While this year’s Top 10 Business Decisions did not contain big surprises or landmark trilogies, perhaps most notable is that two Supreme Court of Canada decisions emerged to provide important clarifications of the contractual duty of good faith.
Criteria for consideration in the Top 10 Cases was a written decision from a Canadian appellate court, federal court, superior court or administrative tribunal, released between Nov. 1, 2020 and Sept. 30, 2021, involving an aspect of the law affecting the business community and that was not under appeal.
The Supreme Court’s decisions in C.M. Callow Inc. v. Zollinger and Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District provided helpful clarification and revision of the framework for the duty of honest contractual performance that arises under the principle of good faith.
In Callow, the top court established a new approach to comparative law analysis between common law in Canada and Quebec. It clarified the duty of honest performance established in Bhasin v. Hrynew, while Wastech also looked at the standard of review for appeals from arbitration awards.
Fairstone Financial Holdings Inc. v. Duo Bank of Canada was the first decision addressing whether the COVID-19 pandemic can serve as a justification to fail to complete a business transaction, making it a touchstone for litigation of this sort.
The clarification of the principles applicable to a limitations analysis in Grant Thornton LLP v. New Brunswick is significant for an extensive range of claims. “The clarification of the proper interpretation of releases in Corner Brook (City) v. Bailey is similarly of broad application,” says Linda Fuerst of Norton Rose Fulbright Canada LLP.
In Quebec (Attorney General) v. 9147-0732 Québec Inc., the Supreme Court overturned the majority opinion of the Quebec Court of Appeal. The top court ruled that the Canadian Charter does not protect corporations from cruel and unusual treatment or punishment because “cruel and unusual” denotes protection that only human beings can enjoy.
Resolute FP Canada Inc. v. Hydro-Québec clarified the formalities governing the assignment of contracts under Quebec law and the substantive effects of the assignment on the respective rights and obligations of the assignor, assignee and assigned party.
Nelson (City) v. Marchi provides guidance on whether a party can sue a government entity for negligence — an issue that affects many businesses, including the mining sector.
With “whistleblowing” a trend in business and society, Carroll v. Toronto-Dominion Bank was significant in considering the status of whistleblowers in bringing actions, as well as the novel issues for financial institutions offering investment products structured as trusts.
And one class action made its way onto the list this year: Winder v. Marriott International Inc., which provided the first example of the courts using the CBA Protocol to hold a joint case conference to resolve the issue of overlapping class actions.
C.M. CALLOW INC. V. ZOLLINGER, 2020 SCC 45
In December, the Callow decision expanded on the duty of honest performance established in Bhasin v. Hrynew and created a new approach to comparative law analysis between common law in Canada and civil law in Quebec.
Callow had an agreement with a Toronto-based condominium management group to perform snow removal and other maintenance services at several condominium apartment buildings in Ottawa. Callow was led to believe its services would be continued and even performed extra “free” work as an incentive to renew the contract. However, in September 2013, it received a notice from the group’s property manager saying its services would not be required for the 2013-2014 season — even though the decision not to renew the contract had been made at least by the previous summer. This decision left Callow with little to no time to line up new work, and Callow sued for breach of contract.
In its decision, the Supreme Court held that the common law duty of honest performance recognized in Bhasin not only precluded a party to a contract from directly lying to another party, but it also precluded it from deliberately remaining silent and failing to correct a counterparty’s misapprehension that the first party created by making deceptive representations.
“The court is clear that while a contracting party does not owe a duty of disclosure, it may still owe a duty of correction where it knows that its active conduct has caused the counterparty to draw false inferences about the party’s exercise or performance of its contractual rights or obligations,” says Brandon Kain of McCarthy Tétrault LLP in Toronto, who represented Callow with Adam Goldenberg.
In other words, silence can constitute a breach of contract.
“In such cases, Callow holds that dishonesty in contracts can extend beyond direct lies to include half-truths, omissions and even silence, and it ensures that a meaningful remedy in damages is available when this type of behaviour occurs,” Goldenberg told Lexpert. “Additionally, Callow creates important new opportunities for dialogue between the common law and the civil law of Quebec.”
Some disagreement arose in the court, though, when the slim majority of five judges looked at civil law sources from Quebec to illustrate how they should decide Callow in the common law. Although just one judge dissented in the ruling, three concurring judges disagreed that the doctrine of abuse of right in the civil law of Quebec was “useful” or “helpful” in understanding the application of Bhasin to the Callow appeal.
