Canada: Corportate Digest @ Gowlings - January, 2006

Edited by Mr Rod Seyffert

• Canadian Food Inspection Agency Information Letter On Nutrition Labelling of Foods Sold in Restaurants
  Originally published in ADBYTES @ GOWLINGS – November 23, 2005

• Warning – Recently Passed Consumer Protection Legislation May Seriously Affect U.S. Businesses Doing E-Commerce in Ontario
  Originally published in CANADIAN COUNSEL @ GOWLINGS – December 20, 2005

• Civil Liability for Secondary Market Disclosure Coming Into Force in Ontario on December 31, 2005
  Originally published in CANADIAN COUNSEL @ GOWLINGS – December 20, 2005

• Pending Legislation to Address Security Review of Foreign Investments
  Originally published in CANADIAN COUNSEL @ GOWLINGS – December 20, 2005

• Employee Related Amendments to Bankruptcy Legislation: Creation of New Priority Charges
  Originally published in CANADIAN COUNSEL @ GOWLINGS – December 20, 2005

• U.S. To Face International Community Over Internet Governance
  Originally published in E.NEWS @ GOWLINGS – November 3, 2005

• Ontario Power Authority Releases Supply Mix Advice Report
  Originally published in ENERGY @ GOWLINGS – December 21, 2005

• Order Adding Greenhouse Gases to Schedule 1 of the Canadian Environmental Protection Act, 1999
  Originally published in ENVIRONMENT @ GOWLINGS – December 23, 2005

• Québec Publishes its Draft Air Quality Regulation
  Originally published in ENVIRONMENT @ GOWLINGS – December 23, 2005

• Proposed Growth Plan for the Greater Golden Horseshoe
  Originally published in INFRASTRUCTURE @ GOWLINGS – December 14, 2005

• The Inkster Report
  Originally published on November 14, 2005

• Proposed Amendments to NI 45-106 Regarding Capital Accumulation Plans
  Originally published in INVESTMENT FUNDS @ GOWLINGS – November 9, 2005

• Mutual Fund Dealers Association Member Regulation Notice – Know Your Product
  Originally published in INVESTMENT FUNDS @ GOWLINGS – November 9, 2005

• Gowlings Argues for Expanded Protection of Famous Trade Marks at the Supreme Court
  Originally published in IP REPORT ONLINE @ GOWLINGS – December 1, 2005 November 1, 2005

• Marks New Beginning for Asbestos Regulation
  Originally published in OHS LAW REPORT @ GOWLINGS – December 2005

• Expansion of Employers' Liability in Their Dealings With Independent Contractors
  Originally published in ON-RISK E-BULLETIN @ GOWLINGS – December 8, 2005

• Communications to Plan Members
  Originally published in PENSIONS @ GOWLINGS – December 6, 2005 Grow-in for

• Plan Members Outside Ontario
  Originally published in PENSIONS @ GOWLINGS – December 6, 2005

• New Guidance on Look-alike Sound-alike Health Product Names
  Originally published in PHARMACAPSULES @ GOWLINGS – November 8, 2005

• Canada: National Do-Not-Call Legislation Enacted
  Originally published in PRIVACY @ GOWLINGS – December 7, 2005

• Growth of Sophisticated Chinese Economy Relative to Other Nations Also Apparent in New Transfer Pricing Rules
  Originally published in TAXATION LAW @ GOWLINGS – November 15, 2005

This article discusses the highlights of the information letter released by the Canadian Food Inspection Agency which clarified the impact of the amended Regulations to the Food and Drugs Act (Canada) on nutrition labelling in the restaurant and food service sector.

To read the article in full please click here.

http://www.gowlings.com/resources/newsletterPDFs/AdBytes_Fall2005_EN.pdf

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On July 30, 2005 the Ontario Government proclaimed into force the Consumer Protection Act , 2002, S.O. 2002 c.30. The new Act brings into force a comprehensive revision of the province's consumer protection laws, including regulations that impose new responsibilities and obligations on U.S.-based companies doing business over the Internet with consumers located in the province of Ontario.

Unlike Ontario's previous consumer protection legislation, the new Act specifically addresses e-commerce related activities, under the heading "Internet agreements". Every business that conducts business over the Internet with Ontario consumers should be aware of these new rules, or risk having its transactions with those consumers held to be unenforceable.

