the blg monthly update is a digest of recent developments...
TRANSCRIPT
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The BLG Monthly Update is a digest of recent developments in the law whichNeil Guthrie, our National Director of Research, thinks you will find interestingor relevant – or both.
IN THIS MONTH’S EDITION
Administrative law• steadydietofappallingprisonfoodcouldbecruelandunusualpunishmentAdministrative law/securities• penaltiesimposedbysecuritiescommissionconstitutional;stiffinthisinstance,butstillnot penalinnatureCivil procedure• usefulsummaryofprinciplesapplicabletolettersrogatoryCivil procedure/employment law• usefulreviewoffactorsfordecidingwhetherapartycanpleadanoffertosettleConflict of laws• furtherproofthatthehousealwayswins?• jurisdiction–theSupremeCourtofCanadaspeaksConflict of laws/contracts• don’tforgetthechoiceoflawclause!Contracts• lawfulactscanbeeconomicduress,renderingacontractvoidable• unknownrepudiation–groundsforterminationbutnotdamagesContracts/derivatives• literalnotcontextualapproachprevailsininterpretationofISDAMasterAgreementContracts/partnerships/unjust enrichment• partnershipcanarisewithoutwrittenagreement,butnotherebecauseallwas‘subjecttocontract’Corporations• BCgovernmentintroduceslegislationallowingcommunitycontributioncompaniesEmployment law• itdoesn’tmatterwhatyouweredoingwheninjuredonthejobinordertobecompensatedforitEvidence• lawyer’strustaccountledgersnotnecessarilysubjecttosolicitor-clientprivilegeIntellectual property• ISPnotifiedofillegaldownloadingbutstillnotliable,saysHighCourtofAustralia• soundsnoweligiblefortrade-markprotectioninCanadaPrivacy• vicariousliabilityforspamtexts
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ADMINISTRATIVE LAW
Steady diet of appalling prison food could be cruel and unusual punishment
TerrencePrudeallegedthatstaffofthe
MilwaukeeCountyJailhadsubjectedhimtocruel
andunusualpunishmentbecausetheyfedhim
nothingbutnutriloaf,whichJudgePosnerofthe
7thCircuitdescribedas‘abad-tastingfoodgiven
toprisonersasaformofpunishment’,forperiods
ofseventotendaysatatime.Prudeallegedthat
thissteadydietcausedvomiting,stomachpains,
constipation,‘alarming’weightlossandpossibly
ananalfissure(‘whichisnofunatall’,inthe
wordsofthelearnedjudge).
Summaryjudgmentwasinitiallygrantedin
favourofthedefendants,butJudgePosner
thoughtthiswaswrong:theirresponsetothe
suitwas‘contumacious’inthattheyignored
theself-representedPrude’sdiscoverydemands
andthecourt’sordertocomplywiththem.
Thedefendants’evidenceonsummaryjudgment
wasa‘preposterous’hearsayassertionthat
nutriloaf‘hasbeendeterminedtobeanutritious
substanceforregularmeals’.ThefactthatPrude
hadsuedprisonstaffwhohadnotactuallybeen
indifferenttohishealthwasnotfataltohis
appeal;atleastsomeofthemwereawareofthe
direeffectsofnutriloafanddidnothingtohelp.
Thecourtbelowwascorrect,however,tostrike
Prude’sclaimthatitwascrueltoofferhima
sandwich(‘andnotofnutriloaf,either’)asabribe
tospyonotherprisoners;Prudehadrejectedthe
offer,butnotgettingthesandwichmadehimno
worseoffthanhewouldhavebeenotherwise.
Thedefendantswereorderedtoshowcausewhy
theyshouldnotbesanctionedfortheirfloutingof
thelowercourt’sorders;iftheyignoredthisorder,
‘theywillfindthemselvesindeeptrouble’.
Prude v Clarke (7thCir,27March2012)
ADMINISTRATIVE LAW/SECURITIES
Penalties imposed by securities commission found constitutional; stiff in this instance, but still not penal in nature
Rowan,presidentandCEOofWattCarmichael
Inc.(WCI)wasfoundbytheOntarioSecurities
CommissiontohavebreachedOntariosecurities
lawintradingin,andfailingtoreporttradesin,
Privacy/wills & estates:• heirscanassertrightofpublicityindeadperson’simage,saysCaliforniacourtTorts• thesultan,hisex-wife,herbadmintoncoachandthemissingdiamondsTrusts• breachoforaltrust• trustisresidentwherecentralmanagementandcontrolcarriedout,saysSCCUnjust enrichment• uncleanhandsprecludeclaimforcontributionstogrowop
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sharesofBiovailCorp.EugeneMelnyk,thechair
ofBiovail,hadsetupanumberofoffshoretrusts
whichheldsharesofBiovailandwhich
maintainedaccountsatWCI.Rowanhadtrading
authorityovertheaccountsandwasalsoa
directorofBiovail.RowantradedmillionsofBiovail
sharesbutdidnotfileinsiderreports.TheOSC
concludedhehadnotengagedininsidertrading
buthadbreachedtheinsiderreporting
requirementsandhadengagedinconductthat
wasabusiveoftheintegrityofthecapitalmarkets.
Rowanwasorderedtopayanadministrative
monetarypenalty(AMP)of$520,000;hisfirm,
$420,000forfailingtosupervisehim.Rowanand
WCIwerealsoorderedtopaycostsof$140,000.
