Source: https://www.lexpert.ca/article/top-10-business-decisions-of-2016/?p=%7C273&sitecode=DIR
Timestamp: 2019-04-26 12:17:35+00:00

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After the disappointing jurisprudential results experienced by Canadian business in 2015, the landscape more than evened out this past year — which is not to say that Canadian appellate courts ignored anti-business arguments: while five of our top 10 business decisions can be regarded as decidedly pro-business, four do not favour the business community, and one decision can be regarded as mixed.
The decision that topped the list, CIBC v. Green, significantly raised the bar for leave to appeal applications in secondary-market securities class actions, and is huge in its impact. Our second choice, Ledcor Construction v. Northbridge Indemnity Insurance, was regarded in many quarters as even more impactful than Green, albeit for its negative impact on business. The decision creates greater exposure to liability for businesses that use standard-form contracts, especially in the insurance and construction industries. Still, it’s the only one in the top five that doesn’t favour business.
The next three — Canada v. Chambre des notaires du Québec; Endean v. BC; and Nortel Networks Corp. (Re) — were all welcomed by the business community: Chambre des notaires enshrined the constitutional protection our courts afford to solicitor-client privilege; Endean will allow judges and parties much greater flexibility in dealing with national class actions, something that should decidedly impact their efficiency and cost; and Nortel provides a procedural and technological framework for the management of multi-jurisdictional insolvencies.
From that point on, however, it’s downhill for business: only McGillivray Restaurant v. Canada, which provides a higher level of certainty and comfort to taxpayers and advisors seeking guidance on the important and pervasive issue of “de facto control” over a corporation for tax purposes, can be regarded as pro-business among the remaining five cases. For its part, Keough v. Sandfire Capital produced a mixed result: although it created greater certainty for New Brunswick mortgagees in the event of default, it also broadened their potential liability.
Otherwise, Daniels v. Canada established that the rights of our country’s Métis peoples were on a par with the rights accorded to First Nations, with significant implications for the duty to consult; Wilson v. Atomic Energy of Canada confirmed that federally regulated employers can’t dismiss employees without cause; and Eastern Regional Integrated Health Authority v. Association of Registered Nurses required health-care practitioners in Newfoundland and Labrador to disclose “quality assurance” information relating to adverse incidents, a decision that could impact other Canadian provinces with similar health laws.
Six of our 10 judgments emanated from the Supreme Court of Canada, including five of the top six. The other four judgments came from the Federal Court of Appeal, the New Brunswick Court of Appeal, the Newfoundland and Labrador Court of Appeal, and the Ontario Court of Appeal.
From a geographical perspective, Ontario produced six decisions, Alberta generated two, and British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Québec and Saskatchewan each produced one. The total of 14 cases arises from the fact that, as noted below in our review of the individual cases, Green was a trilogy and both Endean and Chambres des notaires involved sister cases.
Cases that came close but didn’t quite make the list included the SCC’s ruling in CBC v. SODRAC, a key decision on reproduction rights under the Copyright Act that casts further light on the principle of “technological neutrality” in intellectual property law; Alberta v. Moloney, the lead case in a trilogy characterized by the SCC’s conclusion that provincial legislation preserving liabilities for unpaid fines after bankruptcy was unconstitutional — and one that dealt a serious blow to insurers; Re Hecla Mining, in which the securities commissions of British Columbia and Alberta provided their first guidance on the circumstances in which a private placement was an inappropriate defensive tactic under the new Canadian takeover bid regime that became effective in May 2016; Midwest Properties v. Thordarson, where the OCA gave an expansive interpretation of the statutory right of compensation for spills under the province’s Environmental Protection Act, suggesting that courts could rely on section 99 of the statute to pierce the corporate veil; Ramdath v. George Brown College, confirming Ontario courts’ authority to award aggregate damages in class actions; and U.S. Steel Canada Inc. (Re), in which the OCA appears to have closed the door on claims of equitable subordination in Companies’ Creditors Arrangement Act (CCAA) proceedings.
Also considered carefully were Howard v. Benson Group, where the OCA held that the obligation to pay dismissed fixed-term employees their full wages and benefits for the unexpired portion of their contracts was not subject to mitigation; Canada v. John Doe, in which the Federal Court of Appeal reined in the expansion of individualized privacy claims into the realm of class actions against institutions and businesses; Krayzel Corp. v. Equitable Trust, an SCC decision that held that rate increases triggered by mortgage defaults offended the Interest Act regardless of the form the increase takes, whether by way of an increase in the rate itself, fines, penalties or lump-sum bonuses, so long as the effect was to increase the interest on arrears beyond the rate payable on default; and 1250264 Ontario Inc. v. Pet Valu Canada, a case that limited the scope of franchisors’ obligations under the province’s Arthur Wishart Act to deal fairly with franchisees.