Subject to certain restrictions, the obligations created by the new Act will apply to every agreement with a consumer (someone acting for personal, family, or household purposes and not for business purposes) located in Ontario formed by way of text-based Internet communications, where the consumer's total potential obligation under the agreement, excluding the cost of borrowing, exceeds CDN$50.

The new Act provides for a new comprehensive scheme for ensuring that material information is disclosed to consumers throughout all stages of the e-commerce transaction.

When an e-commerce transaction is subject to the Act, the business involved must: (i) disclose specified information to the consumer before entering into the agreement; (ii) deliver a copy of the agreement containing certain specified information to the consumer within a set amount of time after the contract is concluded; and (iii) ensure that the copy of the agreement is delivered to the consumer in one of the ways set out in the Act.

The information that must be disclosed by the business before the contract is formed is detailed, and includes the identity and contact information of the business; a fair and accurate description of the goods and services sold, including the technical requirements, if any, related to the use of the goods or services; itemized price lists; details relating to the methods and manner of payments; the details pertaining to the delivery of the goods or services; the businesses' policies in relation to cancellations, returns, exchanges and refunds, and any other restrictions, limitations and conditions of purchase that may apply.

The required information must be disclosed to the consumer in a manner that is clear, comprehensible and prominent. Also, the disclosed information must be available in a manner that ensures that the consumer has accessed the information and that the consumer is able to retain and print the information. Finally, the consumer must be given the express opportunity to accept or decline the agreement and to correct errors immediately before entering into it.

Once the contract is formed, the business has fifteen (15) days to provide a copy of the agreement to the consumer in writing. The contract must include all of the information that was disclosed prior to entering into the contract, along with the consumer's name, and the date on which the agreement was entered into. This copy must be delivered by email, fax, postal service, or in any other manner that allows the business to prove that the consumer has actually received it.

Failure to comply with the new requirements can have serious consequences to a business. Unless a court determines otherwise, any consumer agreement that does not comply with the requirements of the Act may not be enforceable. This could mean that failure to comply with the specific requirements under the Act for Internet agreements would permit the affected consumer to cancel his or her contract. For example, failure to disclose all of the information required by the Act and the regulations, or failure to provide the consumer an express opportunity to accept or decline the agreement, would permit the consumer will have to cancel the agreement within 7 days. Failure to provide a copy of the agreement in one of the ways specified in the Act would permit the consumer to cancel the agreement within 30 days. Upon receiving a notice of cancellation from a consumer in accordance with the Act, a business must provide the consumer with a refund within fifteen (15) days. If the consumer does not receive the refund in that time, he or she may commence an action in the courts.

American companies relying on e-commerce should carefully review their web-based sale models to ensure they comply with the new Act, as there are potentially significant consequences for not doing so. Beyond the immediate benefit of complying with the legislation, adapting one's on-line business models to be consistent with the Act, which is based on Canadian Internet Sales Contract Harmonization Agreement, may bring these business models in line with many of the requirements of similar legislation in other Canadian provinces.

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Amendments to the Securities Act (Ontario) (the "Act"), which come into force on December 31, 2005, will give rise to civil liability for secondary market disclosure. These amendments mark the first time a Canadian jurisdiction has created a civil liability regime for disclosures by issuers in the secondary market, although a number of other provinces are expected to follow suit. In the past, issuers have only been exposed to civil liability in Canada for misrepresentations in prospectuses and other securities offering documents. Under Part XXIII.1 of the Act, investors will have a right of action for damages against specified entities and persons for: (i) misrepresentations in a much broader group of documents and in public oral statements; and (ii) failure to make timely disclosure. The Act establishes limits on liability, subject to certain exceptions, and provides for several defences. Pursuant to the Act, plaintiffs will be deemed to have relied on the misrepresentation or on the issuer having complied with its disclosure obligations. However, leave of the court is required for an action to proceed, court approval is required for settlements and costs will be awarded to the prevailing party as determined by the court.