TheirappealwasdismissedbytheDivisional
Court;theCommission’sreasonswerecareful,
thoroughandcorrectinlaw.RowanandWCI
appealedagain,arguingtheCommission’s
abilitytoimposeAMPsofupto$1millionper
infractionviolateds11(d)oftheCharter becausethemagnitudeofpotentialAMPsmadethem
penalratherthanadministrativeinnature,
triggeringCharterprotection.TheOntarioCourtofAppealrejectedthiscontention:thelevelof
possibleAMPswas‘entirelyinkeeping’withthe
Commission’sregulatorymandate,andnecessary
toserveasanadequatedeterrenttomisconduct.
RowanalsoarguedthattheCommissionmay
imposeanAMPonlywheretherehasbeenan
actualbreachoftheSecurities Act, notforconductthathasmerelybeenfoundtobecontrary
tothepublicinterest.This,too,wasrejected:
actingcontrarytothepublicinterestwas
‘inextricablylinked’tohisactualbreachofthe
insiderreportingobligations.AMPsforWCI’s
failuretosupervisewerealsoupheld.
Rowan v OSC,2012ONCA208
[Linkavailablehere].
CIVIL PROCEDURE
Useful summary of principles on letters rogatory
ThesummaryisfoundinMcFadden Lyon Rouse LLC v Lookkin,2012ONSC2243,whereJSO’NeillJwasaskedtoenforce
lettersofrequest(lettersrogatory)issued
byacourtinAlabamafortheexamination
oftwopartiesinOntarioforthepurposes
ofanactioninAlabama.
Thefactsofthecasedon’tmuchmatter,
butthejudgedoesprovideaniceoutlineof
thegeneralprinciplesfortheenforcementof
lettersrogatory,withcitations:(a)obtaining
theevidencemusthavebeendulyauthorised
bytheforeigncourt,(b)thewitnesswhose
evidenceissoughtmustbewithinthejurisdiction
oftheenforcingcourt,(c)theevidencesought
mustbeinrelationtoaproceedinginthe
foreigncourtand(d)theforeigncourtmust
beoneofcompetentjurisdiction.TheOntario
courtwillconsiderwhether(i)theevidenceis
relevant,(ii)theevidenceisnecessaryfor
discoveryortrialintheforeignjurisdiction,
(iii)theevidenceisotherwiseunobtainable,
(iv)thedocumentssoughtareidentifiedwith
reasonablespecificity,(v)enforcementwould
becontrarytopublicpolicyinCanadaand
(vi)enforcementwouldbeundulyburdensome.
Thereisapredispositiontoaccommodatethe
requestsofforeigncourts.
[Linkavailablehere].
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CIVIL PROCEDURE /EMPLOYMENT LAW
Useful review of factors for deciding whether a party can plead an offer to settle
MoneyExpressPOSSolutionsInc.madeanoffer
tosettleinitsterminationlettertoRaheelJiwan,
whichJiwanthenreferredtoinhispleadingsina
wrongfuldismissalsuit.Theemployermovedto
havereferencestotheletterexpunged,onthe
groundstheywereprotectedbysettlement
privilege:Jiwan v Money Express POS Solutions Inc,2012ONSC909.
MasterShortoftheOntarioSuperiorCourtgives
ausefulreviewofthecaselawandthefactors
thatwillbeconsideredincasesofthiskind:
(1)wasthecommunicationfromthedefendant?
(yes,inthiscase);(2)wastheplaintiff
contemplatinglitigation?(yes,eventhough
theoffertosettlewasinthesameletterasthe
termination;neithercame‘outoftheblue’from
theemployee’sperspective);(3)wasthe
defendantofferingarealcompromise?(yes);
(4)wasthecommunication‘withoutprejudice’?
(yes,itsaidsospecifically);and(5)wasthe
genuinepurposeofthecommunicationa
settlement?(again,yes).Theparagraphinthe
pleadingswasthereforestruck.
[Linkavailablehere].
CONFLICT OF LAWS
Further proof that the house always wins?
Or,thatwhathappensinVegasdoesn’t
necessarilystayinVegas:Wynn Las Vegas LLC v Teng,2012ONSC1927.TennyTengwenttoLasVegastogamble,havingobtaineda
$300,000lineofcreditfromtheWynncasino
(and,itappears,fromCaesar’sPalaceandthe
Bellagioaswell).TengdrewontheWynnlineof
creditandleftVegasowingadebtof$290,000
(hehadpaid$10,000onarrivalasfrontmoney).
Thetwochequeshehadprovidedassecurity
weredishonoured.Thecasinowas,not
surprisingly,incontactwithTengabouthis
indebtednessandwasnotsatisfiedbyhistales
offinancialdifficultyandpromisestorepay.
ThecasinosuedinOntario,seekingsummary
judgmentfortheoutstandingprincipaland
interest.TengarguedfirstofallthatNevadawas
themoreappropriateforum,giventhelocation
ofwitnessesandthefactthedebtarosethere.
Healsodeniedhavingappliedforthelineof
creditandclaimedevenifhehadsignedthe
application,hewaswasundertheinfluenceof
allthefreedrinksthatthecasinohadpliedhim
withandcouldn’trememberathing.Teng
contendedtheseweregenuineissuesfortrial.
Yeah,right!Thefactthatthecasinocouldhave
suedinNevadawasnotdispositive;thecredit
applicationprovideditcouldpursueremedies
thereorelsewhere;andOntariowas,furthermore,
whereTengresided,wherehisassetswereand
wherethechequesbounced.Tengalsoattorned
tothejurisdictionoftheOntariocourtbyfilinga
defence.Astothe‘genuine’issuesrequiringtrial,
theywerebeliedbyacleartrailofe-mailswhich
establishedthatTenghadsentthecredit
applicationbyfaxfromhome,andthatany
claimnottobeabletoremembersigningthe
documentationaroseafterWynnsuedhim.