Close calls aside, here’s a review of Lexpert’s Top 10 business decisions.
Plaintiffs seeking leave to file secondary market securities class actions in Canada are now finding themselves on a road with a significantly steeper gradient than they have encountered in the past. For this, they can thank the Supreme Court of Canada’s December 2015 decisions in this trilogy of securities class action cases, all on appeal from the Ontario Court of Appeal.
While the trilogy (which also included Silver v. IMAX and Trustees v. Celestica) dealt with a number of important issues, including the limitation period under section 138.3 of Ontario’s Securities Act, the rulings on the leave issue will have the most lasting impact going forward.
Two months later, the SCC threw more than a little water on that fire in Theratechnologies v. 121851 Canada Inc. Dealing with the Québec equivalent of the Ontario test, the high court ruled that leave was intended to be a “meaningful screening mechanism” designed to prevent “costly strike suits with little chance of success.” Accordingly, plaintiffs had to show more than a mere possibility of success, as some courts had held; rather, the test required “a reasonable or realistic chance that the action will succeed.” The test, therefore, necessitated a preliminary assessment of the merits of the claims based on a review of the evidence as well as the law.
What is certainly clear is that leave hearings must now involve a weighing of whatever evidence is brought forward. Herein, however, lies an unanswered question. “The Supreme Court has spoken on the level of proof necessary for the plaintiff to meet the leave test but has not at all addressed the level of proof necessary for a defendant raising a defence to the plaintiff’s allegations,” says commercial litigator John Campion in Toronto.
The SCC’s 2014 decision in Sattva v. Creston was the second case on Lexpert’s Top 10 business decisions list for that year. Rejecting the traditional view that contractual interpretation involves pure questions of law, the court ruled that the exercise engaged questions of mixed fact and law, meaning that rulings on contractual interpretation could only be successfully appealed if they met a very deferential standard of “reasonableness,” which required identification of a palpable and overriding error by the trial or motions judge.
The business community lauded the SCC’s approach, noting that it promoted certainty in commercial dealings and was in accord with both commercial reality and the way courts had been approaching contractual interpretation in recent years.
As it turns out, it didn’t take that long. Just about two years later, the SCC got a chance to reconsider Sattva in the context of standard-form contracts. At issue in Ledcor was the interpretation of an exclusion clause in a standard-form construction insurance contract.
The Alberta Court of Appeal distinguished Sattva and applied a much less onerous “correctness” standard of appellate review. The SCC agreed. The court held that “reasonableness” was not the appropriate standard of review for standard-form contracts where the interpretation at issue had precedential value and lacked a meaningful factual matrix specific to the parties. When these conditions arose, the interpretation of the contract was better characterized as a question of law, subject to the correctness standard.
The Income Tax Act recognizes solicitor-client privilege, but excludes “an accounting record of a lawyer” from that privilege. These cases, which involved Canada Revenue Agency demands for information from lawyers and notaries, challenged the constitutionality of that exclusion, and both succeeded.
The fallout, Feder believes, will be significant. “There are a lot of administrative practices throughout Canada that are not fully cognizant and respectful of the constitutional status that solicitor-client privilege now clearly enjoys,” he says.
Many observers believe that these twin decisions, in which the SCC ruled that superior court judges in Ontario and British Columbia can conduct certain hearings outside of their home province, will facilitate the management of multijurisdictional class actions. Both the BC Court of Appeal and the Ontario Court of Appeal had ruled that the open court principle necessitated a video link back to courtrooms in the judges’ home provinces. But the SCC disagreed, holding that no such link was necessary.
The SCC did emphasize that the cases before them were being decided on a paper record without oral evidence, which meant that judges would not be required to exercise coercive powers — such as the power to direct a witness to appear and to answer questions — that might be subject to territorial limits. “The decisions also leave open questions about whether the power to sit outside of a home jurisdiction extends to joint hearings involving oral evidence, joint hearings in a cross-border class proceeding, or to cases that are not class actions,” Naudie says.
This decision of the Ontario Court of Appeal, denying leave to appeal, emanates from the cross-border insolvency proceedings relating to Nortel Networks Corp. The denial of leave was undoubtedly a major catalyst to the global settlement that followed, ending more than eight years of legal manoeuvring at unprecedented expense.
