The Appeals Monitor is pleased to present our annual review of the most significant appeals of the past year that can be expected to impact Canadian businesses for years to come.
In Kaynes v BP, PLC, 2014 ONCA 580 (previously discussed here), the Court of Appeal for Ontario stayed a proposed secondary market securities class action due to forum non conveniens. Although the Court held that Ontario could assume jurisdiction over claims by Canadian residents who had purchased securities on foreign exchanges, it held Ontario should nonetheless decline jurisdiction as foreign courts were “clearly more appropriate” venues.
BP, headquartered in London, is listed on the London and Frankfurt stock exchanges. Until 2008, small volumes of BP shares also traded on the TSX. The Court held that Ontario could assume jurisdiction on the basis of a tort committed in Ontario: the disclosure containing the alleged misrepresentation was released to Canadian shareholders shortly after BP was delisted. Even if the initial point of release was outside Ontario, BP knew the information would find its way to Ontarian shareholders.
Still, the Court stayed the claim, holding that either US or UK were preferable venues. The plaintiff purchased his shares on the NYSE and the Court found it would contravene comity for an Ontario court to adjudicate, given the prevailing international standard of tying jurisdiction to trading location. Also noting that an overwhelming majority of Canadians purchased their BP shares through foreign exchanges (due to BP’s “negligible” TSX presence), the Court described Ontario jurisdiction as being both “opportunistic and a classic case of the ‘tail wagging the dog’.”
The plaintiff has sought leave to appeal to the Supreme Court. It remains to be seen whether Kaynes will turn the tide against global securities class actions in Canadian courts, particularly in provinces that have been fairly welcoming to such class actions in recent years.
Canadian National Railway v Canada: All Aboard the Deference Train
In Canadian National Railway Co v. Canada (Attorney General), 2014 SCC 40 (previously discussed here), the Supreme Court of Canada upheld a decision of the Governor in Council that the Canadian Transportation Agency could entertain a complaint by a railway shipper. The Agency initially held that it did not have jurisdiction to consider the complaint, but the Governor in Council decided on appeal that the Agency did have jurisdiction to consider the complaint. The Supreme Court refused to characterize the question as one of vires or jurisdiction, which would demand correctness review, but instead characterized it as a question of statutory interpretation (i.e., which type of complaints could be considered under the relevant statutory provision), which required only reasonableness as standard of review. Because Parliament gave the Governor in Council power to overturn the decisions of many types of economic regulatory bodies, such as in the areas of telecommunications and marine transportation, there is a presumption that Parliament recognized the Governor in Council’s expertise in economic regulatory matters. Accordingly, the Governor in Council’s decision on a question of law was entitled to deference. The Supreme Court applied a reasonableness standard of review and allowed the Governor in Council’s decision to stand. The Supreme Court’s decision clarified and narrowed the definition of what constitutes a question of vires or jurisdiction
The upshot for Canadian businesses is twofold. First, when challenging a government decision, if there is a right of appeal to cabinet, it should be used wisely as it may not be overturned lightly. Second, the Supreme Court’s decision continues a long trend of increasing judicial deference to governmental decision-makers, making it harder to successfully challenge a government decision or regulation.
Marcotte: Take That Provincial Jurisdiction to the Bank
In Bank of Montreal v. Marcotte, 2014 SCC 55, (previously discussed here and here) the Supreme Court upheld a class action launched by credit card consumers seeking recovery against various banks for foreign currency conversion charges on credit card purchases, in violation of the Quebec Consumer Protection Act (“CPA”). This is a significant decision for the banking industry with respect to a financial institution’s disclosure obligations. This decision also confirms the relatively low threshold for authorization of class actions imposed by the Quebec Code of Civil Procedure.
The Court held that the representative plaintiffs had standing to bring a class action against all of the banks; a direct cause of action against each named defendant was not required, provided the representative plaintiffs could establish sufficient facts to justify the conclusion sought and show that mere joinder of actions would be problematic. The representative plaintiffs also needed to establish adequacy to represent the class and demonstrate the actions against each defendant involved identical, similar, or related questions of law or fact.
The Court found that conversion charges are best characterized as “net capital” instead of credit charges because they are related to services ancillary to the credit card, and did not fall under any under the enumerated section 70 credit charges categories. Accordingly, the banks had particular disclosure requirements under section 12 of the CPA.
The Court rejected the banks’ arguments that the relevant CPA provisions were constitutionally inapplicable or inoperative: inter-jurisdictional immunity was not engaged, as the provincial CPA did not impair the federal banking power, and paramountcy did not apply to render the CPA inoperative, as no federal purpose was frustrated.
McCormick: No Country for Old Men? Law Partner Held Not To Be Employee
In McCormick v. Fasken Martineau Dumoulin LLP, 2014 SCC 39 (previously discussed here and here), the Supreme Court held that a law firm partner was not an employee pursuant to the BC Human Rights Code. Mr. McCormick was an equity partner at Faskens, where the equity partners had voted to adopt a provision requiring partners to retire and divest their ownership shares after turning 65. At the age of 64, Mr. McCormick complained to the Human Rights Tribunal that this provision constituted age discrimination.
