THE EXTENT TO WHICH THE CANADIAN BUSINESS community and its concerns are becoming more evenly dispersed throughout this vast country becomes obvious from an analysis of the diversity evident in the geographic composition of our Top 10 Cases of 2013.
In fact, the case that leads our list, Canadian National Railway v. McKercher LLP, emanates from Saskatchewan, the result of a conflicts disputes between a venerable national company and one of the province's top law firms. The Maritimes, with two cases on the list, has as many as Ontario and British Columbia, and one more than Alberta. Quebec has the most representation, with three cases. (The total of 11 arises because one of our selections is composed of three sister cases, two from BC and one from Quebec.)
As has been our practice, we considered decisions from any level of court or tribunal rendered between November 1, 2012, and October 31, 2013. We solicited the opinions of over 40 law firms in arriving at our choices. Seven of our top 10 decisions issue from the Supreme Court of Canada — and an SCC case topped our list. The remaining three cases came from the Courts of Appeal in BC, Ontario and Quebec.
As usual, the decisions engaged diverse areas of law, including a conflicts case; two cases on the law of privilege, one in the form of a constitutional challenge; an insolvency landmark ruling that has previously appeared on our list as it made its way through the appellate court; a commercial case that intertwined with labour and employment law; a trilogy of price-fixing class actions; a securities class action; two labour law cases; and an important tax decision.
Overall, business fared well. Seven of our 10 top cases can be fairly regarded as pro-business. Least palatable to the business community were rulings requiring justification for random alcohol testing even in dangerous workplaces; broadening the ambit of price-fixing class actions to include indirect purchasers; and upholding a low threshold for obtaining leave to proceed with secondary-market securities class actions.
On the positive side, our courts came out strongly against any infringements on the principles of solicitor-client privilege; took a pragmatic approach to the law of conflicts; recognized the importance of freedom of contract in the context of commercial transactions; advanced the cause of symmetry in tax law by holding that reforestation obligations assumed by a purchaser were not part of the vendor's proceeds of disposition; upheld the priority rights of DIP lenders; and interpreted occupational health and safety reporting standards in a way that is manageable for employers.
1) CANADIAN NATIONAL RAILWAY V. MCKERCHER LLP (SCC) (SASK.)
IN THIS CASE, the SCC clarified the rules under which lawyers may act against existing clients, a question that had been vexing lawyers and clients alike since the SCC's seminal 2002 decision in R. v. Neal.
The decision affects a wide range of clients — from large companies that must rely on the limited number of major firms in Canada's legal market for representation in significant transactions and litigation, to consumers from rural and remote areas who are served by only a few lawyers.
The court ruled in McKercher that a lawyer's duty of loyalty comprised three elements: a duty to avoid conflicting interests; a duty of commitment to the client's cause; and a duty of candour. The general rule was bright-line: lawyers and their law firms could not represent clients adverse in interest without first obtaining their consent. This rule applied where a situation engendered an inescapable conflict of interest, applied to concurrent representation in both related and unrelated matters, and could not be rebutted.
But the bright-line rule was limited in scope: it applied only where the immediate interests of clients were directly adverse in the matters on which the lawyer was acting. It also applied only to legal interests, not to commercial or strategic interests. It could not be raised tactically and did not apply where it was unreasonable for a client to expect that a law firm would refrain from acting against it in unrelated matters.
Where the bright-line rule was inapplicable, the issue became whether the concurrent representation created a substantial risk that the lawyer's representation of the client would be materially and adversely affected by the lawyer's own interests or by the lawyer's duties to another current client, a former client or a third person.
“The upshot is that the bright-line rule is still very much intact, but it's there to protect clients and still requires lawyers to turn work away in appropriate cases,” says John Hunter of Hunter Litigation Chambers in Vancouver, who intervened on behalf of the Federation of Law Societies of Canada. “On the other hand, the business community can have confidence that existing or former clients cannot just turn around at any time and assert a conflict that will disqualify their opponent's lawyer of choice.”
The case originated in 2008, when McKercher LLP took on a proposed class action for a group of Prairie farmers. The claim alleged that CN and others had overcharged the class for grain transportation for over 25 years. At the time, McKercher was acting for the railway in other matters, but subsequently withdrew from these cases. CN sought to disqualify McKercher from acting on the class action lawsuit.