Wynnobtainedjudgmentforthefullamountof
thedebtpluspre-judgmentinterestattherate
of18%asstipulatedinthecreditagreement,
post-judgmentinterestof18%andcostsona
partialindemnityscale.
[Linkavailablehere].
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Jurisdiction: the SCC has spoken
IncaseyoumisseditinApril,theSupreme
CourtofCanadahandeddownitsjudgmentsin
fourcasesabouttheassumptionofjurisdiction
byacourtinproceedingswithamultijuris-
dictionalcharacter.Hardtosummarisebriefly,
butheregoes.
InthecombinedappealsinClub Resorts Ltd v Van Breda and Club Resorts Ltd v Charron, 2012SCC17,whichinvolvedcatastrophicinjuries
(inoneinstancefatal)sustainedbyCanadianson
holidayinCuba,theSCCaffirmedthedecisions
below.LeBelJ,forthecourt,largelyendorsedthe
approachthathadbeentakenbySharpeJA
intheOntarioCourtofAppealinrefiningand
reformulatingthecommon-lawtestfor
assumptionofjurisdiction.A‘realandsubstantial
connection’betweenthedisputeandthe
jurisdictionisrequired,andtheSCCagreedwith
JusticeSharpethatjurisdictionmaybepresumed
onthebasisofcertainfactors,eachofwhichmay
berebuttedbyshowingthatthepresumed
connectionisinfactaweakone.TheSCCdid,
however,narrowtherangeofpresumptive
categoriestothese:(a)thedefendantisresident
ordomiciledinthejurisdiction,(b)thedefendant
carriesonbusinessinthejurisdiction(although
suggestingthatactualnotmerelyvirtualpresence
shouldberequired),(c)thetortwascommittedin
thejurisdictionand(d)acontractconnectedwith
thedisputewasmadeinthejurisdiction.Thislist
isnotclosed,however,andmaybeaugmentedas
thecaselawdevelopsbyanalogousrelationships
totheforum.TheSCCagreedwithJusticeSharpe
thattheanalysisforjurisdictionisdistinctfrom
thatforforum non conveniens (FNC),whichdecideswhetherthereisanotherforumwhich
wouldbeabetteronetohearthedisputefor
reasonsofpracticalityandfairness.Onlyonce
jurisdictionisestablisheddoesFNCcomeinto
play,butifitisn’traisedbythedefendantthe
litigationproceeds.IfFNCisraised,theonusison
thedefendanttoshowwhyanotherforumisa
moreconvenientone,andthereisnoexhaustive
listoffactorstobeconsidered;eachcasewill
raiseitsownissues.
[Linkavailablehere]
InBreeden v Black,2012SCC19,whicharosefromallegedlydefamatoryremarksmadeoverthe
internetbyUSrepresentativesofaUScompany
aboutLordBlack,thecourtruledthatthetortof
defamationoccursuponpublicationtoathird
party;inthecaseoftheonlinestatementsat
issue,thiswaswhentheywereread,downloaded
andrepublishedinOntariobythreenewspapers.
Everyrepetitionorrepublicationisanew
publication,andtheoriginalauthormaybeliable
whererepublicationwaseitherauthorisedbyhim
orherorwhererepublicationisthenaturaland
probableresultoftheoriginalpublication.There
wereFNCfactorsinfavourofbothIllinoisand
Ontario,butthebalancetippedinfavourofthe
latter.LordBlack’sactioninOntarioagainstthe
threenewspaperswouldotherwiseproceedhad
thepartiesnotalreadysettled(havingagreedto
letthejurisdictionissuegouptotheSCC).
[Linkavailablehere].
Editions Ecosociété Inc v Banro Corp,2012SCC18,isthecivil-lawbook-endtoBreeden v Black. Banro,anOntario-basedminingcompany,
suedQuebec-basedpublisherEditionsEcosociété
inOntario,onthebasisthatabookithad
published,whichallegedhumanrightsviolations
bythecompanyintheDemocraticRepublicof
Congo,wasavailabletoOntarioreadersonthe
company’swebsiteandin93hardcopies(in
French)inOntariobookstores.Theplacewhere
thetortoccurredwas(asinBreeden)wherethe
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allegedlydefamatorywordswerepublishedtoa
thirdparty,althoughtheSCCmusedthatthe
traditionallex loci delicti rulemightgivewayin
defamationcasestothelawoftheplacewhere
themostsubstantialharmtoreputationoccurred.
Undereitheranalysis,theOntariocourthad
jurisdictiontoheartheclaimandtheFNCfactors.
Netresult?Tooearlytotell,butBarryGlaspellof
theTorontoofficeofBLGsuggeststhatCanadian
courtsaremuchmoreamenabletoassuming
jurisdictionovermultijurisdictionaldisputesthan
theircounterpartsinEnglandortheUStobegin
with;theserecentdecisionsmaynarrow(slightly)
theopportunityforacourttoassumejurisdiction
butmaymakeaFNCtransfertoanother
jurisdiction(slightly)moredifficult.Alsolots
ofunansweredquestions.
[Linkavailablehere].
CONFLICT OF LAWS/CONTRACTS
Don’t forget the choice-of-law clause!
Thisisexactlywhatthepartiesforgottodoin
Presstek Europe Ltd v Multi-Digital De Impresion SL(QBD,13March2012)–althoughoneofthem
claimeditthoughttheagreementincorporateda
choice-of-lawprovisionfromarelatedcontract.
