated by the management company that provided the services.  Units would be rented to the public and the revenue shared between the strata unit owner and the operator.

In order to make the plan work, each strata unit was encumbered by a covenant that provided rentals to the public must be done in accordance with a rental pool management agreement administered by the rental manager.  This ensured revenue for the maintenance of the strata and a cohesive hotel operation run by the management company.  Units rented outside this arrangement would get the benefits of a hotel without contributing to the cost of its operation.  The covenant was intended to avoid this unfairness.  Seems simple.

However, the covenant came under attack by one strata owner who, having moved out, wanted to rent his unit free from the obligations imposed by the rental pool agreement.  The hotel managers sued him seeking an injunction compelling the rental of his unit through their office in accordance with the rental pool management agreement.  The owner counterclaimed seeking an order under the Property Law Act that the covenant was unenforceable on the grounds of uncertainty.  The trial judge, no doubt mindful of the chaos to the hotel operation if the covenant was struck down, found it to be sufficiently clear as to be enforceable.  The Court of Appeal disagreed.

The problem really centered on the fact that the covenant did not contain a complete description of the rental pool agreement.  In short, while it was a detailed document, it only referred indirectly to the “Rental Pool Management Agreement” as the agreement made between the owner and the hotel manager setting out its terms and as may be amended from time to time.   What this meant is that no owner could, by looking at the covenant alone, know with any certainty what obligations they had under the Rental Pool Management Agreement.  To find out, they had to look outside the covenant itself.  Further, the Rental Pool Management Agreement had not existed when the covenants were originally registered and, after it was created, had changed a number of times over the years.  The rental pool agreement also gave the hotel operator the ability to change terms (such as the profit share) without an owner’s agreement.

The Court of Appeal did not like this because it meant there was no real certainty to the terms of the covenant.  What the covenant meant was dependent entirely on an external document that was effectively only an “agreement to agree”.  It was whatever the hotel operator and owner may ultimately agree to.  Such “agreements” are legally unenforceable.   The covenant did not contain a mechanism to resolve cases where no agreement was reached.  The law requires that covenants be absolutely clear so that “present and future owners may know with precision what obligations are imposed upon them.”  As the covenant in this case did not meet that standard, it was held unenforceable and struck from the title to the owner’s unit.

While the decision illustrates the clear line courts seek to draw on the requirements needed to make sure a covenant is enforceable, it also throws into peril the operation of this hotel as a practical matter.  If you seek to have a covenant be enforceable now and into the future, you would do well to make sure it is drafted carefully.  If you are burdened with a covenant you don’t particularly like, there may be hope for its cancellation if you can demonstrate it is not entirely clear in its expression.  It may be worth challenging in court.  The only downside, besides time and cost, is that you may be wrong: it is enforceable.  In that case, you are really no worse off.

“But I’m a lawyer…” Supreme Court of Canada clarifies mental element necessary for contempt

Posted in Civil Procedure

On April 16, 2015, the Supreme Court of Canada released its Reasons for Judgment in the case of Carey v. Laiken, 2015 SCC 17, clarifying that a specific intention to breach a court order is not necessary for a finding of contempt, and clarifying when a Court can and cannot revisit a finding of contempt that it has previously made.

Mr. Carey was counsel for Mr. Sabourin and his companies in a case involving offshore investments that had gone poorly. Ms. Laiken had invested heavily with Mr. Sabourin and his group of companies. The money was lost and, after Mr. Sabourin sued Ms. Laiken for $364,000, alleging a deficit in her margin account, she counterclaimed for $800,000 claiming that he had defrauded her.

During the proceedings, the Ontario Superior Court of Justice issued a Mareva injunction, freezing the assets of Mr. Sabourin and his companies pending trial. As is customary in Mareva injunctions, the order prohibited not only the respondents, but also anyone with knowledge of the order, from disposing or otherwise dealing with any of Mr. Sabourin’s assets.

A few months after the initial order, Mr. Carey received a cheque for $500,000 from Mr. Sabourin, with no explanation or instructions, and deposited it into his trust account. After first instructing Mr., Carey to use the money to try and settle with unrelated third party creditors (instructions that were wisely declined) Mr. Sabourin told Mr. Carey to use the funds to try and settle with Ms. Laiken instead, something within the injunction’s scope.