As the SCC saw it, McKercher's conduct fell squarely within the bright-line rule: CN and the class suing the railway were adverse in legal interest; CN's resistance to McKercher's representation of the class was not tactically abusive; and the expectation that McKercher would not act against CN was reasonable in a lawsuit where the amount claimed was $1.75 billion.
By failing to obtain CN's consent, terminating its retainers with CN, and failing to advise CN of its intention to represent the class, McKercher breached the bright-line rule. Still, McKercher had no confidential information that was prejudicial to CN.
Normally, a breach of the bright-line rule attracted disqualification as a remedy to avoid the improper use of confidential information, avoid the risk of impaired representation, and maintain faith in the administration of justice. Here, however, only the need to maintain faith in the administration of justice came into play and factors that might militate against disqualification had to be considered. These factors, to be considered by the motions judge on a re-hearing to determine whether disqualification was warranted, included delay in seeking disqualification, prejudice to the new client's right to retain counsel of choice, and the law firm's good faith in accepting the new retainer.
CLIENTS > FIRMS > LAWYERS
Canadian National Railway Company > MacPherson, Leslie & Tyerman LLP > Douglas C. Hodson, Q.C., Vanessa Monar Enweani and C. Ryan Lepage
McKercher LLP and Gordon Wallace > Heenan Blaikie LLP > Gavin MacKenzie and Lauren Wihak
Canadian Bar Association > McCarthy Tétrault LLP > Malcolm M. Mercer, Eric S. Block and Brendan Brammall
Federation of Law Societies of Canada > Hunter Litigation Chambers (Hunter), Fasken Martineau Dumoulin LLP (Martin) > John J. L. Hunter, Q.C. and Stanley Martin
2) FEDERATION OF LAW SOCIETIES OF CANADA V. CANADA (ATTORNEY GENERAL) (BCCA)
IN A RULING that certain regulations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act infringed on the independence of the Bar, the British Columbia Court of Appeal reaffirmed the principle that lawyers act for clients and not as government enforcers.
“The decision, which protects clients' interests rather than lawyers' interests, gives clients confidence that their lawyer will not turn into state agents and write reports for the authorities on what clients are doing,” says John Hunter of Hunter Litigation Chambers in Vancouver, who represented the Federation of Law Societies of Canada.
The impugned regulations gave the government power to examine lawyers' financial records to detect and investigate suspicious transfers. The regulations also required lawyers to report suspicious transactions.
The BCCA ruled that lawyers should be exempt from these regulations, as they compromised the confidentiality that is at the heart of the solicitor-client relationship.
CLIENTS > FIRMS > LAWYERS
Attorney General of Canada > Justice Canada > Jan E. Brongers, Christopher M. Rupar, B.J. Wray
The Federation of Law Societies of Canada > Hunter Litigation Chambers (Hunter), Blake Cassels & Graydon LLP (Millen) > John J. L. Hunter, Q.C., Roy W. Millen
Canadian Bar Association > Lawson Lundell LLP > Ronald A. Skolrood, L.L. Bevan
Chambre des Notaires du Québec and Barreau du Québec > Lavery, de Billy, L.L.P. > Raymond Doray, Loïc Berdnikoff
Law Society of British Columbia > McCarthy Tétrault LLP > Leonard T. Doust Q.C., Michael Feder, Angela Juba
3) SUN INDALEX FINANCE, LLC V. UNITED STEELWORKERS (SCC) (ON)
AS IT TURNS OUT, the sigh of relief from debtor-in-possession (DIP) lenders over the SCC's decision in Indalex was not necessarily a breath of fresh air for the entire lending community.
The SCC ruled that DIP lenders have priority over the deemed trust in favour of defined-benefit (DB) pensioners mandated by subs. 57(4) of the Ontario Pensions Benefits Act (PBA). But the court also ruled that, when the deemed trust does apply, it extends to any deficiency that exists on the wind-up of a DB plan. “The deemed trust provision is a remedial one. Its purpose is to protect the interests of plan members. This purpose militates against adopting the limited scope proposed by Indalex and some of the interveners,” the majority wrote.