Goldenberg noted that Chief Justice Richard Wagner, a civilian lawyer himself, though trained at the University of Ottawa in a common law jurisdiction, has been among the more receptive judges that we’ve seen in recent years to arguments that support the harmonization of certain analogous doctrines as between Quebec civil law and common law.
“The need to understand where analogous doctrines support or don’t support the positions that you’re advocating is important and has become more important since Chief Justice Wagner was elevated to his position. … I think we’ve seen that as a theme in the good faith cases since 2014, but quite markedly in Callow in particular.”
The decision took more than a year to release after the SCC heard the case, which was at the same time as the appeal in Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District, below.
CLIENTS > FIRMS > LAWYERS
- C.M. Callow > McCarthy Tétrault LLP > Brandon Kain and Adam Goldenberg
- Tammy Zollinger > Gowling WLG > Rodrigue Escayola and Anne Tardif
- Condominium Management Group,
Carleton Condominium Corporation No. 703, Carleton Condominium Corporation No. 726, Carleton Condominium Corporation No. 742, Carleton Condominium Corporation No. 765, Carleton Condominium Corporation No. 783 > Gowling WLG > Rodrigue Escayola and Anne Tardif - Carleton Condominium Corporation No. 791, Carleton Condominium Corporation No. 806, Carleton Condominium Corporation No. 826, Carleton Condominium Corporation No. 839 and Carleton Condominium Corporation No. 877 > Gowling WLG > Rodrigue Escayola and Anne Tardif
- Canadian Federation of Independent Business > Blake, Cassels & Graydon LLP > Catherine Beagan Flood, Nicole Henderson and Christopher DiMatteo
- Canadian Chamber of Commerce > Torys LLP > Jeremy Opolsky and Winston Gee
WASTECH SERVICES LTD. V. GREATER VANCOUVER SEWERAGE AND DRAINAGE DISTRICT, 2021 SCC 7
Released about seven weeks after the decision in Callow, the Supreme Court was unanimous in dismissing the appeal of a British Columbia waste management company that claimed a breach of contract against a statutory corporation. The court affirmed that contractual discretion duty is only breached where discretion is exercised unreasonably. It also took another look at the standard of review for arbitral decisions since Wastech’s appeal sought to reinstate an arbitrator’s award.
The decision “clarifies that the duty not to abuse discretionary contractual powers applies to all contractual agreements,”
McCarthy Tétrault’s Kain said when the decision was released.
“The biggest similarity in both cases is that the Supreme Court has said that [the duty of honest contractual performance and the duty not to abuse discretionary contractual powers] are both general doctrines of contract law, not implied contractual terms, which apply to all contracts in common law Canada and cannot be excluded by the parties,” he added.
Wastech, a waste transportation and disposal company, alleged that the Greater Vancouver Sewerage and Drainage District, or “Metro,” which is responsible for the administration of waste disposal for the Metro Vancouver Regional District, had breached its 20-year contract by allocating waste among its dumping facilities in a manner that deprived Wastech of the possibility of achieving its target profit since Wastech was paid more to remove waste to a different location.
An arbitrator agreed that Metro had breached its duty of good faith. The British Columbia Supreme Court allowed Metro’s appeal, finding that the imposition of a contractual duty to have appropriate regard for the interests of another contracting party must be based on the terms of the contract itself. The court found that the parties had deliberately rejected a term that constrained the exercise of discretionary power to allocate waste. The Court of Appeal for British Columbia dismissed Wastech’s appeal.
The majority of the Supreme Court found that Metro exercised its discretion for the right purposes, including operating efficiently and managing its costs well. Therefore its exercise of discretion in choosing another dumping site did not constitute a breach of its good faith duties, particularly the duty to exercise discretion in good faith.
The Supreme Court clarified the standards of review for courts on appeal of lower courts and administrative decision-makers in December 2019 in Canada (Minister of Citizenship and Immigration) v. Vavilov and its companion cases.
In Wastech, the majority of Supreme Court judges found that the arbitrator’s award couldn’t stand whether the standard of review was correctness or reasonableness and didn’t identify the standard of review that should be used. In concurring reasons, three judges would have found that a question of law in an arbitral decision should be reviewed based on correctness and noted a need for “clear guidance” on the appropriate standard of review.