However, after failing to reach a settlement with Ms. Laiken’s counsel, during which time Mr. Carey did not mention the existence of the trust funds, Mr. Carey agreed to return the balance of the funds to Mr. Sabourin – after deducting a further amount for future legal fees, given that the parties had agreed that the injunction did not prohibit payment of fees. Mr. Carey accordingly re-transferred $440,000 to Mr. Sabourin. A month later, Mr. Sabourin told Mr. Carey he was terminating the retainer, went out of business, and disappeared.

Meanwhile, other creditors of Mr. Sabourin obtained judgment against him and put his assets and companies into receivership. The receiver learned of the funds that Mr. Carey had at one time held, and demanded an accounting. By then, only $6,000 remained. After Ms. Laiken obtained summary judgment dismissing Mr .Sabourin’s initial claim and granting her counterclaim, she obtained an order holding Mr. Carey in contempt of court for breaching the Mareva injunction by releasing the funds to Mr. Sabourin.

At a subsequent hearing to determine the penalty for the contempt, however, the motions judge revisited her decision. Mr. Carey now testified that he thought that he had been acting in accordance with his professional obligations, simply returning the money that was in excess of what was required for legal fees, and that did not count as a “transfer” of the funds. He also claimed that he thought he had an obligation, arising out of solicitor-client privilege, not to alert counsel for Ms. Laiken to the existence of the funds at the time, and that extended to justifying their release. The motions judge reversed herself, deciding that the terms of the order may not have been clear to Mr. Sabourin and doubting whether or not Mr. Carey’s interpretation of it was deliberately and wilfully blind.

The Ontario Court of Appeal unanimously allowed the appeal and restored the initial contempt finding. While it accepted that Mr. Carey did not specifically desire to breach the order, that was not a necessary element to establish in order to find him liable for civil contempt. Mr. Carey knew of a clear court order and committed an act that violated it: that was all that need be shown. Mr. Carey appealed.

There were two issues before the Supreme Court of Canada:

  1. What is the required intent necessary to find contempt?
  2. Was the motions judge permitted to revisit the initial decision finding Mr. Carey in contempt?

Mr. Carey argued that where someone a) could not purge the contempt in question, b) is a lawyer, or c) is a third party to the order, then to find contempt, a Court must find that the person specifically intended to disobey the order, i.e.: they intended to be in contempt. In contempt cases, the alleged contemnor is often given the chance to “purge” their contempt, i.e.: to undo the action that has breached the court order, or to comply with the order, before punishment for the contempt is imposed. Here, there was no way for Mr. Carey to get the money back, and he argued that he thought he was acting in accordance with professional obligations.

The Court rejected this wholeheartedly, reaffirming that the elements for civil contempt are as follows, to be proved beyond a reasonable doubt:

  1. There must be an order that states clearly and unequivocally what must or must not be done;
  2. The party alleged to have breached the order must have had actual knowledge of it; and
  3. The party allegedly in breach must have acted intentionally, in doing what the order prohibits, or not doing what it requires.

The Court held that to create a heightened requirement for the mental element of civil contempt where the contempt could not be purged, or where a lawyer felt he or she had a conflicting legal duty, was neither consistent with the jurisprudence nor with the goals of civil contempt: securing compliance with court orders and protecting the integrity of the administration of justice. There was no logic or justice in requiring a higher standard, and no reason to “treat with special charity” people whose own actions had made further compliance with the order impossible.

The Court also held that requiring a specific intent to breach a court order would put the test too high and make the mental element of contempt dependent on the type of order alleged to have been breached. It would open the door to mistakes of law as defences, with the perverse result that mistakes of law “become a defence to an allegation of civil contempt but not to a murder charge.”

Mr. Carey’s plea that lawyers should be held to a different standard fell on deaf ears. There was no reason to treat lawyers differently than others in determining the mental element of contempt. Given that reliance on legal advice does not shield parties from a finding of contempt, there was no reason to depart from that principle just because the legal advice the contemnor was relying was his own. Mr. Carey’s argument that the “repayment of excess fees” was not a “transfer” as prohibited in the order was dismissed out of hand. He was aware that the order prohibited transfers and giving the money back to Mr. Sabourin was clearly a transfer. If he had doubts as to his obligations, or obligations with respect to disclosure of the funds’ existence, he could have left the money in his trust account while they were clarified.

