Canada: Litigation Update- May 2010


(a) Bill 38 – Criminal Record Checks for Volunteers Act, 2010, first reading 16 April 2010

The purpose of this Act is to promote volunteerism by reducing the frequency with which an organization can require a criminal record check for a volunteer and by reducing the cost to a volunteer of obtaining a criminal record check, while still ensuring public safety. The proposed Act would not apply in a municipality where a police force does not charge for the release of the criminal record check.

The proposed Act would preclude an organization from requiring a volunteer to provide a criminal record check as a condition of commencing or continuing work for the organization if (a) the volunteer provided a criminal record check that is less than one year old; and (b) the criminal record check is the latest one obtained by the volunteer. However, the organization can require the volunteer to provide it with notice of all proceedings which may result in a conviction, and may require a criminal record check if the organization has actual notice or reasonable grounds to believe that a conviction for an offence has been added to the volunteer's criminal record since the date of the most recent criminal record check for the volunteer that the organization has received.

(b) Bill C-21 – An Act to Amend the Criminal Code (sentencing for fraud); first reading 3 May 2010

This Bill is otherwise known as the Standing up for Victims of White Collar Crime Act. The intent of the Bill is to combat "white collar" crime by way of tougher sentencing provisions in the Criminal Code, including:

  • a minimum two-year imprisonment term for fraud offences exceeding one million dollars;
  • consideration of the magnitude, complexity, duration or degree of planning of the fraud committed as a specified aggravating factor for the court's consideration in sentencing;
  • a prohibition on considering as mitigating circumstances the offender's employment, employment skills, status or reputation in the community if those circumstances were relevant to, contributed to, or were used in the commission of the offence;
  • a new type of prohibition order prohibiting the offender from seeking, obtaining or continuing any employment, or becoming or being a volunteer in any capacity, that involves having authority over the real property, money or valuable security of another person; and
  • consideration of a new type of community impact statement made by a person on a community's behalf describing the harm done to, or losses suffered by, the community arising from the commission of the offence.


(a) Conflict of Interest – Removal of Lawyer of Record – Confidential Information: Rosenstein v. Plant, 2010 ONSC 502, Released 26 January 2010

Plant and Rosenstein separated, and Rosenstein retained a lawyer, Ages, to vary the terms of the separation agreement. Plant, himself a lawyer, moved to remove Ages based on a conflict of interest. Plant alleged that he had discussed confidential matters with Ages on more than one occasion and Ages had provided Plant with advice. Specifically, ten years before, Ages and Plant met over lunch to discuss Ages' firm's interest in having Plant join them; there was a discussion on the street in fall 2006, before Plant and his wife separated, in which Plant claimed to have provided details of his personal and professional life, and to have received advice from Ages; and there was a discussion with Ages at the court house in spring 2009 when the two ran into each other at Assignment Court, during which Plant discussed his law partnership and financial circumstances respecting his former wife. Ages did not recall specifics of these discussions and saw it as a controlling tactic by Plant to prevent his wife from having counsel of her choice.

The motion judge held that it was not necessary for a lawyer to actually be retained before establishing a solicitor-client relationship relevant to the determination of a potential conflict of interest. The motion judge found that the conversations revealed personal and business information about Plant, and established a previous relationship sufficiently related to Ages' retainer with Rosenstein, even though Plant never retained Ages. Ages did not discharge his burden to show that no potentially relevant confidential information was imparted. Ages' continued representation of Rosenstein would create an appearance of a conflict of interest to reasonably informed members of the public.

(b) Pensions – Winding-up – Rule in Saunders v. Vautier – Motion to Strike Pleadings: Lomas v. Rio Algom Limited, 2010 ONCA 175, Released 10 March 2010

Rio Algom established a defined benefit pension plan in 1966, which was changed effective 1997 to a plan with a defined benefit portion and a defined contribution portion. Lomas, a retired employee of Rio Algom, brought an application for damages and for an order allowing him to represent the members of the defined benefit portion of the plan, among other relief. Some of the allegations made by Lomas were that Rio Algom had unilaterally and surreptitiously amended the plan to the detriment of the plan members. He also alleged breach of trust, contract, and fiduciary duty. Lomas originally sought an order winding up the plan, but after the Supreme Court's decision in Buschau v. Rogers Communications Inc., conceded that this relief was unavailable. He amended his application to seek an order compelling Rio Algom itself to take steps to commence the winding up of the plan. Rio Algom brought a motion to strike the application as disclosing no reasonable cause of action.