(And, as in Callow, the minority took issue with the majority’s discussion of Quebec’s Civil Code. Metro had argued that Wastech’s position would not be treated more favourably under Quebec law.)
“The Supreme Court has made it clear that parties need to carefully consider what discretionary powers are granted within a contract, especially if it involves a long-term relationship,” says Geoffrey Cowper of Fasken Martineau DuMoulin LLP in Vancouver, and lead counsel for Wastech.
The court “overturned an arbitration award on the basis that the discretionary power was not clearly exercised outside its intended scope, even if it came at the cost of one part,” he notes.
“If a discretionary power has to be included because of future contingencies, the parties should carefully consider contractual solutions that do not depend on one party exercising a discretion or delineate the purposes and effects which need to be taken into account by a party exercising a discretion so that their decision is closely guided by the terms of the contract.”
CLIENTS > FIRMS > LAWYERS
- Wastech Services Ltd. > Fasken Martineau DuMoulin LLP > Geoffrey G. Cowper, Q.C., Mark D. Andrews, Q.C., and Stanley Martin
-
Greater Vancouver Sewerage and Drainage District > Nathanson, Schachter & Thompson > Irwin G. Nathanson, Q.C., and Julia K. Lockhart
- Attorney General of British Columbia > Attorney General of British Columbia > Jonathan Eades and Graham J. Underwood
- Canadian Chamber of Commerce > Torys LLP > Jeremy Opolsky and Winston Gee
FAIRSTONE FINANCIAL HOLDINGS INC. V. DUO BANK OF CANADA, 2020 ONSC 7397
The Ontario Superior Court’s decision in Fairstone Financial was the first decision to address whether the COVID-19 pandemic can serve as justification to fail to complete a business transaction, and lawyers have described the ruling as “a touchstone” for similar litigation.
Fairstone Financial Holdings Inc., J.C. Flowers IV L.P. and VP Canada Acquisition, LP brought an action against Duo Bank of Canada in seeking specific performance of a share purchase agreement entered into in February 2020. The transaction was conditional on several standard covenants between signing and closing, including that Fairstone Financial — Canada’s largest consumer finance company, in operation since 1923 and with over $3 billion in assets — would continue to operate in the ordinary course of business and would not suffer a material adverse effect. The transaction was also conditional on Fairstone not suffering or reasonably being expected to suffer an amortization event under its securitization facilities.
Duo Bank said it was not required to close the transaction because Fairstone had breached each covenant due to the pandemic. The bank alleged that Fairstone Financial did not operate its business in the ordinary course because, among other things, it changed its operations to require customers to make an appointment before entering any of its branches. As well, it alleged, the pandemic’s impact caused a material adverse effect on Fairstone’s business and that the carveout language in the contractual definition of a material adverse effect did not include the word “pandemic.”
The Ontario court held that Fairstone met the closing conditions and ordered specific performance of the transaction, marking the first time a Canadian court has ordered specific performance of a major M&A deal where the buyer refused to close.
The decision also represents the first Canadian judicial consideration of an MAE clause containing carveouts, as well as of an ordinary course covenant in an acquisition agreement. The Ontario court concluded that carveouts in MAE clauses for systemic risks, emergencies, and changes in general market conditions capture the effects of COVID-19, even where the parties did not expressly allocate the risk of an epidemic or pandemic. The court also found that a business could operate in the ordinary course in the extraordinary circumstances of the pandemic. Short-term pandemic response measures taken in good faith to continue the business did not amount to operating outside the ordinary course.
“The Fairstone decision contains several notable firsts in Canadian M&A litigation,” says Fairstone counsel Eliot Kolers of Stikeman Elliott LLP in Toronto. “It is the first decision by a Canadian court ordering specific performance of a major M&A transaction, including interpretation of a complex MAE clause with carveouts; and it also addresses the interpretation of an interim operating covenant in the context of the pandemic and in the context of the agreement as a whole.”
