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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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1. Contractual Interpretation

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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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