PresstekandMulti-Digitalhadenteredintoa
non-exclusivedistributionagreementwhich
statedthatEnglishlawgovernedalldisputes
exceptanythatinvolvedinjunctiverelief,andthat
theLondonInternationalCourtofArbitrationwas
tohavejurisdiction.Thepartiesthenenteredinto
acontractforthesaleofthreemachinesby
Multi-DigitaltoPresstek;therewasno
choice-of-laworjurisdictionclause.Presstek
(aUKcompany)claimedthatMulti-Digital(a
Spanishcompany)hadfailedtoperformthesales
contractandthatEnglishlawgoverned.Multi-
Digitalsuccessfullychallengedthejurisdictionof
theEnglishcourts:evenif(andthatappearsto
havebeenabigif)thesalescontractdidimplicitly
incorporatethedistributionagreement’schoice-
of-lawandjurisdictionprovisions,itwasclear
thatthepartieshadnotintendedthoseprovisions
toapplytoalldisputes.Mostdisputesweretobe
arbitratedinLondonunderEnglishlaw,butnotall
disputes,andnothinginvolvinginjunctiverelief.
Theactualdisputebetweenthepartiesinvolved
aninjunction,soitfellintothegapareatowhich
EnglishlawdidnotapplyandtheEnglishcourts
didnothavejurisdiction.Bettertohavedealtwith
choiceoflawandjurisdictionsquarelyinthe
salescontract.
CONTRACTS
Lawful acts can amount to economic duress, rendering a contract voidable
Thelawfulconductwashardbargaining
(generallyOKinacommercialsetting)butit
amountedtoeconomicduressinProgress Bulk Carriers Ltd v Tube City IMS LLC, [2012]EWHC
273(Comm).TubeCitycharteredashipowned
byProgress,makingitclearthattheidentityof
thevesselwasimportanttobothitandthe
receiverofthegoodsthatweretobeshippedon
it.Progressthenconcludedacharterfortheship
withanotherparty,inbreachofitsagreement
withTubeCity.Progressconcededthisandsaidit
wouldfindanothership,initiallyagreeingto
compensateTubeCityforanydamages.TubeCity
reliedontheseassurancesanddidnotlookfor
anothervesselitself.Presumablysensingthat
TubeCitywasinajam,Progressthenchanged
7
itstuneandmadea‘takeitorleaveit’offer
whichwouldhaverequiredTubeCitytorelease
allclaimsagainsttheship-owner.
Thedisputewenttoarbitration,whereitwas
foundthatTubeCity’sagreement(underprotest)
towaiveitsclaimshadbeenprocuredby
economicduress.Butwasthatcorrect,giventhat
Progress’shadmerelyrepudiateditscontractand
notdoneanythingillegal?CookeJconsideredthe
leadingcasesoneconomicduress,concluding
that‘lawfulactduress’can–inexceptional
circumstances,andnottypicallyinacommercial
setting–amounttothe‘illegitimatemeans’
sufficienttorenderthecontractvoidable.
Progresshadnotonlyrepudiateditscontract
withTubeCitybuthadreliedonthatbreachto
takeadvantageofthesituationithadcreated.
Thearbitratorsgotitright.
[Linkavailablehere].
Unknown repudiation: grounds for termination but not damages
Anovelpoint,apparently,inLeofelis SA v Lonsdale Sports Ltd, [2012]EWHC485(Ch),
wheretheplaintiffmadeasecondkickatthe
caninclaimingdamagesforrepudiationof
contract.Leofeliswastheexclusivelicensee
incertainEuropeancountriesofLonsdale,
amanufacturerofsportsandleisuregear.In2007,
LeofelisallegedthatLonsdalehadrepudiatedthe
Leofelislicence,butwasunsuccessful.Inthe
courseofthatlawsuit,theevidenceputforward
byLonsdaleindicatedthatthecompanyhad,
infact,grantedalicencetoaLatviancompany
withrespecttosomeoftheterritoriesunderthe
Leofelislicence.HadLeofelisknownthisin2007,
therewouldhavebeengroundstosaythat
Lonsdalehadrepudiatedthecontractandought
tomakeupforLeofelis’slostprofits.
ButcouldLeofelissayitwasjustifiedin
terminatingthecontractin2007inrelianceon
arepudiatorybreachofwhichitwasunaware
atthetime?Yesandno,saidRothJofthe
EnglishChanceryDivision.TheLatvianside
dealwouldhavebeenenoughtojustifynotice
ofterminationbyLeofelis,butbecauseLeofelis
hadnotacknowledgedthatparticularbreachit
didnothavearighttocompensationforlosses
sufferedasaresultofitsdecisiontoterminate
thecontract.
[Linkavailablehere].
CONTRACTS/DERIVATIVES
Literal not contextual approach prevails in interpretation of ISDA Master Agreement
Not,perhaps,whatonemighthaveexpectedin
thewakeoftherecentdecisionoftheUK
SupremeCourtinRainy Sky SA v Kookmin Bank, [2011]UKSC50,whichoptedforthecontextual
approach,asinformedbybusinesscommon
sense.But,onthefactsofLomas v JFB Firth Rixson Inc, [2012]EWCACiv419,theliteral
approachseemstomakesense.
Butfirst,alittleDerivatives101.Underan
interestrateswap,onepartypaysafloating
rateofinterestonanotionalsumoveraspecified
period;theotherpartypaysafixedrateonthe
samesumoverthesameperiod.Attheendof
eachperiodonepartywillbe‘inthemoney’and
theother‘outofthemoney’:thelatterpaysthe
differenceinvaluetotheother.