CLIENTS > FIRMS > LAWYERS
- Fairstone Financial Holdings, J.C. Flowers IV LP, VP Canada Acquisition LP > Stikeman Elliot LLP > Eliot N. Kolers, Danielle K. Royal, Sinziana R. Hennig, Zev Smith and Alexander DeParde
- Duo Bank of Canada > Torys LLP > Linda Plumpton, Andrew Gray, Gillian Dingle, Leora Jackson, Adrienne Oake and Alicja Puchta
GRANT THORNTON LLP. V. NEW BRUNSWICK, 2021 SCC 31
In this case, the Supreme Court’s decision — a cautionary ruling for plaintiffs in bringing claims — clarified the degree of knowledge required for discoverability of a claim and ensured that the standard for discoverability is not too exacting and does not subvert important purposes served by limitation periods.
“The Supreme Court clarified that all that is required for discoverability is a plausible inference of liability on the defendant’s part,” says Peter Griffin of Lenczner Slaght LLP in Toronto, who was lead counsel for the appellants.
“The impact of this decision will be widespread, affecting essentially all litigators across the country,” he adds. “Limitation periods are something that all civil litigants have to grapple with, and the direction provided by the court will hopefully encourage the timely initiation of claims.”
The case concerned a construction company, Atcon, which obtained loans from the Bank of Nova Scotia that required guarantees from the Province of New Brunswick. The province agreed to guarantee $50 million worth of loans on the condition that it receive a report from an approved third party and agreed that Atcon’s auditor, Grant Thornton, could provide the report, which the auditor did, saying it fairly presented the company’s financial position. The loan guarantees were later executed and paid out. But a financial consulting and accounting firm later hired by the province identified multiple material misstatements or errors in Atcon’s financial statements. New Brunswick initiated a formal complaint against Grant Thornton to a professional regulator but didn’t commence an action until 2014.
Grant Thornton sought summary judgment stating the province’s claim was statute-barred under New Brunswick’s Limitation of Actions Act. The questions to be decided were the level of knowledge required to discover a claim and whether the province knew of its claim more than two years before it initiated its action. Grant Thornton was successful on its motion but lost on appeal, with the New Brunswick Court of Appeal finding that discoverability requires knowledge of each constituent element of a claim.
In allowing the appeals, a unanimous Supreme Court found that New Brunswick had discovered its claim when it first received the independent auditor’s report in February 2011 and that the Court of Appeal’s standard for discoverability was too exacting. Rather than requiring knowledge of all constituent elements, the top court found that a claim is discovered when a plaintiff has actual or constructive knowledge “of the material facts upon which a plausible inference of liability on the defendant’s part can be drawn.”
New Brunswick’s Limitation of Actions Act is similar to other provincial limitation statutes in establishing a two-year limitation period and attempting to codify the common law discoverability principles outlined in the Supreme Court’s decision in Central Trust Co. v. Rafuse.
“There had been significant divergence in the application of the discoverability principle across the country, with different courts articulating the standard in very different ways,” Griffin says, and “the decision provides much-needed guidance on when a cause of action becomes discoverable and a limitation period begins to run.”
CLIENTS > FIRMS > LAWYERS
- Grant Thornton LLP and Kent M. Ostridge > Lenczner Slaght LLP, McInnes Cooper, Foster & Company > Peter H. Griffin, Paul-Erik Veel, Sarah Bittman, Anthony S. Richardson and Romain Viel
- Grant Thornton International Ltd. > Foster & Company > J. Charles Foster, Q.C., Steven R. Barnett, Q.C., and Matthew R.S. Pearn
- Province of New Brunswick > Stewart McKelvey > Frederick C. McElman, Q.C., Stephen Hutchison, Q.C., and Josie Marks
- Chartered Professional Accountants of Canada > Borden Ladner Gervais LLP > Nadia Effendi, Neil Abraham and Julien Boudreault
CORNER BROOK (CITY) V. BAILEY, 2021 SCC 29
This unanimous decision of the Supreme Court of Canada is relevant to anyone drafting or signing a release in Canada -- in other words, it affects anyone settling a matter, says counsel for the City of Corner Brook.
“The court has confirmed the law of contractual interpretation generally. Specifically, the court has provided some much-needed guidance on the interpretation of releases,” say Erin Best and Giles Ayers of Stewart McKelvey’s St. John’s office, who acted for the successful appellant.
The case involved interpreting a release executed by a motorist to settle her claim against Corner Brook, Newfoundland, that arose from a motor vehicle accident. Despite releasing the city from all liability for the accident, the motorist later attempted to make the city a third party in a different action arising from the same accident.