Who may be sued. Entities and persons who may be sued pursuant to the Act include: (i) the issuer (either a reporting issuer in Ontario or any other issuer with a real and substantial connection to Ontario, any securities of which are publicly traded); (ii) directors; (iii) officers who authorized, permitted or acquiesced; (iv) influential persons (control persons, promoters, insiders and investment fund managers); and (v) experts (for example, auditors, engineers, financial analysts and lawyers) whose opinion or report contained a misrepresentation and is communicated by an issuer with the written consent of the expert.

Misrepresentation. Where a misrepresentation is made, in a core document (a prospectus, circular, MD&A, annual information form or financial statements), proof of the misrepresentation alone suffices. Where an officer of an issuer is the defendant, material change reports are also considered core documents. Where a misrepresentation is made in a non-core document or in a public oral statement, the onus on the plaintiff is higher. The plaintiff must prove the misrepresentation and that: (i) the defendant knew of the misrepresentation; (ii) the defendant deliberately avoided acquiring knowledge of the misrepresentation; or (iii) through action or failure to act, the defendant was guilty of gross misconduct. Proof of any of these additional elements is not required where the defendant is an expert.

Failure to make timely disclosure of a material change. In the case of failure to make timely disclosure of a material change, the plaintiff must prove the failure to disclose and that: (i) the defendant knew the material change had occurred; (ii) the defendant had deliberately avoided acquiring knowledge of the material change; or (iii) through action or failure to act, the defendant was guilty of gross misconduct. Proof of any of these additional elements is not required where the defendant is the issuer, an officer, an investment fund or its officers.

Damages. A plaintiff who buys or sells securities following a misrepresentation or a failure to make timely disclosure and prior to its public correction is entitled to damages under the Act. Generally, subject to the liability limits discussed below, damages represent the difference between: (i) the price paid or obtained following the misrepresentation or failure to disclose; and (ii) the price prevailing in the 10 day period following the disclosure or public correction.

Liability limits. Subject to certain exceptions, liability for corporate and individual defendants is limited and each defendant is liable only for the portion of damages corresponding to that defendant's degree of responsibility. The liability limit for corporate defendants is the greater of: (i) 5 % of market capitalization; and (ii) Cdn.$1 million. The liability limit for individual defendants is the greater of: (i) Cdn. $25,000; and (ii) 50% of the aggregate of their compensation in the prior 12 months from the issuer. The liability limit for expert defendants is the greater of: (i) Cdn.$1 million; and (ii) the revenues earned from the issuer during the 12 months preceding the misrepresentation. However, neither the liability limits nor the apportionment provisions apply where a defendant knowingly participated in a misrepresentation or a failure to disclose a material change.

Defences. There are several defences available to defendants, including: (i) the reasonable investigation defence - where the defendant can show that it conducted a reasonable investigation and had no reasonable basis to apprehend the existence of a misrepresentation or the occurrence of a failure to make timely disclosure; (ii) for forward-looking statements – there will be a safe harbour, in certain circumstances, where appropriate cautionary language is provided with the statement; (iii) confidential disclosure – where the defendant proves that the material change was disclosed in a confidential material change report and the issuer had a reasonable basis for making disclosure on a confidential basis; and (iv) for whistleblowers – where the defendant becomes aware of a misrepresentation or failure to make timely disclosure before corrective action is taken and notifies the board of directors of the issuer promptly and, if no action is taken by the issuer, reports to the Ontario Securities Commission within two days.

Deemed reliance. One aspect of the amendments to the Act that is expected to facilitate the introduction of securities class actions in Ontario, Canada is deemed reliance. As noted above, the plaintiff is expressly relieved of the obligation to prove reliance. The right of action exists without regard to whether the plaintiff relied on the misrepresentation or on the issuer having complied with its disclosure obligations. Historically, the necessity of proving reliance has been a significant obstacle for plaintiffs to pursue these actions in Ontario.

Safeguards against strikesuits. A plaintiff must obtain leave from the court to proceed with an action. The plaintiff must show that the action is being brought in good faith and there is a reasonable possibility that the action will be resolved at trial in favour of the plaintiff. These proceedings will be based on affidavit evidence, subject to cross-examination. Court approval is required for the settlement or disposition otherwise of any action. The prevailing party in an action is entitled to costs as determined by the court.

