Canada: What Will Justice Nadon’s Appointment Bring To The Supreme Court?

Background

Earlier this week, the Prime Minister surprised many Supreme Court-watchers by nominating the Honourable Marc Nadon to replace Justice Fish at the Supreme Court of Canada. Given this recent appointment, the Canadian Appeals Monitor has taken a look at Nadon J.'s jurisprudential legacy to date and identified key cases which illustrate his judicial leanings, especially as it applies to Canadian businesses and professions. The Canadian Appeals Monitor has also looked at some of the cases that Nadon has argued to get better insights into what kind of judge he is likely to be in the Supreme Court. 

In reviewing the cases noted below, the following themes emerge:

  • Nadon J. is focused on clear parliamentary intention and is deferential to parliament, even when he does not agree with the legislator1;
  • Nadon J. has a clear doctrinal approach and is reluctant to extend the law or to revisit issues already decided upon in existing case law;
  • Nadon J. tends to emphasize the plain and simple meaning to the words of a statute. For example,  he reproduces large excerpts of the legislation he is dealing with, in both French and in English, in the text of his decisions. This is in contrast to many judges who reproduce smaller portions of relevant legislation or appendix the actual text to the end of their decision;
  • Nadon J. is equally concerned with procedure and places the utmost importance on the parties' fulfillment of their respective burdens of proof2.

Jurisprudence

Tax

At issue in this case was the appropriate transfer price for an active pharmaceutical ingredient between related companies. The CRA argued that the appropriate transfer price was what the generic companies paid for the identical ingredient. GlaxoSmithKline Inc. argued that other circumstances had to be taken into account in determining a reasonable arm's length price.

Writing for the Federal Court of Appeal, Nadon J. decided that the test to be applied was that of what the "reasonable business person" would consider relevant when deciding what price to pay, which did not necessarily amount to the "fair market value" of comparable generic drugs. According to Nadon J., all the circumstances had to be taken into account, including incidental supply and licence agreements entered into by the parties.

This decision, upheld by the Supreme Court of Canada, is favourable for multinational enterprises who can more easily justify transferring profits to a lower-tax jurisdiction under the "reasonable business person" test.

Technology/Patents

In this case, previously reported on the Canadian Appeals Monitor, the Supreme Court of Canada ultimately held that the Canadian Radio-television and Telecommunications Commission ("CRTC") lacked the jurisdiction to create a market-based "value for signal" regime. The proposed regime would have enabled private local television stations to negotiate direct compensation for the retransmission of their signals by broadcast distribution undertakings ("BDUs"), such as cable and satellite companies, and to prohibit the BDUs from retransmitting their signals if the negotiations were unsuccessful.

This was a great victory for Nadon J., as the majority of the Supreme Court agreed with his dissent:

"[10] In Nadon J.A.'s view, the proposed value for signal regime is ultra vires the powers of the CRTC because it conflicts with Parliament's "clear statement in paragraph 31(2)(d) of the Copyright Act that royalties must be paid only for the retransmission of distant signals and not for the retransmission of local signals" (para. 49). In his view, Parliament's expressed intention to treat local and distant signals differently is a limit on the CRTC's jurisdiction to impose conditions under the Broadcasting Act (para. 73). Given the exhaustiveness of the statutory copyright law, in Nadon J.A.'s opinion, the CRTC's regime must be ultra vires (para. 85)."

As mentioned by our colleague Brandon Kain in a previous Canadian Appeals Monitor post:

"The Broadcasting Reference will stand as an important precedent in any litigation where a regulator seeks to assert a jurisdiction that is not derived from the specific language of its enabling statute, but inferentially from general statutory provisions (e.g., purpose, regulation-making or licensing clauses). The Court's ruling will also be particularly significant in the area of communications regulation, since it imposes definite limits upon the powers of the CRTC, and confirms that those powers cannot conflict with the Copyright Act."

This case involved a challenge to the validity of the patent for Viagra®, which referred to 260 quintillion compounds. The Supreme Court held that the patent was invalid for insufficient disclosure. A skilled reader who read the patent as a whole would not be able to put the invention into operation, since he would not be able to determine which of the listed compounds embodied the invention, when there was actually only one active ingredient, sildenafil.