The Court held that the motions judge had erred by revisiting her original decision finding Mr. Carey in contempt. The starting point is that, in contempt proceedings, where an initial finding of contempt has been made at the first stage of a two-part proceeding on guilt and penalty, it is usually final. Where a party purges its contempt or complies with the order, or – in exceptional cases — if new evidence comes to light, then a court may revisit the original finding. However, in this case, the motions judge allowed Mr. Carey to relitigate the original contempt finding by offering evidence as to his intentions. In doing so, she erred, and erred further in setting her original decision aside.

While Carey does not break new legal ground, it is an important reaffirmation of the goals and elements of civil contempt, and shows the Court’s reluctance to allow exceptions, or to create different classes of alleged contemnors. Its reluctance in this respect extended most of all to lawyers who should know the paramount importance of complying with court orders and protecting the administration of justice.

Foul Play: How Far is Too Far in Recreational Sports?

Posted in Uncategorized

High profile professional cases of on-field misconduct (think Bertuzzi, McSorley, etc.) have generated considerable headlines in the past, but what about when you or me laces em’ up and goes out on the weekend to play beer league sports?

What are the legal lines we encounter between legitimate and in the heat of the moment physical contact (a body check or slide tackle) and actions which are going to land you in hot water?  When is a penalty not simply 5 minutes but carries criminal consequences?  How far is too far?

In sentencing Marty McSorley for the “baseball swing” of his stick to the head of Donald Brashear, the court cited previous judicial comments advocating an end to coaches, managers and owners valuing intimidation and violence above skill.  Only four years after the McSorley incident, Todd Bertuzzi pled guilty to assault causing bodily harm for a punch to the head of Steve Moore. The McSorley and Bertuzzi incidents are prominent examples of courts grappling with the line of distinction between acceptable and unacceptable physical contact in high intensity sports. Judge Weitzel in R. v. Bertuzzi (2004 BCPC 0472) cited from an earlier case, R v. Watson:

Hockey is a fast, vigorous, competitive game involving much body contact. Were the kind of body contact that routinely occurs in a hockey game to occur outside the playing area or on the street, it would, in most cases, constitute an assault to which the sanctions of the criminal law would apply. Patently when one engages in a hockey game, one accepts that some assaults which would otherwise be criminal will occur and consents to such assaults. It is equally patent, however, that to engage in a game of hockey is not to enter a forum to which the criminal law does not extend. To hold otherwise would be to create the hockey arena a sanctuary for unbridled violence to which the law of Parliament and the Queen’s justice could not apply. I know of no authority for such a proposition.

The Judge then goes on then to quote from the Maki case, which is one of the first cases involving an NHL hockey player:

No sports league, no matter how well organized or self-policed it may be, should thereby render the players in that league immune from criminal prosecution.

But, what about weekend warriors?

Amateur athletes should be aware that criminal responsibility and civil liability are not limited to the professionals.  This is something to think about the next time you lace up.  Your “red mist” at the beer league game can have serious consequences.

In R. v. Adamiec (2013 MBQB 246),  the Manitoba Court of Appeal ruled on criminal sanctions in the context of an amateur soccer match.  Justice Mariella started the decision with the following:

George Orwell warned that lurking behind the fun offered by competitive sports is the threat of the arousal of the most savage combative instincts.

Factually, the accused repeatedly kicked the opposing team’s goalie while going after a loose ball in the penalty area.  The trial judge found the accused guilty of assault – the appellate court acquitted. The kicking was brief and ended when the referee blew the whistle, but in that time the goalie suffered serious injuries to the jaw, neck, chest, and left hip. The appellate Court noted that players consent to physical contact as a risk inherent in the sport but they do not consent to force applied in excess of the particular game’s “playing culture”.  The judge succinctly stated the key question, “When does misconduct become a crime?”

