top “10” cases of 2014 - association of corporate … fact and law; extricable question of law...
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© 2014 Torys. All rights reserved.
Top “10” Cases of 2014
January 21, 2015
Melanie Schweizer
Andrew Bernstein
Molly Reynolds
What were the courts up to in the
past year?
A wide variety of cases dealing with:
Contractual interpretation: duties of contracting
parties; scope of appeal in interpretation cases
Director and auditor liability: piercing the corporate
veil
Disqualification of in-house counsel: conflicts arising
out of past experience
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What were the courts up to in the
past year?
Class actions: further opening the door to investor and
consumer class actions
Federalism: continuing the trend of “co-operative
federalism”
Aboriginal: clarifying the circumstances in which
Aboriginal title may be established
Privacy: recognizing the right to Internet anonymity and
privacy
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Contractual Interpretation
Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53
Factual Background
Parties’ agreement required Creston to pay Sattva a
finder’s fee
Dispute arose regarding calculation and payment of the
finder’s fee - submitted to arbitration
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Contractual Interpretation
Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53
Issues on appeal
Did the appeal raise a question of law?
Standard of review to be applied to commercial arbitral
decisions
Did the arbitrator reasonably construe the agreement as
a whole?
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Contractual Interpretation
Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53
SCC’s key findings:
(1) Contractual interpretation usually a question of
mixed fact and law; extricable question of law rare
Will limit scope of appellate review of cases involving
contractual interpretation
(2) A reasonableness standard of review will almost
always apply to a commercial arbitrator’s decision
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Contractual Interpretation
Bhasin v. Hrynew, 2014 SCC 71
Factual Background
Plaintiff contracted to sell defendant’s RESP products
Contract automatically renewed every 3 years. Either
party had a non-renewal right on 6 months’ notice
Defendant exercised its non-renewal right in compliance
with the provision but deceived the plaintiff of its intention
to do so
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Contractual Interpretation…cont’d
Bhasin v. Hrynew, 2014 SCC 71
Issues
Does Canadian common law impose a duty of good faith
on parties to a contract?
If so, did the defendant breach that duty?
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Contractual Interpretation
Bhasin v. Hrynew, 2014 SCC 71
SCC’s key findings:
(1) There is a general organizing principle of good faith
contractual performance
(2) Parties to a contract have a duty of honest
performance
Parties must not lie or otherwise knowingly mislead each
other about matters directly linked to performance of the
contract
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Contractual Interpretation
Bhasin v. Hrynew, 2014 SCC 71
Outstanding Questions
How far does this duty to act honestly extend?
Does a party now have to provide reasons for
exercising a contractual right?
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2. Director & Auditor Liability
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Director & Auditor Liability
Shoppers Drug Mart Inc. v. 6470360 Canada Inc., 2014
ONCA 85
Factual Background
Shoppers contracted with defendant to manage and pay
its utilities bills
After discovering funds were misappropriated, Shoppers
terminated the contract and sued both the corporation
and its sole director
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Director & Auditor Liability
Shoppers Drug Mart Inc. v. 6470360 Canada Inc., 2014
ONCA 85
Significance
Court of Appeal clarified the circumstances in which
courts will pierce the corporate veil to find a director
personally liable
Typically, where company is incorporated for an illegal,
fraudulent or improper purpose
But it can also be pierced if when incorporated “those in
control expressly direct a wrongful thing to be done”
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Director & Auditor Liability
Unique Broadband Systems Inc. (Re), 2014 ONCA 538
Factual Background
UBS’ board of directors made changes to an existing
share appreciation rights plan and approved a special
bonus pool for senior executives
This resulted in all of the board members gaining
significant compensation
A group of shareholders commenced a proxy fight and
replaced the board of directors, including the CEO
CEO brought a claim for wrongful termination
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Directrs & Auditor Liability
Unique Broadband Systems Inc. (Re), 2014 ONCA 538
Court of Appeal’s key findings:
(1) Reaffirmed nature and importance of fiduciary duties and standard of care required of officers and directors of public and private corporations
(2) Business judgment rule only applies where an officer or director has satisfied preconditions of “honesty, prudence, good faith, and a reasonable belief that his actions were in the best interests of the company”
(3) A corporation and its officers and directors cannot contract out of statutory fiduciary and related duties
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Director & Auditor Liability
Livent Inc. v. Deloitte & Touche LLP, 2014 ONSC 2176
Factual Background
Deloitte provided audit opinions that Livent’s financial
statements accurately reflected its financial position
That image of financial health was false
Restatements resulted in significant downward adjustment
of reported income and share value fell drastically
Livent’s receiver in bankruptcy proceedings brought an
action against Deloitte
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Director & Auditor Liability
Livent Inc. v. Deloitte & Touche LLP, 2014 ONSC 2176
Superior Court’s key findings:
(1) Potential for increased standard of care for auditors
Minimum standard is that of a “reasonably competent
and cautious accountant” but circumstances may dictate
a higher standard
(2) Clarified limited grounds on which auditor can rely
on frauds committed by those within the company as
defence to claim of negligence
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3. In-House Counsel
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In-House Counsel
Valeant Canada LP v. Canada, 2014 FCA 50
Factual Background
Valeant and Cobalt involved in litigation re: a Valeant patent
Until 2008, Deeth Williams Wall LLP (DWW) represented Valeant’s predecessor, Biovail
During this time, Migus was an associate at the firm and involved in work relating to the patent
Migus became in-house counsel at Cobalt
Valeant moved to have Migus removed as counsel because he possessed relevant confidential information
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In-House Counsel
Valeant Canada LP v. Canada, 2014 FCA 50
LSUC Rules of Professional Conduct
Rule 2.04(4) prohibits a lawyer from acting against a
former client in the same matter for which he or she was
retained or any related matter unless the client consents
It also prohibits the lawyer from acting against a former
client in any new matter if the lawyer has obtained from
the other retainer relevant confidential information
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In-House Counsel
Valeant Canada LP v. Canada, 2014 FCA 50
FCA’s key findings:
In-house counsel are susceptible to being disqualified based on confidential information obtained from previous work experience
On a disqualification motion, 2 questions must be asked:
(1) Did the lawyer receive confidential information attributable to a solicitor and client relationship relevant to the matter at hand?