At issue was a 150-year-old rule called the Blackmore rule, which has sometimes been used to radically limit the scope of a release, even if the parties used broad language in drafting the release. The Blackmore rule has been deployed inconsistently by various courts across Canada, resulting in conflicting appellate decisions.
In Bailey, the Supreme Court held that a release is a contract, and therefore the ordinary rules of contractual interpretation will apply. While the Blackmore rule was useful once, it no longer adds anything and should no longer be referred to or used in Canadian contract law. Instead, courts must read the release as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the release.
While there is no longer a general rule limiting the scope of releases, the court cautioned that releases tend to have certain features that may mean that a narrow interpretation is appropriate. The court also gave some guidance to parties on how to draft enforceable releases that achieve their objectives.
The impact of the case is that fewer litigants will question the meaning of certain release provisions, which means there will be less litigation regarding the interpretation of releases in Canada, say the appellant’s counsel. “When litigants do appear before the courts, they will no longer muddy the waters with arguments about the confusing and outdated Blackmore rule.”
CLIENTS > FIRMS > LAWYERS
- City of Corner Brook > Stewart McKelvey > Erin E. Best and Giles W. Ayers
- Mary Bailey > McInnes Cooper, Lenczner Slaght LLP > J. Alexander Templeton, Tom Curry and Scott Rollwagen
QUEBEC (ATTORNEY GENERAL) V. 9147-0732 QUÉBEC INC., 2020 SCC 32
In a landmark ruling concerning the Canadian Charter of Rights and Freedoms, the Supreme Court determined for the first time if the Charter protection against “cruel and unusual treatment or punishment” applied to corporations as well as to other legal persons.
The high court unanimously ruled that corporations cannot benefit from these Charter protections, in one of the few corporate criminal law cases it has heard.
In rejecting a Quebec building contractor’s Charter claim to have been the victim of such punishment, the Supreme Court found that s. 12 of the Canadian Charter of Rights and Freedoms — which provides that “Everyone has the right not to be subjected to any cruel and unusual treatment or punishment” — applies only to living beings.
“The significance of the court’s judgment in 9147 is not limited to its conclusion that s. 12 of the Canadian Charter of Rights and Freedoms does not protect corporations from cruel and unusual treatment or punishment,” says McCarthy Tétrault’s Brandon Kain, who represented the intervener Canadian Constitution Foundation with Adam Goldenberg.
“The majority of the court also provided important guidance on the principles of constitutional interpretation, and particularly the primacy of constitutional text in delineating the scope of the Charter’s protections,” Kain said in an email.
“The Supreme Court has already applied this guidance in other cases, including in Toronto (City) v. Ontario (Attorney General), a case that concerned the constitutionality of provincial legislation which reduced the size of Toronto’s city council during the 2018 municipal election campaign.”
The Supreme Court found that the term “everyone” in s. 12 of the Canadian Charter must be read as being limited to natural persons and doesn’t extend to legal persons such as corporations. The ordinary meaning of the word “cruel” would refer strictly to human pain and suffering and would not permit its application to inanimate objects or legal entities such as corporations, the court found.
“In so doing, the court provided significant guidance on the role of constitutional text and the use of international and foreign law in the interpretation of the Canadian Charter,” counsel for the Canadian Constitution Foundation added.
CLIENTS > FIRMS > LAWYERS
- Director of Criminal and Penal Prosecutions > Directeur des poursuites criminelles et pénales du Québec > Laura Élisabeth Trempe
- Attorney General of Quebec > Procureure générale du Québec > Stéphanie Quirion-Cantin, Anne-Sophie Blanchet-Gravel, Sylvain Leboeuf and Julie Dassylva
- 9147-0732 Québec Inc. > Services juridiques de l’APCHQ inc. > Martin Villa
- Director of Public Prosecutions > Directeur des poursuites pénales du Canada > François Lacasse and Mathieu Stanton
- Attorney General of Ontario > Attorney General of Ontario > Courtney Harris, Ravi Amarnath and Ellen Weis
- Association des avocats de la défense de Montréal > Davies Ward Phillips & Vineberg LLP > Léon H. Moubayed, Sarah Gorguos and Guillaume Charlebois
- British Columbia Civil Liberties Association > Gib van Ert Law > Gib van Ert and
Jessica Magonet - Canadian Civil Liberties Association > CazaSaikaley LLP > Alyssa Tomkins, Albert Brunet and Penelope Simons
- Canadian Constitution Foundation > McCarthy Tétrault LLP > Brandon Kain, Adam Goldenberg and Sébastien Cusson
RESOLUTE FP CANADA INC. V. HYDRO-QUÉBEC, 2020 SCC 43
In Resolute, the Supreme Court ruled on the legal framework applicable to the assignment of contract in Quebec law for the first time. The decision established the conditions under which the assignment may be set up against an assigned party.