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WhenLehmanBrothersbecameinsolventin2008,
itwasinthemoneyinrelationtoanumberof
swaps.Itsadministratorsnaturallywantedto
collectbutfacedanobstacleintheInternational
SwapsandDerivativesAssociation(ISDA)Master
Agreement,thestandard-formcontractwhich
governedthetransactions.TheISDAMaster
Agreementprovidesthatpaymentisconditional
ontherebeing‘noEventofDefaultorPotential
EventofDefault’(definedtoincludeinsolvency)
that‘hasoccurredandiscontinuing’.Onitsface,
notgoodfortheadministrators’case.They
arguedthattheconditionprecedentoughttobe
readinthelightoffouralternativeimpliedterms,
underwhichtheconditionwouldnolongerbe
operative(a)aftertheexpiryofsuchtimeas
wouldberequiredtoallowthenon-defaulting
partytoelectanearlyterminationdate,(b)after
areasonabletime,(c)ontheexpiryormaturityof
allrelevanttransactionsor(d)ontheexpiryofall
transactionsbetweenthepartiesgovernedbythe
ISDAMaster.Thesealternativesmadesome
commercialsense:whyshouldtheout-of-the-
moneypartygetoffscot-free?
Well,saidtheEnglishCourtofAppeal,because
that’swhattheISDAMasterAgreementprovided
inclearterms(thatbitabout‘andiscontinuing’
stronglysuggestingthatanimpliedexpiration
dateoftheconditionoughtnottobereadin).
Thecourtsaiditwouldreadintermsonly
‘ifitisnecessarytodosoorifitwouldbe
obvioustoanydisinterestedthirdpartythatthe
contractmusthavethemeaningwhichthe
impliedtermswouldgiveit’.Nothere.
[Linkavailablehere].
CONTRACTS/PARTNERSHIPS/UNJUST ENRICHMENT
Partnership can arise without written agreement, but not here because all was ‘subject to contract’
Ausefullittlereminderaboutthenatureof
partnershipsandcontractualnegotiationsin
Valencia v Llupar,[2012]EWCACiv396.
Valenciaownedtworestaurants.Llupar,afriend
ofValencia’sdaughter,wantedtobecome
involvedinValencia’sbusiness.Heallegedthat
Valenciahadrepresentedthattherestaurants
wereflourishingandthathecouldbecomeher
businesspartnerandrentouttheapartment
aboveoneofthelocations.Lluparmade
paymentstoValenciatotalling₤80,000althoughonexactlywhatbasiswasunclear.Profitsfrom
therestaurantsturnedouttobeconsiderably
lessthanLluparclaimedhehadbeenledto
believe,andtheflatwasn’treadyforoccupation.
Hesued,claimingthatalettersenttohimby
Valenciaconstitutedapartnershipagreement.
Itwasheaded‘partnershipagreement–subject
tocontract’.
ThetrialjudgeacceptedthatValenciahadmade
misrepresentationsbutheldthatbecausethe
partnershipagreementwasneversigned,
thepartiesshouldsimplyberestoredtotheir
originalposition,eitheronthebasisofthe
misrepresentationsoratotalfailureofcontractual
consideration.Correctresult,butwrongonthe
law,saidtheEnglishCourtofAppeal.Partnership
can,ofcourse,ariseatwillwithouttheneedfora
writtenagreement,butitwasclearfromthe
actualletterthatanyrelationofpartnershipwas
tocomeintoexistenceonlywhenanagreement
wasconcluded–the‘subjecttocontract’bit.
Moneystransferredinanticipationofaformal
contractthatnevermaterialisearetobe
9
refunded.Therewasnoneedtoconsiderwhether
Valenciahadmisrepresentedthestateofthe
businesstoLlupar;thiswasasimplecaseof
unjustenrichment.
[Linkavailablehere].
CORPORATIONS
BC government introduces legislation allowing community contribution companies
FollowingtheleadofanumberofUSstateswhich
permittheformationofbenefitcorporations,
BritishColumbia’sBill23(Finance Statutes Amendment Act 2012)would,ifenacted,seeanewcorporatehybridintheprovince,with
featuresofbothabusinesscorporationanda
not-for-profit.
Thenewcommunitycontributioncompany(orC3)
wouldberequiredtodevoteaportionofitsprofit
toacommunitypurposespecifiedintheC3’s
articles,havelimitsonitsabilitytodistribute
profitstoshareholders(includingondissolution)
andberequiredtomakepublicdisclosureofits
contributiontothecommunity.
[Linkavailablehere].
EMPLOYMENT LAW
It doesn’t matter what you were doing when injured on the job in order to be compensated for it
PVYW(anonymisedbythecourtforreasons
whichwillbecomeapparent)wasemployed
intheHRdepartmentofanAustralian
governmentagency,whichrequiredherto
traveltoacountrytowninNewSouthWales
toconductbudgetreviewsandprovidetraining.
Whilethere,shehookedupwithamalefriend
andtookhimbacktohermotelroom,where
theyhadsex.Duringtheirencounter,aglass
lightfittingabovethebedwas(somehow)
pulledfromitsmount.Thelightfittingfell
onPVYWandcausedherinjuries.Sheclaimed
compensationundertheSafety Rehabilitation and Compensation Act 1988 foraninjurysustainedinthecourseofheremployment.
Theemploymenttribunalrejectedtheclaim:
atthetimeoftheinjuryshewasnotengagedin
acts‘associatedwithheremployment’or‘atthe
directionorrequestofheremployer’,norwas
theinjury‘sufficientlyconnected’withherjob.