“The court's confirmation of the existence of a constructive trust may have significant ramifications for lenders relying on security interests in accounts receivable and inventory because the Ontario Personal Property Security Act expressly makes such interests subordinate to deemed trusts under the PBA,” says James Gage in McCarthy Tétrault LLP's Toronto office.
And it's not just Canadian lenders who will be struggling with Indalex. “The decision is highly relevant in the cross-border environment, because almost all of Canada's big companies borrow money from US lenders,” says Gage's partner Kevin McElcheran. “So companies with large pension shortfalls could have difficulty getting financing from across the border.”
Although some observers have expressed the view that lenders will adjust to this reality and that it will have only a small impact in terms of loan pricing, Gage does not share that view. “Some lenders took a very conservative approach in assessing their risk while awaiting the Indalex decision,” he says. “It's now clear that they will be facing a priority issue without any guarantee that they can reverse that priority as part of a restructuring. That makes it uncertain whether the issue will go away.”
Additionally, because the deemed trust covers not only payments due to the pension fund but also to the shortfall between the value of benefits payable and the assets available to satisfy those benefits, lenders will find it difficult to assess their risk both qualitatively and quantitatively. Even where the risk of loss may be small, the extent of a potential loss can be huge because deficits can be enormous and extremely difficult to quantify. “The problem may be a mile deep because deficits can be enormous and extremely difficult to quantify,” Gage says.
Pamela Huff in Blake, Cassels & Graydon LLP's Toronto office is of similar mind. “It's not uncommon for a pension claim, especially one relating to a legacy plan that has a deficiency, to be the largest claim in an insolvency or CCAA proceeding,” she says.
What's not clear is whether Indalex would apply beyond Ontario. “Other provinces don't necessarily have similar provisions in relation to the creation of a statutory trust for pension benefits,” Huff says.
CLIENTS > FIRMS > LAWYERS
Sun Indalex Finance, LLC > Goodmans LLP > Benjamin Zarnett, Frederick L. Myers, Brian F. Empey, Peter Kolla
George L. Miller, the Chapter 7 Trustee of the Bankruptcy Estates of the U.S. Indalex Debtors > Chaitons LLP > Harvey G. Chaiton and George Benchetrit
FTI Consulting Canada ULC, in its capacity as court-appointed monitor of Indalex Limited, on behalf of Indalex Limited > Stikeman Elliott LLP > David R. Byers, Ashley John Taylor and Nicholas Peter McHaffie
United Steelworkers > Sack Goldblatt Mitchell LLP > Darrell L. Brown
Keith Carruthers, et al. > Koskie Minsky LLP > Andrew J. Hatnay and Demetrios Yiokaris
Morneau Shepell Ltd. (formerly known as Morneau Sobeco Limited Partnership) > Cavalluzzo Shilton McIntyre Cornish LLP > Hugh O'Reilly and Amanda Darrach
Superintendent of Financial Services > Ministry of the Attorney General (ON) > Mark E. Bailey, Leonard F. Marsello and William MacLarkey
Insolvency Institute of Canada > Thornton Grout Finnigan LLP > Robert I. Thornton and D. J. Miller
Canadian Labour Congress > Sack Goldblatt Mitchell LLP > Steven Barrett and Ethan Poskanzer
Canadian Federation of Pensioners > Paliare Roland Rosenberg Rothstein LLP > Kenneth T. Rosenberg, Andrew K. Lokan and Massimo (Max) Starnino
Canadian Association of Insolvency and Restructuring Professionals. > McMillan LLP > Éric Vallières, Alexandre Forest and Yoine Goldstein
Canadian Bankers Association > Osler, Hoskin & Harcourt LLP > Mahmud Jamal, Jeremy Dacks and Tony Devir
4) YANICK PAYETTE ET AL. AND GUAY INC. (SCC) (QUE.)
WITH ITS STATEMENT that restrictive covenants negotiated as part of the sale of a business are governed by commercial law rather than employment law, the SCC struck a definitive blow in favour of freedom of contract.
“Often the key to a business sale is keeping on the vendor's key person,” says Mario Welsh in Heenan Blaikie LLP's Quebec City office, who represented Guay. “So purchasers need to be free to negotiate a clause that ensures that, at the end of the process, that key person doesn't compete. By allowing purchasers to do so, the judgment is an important contribution to the stability of commercial transactions.”