Although contract assignment is a legal transaction and business technique commonly used by lawyers and their clients, it had been “an ill-defined legal concept and a source of uncertainty,” says counsel for Hydro-Québec and the Gatineau Power Company.
“The Supreme Court’s analysis rests in part on its conclusion that a contract may be considered as a patrimonial asset that may be subject to assignment, which is a novelty under Quebec civil law,” says Dominique Ménard, who acted for the respondent.
“In this regard, the Supreme Court highlights the malleable nature of the assignment of contract, which allows it to adapt to the commercial reality of the parties, including the fact that the assignment may be temporary — which distinguishes it from the notion of sale, the effect of which is necessarily permanent,” she adds.
In 2011, Hydro-Québec sent Resolute an invoice for more than $3 million for electricity provided to Resolute’s Gatineau mill. The invoice included three years of hydraulic charges that Hydro-Québec had paid the Quebec government since 2008, under the legislation.
The initial power supply contract was entered into in 1926 by Gatineau Power and Resolute’s predecessor, Canadian International Paper Company, for 40 years, renewable for additional 10-year periods. The contract between the paper company and the power company said the former might have to cover any “taxes or charges” that the latter paid to the Quebec government. It also said it would apply to the “successors or assigns” of both companies.
In 1965, Gatineau Power continued to exist, but Hydro-Québec acquired all of its shares by contract.
The parties disagreed about the impact of the 1965 contract on the rights and obligations of the parties to the 1926 contract and whether the 1965 contract had assigned the 1926 contract. Resolute eventually paid, under protest, the amount claimed by Hydro-Québec and filed an action in the Superior Court seeking a declaratory judgment and reimbursement.
In dismissing Resolute’s appeal, the Supreme Court clarified the formalities governing the assignment of contracts under Quebec law and the substantive effects of the assignment on the respective rights and obligations of the assignor, assignee and assigned party. It also clarified the distinction between perfect and imperfect assignment under Quebec civil law.
Considering the frequency with which assignments of contracts occur, “this decision provides clarifications that will certainly be of great assistance to legal practitioners and companies doing business in Quebec,” Ménard adds.
CLIENTS > FIRMS > LAWYERS
- Resolute FP Canada Inc. > Stikeman Elliot LLP > Yves Martineau, Patrick Girard and Guillaume Boudreau Simard
- Hydro-Québec, Gatineau Power Company > LCM Avocats Inc. > Dominique Ménard, Max R. Bernard and Nicolas Roche
NELSON (CITY) V. MARCHI, 2021 SCC 41
A city’s snow clearance and removal was an operational and not a policy decision, and therefore not immune from negligence claims, a unanimous Supreme Court ruled in a decision that clarifies how core policy decisions should be determined in the context of a tort.
In upholding the British Columbia Court of Appeal’s decision that a woman’s injury, resulting from climbing over a snowbank created by city workers plowing the roads, the Supreme Court found that the case should return to trial.
The court “restated the test they tried to lay down in a number of prior decisions, [but] this one expresses more distinctly the evidentiary burden that a government will have to meet” to satisfy the requirements of a core policy decision versus an operational decision, said Jay Ralston, a partner in Murray Ralston PC in Barrie, Ont., and counsel for the intervener Ontario Trial Lawyers Association, when the decision was released.
Policy decision immunity is a doctrine made by judges, intended to create “a separation of power so that courts aren’t stepping over and interfering with elected officials’ rights, and vice versa,” Ralston said. In this way, the doctrine protects a municipality or other government from liability when that government makes a policy decision.
The court outlined four factors with which to assess whether the nature of a government’s decision is policy or operational: the level and responsibilities of the decision-maker; the process by which the decision was made; the nature and extent of budgetary considerations; and the extent to which the decision was based on objective criteria.