A key distinction in arriving at the acquittal appeared to be between contact that occurs near the ball and that which is “off the ball”. Generally, physical violence occurring “on the ball” is “the most troublesome scenario” for the courts to grapple with in that the line between application of lawful force in a contact sport and assault is the toughest to define (i.e. as opposed to a sucker punch away from the play).  The incident in Adamiec occurred inside the penalty area and even though the accused actions were in breach of the rules of soccer, he was acquitted because his actions were found to be a legitimate sporting play as he was going for the ball and not the goalie; there was no intent to injure the complainant. Further, Adamiec’s force was not motivated by a non-sporting purpose such as an intentional retaliatory attack designed to injure an opponent.

A similar result occurred in R. v. Chu (2006 BCPC 587) where the accused delivered a body check in a recreational hockey game which resulted in a fractured jaw. Although the league was non-contact, the Court concluded that Chu’s conduct was directed at knocking his opponent off the puck rather than causing serious bodily harm. The charge was dismissed because the conduct was within the scope of consent provided by the opponent by virtue of playing the game.

Unlike the previous “on the ball” cases, R. v. Carroll (1995 CanLII 1123 (BCCA)) centered on a 42 year old amateur soccer player who head-butted an opposing player suddenly and without warning. Shades of Zidane in the 2006 World Cup Final come to mind. However, an opposed to Italian defender, Marco Materazzi who suffered no apparent physical injuries from Zidane, the complainant in Carroll suffered dental damage which included three broken teeth. The B.C. Court of Appeal ordered a conditional discharge instead of a fine and criminal conviction as the key factor weighing against a criminal conviction appeared to be the impact on Carroll’s career prospects.

The principles emerging from these cases appear to be that criminal responsibility may not be necessarily so much a function of the harm caused by conduct on the field, ice or court so much as the broader surrounding circumstances.  Context is key. If an action is taken with the intention of playing the ball and is within the playing culture of a sport, there is a lower likelihood of criminal responsibility being imposed regardless of the injury suffered by the other player.

Two civil cases demonstrate two different outcomes.

The case of Zapf v. Muckalt (1996 CanLII 3250 (BCCA)), illustrates one outcome. The Plaintiff in Zapf was playing hockey for the Nanaimo Clippers when a hit from behind rendered him a quadriplegic. In determining liability, the Court asked what a reasonable competitor would do when taking into account the speed, physicality, stresses, and risks inherent in participating in the sport. While the hit in Zapf occurred at a time when hitting from behind was strictly forbidden, the Court noted that breach of the rules is not necessarily sufficient to establish liability. Despite this, the Court determined the hit was careless in the circumstance and therefore imposed liability for a breach of the standard of care required in the circumstances In Zapf, carelessness was enough for liability to be established in the context of a contact sport, the Plaintiff did not need to establish intentional or reckless intention of harm during the game in order to establish civil liability.

In contrast to the result in Zapf, the Court in Nichols v. Sibbick (2005 CanLII 23685 (ON SC)), set out that “Western” cases of civil liability in sports may be different than case law in Ontario.  The plaintiff in Nichols had to establish that the defendant had an intention to injure or was reckless to the consequences of his actions as opposed to the lower threshold of carelessness. The hockey game at issue was fast-paced and competitive between the two top teams in a recreational league. Sibbick attempted to lift Nichols’ stick but instead hit him in the eye causing significant damage that resulted in the eye being surgically removed. Nichols emphasized Sibbick’s admission that he “lost control of his stick” but such carelessness was not sufficient for the Court because it did not establish intentionally harmful or reckless conduct. The Court concluded that the tactic employed by Sibbick (it was a legitimate tactic a reasonable competitor would use – i.e. attempting to prevent a shot by checking Nicholas’ stick) was reasonable and did not impose liability.

But wait, hot off the presses, the 2015 BCSC case of Forestieri v. Urban Recrecation Ltd. (2015 BCSC 249) may represent the latest work on this topic.  The brief facts are: slidetackle by a soccer player in no slidetackle recreational league carries civil liability, but most notably, civil liability for the team captain…I will follow up on this case in my next blog.

So, at the end of the day what do we take from this?  Playing hard and aggressively is fine and, if within the rules of the game, you stand a much greater chance of being onside.  But, context is everything – intent to injure or just being plain reckless may get you in trouble whether by way of a match penalty, a yellow card, or litigation.  Contact sports cannot render lawful what outside the lines is actionable.  And, remember we all have to go to work on Monday.

