On May 2, 2023, McCarthy Tétrault's National Appellate Litigation Group hosted our fourth Appellate Quarterly webinar, featuring five recent appeals that may impact the Canadian business community. Partners Kara Smyth, Byron Shaw, Sarah Woods, James S.S. Holtom, and Adam Goldenberg discussed these appellate developments and future trends to watch across Canada.
Here are some key takeaways:
1. Certification of data breach class action denied
The Court of Appeal of Alberta's decision in Setoguchi v. Uber BV, 2023 ABCA 45 may assist companies across Canada facing the threat of class actions following a data breach. The Court upheld the dismissal of the certification application by the Honourable Associate Chief Justice J.D. Rooke (as he then was). In doing so, the Court affirmed that the test under s. 5(1)(a) (valid cause of action) is not a perfunctory exercise, and carefully scrutinized the appellant's pleadings to conclude that the appellant's theory of harm was not compensable at law. Further, the Court affirmed the certification judge's finding that, in the absence of compensable class-wide harm, a class proceeding was not the preferable procedure. This decision reflects the recent emphasis on the judge's "gatekeeper" role to ensure that the certification hearing is a meaningful screening device.
2. Guidance on misleading advertising claims
In Rebuck v. Ford Motor Company, 2023 ONCA 121, the Court of Appeal for Ontario upheld the summary dismissal of a class action which had been certified against Ford. The claim alleged that Ford breached the Competition Act and provincial consumer protection statutes, claiming $1.5 billion in damages. The plaintiffs argued that Ford was obliged to shift from a two-cycle test to the improved five-cycle test and that its EnerGuide label deceived consumers as to the vehicle's actual fuel consumption. The courts rejected both arguments, noting that the government only required a two-cycle test and the EnerGuide label would not mislead an average car buyer. This case shows that false or misleading advertising claims are difficult to prove where companies comply with government requirements.
3. Conflict risks inherent to liability insurance policies
The Court of Appeal of Quebec in Commission scolaire De La Jonquière c. Intact Compagnie d'assurance, 2023 QCCA 124 confirmed that insurers must put measures in place to maintain a segregation between their duty to defend and duty to indemnify. The insurers had requested privileged communications to assess the reasonableness of a settlement in a class action. The insureds objected on the basis of privilege, which objections were dismissed by the first instance judge. The Court of Appeal confirmed that an insurer that defends its insured enters its "circle of privilege". However, two safeguards must be implemented to preserve the insured's right to a full and complete defence: (1) the information obtained from the insured's lawyer must not only be accessible to the person responsible for the duty to defend, and not percolate to others within the insurer responsible for the duty to indemnify; (2) only the information required to assess the settlement should be provided.
4. Uncertainty surrounding legislative bars to judicial review
The Federal Court of Appeal recently considered statutes that provide for limited "appeals" from administrative decision-makers. They often contain partial privative clauses preventing review of other issues. In Canada v. Best Buy, 2021 FCA 161, the majority held that judicial review is constitutionalized for un-appealable issues and this principle overrides partial privative clauses. The issue was revisited in Democracy Watch v. Canada, 2022 FCA 208/2023 FCA 39, with Justice Stratas querying whether statutory provisions that limit the review of administrative decisions are enforceable. Justice Stratas observed that there was mixed authority on the issue and many industries stood to be impacted. He implored the Supreme Court of Canada to clarify. Since then, the Supreme Court has granted leave to appeal from the Court of Appeal for Ontario's judgment in Yatar v. TD Insurance Meloche Monnex, 2022 ONCA 446, which raises this issue.
5. Enforcement of arbitration agreements during insolvency proceedings
In Peace River Hydro Partners v. Petrowest Corp., 2022 SCC 41, the Supreme Court of Canada confirmed that arbitration agreements may be inoperative in a receivership. Peace River and Petrowest had arbitration clauses in their contracts. Petrowest entered receivership. The receiver sued Peace River, which applied for a stay in favour of arbitration under British Columbia's arbitration legislation. A majority of the Supreme Court held that a court may find an arbitration agreement to be "inoperative" within the meaning of the British Columbia arbitration legislation where arbitration would compromise the orderly and efficient resolution of a receivership. However, there is a "heavy onus" to avoid arbitration. In Peace River, the receiver succeeded in showing that arbitration would result in a chaotic process and should be avoided. Other cases may turn on the specific phrasing of the provincial legislation and arbitration clauses.
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