According to the SCC, the rules regarding restrictive covenants do not apply with “the same rigour and intensity” in the context of a commercial agreement and particularly where the parties are on an equal footing.
Here, Payette sold several crane rental businesses to Guay for $26 million. The parties entered into non-competition and non-solicitation agreements that ran for five years after Payette ceased employment with Guay. After Guay terminated Payette without cause, he took a job with a competitor. Some of Guay's most experienced employees joined him.
The SCC upheld the enforceability of both covenants against Payette, reasoning that different rules in the employment context applied due to the presumed imbalance of power between employee and employer — a presumption that does not exist in the vendor-purchaser context. Unlike covenants found in employment situations, therefore, commercial restrictive covenants were presumptively enforceable.
Still, courts had to decide whether the covenants were reasonable in the circumstances, which included a consideration of the sale price, the nature of the business, the parties' experience and expertise, whether the parties had access to professional assistance, and the circumstances around the negotiations. Here, given the specialized nature of the business and the equality in bargaining power, the covenants were reasonable.
Also significant was the SCC's ruling that territorial limitation in non-solicitation clauses “have generally become obsolete” because “customers are no longer limited geographically.”
CLIENTS > FIRMS > LAWYERS
Yanick Pyette and Mammoet Canada Eastern Ltd., successor to Mammoet Crane Inc. > Norton Rose Fulbright Canada LLP > Éric Hardy, Pierre Duquette and Vincent Rochette
Guay inc. > Heenan Blaikie LLP > Mario Welsh, Gilles Rancourt and Gwenaelle Thibaut
5) COMMUNICATIONS, ENERGY AND PAPERWORKERS UNION OF CANADA, LOCAL 30 V. IRVING PULP & PAPER, LIMITED (SCC) (NB)
IN ITS FIRST consideration of random drug and alcohol testing in the workplace, the SCC ruled that a dangerous work environment does not automatically permit imposition of universal random testing. Rather, employers had to justify such policies on the basis of safety risks in the particular workplace. As Irving had not done so, its testing policy was invalid.
Quite apart from the specific issue relating to drug and alcohol testing, the court left employers with a broader message, making it clear that it would not easily tolerate interference with privacy rights. Its careful balancing of these rights with safety concerns is the stuff of which future workplace policies will undoubtedly be fashioned.
“Irving's particular importance is in setting a framework within which employers can maintain a safe work environment,” says Barbara Johnston in Dentons Canada LLP's Calgary office, who represented the Construction Owners Association of Alberta, Construction Labour Relations — an Alberta Association, and Enform. “It's also the first time the SCC has recognized that employers in dangerous work environments can and must take proactive steps, including random testing, where there is appropriate evidence of legitimate safety concerns.
CLIENTS > FIRMS > LAWYERS
Communications, Energy and Paperworkers Union of Canada, Local 30 > Pink Larkin > Daniel Leger, David Mombourquette and Joël Michaud
Irving Pulp & Paper, Ltd. > McCarthy Tétrault LLP > Neil Finkelstein, Steven Mason, Brandon Kain, Byron Shaw and William Goss, Q.C
Construction Owners Association of Alberta, Construction Labour Relations — an Alberta Association and Enform > Dentons Canada LLP > Barbara B. Johnston and April Kosten
Canadian National Railway Company, Canadian Pacific Railway Company and Via Rail Canada Inc. > Heenan Blaikie LLP (Dupont), Canadian National Railway Company (Paquette, Cavé) > Robert Dupont, Simon-Pierre Paquette and Johanne Cavé
Alberta Federation of Labour > Chivers Carpenter Lawyers > Ritu Khullar and John Carpenter (written submissions only)
Communications, Energy and Paperworkers Union of Canada, Local 707. > Chivers Carpenter Lawyers > Ritu Khullar