Suggestions for mitigating risk. Issuers should consider the following to protect their boards and management: (i) adopt/update a corporate disclosure policy and related policies; (ii) establish a disclosure committee; (iii) adopt/update disclosure controls and procedures; (iv) institute a directors' and officers' questionnaire process and ensure back-up of statements; (v) adopt a records retention/destruction policy; (vi) address specific issues with public oral statements; (vii) address specific issues with forward-looking statements; (viii) educate, train and monitor personnel; (x) consider insurance coverage and indemnification; and (x) prepare for corrective action and crisis management.

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On June 20, 2005 the Canadian Minister of Industry introduced legislation in Parliament to authorize the Federal government to review any foreign investments, which, in the government's opinion, could be injurious to national security. The legislation died with the start of this winter's general election, but likely will be reintroduced when Parliament resumes.

This amendment, if enacted, will apply to all new businesses and acquisitions by non-Canadians without regard to their size, country of origin or the business sector in which they are to be made.

Any review under the new law will take place at the political level, since the power to allow a reviewed transaction to proceed is in the discretion of the Prime Minister and Cabinet of the day.

The draft legislation does not define what is meant by the phrase "national security," thereby opening the door to increased government regulation, restrictions and involvement with genuine and legitimate commercial investments by non-Canadians.

The Minister of Industry reports that the new legislation is an update of Canada's security system, not a change in investment policy, and that its exercise will be rare. However, limitations of that nature are not specifically incorporated in the draft legislation.

The new political discretions operate on three levels. First, the federal Minister of Industry may decide to issue a notice that immediately freezes the implementation of the investment. Second, the federal Cabinet is empowered to decide if the new business or acquisition should be reviewed. Third, the Federal Cabinet is also given the power to decide the outcome of the reviewincluding the power to prohibit the investment, to order divestiture, and or to impose any conditions deemed advisable to protect "national security".

All steps in the investment are frozen pending the outcome of the reviews. The amendments will give the government the power to demand any information it wishes. While the outcome of a review is within federal jurisdiction, long established Federal practice is to engage in confidential dialog with any provincial government affected by the new investment.

The legislation includes a special provision precluding access to Canadian courts except on procedural grounds, and failure to comply leads to heavy daily fines in addition to other legal sanctions.

The only exemptions are generally for matters that are already subject to intensive government review, and it is noteworthy that the government bill will exempt the government itself when it is a party to an investment by non-Canadians.

The draft law does not require that reasons be given for any decision made.

At present there is no review of any new business investments, except by Cabinet order in the cultural field. Likewise, there is no generally no review of the acquisition of existing companies below a $250 million threshold, except in the transportation, cultural, uranium and financial service sectors, where the threshold is only $5 million. Current law requires the notification of all new businesses and all acquisitions, but generally only after the transaction is implemented.

Hopefully the legislation will provide more certainty when it is reintroduced after the election.

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On November 25, 2005, An Act to establish the Wage Earner Protection Program Act, to amend the Bankruptcy and Insolvency Act and the Companies' Creditors Arrangement Act and to make consequential amendments to other Ac ts ("Bill C-55") received Royal Assent. Bill C-55 will not be in come into force until the day fixed by order of the Governor in Council. The portions of this Bill related to the Wage Earner Protection Program can create a charge on certain assets of which creditors and directors should be aware.

Bill C-55 is intended to accomplish four key objectives: (a) continue to encourage the restructuring of viable companies; (b) protect employee claims for wages and vacation pay; (c) make bankruptcy more fair and reduce abuse; and (d) improve the administration of the insolvency system.

This article briefly explains the impact of Bill C-55 with respect to the following employee related amendments: (i) the creation of the Wage Earner Protection Program (the "WEPP"); (ii) the employee remuneration charge under the Bankruptcy and Insolvency Act (the "BIA"); and (iii) pension contributions under the BIA.

The WEPP will provide compensation for non-management and non-related party employees who have been employed for at least three months as at the date their employer becomes bankrupt or a receiver is appointed in respect of the employer.

Eligible employees will be able to apply for compensation from the WEPP for any unpaid wages or vacation pay earned during the six month period prior to the employer becoming bankrupt or being placed into receivership (but not severance or termination pay). The maximum amount of the compensation any employee will be entitled to receive is the greater of $3,000 or four times the employee's maximum weekly insurable earnings under the Employment Insurance Act .