In coming to this conclusion, the Supreme Court reversed the Federal Court of Appeal decision written by Nadon J., which centered on two questions: (1) What is the invention? (2) How does it work? Responding to these questions, Nadon J. determined that the invention was actually Claim 7, which contained only the active sildenafil compound. Nadon J. concluded that disclosure was sufficient because Claim 7 was clear, regardless of the rest of the patent.

The Supreme Court relied on the scheme of the Patent Act to conclude that there is no existing principle that each claim in a patent concerns a separate invention. In fact, the patent itself in this case suggested that the entire class of claimed compounds, and not only sildenafil, will be effective in treating erectile dysfunction. The Supreme Court gave utmost importance to the underlying principle of the patent system, which is based on a "bargain". The inventor is granted exclusive rights in a new and useful invention for a limited period in exchange for disclosure of the invention so that society can benefit from this knowledge. Sufficient disclosure is therefore an important and demanding requirement.

At issue in this case was whether a patent could be filed to protect multicellular differentiated organisms such as mammals. The President of Harvard attempted to patent an "oncomouse", which is a differentiated mouse which can be used to test for carcinogens. Nadon J. held that the method for producing the oncomouse is appropriately patentable, but the oncomouse itself cannot be patented. In coming to this decision, Nadon J. relied on the explicit wording of the Patent Act:

"[35].......A complex life form does not fit within the current parameters of the Patent Act without stretching the meaning of the words to the breaking point, which I am not prepared to do."

What is particularly noteworthy in this case is that Nadon J. criticized a judgment of the U.S. Supreme Court, believing it to be contrary to the explicit wording of the statute and the previously expressed intent of the U.S. legislature:

"[15]... The question remains, what has the legislature already said? If it would like to say something new, that door is always open. Thus, with respect for the contrary position, I am not prepared to adopt the reasoning of the majority decision in Chakrabarty as I do not find it persuasive [emphasis added]."

Miscellaneous

At issue in this case, as previously reported on the Canadian Appeal Monitor, was whether parties will be held to their agreement to arbitrate, even if a claim involves a class action for a breach of the Competition Act.  Kieran Murphy ("Murphy"), an independent business owner, had a distribution agreement, which contained an arbitration clause, with Amway Canada Corp. ("Amway"). Murphy brought a proposed class action claim against Amway alleging that Amway violated provisions of the Competition Act. Murphy, believing competition law to be a public interest objective, argued that his claim could not be subject to the arbitration clause. Nadon J. held that the arbitration agreement applies unless there is express legislative language in a statute that excludes or prohibits arbitration agreements or class action waivers. In coming to this decision, Nadon J. carefully considered the leading Supreme Court precedent and was careful to ensure his decision was consistent with it:

"[46] In my view, the answer to the question of whether or not the subject matter of the appellant's Statement of Claim is arbitrable is found in Seidel, to which I now turn.

[60] [...]The Supreme Court has made it clear that express legislative language in a statute is required before the courts will refuse to give effect to the terms of an arbitration agreement. [...]"

In this decision, Nadon J. upheld the constitutionality of the Investment Canada Act regime. The appellant, United States Steel Corp. ("U.S.Steel") was in breach of two of the undertakings it provided to the Ministry of Industry in order to acquire control of a major Canadian steel company. The Minister sought an order directing compliance and a penalty of $10,000 per day of the breach as provided for under the Investment Canada Act. U.S. Steel challenged the constitutionality of the enforcement proceedings, and in particular argued that certain provisions of the Investment Canada Act were contrary to subsection 11(d) of the Charter (presumption of innocence).

Nadon J. held that s. 11(d) of the Charter only applied to those "charged with an offence" and U.S. Steel was clearly not. Nadon J. also held that a high monetary penalty was proper given that "the deterrence goals of the Act will necessarily be front and centre."3 

The question at issue in this case was whether, by virtue of an oral treaty with the Crown, it was agreed that Aboriginal signatories would not have any tax imposed upon them at any time for any reason. Writing for the Federal Court of Appeal, Nadon J. reversed the Federal Court decision of first instance which had found that there was indeed tax exemption. He stressed the importance of the burden of proof, considering the grave consequences of a complete tax exemption:

"[23] [...] Placing "due weight" on the aboriginal perspective, or ensuring its supporting evidence an "equal footing" with more familiar forms of evidence, means precisely what these phrases suggest: equal and due treatment. While the evidence presented by aboriginal claimants should not be undervalued "simply because that evidence does not conform precisely with the evidentiary standards that would be applied in, for example, a private law torts case", neither should it be artificially strained to carry more weight than it can reasonably support. [...]