Canadian Civil Liberties Association > Ursel Phillips Fellows Hopkinson LLP > Joshua S. Phillips and Karen Ensslen
Alliance of Manufacturers & Exporters of Canada, carrying on business as Canadian Manufacturers & Exporters > Fasken Martineau DuMoulin LLP (Keith), Gowling Lafleur Henderson LLP ( Wiggins, Abbott) > Norman A. Keith, Ailsa Jane Wiggins and Anna Abbott
Canadian Mining Association, Mining Association of British Columbia, Mining Association of Manitoba Inc., Québec Mining Association, Ontario Mining Association and Saskatchewan Mining Association > Heenan Blaikie LLP > Peter A. Gall, Q.C., Andrea Zwack and Melanie Vipond
Power Workers' Union > Paliare Roland Rosenberg Rothstein LLP (Lokan, Lawrence), Power Workers Union (Dassios) > Andrew K. Lokan, Emily Lawrence and Christopher M. Dassios
6) PRO-SYS CONSULTANTS LTD. V. MICROSOFT CORPORATION (BC); SUN-RYPE PRODUCTS LTD. V. ADM (BC); INFINEON TECHNOLOGIES V. OPTIONS CONSOMMATEURS (QUE.); (SCC)
IN A LANDMARK trilogy, the SCC declared open season for consumers who wish to use class actions to recover overpayments for products or services that have been the subject of price-fixing conspiracies. “Price-fixing class actions are open for business in Canada,” says J. J. Camp of Vancouver's Camp Fiorante Matthews Mogerman, who represented the class in Pro-Sys Consultants Ltd. v. Microsoft Corporation, one of the three cases decided by the SCC. More particularly, the court ruled that plaintiffs' lawyers can lump direct and indirect purchasers into the same class action.
Microsoft was a BC case involving operating systems. The second case, Sun-Rype Products Ltd. v. ADM, was also a BC case, but this one involved high-fructose corn syrup. The third, Infineon Technologies v. Options Consommateurs, originated in Quebec and dealt with DRAM memory chips.
The court unanimously (9-0) certified the indirect purchaser classes in Microsoft and Infineon, but in a split decision (7-2) rejected certification for both direct and indirect purchasers in Sun-Rype. The rejection of the indirect purchasers was based on the plaintiffs' inability to offer any evidence showing that at least two individuals (two being the minimum number for a class) could “self-identify” by proving they purchased a product that actually contained the impugned syrup, which tended not to be identified on product labels.
In all three cases, however, the court rejected the 1977 US Supreme Court decision in Illinois Brick Co. v. Illinois, which has served to bar indirect purchaser claims in federal courts (but not in state courts) for more than three decades.
“Despite recognizing that there were complicated issues of multiple and double recovery in allowing indirect purchaser claims to proceed, the SCC clearly believed that trial judges would be able to sort these things out,” says Adam Fanaki, a class action defence lawyer in Davies Ward Phillips Vineberg LLP's Toronto office who represented the Canadian Chamber of Commerce, an intervener in Sun-Rype.
Just as significantly, the SCC confirmed, as it had 10 years earlier when it first considered the question, that a relatively low evidentiary standard is required for certification of price-fixing class actions in common-law provinces — and an even lower one in Quebec. “It's clear that the Supreme Court does not see the certification process as a robust gatekeeping function,” says Fanaki's colleague Mark Katz.
Christopher Naudie, a defence lawyer in Osler, Hoskin & Harcourt LLP's Toronto office, says that the trilogy is not bereft of “silver linings for defendants.” In particular, he points to the court's refusal to certify the indirect class in Sun-Rype.
“The significance of this ruling can't be underestimated because it reiterates that, whatever the standard for certification, plaintiffs must at least adduce persuasive evidence to meet the requirement that a class of two or more does in fact exist,” he says. “So many class actions these days, like those about computer components or auto parts, involve a part of a part, where it can be hard to show that the defective product actually existed in an individual consumer's purchase or that it was produced by a particular defendant.”
