Canada: Appeals To Watch In 2015: The Appeals Monitor’s Top Ten

I can't predict the future and I don't have respect for people who try to.

-Jackie Mason (1931-)

As part of the Appeals Monitor's annual attempt to give lawyers something to talk about over the holidays other than the two traditional Canadian touchstones (weather and hockey), we are proud to once again this year present our top ten anticipated appeals for the new year.  Of course, we can't control what the judges will actually do with these cases, but we think these are the ones worth watching.

10. Ontario Energy Board v Ontario Power Generation Inc. et al

In December 2014, the Supreme Court heard the appeal in Ontario Energy Board v Ontario Power Generation Inc. et al, a case which could have important implications for tariff-setting in regulated industries.

Ontario Power Generation Inc. (OPG) is Ontario's largest electricity generator. Around 90% percent of OPG's regulated workplace is unionized. OPG entered into collective agreements prescribing the compensation rates for staff and also strict terms regulating staff levels at OPG's stations. Due to the agreements, OPG could not reduce compensation rates or staff levels unilaterally. OPG then filed an application to seek approval of its customer rates, which would provide it with a 6.2% increase in revenue (to cover its projected costs). The Energy Board found that OPG's compensation rates and staffing levels were both too high, ordering OPG to cut payroll spending in the nuclear division by $145 million over 2 years. The Energy Board treated both compensation rates and staffing levels as "forecast costs" that OPG could manage downward, rather than as "committed costs". While OPG lost its appeal to the Divisional Court, the Court of Appeal concluded that the Energy Board acted unreasonably and its decision was set aside.

The Supreme Court may use this opportunity to expound on the principles governing "just and reasonable" ratemaking for prospective rates, as well as the definition of "prudent" in the review of previously committed costs.  Its decision may therefore have broad ramifications on tariffs set by all regulated utilities that have unionized workforces (including companies in areas such as pipelines, airlines, telecommunications and trains, in addition to electricity production, transmission and distribution).

9. Potter v. New Brunswick Legal Aid Services Commission

In May 2014, the Supreme Court heard the appeal in this constructive dismissal case, which raises the interesting question of whether taking legal action against one's employer constitutes a repudiation of the employment relationship.

Both the Court of Queen's Bench of New Brunswick and the Court of Appeal of New Brunswick responded affirmatively.  They concluded that an employee who alleges constructive dismissal, but ultimately fails to establish it, is left with an "untenable" employment relationship and therefore the action constitutes an effective resignation.

Mr. Potter was an attorney who held a public office in New Brunswick. Following incidents which shook the employer's confidence in Mr. Potter, he was suspended indefinitely with pay while the terms of a severance package were being negotiated to allow him to leave gracefully without having to be dismissed for just cause (or, more precisely, having his election to public office revoked for just cause).

The Court of Appeal observed that: "In litigation, as in life, consequences, at times dire, flow from choices made, whether voluntary or otherwise. [...] [The employee] knew or ought to have known that, if he failed to establish this allegation at trial, his lawsuit would constitute an election to terminate his employment relationship [...]". Whether the Supreme Court confirms this conclusion remains to be seen. Such a confirmation could have a strong chilling effect on the filing of constructive dismissal claims in all Canadian jurisdictions.

8. CBC v. SODRAC 2003 Inc.

As previously discussed by Barry Sookman in September, the Supreme Court of Canada granted leave to appeal from the Federal Court of Appeal's decision in Canadian Broadcasting Corporation/Société Radio-Canada v. SODRAC 2003 Inc.  The copyright appeal, which will be heard in March 2015, addresses the question of whether broadcasters must pay royalties for the use of ephemeral recordings made solely for the purpose of facilitating the broadcast of a performance.

At the Court of Appeal, the broadcasters unsuccessfully argued that the Supreme Court's 1990 decision in Bishop v. Stevens had been effectively overruled by its 2012 decision in Entertainment Software Association v. Society of Composers, Authors and Music Publishers of Canada. Although the Court of Appeal deemed the Bishop decision to remain good law, it expressed uncertainty as to the operation of the doctrine of "technological neutrality", a core interpretive principle discussed in numerous Supreme Court decisions that governs how the Copyright Act applies to emerging technologies. This appeal will provide an opportunity for the Supreme Court to reconcile these decisions and create clarity as to how the doctrine operates.

7. Procureur général du Québec v. Best Buy

The Quebec Court of Appeal will be hearing an important appeal which will be followed closely by retailers and other businesses active in Quebec.  The case deals with the interaction between the Quebec Charter of the French Language and trade-mark law and will have broad implications.

Under appeal is the Superior Court's April 2014 decision which found that the Charter of the French Language and the regulations adopted thereunder do not require businesses to add generic French terms to trade-marks registered under the federal Trade-Marks Act which are used in public signs, posters and advertising – including storefronts –, even though these trade-marks are exclusively in a language other than French, when a French version of the trade-mark has not been registered. The Court thus did not accept the Quebec Attorney General's position that a trade-mark was a "commercial name".  The Superior Court decision was discussed on the Consumer & Retail Advisor and snIP/Its.