NicholasJoftheAustralianFederalCourt
reversed:PVYWwasinthemotelonlybecause
herjobrequiredit,andaninterludeinanoverall
periodorepisodeofworkwasstillpartofbeing
onthejob.Injuriessustainedinthatkindof
interludearestillinthecourseofemployment,
unlesstheyinvolvegrossmisconduct(whichher
trystwasnot)orself-inflictedinjury(whichthis
didn’tseemtobe,intentionallyanyway).
Shewouldhavebeeneligibleforcompensation
ifshehadbeenbathingordressinginhermotel
room;indeed,‘iftheapplicanthadbeeninjured
whileplayingagameofcardsinhermotelroom
shewouldbeentitledtocompensationeven
thoughitcouldnotbesaidthatheremployer
inducedorencouragedhertoengageinsuchan
activity’.PVYW’sparticularrecreationalactivity
whileonaworktripwasalsocoveredbythe
compensationscheme:PVYW v Comcare (No 2), [2012]FCA395.
[Linkavailablehere].
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EVIDENCE
Lawyer’s trust account ledgers not necessarily subject to solicitor-client privilege
Solicitor-clientprivilegeshieldslegaladvicegiven
totheclientfromdisclosure,butitdoesn’textend
toallfactscontainedinthelawyer’sfile.Arethe
thecontentsofalawyer’strustaccountsmore
likelegaladviceoraretheyjustfacts?
Justfactsinthiscase,saidtwooutofthree
membersoftheBCCourtofAppealhearing
Donell v GJB Enterprises Inc., 2012BCCA135.Theclient,GJBEnterprises,wasapyramid
schemeinCaliforniawithnolegitimatebusiness.
Berke,itsprincipal,foundhiswaytoBritish
Columbia,whereheretainedtheFarrisVaughn
firm(FV).GJB’sCaliforniareceiverappliedtothe
BCcourttoobtainrecordsinFV’spossession
whichrelatedtoGJB’sillegalconduct,whichthe
receivercontendedwouldidentifythesourceof
paymentstoBerke’spersonalbankaccountinBC.
Thechambersjudgeconcludedthatthefirm’s
recordswereprotected,thecrime-fraudexception
notcomingintoplaybecausetherewasno
evidencethatFV’scommunicationswithBerke
involvedparticipationinorcounsellingofany
criminalactivity.Onappeal,thereceivernarrowed
therequesttothefirm’strustaccountledgers.
ChiassonJA(NeilsonJAconcurring)notedthat
whilesolicitor-clientprivilegeisnowasubstantive
rightinCanada,withconstitutionalprotection,the
olddistinctionbetweenfactsandcommunications
forthepurposesofobtaininglegaladviceisstill
relevant.Alawyer’sbillwillbeprivilegedbecause
itarisesoutofthelawyer-clientrelationshipand
‘whattranspireswithinit’,buttrustaccount
ledgersarenotpresumptivelyprivileged.Where
theledgersreflectthesolicitor-clientrelationship,
privilegewillattach;wheretheydonot,itwon’t.
Someoftheledgerentriesfellintotheformer
category,buttheonesthereceiverwantedtosee
merelytracedpaymentsinandoutandshouldbe
produced.SmithJAdissented:thefactofthe
paymentsdidnotariseindependentlyofthe
solicitor-clientrelationship,withtheresultthat
privilegeshouldattach.
[Linkavailablehere].
INTELLECTUAL PROPERTY
ISP notified of illegal downloading but still not liable, says High Court of Australia
iiNetisAustralia’sthird-largestinternetservice
provider(ISP)andtheevidenceinthis
infringementcasesuggestedthatmorethan
halfofitssubscribers’usageconsistedofillegal
downloadingofcontentusingBitTorrentpeer-to-
peertechnology.AFACT,acoalitionofcopyright-
holders,usedacomputerprogrammetogather
evidenceofinfringementandsenttheresultsto
iiNetonnumerousoccasions.Theissuewas
whetheriiNet,havingbeennotifiedofspecific
infringements,wasitselfliableforhaving
authorisedinfringement: Roadshow Films Pty Ltd v iiNet Ltd,[2012]HCA16.
Intheend,no.WhileiiNetcouldhavesimply
terminatedindividualsubscriptionstoitsservice,
itwouldhaveneededtoconductaninvestigation
ofitsowntodeterminewhowasdownloading,
whichapplicablelegislationdidnotrequireit
todo.Itcouldnothaveterminatedcontracts
solelyonthebasisoftheAFACTnotices,which
didnotprovideenoughinformationtogoon.
Inactivitycouldnotgiverisetoaninference
ofauthorisation–orindeedtooneofindifference
ontheISP’spart,giventhatitwouldhavebeen
11
imprudenttoactonthebasisoftheAFACT
noticesalone,whichmighthavedeprived
accesstonon-infringingservices.
[Linkavailablehere].
Sounds now eligible for trade-mark protection in Canada
Metro-Goldwyn-MayerLionCorp.appliedfora
trade-marktoprotectthedistinctivelion’sroar
usedbyitintheopeningcreditsatthemovies.
Thetrade-marksregistrarsaidno;soundsaren’t
eligiblefortrade-markprotection.Thiswas
reversedbyabrieforderofaprothonotaryofthe
FederalCourt:Metro-Goldwyn-Mayer Lion Corp v AG Canada, docketT-1650-10(1March2012).
Inresponse,theCanadianIntellectualProperty
Officehasannouncedthatitwillnowaccept
applicationsforsoundmarks.
[Linkavailablehere].