[25] [...] The truth is that, when the law requires the proof of any fact, the tribunal must feel an actual persuasion of its occurrence or existence before it can be found. It cannot be found as a result of a mere mechanical comparison of probabilities independently of any belief in its reality. [...] The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal. In such matters, "reasonable satisfaction" should not be produced by inexact proofs, indefinite testimony or indirect inferences. [...]"

Legal Career Before His Judicial Appointment

Nadon J. is the author of several legal publications and participated in drafting William Tetley's Marine Cargo Claims (1978). In 1986, he wrote an article advocating for the creation of specialized commercial and maritime courts, believing that these specialized areas of law required specialized judicial expertise.5

As a lawyer, Nadon J. has had several opportunities to argue before the Supreme Court of Canada in leading maritime law cases. His contribution as an advocate centers around the recognition of the Federal Court's clear jurisdiction over maritime law issues and the elaboration of what actually constitutes "Canadian maritime law".

In Tropwood A.G. v. Sivaco Wire & Nail Co., [1979] 2 S.C.R. 157, Nadon J. successfully argued that the Federal Court must seize itself of a claim in damages to goods shipped by sea from France to Montreal, and that it must be the one to determine the applicable maritime conflict of law rules.

Although the subsequent ITO-Int'l Terminal Operators v. Miida Electronics, [1986] 1 S.C.R. 752 case did not prove to be meritorious for Nadon J. and his client, Miida Electronics, it is interesting to note that he participated in this precedent-setting case which established the principle of uniformity of maritime law. Since then, courts have consistently recognized that maritime law is a body of federal law stemming from the adopted laws of England, which must be uniformly applied throughout Canada no matter where the events occurred, without incidental application of provincial common law principles or reference to the Civil Code of Quebec.

Conclusion

What can we expect from Nadon J. at the Supreme Court? If the past is any indicator of the future, we can predict that he will be guided by principles of judicial restraint, that he will continue to provide clear-cut analyses of the applicable rules of law, and that he will likely not be afraid to make his voice heard in dissent, if need be.

Nadon J.'s previous experience lies in specialized fields such as maritime, immigration, labour, tax, and intellectual property law. Sitting on the country's highest bench, he will have to face new challenges, namely in hearing and deciding cases which raise polarizing social issues. Again, if the past is a testament to the future, we can expect that he will seek to abide by the legislator's strictest of intents, and leave up to the political and legislative arenas the task of reforming the law, when necessary.  However, many judges surprise when they arrive at the Supreme Court and strike a different tone than people expect.  Only time will tell what kind of  Supreme Court judge Justice Nadon will be.

Footnotes

  1. See namely Couture v. Canada (Attorney General), 2002 FCA 264.
  2. See namely Alaska (State) v. Pacific Shore (The), 1997 CanLII 5772; Legault v. Canada (Minister of Citizenship and Immigration), 2001 FCT 315, reversed by 2002 FCA 125; Mugesera v. Canada (Minister of Citizenship and Immigration), 2001 FCT 460, reversed in part by Mugesera v. Canada (Minister of Citizenship and Immigration), 2005 SCC 40.
  3. At para. 80
  4. On the issue of native tax, see also Dubé v. Canada, 2009 FCA 109, where Nadon J. held that investment income was generated from the economic mainstream, even if the investments were made at a financial institution located on the reserve. He therefore held that the interests from these investments were not exempt from taxation. The majority of the Supreme Court of Canada did not share this view and rather found that the generation and payment of the income was strongly connected to a reserve. It therefore overturned the Federal Court of Appeal decision in Dubé v. Canada, 2011 SCC 39, [2011] 2 SCR 764.
  5. Nadon, Marc. "Commercial Courts" (1986) 1 Nat. Creditor/Debtor Rev. 83-92.

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