In deciding that the snow removal decisions did not qualify as core policy decisions, the court found that the City of Nelson owed Marchi a duty of care.
“The decision in Nelson (City) v Marchi will be a leading precedent in municipal and tort law for years to come,” said Tom Barnes, CEO of the Municipal Insurance Association of British Columbia, which insures the City of Nelson. “This decision provides welcome clarity to what has sometimes been a difficult area of law.”
“Nelson (City) provides guidance on the question of whether a government entity can be sued for negligence,” says Eugene Meehan of Supreme Advocacy LLP in Ottawa. “That is an issue that affects many businesses, including the mining sector,” given that provincial governments are responsible for mining within their jurisdictions under the Minerals and Metals Policy of the Government of Canada.
“While Marchi does not ultimately change the law, it does give us significant guidance on figuring out what constitutes a policy decision,” Meehan adds. “Simply labelling a plan as ‘policy’ is not enough; putting a ‘vegan’ sticker on a hamburger does not make it so.”
CLIENTS > FIRMS > LAWYERS
- City of Nelson > Allen/McMillan Litigation Counsel > Greg J. Allen, Liam Babbitt and Suzy Flader
- Taryn Joy Marchi > Daroux Law Corporation > Danielle K. Daroux
- Attorney General of British Columbia > Ministry of Attorney General (B.C.) > Meghan Butler, Graham Underwood
and Kenn Inaya - Attorney General of Canada > Attorney General of Canada > Sean Gaudet and Zoe Oxaal
- Attorney General of Alberta > Justice and Solicitor General, Appeals, Education & Prosecution Policy Branch > Doreen Mueller
- Trial Lawyers Association of British Columbia > Hunter Litigation Chambers Law Corporation > Ryan D. W. Dalziel, Q.C., and Aubin P. Calvert
- Ontario Trial Lawyers Association > Murray Ralston PC > K. Jay Ralston
- City of Abbotsford > City of Abbotsford > Aniz Alani and Betty Nguyen
- City of Toronto > City of Toronto > Michael J. Sims and Alison Barclay
- Attorney General of Ontario > Attorney General of Ontario > Sonal Gandhi and Andi Jin
The TD case takes on particular significance in the age of whistleblowers and in considering several novel issues to financial institutions offering investment products structured as trusts.
The Court of Appeal for Ontario’s ruling looked at the status of whistleblowers (persons claiming to have information about potential wrongdoing), including whether they can satisfy the test for standing to bring an action to remedy perceived wrongdoing in the absence of a direct personal interest in the matters in issue. The decision also examined the nature and extent of the court’s inherent jurisdiction to supervise and administer trusts and whether its inherent jurisdiction over trusts makes standing subordinate or irrelevant.
An application was brought by a former TD Bank compliance officer, alleging she was a whistleblower, that the bank had breached its legal obligations in connection with several mutual fund trusts of which it was trustee, including by charging more than $50 million in undisclosed fees, and that the bank had withheld the extent of its misconduct from the Ontario Securities Commission.
The application sought various orders, including to direct an investigation into all of the trusts’ accounts, compel the bank to pass its accounts for the trusts, and require payment of amounts equal to the improper benefits that had allegedly accrued to the bank. The applicant made parallel complaints to the OSC, the U.S. Securities and Exchange Commission, and the Office of the Superintendent of Financial Institutions.
Counsel for TD obtained a rare pre-hearing dismissal of the lawsuit, as the Ontario Superior Court of Justice accepted TD’s submission that the applicant was effectively a “stranger” to the trusts and therefore lacked standing and that the court should reject the applicant’s position that the application should proceed due to her allegations about the bank’s conduct and the court’s supervisory jurisdiction over trusts.
TD’s counsel then successfully defended the dismissal judgment before Ontario’s appellate court, which clarified numerous areas of trust law and the relationship between trust principles and standing rules. Finally, counsel defeated an application for leave to appeal before the Supreme Court of Canada.
“The Court of Appeal for Ontario recognized that the court’s supervisory jurisdiction over trusts is not so elastic as to allow persons with no financial interest in the trust to sue the trustee for alleged breaches of trust, no matter how serious the allegations,” says Linda Fuerst of Norton Rose Fulbright Canada LLP’s Toronto office, who led the legal team for TD Bank.