PRIVACY
Vicarious liability for spam texts
Spamisirritating,whetheritcomesbye-mailor
textmessage,eventhoughit’sactuallypretty
easyjusttodeleteit.Agroupofcustomersof
HeartlandAutomotiveServices,afranchisee
whichoperatedJiffyLube(JL)servicestations,
foundthespamtextstheyreceivedsufficiently
annoyingthattheyinitiatedclassproceedings:
In re Jiffy Lube International Inc Text Spam Litigation (SDCal,9March2012).Themessages
atissue,whichoffereddiscountsonJLservices,
wereactuallysentbyTextMarks,acompany
whichhadallegedlybeenhiredbyHeartlandto
storephonenumbersandsendoutmasstexts.
Theplaintiffsclaimedthisviolatedfederallaw
againsttheuseofautomateddiallingtechnology.
Indecliningtodismisstheirclaims,theCalifornia
districtcourtthoughttherewasnoreasonin
principlewhyHeartlandcouldn’tbevicariously
liableforrobocalling,eventhoughthiswasnot
expresslyprovidedforinthelegislation.Heartland
alsoarguedthatitscustomershadconsentedto
receivingtextmessagesbyprovidingtheirphone
numberswhenmakingpayment,andwhilethe
courtdidn’truleonewayoranotheronthepoint
itsuggestedthatconsentprobablyrequiredan
expressstatementbythecustomerthat
promotionaltextswouldbeOK.
PRIVACY/WILLS & ESTATES
Heirs can assert right of publicity in dead person’s image, says California court
ThedeadpersoninquestionisAlbertEinstein,
whoseimagewaslicensedfromGettyImages
byGeneralMotorsforanadinasingleedition
ofPeoplemagazine.TheHebrewUniversityof
JerusalemclaimedthisinfringedEinstein’s
statutoryandcommon-lawrightsofpublicity,
whichtheuniversityhadinheritedunderthe
termsofEinstein’swill.ThewillleftEinstein’s
‘literarypropertyandrights,ofanyandevery
kindornaturewhatsoever’totheuniversity.
GMcontendedthatthiscouldnotextendto
arightofpublicityinEinstein’simage;
theuniversitycounteredthatitwasimplied,
andthatEinsteinhad,duringhislifetime,
licensedtheuseofhisimageforcommercial
purposes(e.g.arefrigeratorad),althoughit
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wasunclearwhetherhehadeverreceived
compensation.
MatzJoftheCaliforniadistrictcourtdidn’t
thinkitwasnecessaryfortheplaintifftoshow
thatEinsteinhadexploitedhisimagefor
moneyduringhislifetime(someauthorityto
thecontrary);whatmatteredwasEinstein’s
‘probableintent’indesiringtocontrolhisimage,
hadheknownhecoulddothisevenafterdeath.
Thejudgeobservedthatthereare‘sound,even
compellingreasons’toallowheirsofthefamous
deadtopreventuseoftheperson’simagefor
purposesinconsistentwiththename,image,
reputationandidentityheorshehadestablished
whileliving.GM’smotionforsummaryjudgment
wasthereforedenied,althoughitdidmanageto
havetheuniversity’sunfaircompetitionandfalse
endorsementclaimsdismissed,becauseitwas
obviousthatGMwasnotsuggestingEinstein’s
actualendorsementofitsproduct:The Hebrew University of Jerusalem v General Motors LLC (CDCal,17March2012).
TORTS
The sultan, his ex-wife, her badminton coach and the missing diamonds
TheratioofAziz v Lim, [2012]EWHC915,is–
asmuchasanythingelse–thatit’shardtofind
goodhelpthesedays.MariamAzizistheex-wife
oftheSultanofBrunei,oneoftherichestmenin
theworld.Asaresultofherdivorcesettlement,
MsAzizbecame‘anextremelywealthywoman
inherownright’andamongthetrinketsshe
receivedonpartingwayswithHisMajestywere
adiamondbraceletworthUS$5.545million,
a12.71-caratpear-shapedbluediamond
(US$12.7million)anda27.1-caratsquareyellow
diamond(amere$1million).Azizclaimedthat
FatimahLim,herbadmintoncoach,bodyguard
andpersonalassistant,hadpurloinedthejewels,
sellingthebraceletandcontrivingwithajeweller
toreplacethetwolargediamondswithreplicas.
LindblomJfoundMsLim’sexplanations(there
wereseveral,andtheyconflicted)completely
unbelievable.Thestorythatthediamondswere
soldtopayoffgamblingdebtsinLim’snamebut
actuallythoseofAziz(whowasallegedlyhardup)
wassimplynotcredible;dittoLim’sretractionof
anearlierconfessiontotheRoyalBruneiPolice
thatshehadstolenthejewels,whichsheclaimed
hadbeenforcedfromherunderduress.
Thecasedoesn’ttellusanythingaboutthetort
ofconversionwedidn’talreadyknow,butitdoes
shinesomelightonthelivesofthe1%ofthe1%.
[Linkavailablehere].
TRUSTS
Breach of oral trust
It’sneverahappydaywhenafatherhasto
suehisdaughter,buttherewillbetimeswhen
itappearstobenecessary:Berkowitz v Berkowitz, 2012USDistLEXIS31487(DMass,9March2012).
SamuelBerkowitzgrantedageneralpowerof
attorneytohisdaughterBonnie,tellingherto
‘takecare’ofhermother(Samuel’sex-wife)and
brotherBrianintheeventofhisdeath.Samuel
laterconveyedaseriesofpiecesofrealestateto
Bonnie,allegingheagaininstructedherorallyto
usetheincomefromthemto‘takecare’ofher
motherandtoshareanyremainingvaluewith
13
Brian.Bonniesoldthepropertiesfor$1.7million.