(2) Is there a risk the confidential information will be used to prejudice the client?
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4. Clearing the Class Action Path
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Class Actions
Green v. CIBC, 2014 ONCA 90
Statutory Background
Ontario Securities Act (OSA) provides cause of action for misrepresentations made in secondary market disclosures
However, such an action must be commenced with leave of the court and within 3 years of the date of the alleged misrepresentation.
Class Proceedings Act suspends any limitation period applicable to a cause of action asserted in a class proceeding upon commencement of class action
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Class Actions
Green v. CIBC, 2014 ONCA 90
Factual Background
Three appeals involving representative plaintiffs in class
actions claiming damages under the OSA for
misrepresentation
Statements of claim served within 3 year limitation period,
but leave to commence the action not obtained within 3
year period
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Class Actions
Green v. CIBC, 2014 ONCA 90
Court of Appeal’s key findings:
(1) Overturned previous decision in Sharma v. Timminco
(2) Clarified low standard for leave: reasonable possibility
of success at trial
(3) Confirmed that common law negligent
misrepresentation claims are suitable for certification,
even if reliance cannot be dealt with as a common issue
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Class Actions
Bank of Montreal v. Marcotte, 2014 SCC 55
Factual Background
Three class actions by consumers seeking repayment of
conversion charges imposed by credit card issuers on
foreign currency purchases
Claims primarily made on basis that conversion charges
violated Quebec’s Consumer Protection Act
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Class Actions
Bank of Montreal v. Marcotte, 2014 SCC 55
SCC’s key findings:
Class Actions: Representative plaintiff does not need direct
cause of action against each defendant to have standing
Federalism: CPA does not impair core of federal banking
power
Interjurisdictional immunity must be applied with restraint
Paramountcy: CPA does not conflict with federal law
The “mere fact that Parliament has legislated in an area does
not preclude provincial legislation from operating in the same
area”
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5. Aboriginal Title Claims
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Aboriginal Title Claims
Tsilhqot’in Nation v. British Columbia, 2014 SCC 44
Factual Background
In 1983, B.C. granted a commercial logging licence on
land considered by Tsilhqot’in people to be part of their
traditional territory
Tsilhqot’in sought declaration prohibiting the commercial
logging
Negotiations stalled in 1998; claim amended to include a
claim for Aboriginal title
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Aboriginal Title Claims
Tsilhqot’in Nation v. British Columbia, 2014 SCC 44
SCC’s key findings:
Clarified the test for Aboriginal title
Exclusive occupation prior to assertion of European
sovereignty of sufficient intensity, continuous to present
day
Crown has duty to consult and potentially accommodate
before title is recognized
Once recognized, title confers a substantial set of rights
Exclusive use and occupation of the land
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Aboriginal Title Claims
Tsilhqot’in Nation v. British Columbia, 2014 SCC 44
SCC’s key findings:
Incursions on Aboriginal title only justified in narrow
circumstances
Government must show that (1) discharged duty to consult
and accommodate, (2) actions backed by compelling and
substantial objective and (3) action is consistent with
Crown's fiduciary obligation to the Aboriginal group
Provincial laws of general application will usually apply to
Aboriginal title lands
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6. Privacy and Internet Anonymity
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Privacy and Internet Anonymity
R. v. Spencer, 2014 SCC 43
Factual Background
Police identified IP address of a computer used to access
and store child pornography
“Law enforcement request” to ISP for subscriber
information (i.e. name and address)
Police used information provided to obtain a search
warrant, leading to the accused’s arrest
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Privacy and Internet Anonymity
R. v. Spencer, 2014 SCC 43
SCC’s key findings:
Reasonable expectation of privacy in online activities
“…account for the role that anonymity plays in protecting
privacy interests online”
Mere request from police is not “lawful authority” to
disclose personal information under PIPEDA
Police must have warrant to obtain subscriber information
from ISPs, subject to exigent circumstances
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Other Highlights of 2014
A.I. Enterprises Ltd. v. Bram Enterprises Ltd., 2014 SCC 12:
narrows scope of liability for unlawful interference with
economic relations
Hyrniak v. Mauldin, 2014 SCC 7: increased availability of
summary judgment in Ontario
McCormick v. Fasken Martineau DuMoulin LLP, 2014 SCC
39: whether law partner is employee - degree of control and
dependency
Vivendi Canada Inc. v. Dell’Aniello, 2014 SCC 1: Quebec
class action regime has more flexible commonality
requirement
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Top 10 Cases of 2014
Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53
Bhasin v. Hrynew, 2014 SCC 71
Shoppers Drug Mart Inc. v. 6470360 Canada Inc., 2014
ONCA 85
Unique Broadband Systems Inc. (Re), 2014 ONCA 538
Livent Inc. v. Deloitte & Touche LLP, 2014 ONSC 2176
Valeant Canada LP v. Canada, 2014 FCA 50
Green v. CIBC, 2014 ONCA 90
Bank of Montreal v. Marcotte, 2014 SCC 55
Tsilhqot’in Nation v. British Columbia, 2014 SCC 44
R. v. Spencer, 2014 SCC 43
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Questions?
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