On appeal, the Court of Appeal struck the portion of the application seeking to compel Rio Algom to wind up the plan. The only issue on appeal to the Court of Appeal was whether the court can compel an employer to commence proceedings to wind up a pension plan. The Supreme Court, in Buschau, held that the rule in Saunders v. Vautier, which provides that trust beneficiaries may, in certain circumstances, terminate a trust and force the distribution of trust property, was inapplicable to pension plans. Ordering an employer to commence wind up proceedings under the Pension Benefits Act is tantamount to ordering the wind up of the pension plan. The court cannot do indirectly that which it cannot do directly. Buschau makes it "plain and obvious" that the Court does not have the authority to grant the relief sought by Lomas.

(c) Tort – Misfeasance of Public Office; Costs: St. Elizabeth Home Society v. Hamilton (City), 2010 ONCA 280, Released 16 April 2010

The Plaintiff operated a retirement home in the City of Hamilton. The City and the Regional Municipality of Hamilton-Wentworth issued an order to comply as a result of alleged violations by the Plaintiff of a municipal by-law. The Plaintiff subsequently sought damages, alleging, among other things, negligent investigation and misfeasance in public office. The Court of Appeal upheld the dismissal of the Plaintiff's claim.

With respect to the claim for negligent investigation, the Court held that the City and the Region owed no duty of care to the Plaintiff in issuing the orders to comply; rather, their duty was to the residents of the Plaintiff's home.

With respect to the claim for misfeasance in public office, the Court noted that this tort targets officials who act dishonestly or in bad faith, and that to establish the tort, a plaintiff must prove that: (1) the public official deliberately engaged in unlawful conduct in the exercise of public functions; (2) the public official was aware that the conduct was unlawful and likely to injure the plaintiff; (3) the tortious conduct caused the plaintiff's injuries; and (4) the injuries are compensable in tort law. The Court held that the City and the Region had acted lawfully in issuing the order to comply, and further, that the mental element of the tort had not been made out.

The Court did reduce a costs award of over $4 million made by the trial judge. During the course of the litigation, the City and the Region had amalgamated. The trial judge awarded costs to the City and the Region, but the Court held that only one set of costs ought to have been awarded after amalgamation. Further, the Court held that the trial judge had erred in relying on offers to settle made by the Defendants to award costs on a substantial indemnity basis. The Court held that there is no provision in Rule 49 entitling a defendant to substantial indemnity costs where it makes an offer to settle that is greater than the amount awarded at trial.

(d) International Arbitration – Enforcement of Arbitral Award – Public Interest – Issue Estoppel: Znamensky Selekcionno-Gibridny Center LLC v. Donaldson International Livestock Ltd., 2010 ONCA 303, released 29 April 2010

The respondent brought an application pursuant to the Ontario International Arbitration Act for the recognition and enforcement of two arbitral awards made against the appellant in Russia. The appellant did not participate in the arbitration proceedings. It claimed that it had been unable to present its case in the arbitration proceedings, and that the recognition or enforcement of the award would be contrary to Ontario's public policy. The appellant sought to have the court deal with the allegation that the respondent's principal had made death threats to the appellant's principal. The respondent denied the death threats and argued that, in any event, the issue of death threats had been dealt with in prior proceedings, such that the appellant was precluded from raising the issue again.

The motion judge made an order for the recognition and enforcement of the arbitral awards. He concluded that the issue of the alleged death threats had been dealt with by the court in prior proceedings, and refused to hear the appellant's evidence in that respect.

The Court of Appeal allowed the appeal. The Court held that the motion judge erred in finding that the issue of death threats had been dealt with by the court on a prior occasion. Further, even if the conditions for issue estoppel had been satisfied, it remained that the court has the discretion to determine whether, considering all of the circumstances, the doctrine of issue estoppel ought to be applied. In the circumstances of this case, the application of issue estoppel would have been an injustice. The enforcement application was therefore remitted for a fresh determination.

(e) Limitations Act, 2002 – Third Party Proceedings – Time for Issuing Third Party Proceedings for Contribution and Indemnity: Trent University v. Nortex Roofing Limited, 2010 ONSC 2460, Released 4 May 2010

The main action arose as a result of a torrential rainfall that caused damage to a construction project owned by Trent University. Trent University commenced an action against Nortex in addition to other engineers, architects and contractors who had worked on the project.