The WEPP will be funded out of a consolidated revenue fund, but if a payment is made out of the WEPP to an employee, the Crown will be subrogated to the employee's right to recover against the employer and the employer's directors. The Crown will, for example, be entitled to seek recovery in a bankruptcy from assets subject to the employee remuneration charge to be created by Bill C-55.

Bill C-55 imposes a positive obligation on trustees and receivers to, among other things: (a) identify employees who are owed wages or vacation pay; (b) determine the amount of the wages or vacation pay owing to each employee; (c) provide information to employees with respect to the WEPP and any wages or vacation pay owing to them; (d) provide information to the Minister designated under the WEPP with respect to employees and the amount of wages or vacation pay owing to those employees; and (e) comply with directions from the Minister designated under the WEPP.

Bill C-55 amends the BIA to create a charge in favour of employees for unpaid wages and vacation pay (but not severance or termination pay), up to a maximum of $2,000, owing in respect of the six months prior to their employer becoming bankrupt or a receiver being appointed in respect of the employer. The employee remuneration charge will apply to all of the debtor's current assets. "Current assets" will be defined to mean unrestricted cash or any other asset that is expected to be converted to cash or consumed in the production of income within one year or the debtor's ordinary operating cycle, whichever is longer.

The employee remuneration charge will rank in priority to the claims of all creditors, but will be subject to the rights of unpaid suppliers and the statutory deemed trust claims that survive bankruptcy. If a bankruptcy trustee or receiver realizes on any assets subject to the employee remuneration charge, the trustee or receiver will become personally liable for any employee claims that are secured by the charge up to the amount realized and will be subrogated to any rights that the employees might have to recover this claim.

Bill C-55 will amend the BIA to create a charge over all of the assets of a debtor to secure: (a) any unremitted employee pension contributions; (b) any unpaid employer contributions in respect of defined contribution pension plans; and (c) any unpaid normal costs as required by the applicable pension legislation in respect of a defined benefit plan. This charge will not cover employer-funding deficiencies under a defined benefit pension plan.

The pension contribution charge will rank in priority to the claims of all creditors, but will be subject to the rights of unpaid suppliers, statutory deemed trust claims that survive bankruptcy and the employee remuneration charge. If a bankruptcy trustee or receiver realizes on any assets subject to the pension contribution charge, the trustee or receiver will become personally liable for the amounts secured by the charge up to the amount realized and will be subrogated to any rights that the pension plan might have to recover those amounts.

Bill C-55 will also amend the BIA to require that a reorganization or plan provide for the payment in full of amounts subject to the pension contribution charge unless there is an agreement in place with respect to the payment of those amounts that has been approved by the appropriate pension regulator.

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The United Nations-sponsored World Summit on the Information Society being held in Tunisia from November 16 to 18, will focus on how much control the United States continues to have in overseeing the Internet. Several countries, particularly many in the developing world, object to continuing U.S. supremacy and want the international community to replace the United States as primary overseer. T he heart of the international political debate is on the influence that the U.S. federal government has over Internet addresses and the master database of top-level domain names. Attempting to compromise between the United States position and countries that want a new Internet governing body, the European Union ("EU") suggested an international "forum" be created to set policy principles for the Internet Corporation for Assigned Names and Numbers ("ICANN") and adjudicate complaints.

The United States however refuses to give up its control and suspects that some of the governments advocating for a change are trying to control the Internet to suppress free expression and preserve dictatorial control. A resolution was recently introduced in the U.S. Senate that offers political backing to the Bush administration by denouncing the United Nations effort to exert more influence over the Internet. In a similar move, the U.S. House of Representatives also called for the Internet's core infrastructure to remain under U.S. control. The resolution, introduced by two Republicans and one Democrat, aims to line up Congress behind the Bush administration as it heads for a full confrontation with much of the rest of the world over control of the Internet.

More information available at:
http://www.washingtonpost.com/wp-dyn/content/article/2005/ 10/12/
AR2005101202210.html

http://news.com.com/2100-1028_3-5900690.html

http://today.reuters.com/news/NewsArticle.aspx?storyID=2005-10-
21T171310Z_01_ROB160456_RTRUKOC_0_US-CONGRESS-INTERNET.xml

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To read part 2 of this article please click below