Fraud: Where does the loss lie as between innocent victims?

Posted in Commercial

This is a vexing question. It generally arises when a rogue has made off with money or assets having perpetrated a fraud and has left behind two or more equally innocent victims. As between those victims, who should bear the loss?

Earlier this week, the Alberta Court of Appeal weighed in on just such a case. The short answer is that the court will look to the statutory rights of the parties to resolve that issue.

A Mr. Salman signed a conditional sales contract with TD for the purchase of a $42,000 vehicle. Part of that contract required him to maintain possession of the vehicle. TD registered the conditional sales contract in the personal property registry. In legal terms, TD perfected its security in the vehicle by doing so. In this case, that turned out to be the difference.

The Mr. Salman made the first four monthly payments but then stopped. TD did nothing for 8 months and wrote the loan off as a bad debt. Meanwhile, Mr. Yan became aware that a Mr. Amshyah was advertising a vehicle for sale. To satisfy himself the sale was legitimate, Mr. Yan got copies of Mr. Amshyah’s drivers licence and passport. He also obtained a vehicle report from the Registrar of Motor Vehicles which confirmed there were no liens on the vehicle. He then bought the car for $19,000. A few months later, the police seized the vehicle and advised Mr. Yan and TD that the vehicle’s VIN had been “re-VINed” or cloned. Following the criminal investigation, the vehicle was released by the police to Mr. Yan.

TD sued to have Mr. Yan declared its debtor. The chambers judge dismissed that application by finding that TD’s delay in taking any steps against its original debtor, Mr. Salman, essentially amounted to an implied consent for the transfer to Mr. Yan. She also relied on the fact TD had written off the loan.

The Alberta Court of Appeal reversed that decision. They relied on the Latin maxim nemo dat quod non habeti, which means that you cannot sell or give away more than you have. The vehicle sold to Mr. Yan was subject to TD’s security interest, perfected under the Personal Property Security Act (PPSA). That security interest persisted and was enforceable against Mr. Yan.

The argument that TD impliedly consented to the transfer through its conduct was defeated because implied consent must mean informed consent. TD knew nothing of the vehicle’s sale or its “re-VINing.” TD also did not expect the vehicle to be transferred as part of the debtor’s business (as would be the case when financing a car dealer). As a result, all Mr. Yan could have purchased was the same interest in the vehicle when in the possession of the original rogue: a right to possession subject to a conditional sales contract.

As the court noted, “the circumstances of this case are unfortunate. Mr. Yan was an unusually careful purchaser. Both parties were duped by a rogue or a series of rogues. However, the legislation, properly interpreted, protects the security interest of the finance company, and provides no recourse for Mr. Yan.”

Like many such cases, this likely comes down to the proposition that if a deal seems too good to be true, it is probably not what it may seem. Mr. Yan was buying a vehicle at a price significantly below its apparent value. That may have been a clue to the trouble that lay ahead.

Failure to comply with the new Canadian anti-spam legislation (CASL) can cost you

Posted in Privacy

In a recent decision from the Canadian Radio-television and Telecommunications Commission (CRTC), Plentyoffish Media Inc. was fined $48,000 for violating Canada’s anti-spam legislation. This announcement comes only weeks after Compu-Finder was hit with a $1.1 million fine, which was the first fine levied after CASL came into effect in July 2014.

Plenty of Fish, a Vancouver based company, runs a popular free online dating service. It was founded in 2003 and has grown to be a massive global presence, being ranked the number one dating site worldwide in 2011. In addition to their website, pof.com, Plenty of Fish also has mobile apps for iPhone and Android.

On March 25, 2015, it was announced that Plenty of Fish had voluntarily entered into an undertaking with the Chief Compliance and Enforcement Officer of the CRTC. The undertaking resulted from emails that Plenty of Fish sent to registered users of its dating service between July 1, 2014 and October 8, 2014 that contained an unsubscribe mechanism that, according to the CRTC, “was not set out ‘clearly and prominently’ and was not able to be ‘readily performed’”. The emails in question were contrary to sections 6(2)(c) and 11(1)(b) of the statute, as well as sections 2(2) and 3 of the regulations.