Responding facta were filed early in December 2014, but no hearing date has yet been set.  If the Court of Appeal were to overturn the decision, companies doing business in Quebec would be obliged to modify their registered trade-marks to include a French descriptor. Violators could face penal proceedings and hefty fines under the Charter of the French Language. Such a decision would also have the potential to disrupt the normal order of international trade-mark protection, which is generally based on the uniform use of a mark.

6. Tervita Corporation, et al v Commissioner of Competition

This case is so anticipated that this is its second appearance on our year-end blog post about upcoming appeals to watch.  The Supreme Court heard argument in Tervita Corporation, et al v Commissioner of Competition on March 27, 2014 but the judgment remains under reserve. Tervita is an appeal from a divestiture order of the Competition Tribunal in regards to the acquisition of a waste disposal site. The central issue being considered by the Supreme Court is the proper legal test for determining when a merger gives rise to a substantial prevention of competition under s. 92 of the Competition Act. The appeal decision is expected to be important because it will set the framework for "prevention" merger reviews under s. 92 of the Act and may determine the scope of the Competition Bureau's power to review and undo mergers (of any size).

Tervita owned and operated two hazardous waste landfills in Northeastern BC. In 2011, it sought to acquire a third site, which would have given it three of the four permits for the operation of hazardous waste landfills in that area.  The Commissioner of Competition opposed the transaction on the basis that it was likely to substantially prevent competition in secure landfill services in that area, despite the fact the transaction was below the threshold for merger notification. After a contested hearing, the Competition Tribunal ordered Tervita to divest itself of the newly acquired site. Tervita's appeal from the Tribunal's order was dismissed by the Federal Court of Appeal in 2013.

5. Green v. Canadian Imperial Bank of Commerce, Silver v. IMAX Corp, and Trustees of the Millwright Regional Council of Ontario Pension Trust Fund v. Celestica Inc.

As Elder Marques has discussed twice on this blog, the Supreme Court will hear a trilogy of appeals raising two significant issues for Ontario securities class actions on which the bar eagerly awaits some clarity.  The hearing is scheduled for early February.

First, it will consider the question of the limitation period for such claims, which has been the subject of previously contradictory findings. Ontario's Securities Act requires a plaintiff to commence a claim for damages for an alleged secondary market misrepresentation within three years of the alleged misrepresentation. However, the Act also requires leave of the court before such an action may proceed. This leave requirement is important because Ontario's Class Proceedings Act suspends a limitation period once a cause of action is "asserted". The issue before the Court is whether a claim is "asserted" when the claim is issued or when the court grants leave. In early 2012, a unanimous panel of the Ontario Court of Appeal concluded that it was the latter: Sharma v. Timminco Limited, 2012 ONCA 107. As Strathy J. put it in the lower court judgment in Green, this conclusion came as a "thunderbolt"to the class actions bar because of the length of time it typically takes for a case to advance from claim to leave to proceed motion. Two years after Timminco, a unanimous five-judge panel of the same Court reversed course and held that plaintiffs need only issue a statement of claim seeking leave to meet the three-year time limit: Green v. Canadian Imperial Bank of Commerce, 2014 ONCA 90.

Second, the Supreme Court will have its first opportunity to consider the standard required for a court to grant a plaintiff leave to proceed with a claim for damages for a secondary market misrepresentation under the Act. The Court's commentary on the standard for leave will have significant implications for issuers' ability to defeat claims at an early stage.

4. Chevron Corporation et al. v. Yaiguaje et al.

In December of 2014, the Supreme Court heard this appeal which will have significant implications both for enforcing foreign judgments in Canada and for the doctrine of piercing the corporate veil, particularly for Canadian subsidiaries of U.S.-based multinational corporations.

A group of Ecuadorian villagers obtained a $9.51 billion judgment in Ecuador against Chevron Corp. for alleged pollution. The plaintiffs have sought to enforce this judgment across the world, including initiating an action in Ontario against both Chevron Corporation and its Canadian subsidiary, Chevron Canada Ltd. The Ontario Court of Appeal unanimously held that the Ontario Superior Court had jurisdiction to entertain the plaintiffs' enforcement action against both entities, a decision which we commented on at the time. The Supreme Court will have to decide whether the plaintiffs can pierce the corporate veil to maintain an action against Chevron Canada Ltd., given that they only have a judgment against its U.S. parent company. The Court will also consider enforcement of foreign judgments for the first time since it refined the test for jurisdiction in the Van Breda Trilogy.