The Supreme Court concluded that Mr. McCormick could not assert age discrimination under the Code because, as an equity partner, he could not be characterized as an “employee” of the firm. The Court held that the analysis of whether one is an “employee” properly focuses on whether the relationship exhibits control of the employer over working conditions and remuneration, and a corresponding dependency on the part of the worker. The Court considered Mr. McCormick’s ownership, sharing of profits and losses, and right to participate in management, and held that “[a]s an equity partner, he was part of the group that controlled the partnership, not a person vulnerable to its control.” In fact, Mr. McCormick had been entitled to vote on the very policy he was challenging.
Importantly, the Court left open the possibility of a partner in a firm constituting an “employee” in other circumstances where the powers, rights, and protections normally associated with partnership were diminished. The Court also noted that Mr. McCormick was entitled to the protection of fiduciary duties owed to him by his partners, although these duties had not been violated with the retirement policy in question.
A.I. Enterprises: The “Unlawful Means” Tort Grows Up
In A.I. Enterprises Ltd v. Bram Enterprises Ltd., 2014 SCC 12 (previously discussed here), the Supreme Court of Canada clarified the “unlawful means” tort (sometimes known as the tort of unlawful interference with economic relations). In this case, the majority owners of an apartment building tried to sell the building. The minority shareholder undermined the sale by filing encumbrances and refusing to let prospective buyers into the building. The building was ultimately sold for less than fair market value. The majority shareholders brought a tort action.
To establish the unlawful means tort, the plaintiff must prove that the defendant used unlawful means against some third party, intentionally causing damage to the plaintiff. The issue facing the Supreme Court was how to define unlawful means. Should it be defined broadly and include any actions that are against the law, such as criminal acts? Or should it be defined narrowly? The Supreme Court took the latter option, following the majority of the House of Lords in OBG Limited v. Allan. The defendant must commit an act for which the third party, if it had suffered damages, could sue the plaintiff. Merely violating a criminal or regulatory law is not sufficient. Although it limited the scope of the tort, A.I. Enterprises also broadened its applicability by holding that unlawful means is not a “tort of last resort” and can be pleaded along with other causes of action. In this case, the majority shareholders were not successful in arguing the unlawful means tort because the minority shareholder had not committed an actionable civil wrong against the third parties.
A.I. Enterprises gives Canadian businesses some elbow-room to act competitively, so long as they do not commit an actionable civil wrong against a third party with the intention of harming someone else.
Imperial Oil: Do You Hear What the Class Action Plaintiffs Hear?
In Imperial Oil v. Jacques, 2014 SCC 66 (previously discussed here), the Supreme Court held that class action plaintiffs were permitted to obtain wiretap evidence that had been disclosed in the process of a Competition Bureau investigation into gasoline price fixing. Both the majority decision and the concurring reasons of McLachlin C.J. confirmed that the authority to access the wiretap evidence arose from a specific provision of the Quebec Code of Civil Procedure, which allows parties to an action to seek relevant evidence from non-parties. The Court’s inquiry was therefore fairly circumscribed: the evidence was clearly relevant and the only real question was whether either the Criminal Code or the Competition Act created an immunity that prevented disclosure of the wiretap evidence. Both the majority and McLachlin C.J. found that no such immunity existed.
This decision is especially significant to litigants concerned with privacy rights. The majority decision reminds litigants that seeking the truth is the “cardinal principle” of civil proceedings. Under this banner, the Quebec legislature had provided a mechanism that allows parties to seek truth by obtaining all available evidence—including from other fora—where appropriate. Especially during the “exploratory” phase of an action, transparency of any relevant information is favoured to hasten the truth-seeking process. Consideration of the protection to privacy rights was relegated to a secondary consideration, and found to have been successfully achieved by simply limiting the scope of the disclosure order. This limitation was also considered paramount to the efficient conduct of criminal proceedings, ensuring that parties facing criminal charges (in which the wiretaps would be used as evidence) were still guaranteed the right to a fair trial.
In a spirited dissent, Abella J. held that wiretaps were a fundamentally intrusive form of electronic surveillance, and state power needed to be appropriately constrained to ensure the protection of privacy. In her view, wiretaps should only be admissible in civil actions if the subjects had consented or the evidence had been previously disclosed in a criminal proceeding.
Tsilhqot’in: The Ground Shifts Beneath the Law of Aboriginal Title
Tsilhqot’in Nation v. British Columbia, 2014 SCC 44 (previously discussed here, here, here and here) represents the first time that Aboriginal title has been definitively established in Canada. The appeal involved permits issued by the British Columbia government in the 1980s for commercial logging in an area the Tsilhqot’in Nation’s semi-nomadic ancestors had, for over 200 years, used for living, hunting, trapping and fishing. The Supreme Court held that the Tsilhqot’in had established Aboriginal title because their ancestors’ use of the land was sufficient, continuous and exclusive. “Sufficient” means use of the land in a way that communicated to third parties that the Aboriginal group had a strong presence on the land, viewed in context through both Aboriginal and common law perspectives. “Continuous” means some connection between present use and use prior to European assertion of sovereignty; it does not require an unbroken chain of usage. “Exclusive” means intention and capacity to control the land; it does not require actual exclusion of other groups.