In addition to the $48,000 payment, Plenty of Fish has undertaken to implement a compliance program and ensure that third parties that send messages on its behalf will also comply with the Act and the Regulations. The compliance program, which will be implemented by Plenty of Fish, will include training and education for employees, monitoring, and disciplinary procedures, among other things.

It is interesting to note, that while Plenty of Fish took steps to remedy the situation by updating its unsubscribe process to comply with the legislation and has since agreed to develop a compliance program including staff training, Compu-Finder was ordered to pay a much more substantial fee of $1.1 million after the CRTC found that it has “flagrantly” flouted CASL.

These decisions are instructive in three respects. First, the facts serve as a reminder of the kind of conduct that can give rise to liability under CASL for businesses that communicate electronically with their customers and others (which is most businesses in the modern world) and the need for vigilance and appropriate advice to ensure compliance. Second, the decisions give businesses and the lawyers who advise them a sense of monetary and non-monetary penalties that can result from a breach of CASL. Third, the decisions, and variance in fines, demonstrate that, although the CRTC is willing to issue tough penalties, parties are more likely to receive favourable treatment if they respond quickly and work with the CRTC to develop a plan to address compliance issues.


And so it ends…The Final Chapter of the Long-Gun Registry in Canada a.k.a The Limit of Cooperative Federalism

Posted in Constitutional

Today, the Supreme Court of Canada, in a judgment that revealed a deep divide between Justices from Quebec and those from the rest of Canada, wrote the final chapter in the long-gun registry saga. In a 5 to 4 decision, with all 3 Quebec Justices in the minority, the Court dismissed Quebec’s constitutional challenge to federal legislation that mandated the destruction of long-gun registry data, including data that originated from Quebec. Quebec intends to establish its own long-gun registry and sought an order compelling the federal government to transfer data from the now abolished federal long-gun registry.

Approximately 15 years ago, a former federal government established the Canadian long-gun registry. It was a contentious policy decision and, ultimately, when a new party was elected, it passed legislation to abolish the registry. In doing so, it also passed a provision calling for the destruction of all of the data from the registry. Quebec applied for an order that this provision was unconstitutional as it offended “cooperative federalism” and for an order that the data originating from Quebec be transferred to it. It was successful at the trial level but that decision was overturned by the Quebec Court of Appeal. The Supreme Court of Canada has now dismissed the appeal.

The majority decision was written jointly by Justices Cromwell and Karakatsanis. Quebec argued that there was a partnership between the federal and the provincial governments to work together to achieve both a federal purpose, the criminal law, and a provincial purpose, public safety. It was argued that in ending this partnership, each party’s constitutional authority must be guided by the unwritten constitutional principle – cooperative federalism – such that neither Parliament nor the provinces can pass legislation to terminate such a partnership without considering the foreseeable consequences to do so on the other partner’s constitutional powers.

The minority judgement agreed with this analytical framework and went on to find that the specific purpose of the federal enactment was not just to destroy the data but to do so for the specific purpose of ensuring that the provinces did not set up their own long-gun registries under a valid head of provincial constitutional power.

The majority decision bluntly rejected this framework. They wrote that “Quebec’s position has no foundation in our constitutional law…”.  The majority went on to write that cooperative federalism is a concept used to provide flexibility in separation of powers doctrines such as federal paramountcy, to facilitate interlocking legislative schemes and to avoid unnecessary constraints on provincial powers  It does not, however, impose limits on an otherwise valid exercise of legislative power. The court wrote:

To hold otherwise would undermine parliamentary sovereignty and create legal uncertainty whenever one order of government adopted legislation having some impact on the policy objectives of another.  Paradoxically, such an approach could discourage the practice of cooperative federalism for fear that cooperative measures could risk diminishing a government’s legislative authority to act alone.

The majority did, however, open the door to this argument being reconsidered in different circumstances. The majority decision relied on the fact that the impugned legislation was not dependent on any provincial legislation. If it had, “different consideration might arise” where there is a “truly interlocking legislative framework.”

And so the saga of the long-gun registry in Canada ends with a discussion of the limits of cooperative federalism. Quebec, however, will not be deterred and shortly after the release of the Supreme Court of Canada decision reaffirmed its intention to go it alone and create its own separate long-gun registry from scratch – without this data.