CLIENTS > FIRMS > LAWYERS
PRO-SYS CONSULTANTS LTD. V. MICROSOFT CORPORATION
Pro-Sys Consultants Ltd. and Neil Godfrey > Camp Fiorante Matthews Mogerman (Camp, Mogerman, Buckley), Michael Sobkin (Sobkin) > J. J. Camp, Q.C., Reidar Mogerman, Melina Buckley and Michael Sobkin
Microsoft Corporation and Microsoft Canada Co./Microsoft Canada CIE > McCarthy Tétrault LLP (Finkelstein, Kain), Blake, Cassels & Graydon LLP (Sullivan, Beagan Flood) > Neil Finkelstein, James Sullivan, Catherine Beagan Flood and Brandon Kain
Attorney General of Canada > Justice Canada > John S. Tyhurst
SUN-RYPE PRODUCTS LTD. V. ARCHER DANIELS MIDLAND COMPANY
Sun-Rype Products Ltd. and Wendy Weberg > Camp Fiorante Matthews Mogerman (Camp, Mogerman, Buckley), Michael Sobkin (Sobkin) > J. J. Camp, Q.C., Reidar Mogerman, Melina Buckley and Michael Sobkin
Archer Daniels Midland Company and ADM Agri-Industries Company. > Norton Rose Fulbright Canada LLP (Brown), Nash & Company (Nash, Yule) > D. Michael Brown, Gregory J. Nash and David K. Yule
Cargill, Incorporated, Cerestar USA, Inc., formerly known as American Maize-Products Company and Cargill Limited > Hunter Litigation Chambers > J. Kenneth McEwan, Q.C., and Eileen M. Patel
Corn Products International, Inc., Bestfoods, Inc., formerly known as CPC International, Inc., Casco Inc. and Unilever PLC doing business as Unilever Bestfoods North America > Nathanson, Schachter & Thompson LLP > Stephen R. Schachter, Q.C., Geoffrey B. Gomery, Q.C., and Peter R. Senkpiel
Attorney General of Canada > Justice Canada > John S. Tyhurst
Canadian Chamber of Commerce > Gowling Lafleur Henderson LLP (Akman), Davies Ward Phillips Vineberg LLP (Fanaki) > Davit D. Akman and Adam Fanaki
INFINEON TECHNOLOGIES AG V. OPTION CONSOMMATEURS
Infineon Technologies AG and Infineon Technologies North America Corp. > Stikeman Elliott LLP > Yves Martineau
Option consommateurs > Belleau Lapointe > Daniel Belleau, Maxime Nasr and Violette Leblanc
Canadian Federation of Independent Grocers > Sotos LLP > David Sterns and Jean-Marc Leclerc
7) SABLE OFFSHORE ENERGY INC. V. AMERON INTERNATIONAL CORP. (SCC) (NS)
AS THE SCOPE of commerce continues to invite multi-party litigation, individual parties will at least have the comfort of knowing they can – outside exceptional circumstances – partially settle cases without having to disclose the financial terms of their settlements to the non-settling parties remaining in the litigation.
That's the upshot of the SCC's decision in Sable Offshore, a complex and ongoing litigation saga that is still a ways from being tried on the merits. “It is my personal observation that this case has determined and will continue to determine many complex issues of significance to the legal community, including the issue relating to disclosure of settlement amounts in Pierringer agreements,” says Bob Belliveau in McInnes Cooper's Halifax office, who represents Sable.
A Pierringer agreement allows plaintiffs to settle with some but not all of the defendants. Typically, under its terms, the settling defendants are released from the litigation, while non-settling defendants' liability is limited to their proportionate share and they are given continued access to the settling defendants' evidence.
The SCC reasoned that the doctrine of “settlement privilege” applied not only to settlement discussions and negotiation, but also to the settlement itself. Only when some other public interest outweighed promoting settlement in an overburdened court system – as in cases of misrepresentation, fraud, undue influence or overcompensation – would departure from the privilege be warranted.
CLIENTS > FIRMS > LAWYERS
Sable Offshore Energy Inc., as agent for and on behalf of the Working Interest Owners of the Sable Offshore Energy Project, ExxonMobil Canada Properties, Shell Canada Limited, Imperial Oil Resources, Mosbacher Operating Ltd., Pengrowth Corporation, and ExxonMobil Canada Properties, as operator of the Sable Offshore Energy Project > McInnes Cooper > Bob Belliveau, Q.C., and Kevin Gibson
Ameron International Corporation and Ameron B.V. > Merrick Jamieson Sterns Washington & Mahody > John P. Merrick, Q.C., and Darlene Jamieson, Q.C.