The Ontario Court of Appeal, which rarely issues reasons when leave to appeal is denied, saw fit to issue 42 pages of reasons in this case. The court upheld the decision of the Canadian trial judge for the joint Canada-US trial and cited the reasons of the US judge involved. It represents the first appellate confirmation anywhere of an allocation of global sale proceeds based on pro rata principles.
Quite apart from the substantive aspects of the case, however, its procedural implications are at least as significant. Former Ontario Chief Justice Warren Winkler described the proceedings as “one of the most complex trans-national legal proceedings in history” that lacked “any realistic ‘litigation’ option to resolve the dispute.” The case, which involved more than 40 Nortel-related companies around the world, proceeded under the supervision of Canada and US bankruptcy courts. Creditors in over 20 countries made claims.
Daniels decided that the federal government has legislative authority over Métis peoples, resolving a longstanding constitutional dispute. While the Court refused to declare that the “duty to consult” applied to Métis, it did so because, in its view, that duty had already been established.
The federal government has taken notice. In May 2016, less than two months after the Daniels judgment, it signed a Memorandum of Understanding on Reconciliation with the Manitoba Métis Federation that set out a “mutually agreeable path on finding a shared solution in implementing” Daniels. Carolyn Bennett, Minister of Indigenous and Northern Affairs, followed up in July by releasing a report on the development of Métis rights authored by Thomas Isaac of Cassels Brock & Blackwell LLP in Vancouver.
The Canadian tax community and its clients have long awaited a clear legal test for determining whether a person has “de facto control” over a corporation for tax purposes. “Business people feared the issue because there was no red line in the jurisprudence,” says William Innes of Rueters LLP in Toronto.
McGillivray should allay these fears. “The FCA’s clarification in McGillivray should have the practical effect of providing a higher level of certainty and comfort to taxpayers seeking advice on this important and pervasive issue in a variety of circumstances,” writes Matthew Peters in a Bennett Jones LLP newsletter.
The case confirms a much narrower and more practical test than existed previously in deciding whether de facto control existed. “In this respect, the only relevant factors are those founded on a legally enforceable right and ability to effect a change to the board of directors or its powers, or to exercise influence over the shareholder or shareholders who have that right and ability,” Peters writes.
For years, judges have confirmed that federally regulated employers cannot terminate employees without just cause. In other words, the common-law rule that non-unionized employees can be dismissed without cause, if reasonable notice or pay in lieu of notice is provided, did not apply in the federal landscape.
In Wilson, however, the Federal Court of Appeal shocked employers and employees by ruling that a proper reading of the Canada Labour Code did allow dismissal without just cause. The employee appealed, and Wilson became the first time the SCC had confronted the subject.
The upshot is that employees dismissed without just cause may complain under section 240 of the Canadian Labour Code, and seek reinstatement, with or without back pay or damages, or compensation with pay in lieu of reinstatement plus damages.
Like Newfoundland, many Canadian jurisdictions have laws that give regulatory bodies and professional associations statutory powers to demand evidence when conducting investigations. But most of them also share the prohibition that Newfoundland’s Evidence Act features regarding the release of quality-assurance information compiled pursuant to an adverse incident review.
As the Newfoundland Court of Appeal saw it, the Health Authority’s powers under the Public Inquiries Act overrode the prohibition in the Evidence Act. “The decision signals an underlying policy decision favouring disclosure of information relating to adverse incidents in the right circumstances over shielding such information, and sheds some light on courts’ preferred approach,” Skanes writes.
New Brunswick’s mortgagors and mortgagees have long been frustrated by conflicting jurisprudence over lender’s rights to recover post-mortgage sale expenses. “Keough provides welcome clarity not only on the subject of whether a lender is entitled to recover post-mortgage sale expenses in a deficiency action but also on how courts should calculate lenders’ damages in such cases,” says Romain Viel of McInnes Cooper in Fredericton.
Viel says that four principles emerge from the decision: (1) a lender may be subject to a claim for damages if it exercises its power of sale improperly, but the duty doesn’t apply when lenders exercise their right to buy-in or resell, in which cases they benefit from the unrestricted immunity given by the statutory regime; (2) purchasing a property for a nominal amount at a mortgage sale is an improper exercise of the power of sale; (3) if the lender acts improperly, the deficiency will be the unpaid mortgage balance less the property’s market value at the date of the sale; (4) a lender who purchases a property at a mortgage sale owns the property for its own benefit and use and can sell it as it sees fit.

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