By2002,SamuelsuspectedthatBonniehad
forgedhissignatureonshareandfundstransfers,
butassumedshewasneverthelessactingin
furtheranceofhisgeneralinstructions.In2008
Samuelaskedforanaccountingoftheoraltrust.
‘Whattrust?’wasessentiallythereply:Bonnie
tookthepositionthatherfather’swordswere
insufficienttocreateatrustandthat,anyway,
becausethepropertyatstakewasland,the
statuteoffraudswasengagedandany
declarationoftrustwouldneedtobein
writing.Bonniemovedtohaveherfather’s
claimdismissedasnotdisclosingaplausible
causeofaction.
TheMassachusettsdistrictcourtconcluded
Samuel’scomplaintcertainlydisclosedacauseof
action.Aslongasyouhavethethreecertainties
ofintention,subject-matterandobjects,therewill
beavalidtrust;thereisnorequirementinequity
forthesettlementtotakeanyparticularform.
Samuelthereforehadaplausiblecasethathe
hadcreatedatrustinfavourofBonnie’smother
forlife,witharemaindertoBonnieandBrian.
Bonnie’slimitationdefencefailed:theclockbegan
totickfromherrepudiationofthetrustin2008
andherfather’sactualknowledgeofthat
repudiation,notfromthedateSamuelbecame
awareofherapparentlydodgydealingsin2002.
Bonnie’sstatuteoffraudsargumentwasbest
leftfortrial.
Trust is resident where central management and control carried out, says SCC
InFundy Settlement v Canada,2012SCC14,thatmeantwherethemainbeneficiaries–not
thetrustee–resided.Twotrustsweresettled
inStVincentandadministeredbyStMichael
TrustCorp.,whichwasresidentinBarbados.
Thetrusteearguedthatitsresidenceshould
govern,withtheresultthatthetrustswere
entitledtoarefundof$152millioninwithholding
taxoncapitalgainsbyvirtueoftheCanada-
Barbadostaxtreaty,whichhasanexemption
forCanadiancapitalgainsrealisedby
Barbadianresidents.
TheSupremeCourtofCanada,noting‘adearth
ofjudicialauthorityontheresidencyofatrust’,
appliedthetestusedtodeterminetheresidence
ofacorporation:wherethecentralmanagement
andcontrolofthecorporation’sbusinessis
carriedout.Thecourtrejectedtheargumentthat
thistestwasinapplicablegiventhatatrustisnot
alegalperson.Trueasamatterofthelawof
trusts,butnotundertheIncome Tax Act,whichdeemsatrusttobeaperson.WhileStMichael
carriedout‘limited’administrativefunctionson
thebeneficiaries’behalf,itwasreallytheywho
hadthecentralmanagementandcontrolof
thetrusts–andtheyresidedinCanada.
Ondifferentfacts,thetrustee’sresidency
mightgovern,butnothere.Sonorefundof
the$152million.(Andunclearwhatthe
answerwouldbeoutsidethetaxcontext.)
[Linkavailablehere].
UNJUST ENRICHMENT
Unclean hands preclude claim for contributions to grow-op
LonnieCraiggsandJoannLynnOwensshackedup
together,livingin‘amarriage-likerelationship’in
ahouseownedbyOwens.Inthebasementwasa
marijuanagrow-op,butafterthecouplesplitup
eachpartyclaimedtheotherwasthedirecting
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mindoftheventure.Craiggsclaimedthathehad
investedlabourandmoneyintheproperty,
andhelpedpayoffthemortgage,unjustly
enrichingOwens.Headmittedthatheshared
intheprofitsfromthebasement,butmaintained
thathisfinancialcontributionstotheproperty
werefromlegitimatesources.Owens
counterclaimed,allegingthatCraiggsforcedher
intohelpingwiththepotbusinessandthathe
shouldpaydamagestothepropertyflowingfrom
apolicedrugbust(whichresultedina15-month
prisonsentenceforCraiggs).
BruceJoftheBCSCfoundthatbothparties’
testimonywasdifficulttoacceptinfull,butwas
preparedtosaythatCraiggshadmadeouta
claiminunjustenrichment:Craiggs v Owens, 2012BCSC29.Recoverywasprecluded,however,
byhisuncleanhands–hiscontributionstothe
property(likedivertinghydrofromthemunicipal
wiresandhaulingbagsoffertiliserfromthelocal
gardencentre)weredirectlylinkedtotheillegal
activitybelowstairs.Evenifsomeofthefinancial
contributionscamefromlegitimatesources,they
wereusedtofundanillegaloperation.Although
shewasthesuccessfulpartyinthelitigation,
Owenswasnotawardedcostsonaccountof
herownwillingparticipationinthegrow-op.
Perfectlycorrect,butcouldpeople(including
judges)pleasestopsaying‘unjustenrichmentis
anequitableremedy’(atpara34)?Itisn’t.
[Linkavailablehere].
AUTHOR
Neil Guthrie
Partner,NationalDirectorofResearch
Toronto
416.367.6052
ng
15
BORDEN LADNER GERVAIS LLP
National Managing Partner
Sean Weir Toronto 416.367.6040 [email protected]
Regional Managing Partners
David Whelan Calgary 403.232.9555 [email protected]
John Murphy Montréal 514.954.3155 [email protected]
Marc Jolicoeur Ottawa 613.787.3515 [email protected]
Frank Callaghan Toronto 416.367.6014 [email protected]
Don Bird Vancouver 604.640.4175 [email protected]
b
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