Allcolour Paint Limited, Amercoat Canada, Rubyco Ltd., Danroh Inc. and Serious Business Inc. > Bingham Law > Terrence L. S. Teed, Q.C., and Ronald J. Savoy
8) BLUE MOUNTAIN RESORTS LIMITED V. ONTARIO (THE MINISTRY OF LABOUR AND THE ONTARIO LABOUR RELATIONS BOARD) (OCA)
ON THE WHOLE, employers welcomed the Ontario Court of Appeal ruling earlier this year that overturned the decision of the Divisional Court in Blue Mountain. “This is the occupational health and safety case of the year for employers,” says Cheryl Edwards in Heenan Blaikie LLP's Toronto office. “It is so sensible and such a relief for municipal, retail and health-care sector employers, as well as school boards and others.”
The Divisional Court had ruled that employers' duty under the Occupational Health and Safety Act (OHSA) to report all fatal and critical injuries at a workplace extends beyond workers to members of the public where the incident arises from hazards or risks to which workers are vulnerable.
But the OCA saw things differently. “The interpretations (the Divisional Court and OLRB) gave to s. 51(1) of the OHSA would make virtually every place in the province of Ontario (commercial, industrial, private or domestic) a ‘workplace' because a worker may, at some time, be at that place,” Justice Robert Blair stated. ”This leads to the absurd conclusion that every death or critical injury to anyone, anywhere, whatever the cause, must be reported. Such an interpretation goes well beyond the proper reach of the Act and the reviewing role of the Ministry reasonably necessary to advance the admittedly important objective of protecting the health and safety of workers in the workplace. It is therefore unreasonable and cannot stand.”
In the Court of Appeal's view, an incident was not reportable unless there was “some reasonable nexus between the hazard giving rise to the death” and “a realistic risk to worker safety at that site.”
Blue Mountain arose in December 2007, when a guest of Blue Mountain Resorts drowned in an unsupervised swimming pool at the resort. Blue Mountain did not report the incident to the Ministry of Labour (MOL) because it did not involve a worker.
But Richard Den Bok, an MOL inspector, ordered Blue Mountain to report the death pursuant to s. 51(1) of the OHSA, which requires reporting when any person is killed or injured at a workplace. The Ontario Labour Relations Board upheld the order, reasoning that reporting was required where workers are vulnerable to the hazard underlying an incident.
The Divisional Court upheld the board's interpretation that non-worker injuries were reportable. According to the court, there was no dispute that the swimming pool was a place where workers worked, and the absence of a worker at the time of the incident did not detract from the fact that it was a workplace. Since “workers and guest are vulnerable to the same hazards,” it served the legislation to have employers report common risks.
The Court of Appeal ruling, however, doesn't mean that employers are completely out of the woods. They still could have reporting obligations when members of the public are involved in accidents causing death or critical injury, so long as there is a reasonable link between the hazard and worker safety, and the accident occurs at a place where a worker was carrying out or could reasonably be expected to be carrying out his or her duties. Consequently, workplaces that are accessible to the public – such as hotels and resorts, hospitals, retirement homes and retail stores – could be affected by Blue Mountain.
Indeed, occupational health and safety lawyers are advising their clients to update their crisis-management procedures and related training to take into account the reporting potential when any person is injured or killed at a workplace.
CLIENTS > FIRMS > LAWYERS
Blue Mountain Resorts Limited > Beard Winter LLP > John Olah
Richard Den Bok and Ministry of Labour > Ministry of Labour (ON) > David McCaskill and Kikee Malik
Ontario Labour Relations Board > Ontario Labour Relations Board > Leonard Marvy
Conservation Ontario > Torys LLP > John Terry and Sarah E. Whitmore
Tourism Industry Association of Ontario > Fasken Martineau DuMoulin LLP > Peter Pliszka, Rosalind Cooper and Andrew Baerg
9) THERATECHNOLOGIES INC. V. 121851 CANADA INC. (QUE. CA)
IN THE QUEBEC Court of Appeal's first ruling on Quebec's secondary-market liability regime since its adoption in the Securities Act in 2007, the court ruled that the threshold for authorization to pursue such a claim is low.