3. Sanofi-Aventis et al v Apotex et al

The Supreme Court will hear an important pharmaceutical patent appeal from a decision of the Federal Court of Appeal (FCA) in Sanofi-Aventis et al v Apotex et al. This appeal – tentatively scheduled to be heard in April 2015 – is of great interest to pharmaceutical companies because it will be the first time the Supreme Court will consider the correct interpretation and framework applicable to quantify section 8 damages under the Patented Medicines (Notice of Compliance) Regulations, (the "PM(NOC) Regulations").  Section 8 provides a right of action for damages to a "second person" (typically a generic company) who has suffered losses as a result of its delay in receiving its NOC because of unsuccessful proceedings brought by a "first person" (typically an innovative company) pursuant to the PM(NOC) Regulations.

The appellant, Sanofi, is an innovative drug company which marketed the drug Ramipril in Canada under a number of patents.  Sanofi asserted those patents against a number of generic drug companies, including Apotex and Teva and, when prohibition cases brought by Sanofi under the PM(NOC) Regulations were dismissed, Apotex and Teva became entitled to claim damages.  At the trial of the Apotex action there was evidence that multiple generics were able to enter the market and compete with Apotex for sales, including Teva, and that such competitors would have taken sales that Apotex was claiming it lost. The trial judge and a majority of the FCA held that such competition was not relevant to the damages because section 8 did not permit the Court to deduct from Apotex's claimed loss the sales that others would have made instead of Apotex.

The key issue on appeal is whether section 8 requires the Court to model Apotex's losses on the assumption that Apotex would face no competition from other generics, including generics who competed in the real world. If the FCA's interpretation is upheld by the Supreme Court, the result will be overcompensation for generics as they will have a right to damages for sales which they could never have achieved in the real world. That would, in turn, provide a strong disincentive for generics to settle applications brought pursuant to the PM(NOC) Regulations.  Instead, generics would have the potential to earn far more in section 8 damages claims before the Federal Court than they earn could in the marketplace.

2. Theratechnologies inc., et al. v. 121851 Canada inc.

In December 2014, the Supreme Court heard the long awaited appeal in Theratechnologies inc., et al. v. 121851 Canada inc., a very important securities case dealing with the application of Québec's statutory secondary market liability regime (Quebec Securities Act, "QSA") at the class action authorization stage. The Quebec Court of Appeal decision, previously discussed by Martin Boodman, Pierre-Jérôme Bouchard and Laure Fouin, was identified as one of the most important appeals of 2013, and the case was again discussed at length by Marc-André Russell when leave to appeal was granted by the Supreme Court. This long saga is expected to end sometime in 2015 with the final word from the Supreme Court.

Shareholders of Theratechnologies brought a claim alleging that the company should have disclosed its dealings with the United States Food and Drug Administration (FDA) in relation to the approval of one of its products.  When the FDA itself released the information, market analysts drove the share price down, even though ultimately the product was approved.  The question is whether the company's dealings with the FDA constituted a "material change" in the company's business which should have been disclosed.

The standard imposed by the QSA for the Plaintiff to succeed at the class action authorization stage is to show a "reasonable possibility of success". The Superior Court of Quebec authorized the class action and the Court of Appeal of Quebec upheld that decision, both concluding that the "serious arguments" raised by the Plaintiff were sufficient to satisfy this burden. Although no clear test was set out to determine the weight of Plaintiffs' burden under the QSA, the Court of Appeal suggested that it was between a mere demonstration of "colour of right" and a "balance of probabilities". The Supreme Court must determine whether the determination that there is a "reasonable chance of success" requires a more stringent analysis, which would require that Plaintiffs adduce sufficient evidence to support that a "material change" actually occurred rather than merely raise "serious arguments" in that regard.

1. Ontario's Expert Evidence Trilogy (Moore, Westerhof, and McCallum)

In September 2014, the Ontario Court of Appeal heard a trilogy of appeals that raise important questions about interactions between counsel and experts; the evidentiary status of expert reports at trial; and whether medical evidence from a treating physician should be considered expert opinion evidence and therefore subject to Rule 53 of Ontario's Rules of Civil Procedure. These appeals – Moore v. Getahun, Westerhof v. Gee Estate , and McCallum v. Baker – will be key decisions for medical malpractice practitioners, but will also have broad implications for the use of expert evidence generally, both at trial and during the preparation of expert reports in advance of trial.

The decisions below, most particularly the trial decision in the Moore case, were the subject of considerable coverage by the legal press and discussion by the bar and bench.  Among the most notable aspects of Moore was the Court's conclusion that it is "improper" for counsel and experts to discuss draft expert reports.  The Court based this and similar findings on the expert obligations of neutrality and independence, which have been codified in Ontario's Rules.

Indeed, the degree of interest by the Ontario bar in the cases is evidenced by the six parties who intervened in the appeals: The Advocates' Society; The Holland Group; the Ontario Trial Lawyers Association; the Canadian Defence Lawyers Association; the Canadian Institute of Chartered Business Valuators and the Criminal Lawyers' Association.  Facta of the parties and all interveners are available here.  Given that the principles of expert independence are similar across the country, it is anticipated that the Court of Appeal's decision will have a significant impact beyond Ontario's borders.

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