Once Aboriginal title is established, the government must ensure that any incursion on the land is consistent with the Charter duty to consult and accommodate, with a compelling government objective and with the government’s fiduciary duty to the Aboriginal group. Finally, the Supreme Court held that provincial legislation can justifiably infringe on Aboriginal rights, a point that was previously unclear in the case law.
Tsilhqot’in will have a lasting effect on Aboriginals’ ability to assert title, as well as the rights associated with Aboriginal title. It will affect all natural resource industries, especially regarding the approval process for projects on or near traditional Aboriginal territory, and may also affect past approvals of projects. Tsilhqot’in provides guidance and clarity in an important and developing area of the law.
Sattva: Contracting Out Contract Interpretation (to Trial Courts)
The Supreme Court’s decision in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 (previously discussed here) is a significant judgment for contract law in Canada, with substantial implications for appellate review of questions of contractual interpretation.
The issue in Sattva was whether the lower courts in BC should have granted leave to appeal a commercial arbitration award, where the Arbitration Act provides that leave to appeal from an arbitration decision can only be granted on a “point of law”. The question before the arbitrator was the proper interpretation of a contract. Although appellate courts had previously been divided on whether contractual interpretation was a question of law or a question of mixed fact and law, the Supreme Court in Sattva unequivocally held the issue is one of mixed fact and law.
The decision was largely based on the importance of the factual matrix in contractual interpretation. The Court highlighted that contractual interpretation is highly contextual, and clarified that the factual matrix can include “absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable [person]”.
As a result of Sattva, appellate courts will now generally owe deference to trial judges on many questions of contractual interpretation, and will in most cases only be able to intervene if the judge made a palpable and overriding error.
Hryniak: Summary Judgment Day
In Hryniak v. Mauldin, 2014 SCC 7, and Bruno Appliance and Furniture, Inc. v. Hryniak, 2014 SCC 8 (previously discussed here), the Supreme Court confirmed an important shift in litigation culture, moving the emphasis away from the conventional trial. Summary judgment will now be available so long as the process allows the motions judge to reach a fair and just determination on the merits. Specifically, the Court held that summary judgment must be granted in cases where there is no genuine issue requiring a trial, provided that the motion procedure allows the judge to make the necessary findings of fact, allows the judge to apply the law to the facts, and provides a proportionate, more expeditious, and less expensive means of achieving a just result.
Motions judges assessing whether a case is suitable for summary judgment should begin by considering if a dispute can be fairly resolved solely on the basis of the evidence already before the court. Even if there appears to be a genuine issue requiring a trial on this basis, the inquiry continues: the judge should then determine if a trial can be avoided through use of the expanded fact-finding powers in Rules 20.04(2.1) and (2.2) (weighing evidence, evaluating credibility, drawing reasonable inferences, or ordering oral evidence). The Court indicated a presumption in favour of these powers, and held that a judge’s decision of whether there is a genuine issue requiring a trial will attract considerable deference.
Although Hyrniak does not provide guidance regarding the analysis of what constitutes a “fair and just” determination, leaving room for some uncertainty, the decision marks a clear policy shift in favour of summary determination of disputes. As a result, we should expect summary judgment motions to be used in an increasing number of cases.
Bhasin: Offer Me A Contract and I’ll Tell You No Lies
In Bhasin v. Hrynew, 2014 SCC 71 (previously discussed here and here), the Supreme Court confirmed that good faith in contractual performance is an overarching common law principle that stands apart from other legal doctrines. Articulation of good faith as an independent principle, which the Court specifically describes as an incremental development of Canadian common law, was necessary to lend coherence to this previously piecemeal legal landscape. The duty of good faith is a now fundamental organizing principle of the common law, leading to a corresponding duty of honest performance of any and all contractual obligations.
Bhasin puts Canadian contractual partners on notice that they should behave “reasonably and not capriciously or arbitrarily” in the execution of their contractual obligations. Cromwell J. described the requirement as “simple”: contractual parties, simply put, must not lie or knowingly mislead one another about matters relevant to the performance of the contract. While the duty of honest performance should not to be misconstrued as a duty of loyalty or disclosure, or a requirement to put another entity’s interests first, parties must nonetheless maintain appropriate regard for the legitimate contractual interests of their contractual partners.
The Court was careful to constrain the doctrine and assert that it should not be used to undermine freedom of contract. Nonetheless, parties that fail to adhere to the duty of honest performance in interactions with their contractual partners may face increased litigation risk, especially while the scope of this decision is being tested and defined. New legal challenges to contracts based on this doctrine are sure to arise, including the possibility that contract holders may find legal relief barred if this duty has not been adequately discharged.