Under the Quebec regime, plaintiffs must show that they are acting in good faith and that the claim has a reasonable chance of success. “That can mean either that the plaintiff has to file some evidence to support his claim or that it's enough if there is a serious argument to present,” says Pierre Lefebvre in Fasken Martineau DuMoulin LLP's Montreal office, who represented Theratechnologies. “It may not be what the legislature intended, but the Court of Appeal has chosen the lighter burden, and that certainly opens the door to more claims.”
The case arose when the media published the news that the United States Food and Drug Administration had raised questions about the side effects of Theratechnologies' new drug, tesamoralin. Theratechnologies itself did not disclose that these questions had been asked.
On the day the media reports came out, Theratechnologies shares fell 58 per cent, and the plaintiffs sold their holdings at a loss. Two days later, the FDA voted to approve the drug, whereupon the stock price recovered.
The plaintiff sought authorization for a class action alleging that the defendant had breached Quebec law by failing to disclose the material change that occurred when the FDA raised its questions.
The Court of Appeal concluded that the plaintiff had met these tests. In so doing, it articulated a test similar to one adopted by first-instance judges in Ontario, where the issue is currently reserved by the Court of Appeal.
Lefebvre is seeking leave to appeal. “We believe that the SCC may wish to clarify these matters,” he says.
CLIENTS > FIRMS > LAWYERS
Theratechnologies Inc., Yves Rosconi and Paul Pommier > Fasken Martineau DuMoulin LLP > Pierre Y. Lefebvre and Philippe Charest-Beaudry
121851 Canada Inc. > Savonitto & Associés Inc. > Michel Savonitto
10) DAISHOWA-MARUBENI INTERNATIONAL LTD. V. THE QUEEN (SCC) (AB)
THE TAX TREATMENT of liabilities and obligations assumed by a purchaser in relation to the purchased asset has long been a fundamental tax issue.
“The issue is extremely important to the mining, logging, and oil and gas sectors, where there is an obligation to clean up after yourself, and usually you're talking huge dollars to do that,” says Warren Mitchell in Thorsteinssons LLP's Vancouver office, who represented the interveners Tolko Industries Ltd., International Forest Products Ltd., West Fraser Timber Co. Ltd. and Canfor Corporation. “The case may also have implications in other industries because the issue can arise in a variety of asset acquisition transactions.”
When Daishowa decided to sell two timber mill divisions and associated harvest timber rights on the surrounding land, the company was subject to certain reforestation obligations. Under Alberta law, the rights could not be transferred unless the purchaser assumed these obligations.
The sale agreement stated the purchase price at $169 million, allocating $20 million to the harvest rights, with the purchaser assuming the reforestation obligations that were estimated at $11 million. Under the agreement, costs above $11 million would be Daishowa's responsibility. In fact, Daishowa paid the purchaser almost $300,000 after a reforestation statement estimated the cost at some $11.3 million.
The SCC acknowledged that a liability assumed by a purchaser normally became part of the vendor's proceeds of disposition for tax purposes. Here, however, the reforestation obligation was not a distinct existing liability comparable to a mortgage. Rather, the statutory scheme governing the land embedded the reforestation obligation in the harvest rights so that they could not be separated, making the property more analogous to an asset needing repair than land encumbered by a mortgage.
It followed that the reforestation obligation reduced the value of the harvest rights by $11 million, from $31 million to $20 million. This view, the court noted, had the advantage of creating symmetry and fairness in the transaction, as the Minister had argued that the purchaser could not add the liability to the cost of the harvest rights.
CLIENTS > FIRMS > LAWYERS
Daishowa-Marubeni International Ltd. > Wilson & Partners LLP > John H. Saunders
Her Majesty The Queen > Justice Canada > David W. Jacyk and Lisa M. Macdonell
Her Majesty the Queen in Right of Alberta > Department of Justice and Solicitor General (AB) > Marta E. Burns, Michael Sobkin, Jeffrey W. A. Moore and Monica Johnson
Tolko Industries Ltd., International Forest Products Ltd., West Fraser Timber Co. Ltd. and Canfor Corporation > Thorsteinssons LLP > Warren J. A. Mitchell, Q.C., Ian Gamble and Leah Plumridge
Canadian Association of Petroleum Producers > Osler, Hoskin & Harcourt LLP > Al Meghji and Monica Biringer
Julius Melnitzer is a freelance legal-affairs writer in Toronto.