“The practical impact of the decision is significant,” she adds. “It closes the door on investment fund trustees and managers offering investment fund products, like mutual funds, that are structured as trusts being exposed to lawsuits by former employees acting as ‘whistleblowers’ unless the whistleblower owns units of the fund.”
CLIENTS > FIRMS > LAWYERS
- Marian L. Carroll > Groia & Company Professional Corporation > Joseph Groia, David Sischy and Dawit Debssou
- The Toronto-Dominion Bank c.o.b. TD Bank Group, TD Waterhouse Private Investment Counsel Inc., TD Asset Management Inc. as Trustee of the TD Mutual Funds Trust and the TD Private Funds Trust > Norton Rose Fulbright Canada LLP > Linda Fuerst and Erika Anschuetz
The Ontario Superior Court’s decision in the largest privacy class action commenced in Canada was intended “to memorialize what was a remarkably successful collaboration of five superior courts from across the country that furthers access to justice and the fair and efficient administration of justice across the country,” Justice Paul Perell wrote in his reasons.
The Marriott class action arose from a Starwood Security Database data breach in 2018. In response to the breach, sixteen proposed and overlapping class actions were started against various combinations of Marriott International, Luxury Hotels, and Starwood Canada across Canada: two actions in Alberta, six in B.C., five in Ontario, two in Quebec and one in Nova Scotia.
The Ontario court had directed Marriott to assist in developing a procedure akin to — and perhaps even better than — the multidistrict litigation procedure used by American states, and counsel for Marriott used a “first impression” simultaneous motion to settle how many class actions should proceed. In November 2020, the multijurisdictional panel — the first of its kind in Canada, using the Canadian Judicial Protocol for the Management of Multijurisdictional Class Actions and the Provision of Class Action Notice (CBA Protocol) — directed that a single national class action in Ontario should proceed, reducing 16 actions in five provinces to a single national class action in Ontario.
The issue of privilege with a cross-border breach, involving multiple regulator inquiries and a wide breadth of litigation, was complex and involved novel issues of law that Canadian courts had not previously addressed and will contribute to the further shaping of this complex field of law, says counsel for the defendant.
“This case was significant because it provides a roadmap for courts across Canada to apply the CBA Protocol to resolve how many or which overlapping class action should proceed before certification,” says Michael Eizenga, co-head of Bennett Jones’s class actions practice.
“It is the first example of the courts using the CBA Protocol to speak to each other and hold a joint case conference for the purpose of resolving the issue of overlapping class actions.”
CLIENTS > FIRMS > LAWYERS
- Glenn Winder > Siskinds LLP > Michael G. Robb, Alex Dimson, Stefani Cuberovic, Ron Podolny and Joel Rochon
- Marriot International, Inc., Luxury Hotels International of Canada, ULC, Starwood Canada ULC > Bennett Jones LLP > Michael A. Eizenga, Ranjan K. Agarwal and Nina Butz
HONOURABLE MENTIONS
- ESW Capital, LLC (Re), 2021 ONSEC 7: This was the first application to the Ontario Securities Commission for an exemption from the minimum tender requirement and the first case to address the mandatory minimum tender requirement of the takeover bid rules adopted by Canadian securities regulators in 2016.
- Northern Regional Health Authority v. Horrocks, 2021 SCC 42: The top court’s ruling that a labour arbitrator appointed under the collective agreement, not by a human rights adjudicator, should settle employment discrimination disputes in unionized workplaces is significant for any business affected by a collective bargaining agreement.
- Bell Canada et al. v. L3D Distributing Inc., 2021 FC 832: The Federal Court’s judgment against three retailers of “pre-loaded” set-top boxes and unauthorized internet protocol television services awarded nearly $30 million to the plaintiffs in statutory and punitive damages for copyright infringement, in addition to declaratory and injunctive relief.
- Groupe TVA Inc. v. Bell Canada, 2021 FCA 153: In a dispute between Québecor and Bell stemming from negotiations over pricing for specialty TV channels, Québecor cut the signal of TVA Sports to Bell subscribers during the NHL playoffs. The CRTC invoked the standstill rule in ordering Québecor to reinstate the service. The Federal Court of Appeal ruled that the impugned regulatory provisions were intra vires the CRTC’s powers under the Broadcasting Act and dismissed the appeal.