Nortex was served with the claim on January 3, 2007. On June 21, 2007, Trent discontinued the action against all named defendants except Nortex. Following service of an amended statement of claim, Nortex eventually delivered a defence on July 17, 2008. On June 18, 2009, Nortex brought a Rule 29.02 motion seeking leave to issue third party claims against seven parties, five of whom were former co-defendants in the original statement of claim.

Master Short dismissed Nortex's motion on the basis that its proposed third party claims were statute barred under ss. 5(2), 18 and 21 of the Limitations Act, 2002. The time for asserting a third party claim expired on January 3, 2009 because by virtue of ss. 5(2) and 18 of the Limitations Act, 2002, a defendant is presumed to have discovered its cause of action for contribution and indemnity as of the date of service of the statement of claim, unless the defendant demonstrates otherwise. Nortex failed to discharge its onus of proving that it did not have sufficient information to discover its claim for contribution and indemnity when it was initially served with the statement of claim.

(f) Charter – Freedom of Expression – Confidential Sources: R. v. National Post, 2010 SCC 16, Released 7 May 2010

A reporter for the National Post learned that then-Prime Minister Chrétien's had contacted a federally-funded bank to urge it to approve a loan to a hotel in his home riding. The reporter wrote an article on the story, which was confirmed by Chrétien.

After that article, the reporter received a document anonymously in the mail that appeared on its face to be a bank record of a loan from the hotel to a Chrétien family investment company. If it were genuine, it would mean Chrétien had a serious conflict of interest when he contacted the bank president. The bank, the PMO and Chrétien's lawyer all told the reporter that the document was a forgery. An anonymous source "X" confirmed to the reporter that he or she was the one who mailed the document to the reporter, but explained that he or she had received it in the mail anonymously him/herself and believed it to be genuine.

The bank complained to the RCMP about the alleged forgery, and the RCMP successfully applied ex parte for a search warrant to seize the original document and envelope and submit it for testing. The National Post applied to quash the warrant. The majority of the Court upheld it.

The majority rejected granting a class privilege to journalists and their sources, and instead adopted the case-by-case model of determining privilege using the "Wigmore criteria". The first two criteria, that the communication originates in confidence that the identity of the informant will not be disclosed and that confidence is essential to the relationship, were not controversial. The third, that the relationship should be "sedulously fostered" in the public good, introduced flexibility for the court to evaluate different sources and different types of "journalists", from bloggers to National Post journalists. The fourth required weighing the public interest in the instant case as between the protection of the source and the public getting at the truth. The criteria must be analyzed in light of society's evolving values, and the media has the burden of meeting all four criteria to establish journalistic source privilege. In this case, the public interest outweighed protection, and the documents were physical evidence that should be disclosed.

(g) Constitutional Law – Interpretation of Aboriginal Treaties – Division of Powers: Quebec (Attorney General) v. Moses, 2010 SCC 17, Released 14 May 2010

In 1975, the governments of Quebec and Canada and Cree and Inuit communities in northern Quebec entered into the James Bay Treaty. A proponent sought to develop a vanadium mine in the territory covered by the Treaty. The mining project fell within provincial jurisdiction over natural resources. However, the mine would also impact fisheries and fish habitats, an area of federal jurisdiction, and therefore required a permit from the federal Minister of Fisheries. Pursuant to federal legislation, before issuing a permit in such circumstances, the Minister of Fisheries is required to comply with the Canadian Environmental Assessment Act ("CEAA") and conduct an environmental assessment.

The government of Quebec argued that the CEAA did not apply in the territory covered by the Treaty because the Treaty provided for a single, separate environmental review process. The government of Canada and the Cree First Nation argued that, notwithstanding the Treaty, the Minister of Fisheries was required to conduct an environmental assessment.

A 5-4 majority of the Court agreed with the government of Canada and the Cree First Nation. The majority held that the Treaty was drafted by skilled individuals, with legal advice, and that "the Court ought to do the parties the courtesy of respecting the rights and obligations in the terms they agreed to." Under the Treaty, all federal laws of general application respecting environmental protections apply insofar as they are not inconsistent with the Treaty. The majority held that there were no inconsistencies between the Treaty and the CEAA. The CEAA procedure governs, but must be applied in a way that respects the Crown's duty to consult the Cree on matters affecting their rights under the Treaty.

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