News about Quebec legal developments
The Competition Bureau is keeping a watchful eye on the digital world.
The Commissioner of Competition, Matthew Boswell, has made it plain that one of his priorities is to investigate and clamp down on false and misleading advertising online, and build trust in the digital economy through enforcement, “a key element of our vision.”
Continue reading “Competition Bureau clamping down on online misleading advertising”
An ambitious pilot project by the federal courts that will allow for the application of the Quebec Code of Civil Procedure is being lauded by Quebec practitioners as a welcome initiative that may prompt more of them to avail themselves of the federal judicial bodies.
Continue reading “Procedural bijuralism pilot project to be launched by federal courts this fall”
The Arctic Ocean, the smallest and shallowest of the world’s five oceans, is melting. Cursed by hostile weather and rough seas, the forbidding, remote and one of the least understood environments in the world is now beginning to open up under the weight of climate change. Navigation, not long ago unthinkable, is increasingly feasible. Large ships are beginning to explore the area in ways that Viking settlers and European merchants could only dream of. Shrinking Arctic sea ice allowed last year a tanker carrying a cargo of liquefied natural gas to travel through the northern sea route for the first time without an icebreaker escort.
A property owner who challenged a municipal zoning bylaw he considered to be a disguised expropriation waited too long before taking legal action but can nevertheless still ask to be compensated for the loss in property value, ruled the Supreme Court of Canada.
In Ville de Lorraine et al v. 2646-8926 Québec inc., the nation’s highest court recognizes the power of municipalities to adopt bylaws to create conservation zones, underscores the need for plaintiffs contesting by-laws to be diligent and bring action within a reasonable time, confirms that a plaintiff can claim indemnity for disguised expropriation, and seems to suggest that it may simplify criteria for compensation for disguised expropriation under common law, contend municipal law experts.
“While the decision will not have a direct impact on disguised expropriation in common law jurisdictions, we believe that, should a disguised expropriation matter from a common law jurisdiction be considered again by the current judges of the Supreme Court, they may revisit the criteria in the SCC ruling in Canadian Pacific Railway Co. v. Vancouver (City) 2006 SCC 5 in order to simplify it in the direction of the criterion established in Ville de Lorraine,” said Nikolas Blanchette, a partner with Fasken Martineau DuMoulin LLP in Montreal who acted for an intervener in the case, the Quebec Association of Construction and Housing Professionals Inc.
In Vancouver, the SCC wrote that for a “de facto taking requiring compensation at common law,” two requirements must be met: an acquisition of a beneficial interest in the property or flowing from it and removal of all reasonable uses of the property. However in Lorraine, Chief Justice Richard Wagner, writing on behalf of the court, wrote that “where a municipal government limits the enjoyment of the attributes of right of ownership of property to such a degree that the person entitled to enjoy those attributes is de facto expropriated from them, it therefore acts in a manner inconsistent with the purposes being pursued by the legislature in delegating to it the power ‘to specify, for each zone, the structures and uses that are authorized and those that are prohibited.’”
That leads Blanchette to maintain that the focus of the Lorraine ruling lies with the loss of the attributes of the right of ownership as opposed to the acquisition of a beneficial interest in the property on the government’s part.
In 1989, a numbered company bought a wooded property in a residential zone in Lorraine, an affluent off-island suburb of Montreal, in order to eventually build a housing subdivision. But in 1991, the town passed a zoning regulation that included more than half of the property to become part of a conservation zone which limited its authorized use for recreational and leisure activities. The numbered company’s majority shareholder, François Pichette, found out about the zoning changes some ten years later when he visited the land for the first time. Pichette tried to get the town to change the zoning restrictions but to no avail. In 2007, Pichette accused the town of disguised expropriation and brought an action against it seeking damages and to have the bylaw declared to be null.
On July 2015, Quebec Superior Court Justice Benoît Emery ruled in favour of the town because Pichette took too long to file the suit, a decision that was overturned by the Quebec Court of Appeal because it found that the town had abused its power of regulation by carrying out a disguised expropriation.
The Supreme Court in turn overturned the Quebec appeal court’s ruling, holding that the trial judge’s decision to deny the claim was reasonable. The SCC found that the trial judge had exercised his discretion judicially in dismissing the action in nullity for being out of time. The SCC noted that 16 years had elapsed between the adoption of the bylaw and its contestation, and that at least five years had lapsed when Pichette found about the zoning changes. Both delays were unreasonable. It also found that the Court of Appeal erred when it went on to decide an issue that was not before it, namely whether, the lateness of the action in nullity notwithstanding, the bylaw represented a disguised expropriation.
“The alleged abuse of power did not have the effect of relieving the plaintiff of its duty of diligence, that is, the requirement that the plaintiff institute its action within a reasonable time,” wrote Justice Wagner in the 25-page ruling.
The ruling has two key takeaways, said Pierre Paquin, who successfully plead the case. The SCC recognized that municipalities have the power to enact zoning bylaws that create conservation areas, said Paquin of Tandem Avocats Conseil Inc. The ruling also emphasizes that property owners who want to contest the validity of a bylaw due to disguised expropriation must bring an action within a reasonable time frame, regardless of whether they are seeking to have it annulled or inoperable, added Paquin.
But even in cases where a plaintiff does not meet conditions for applying for judicial review, the Supreme Court “clearly stated” that a plaintiff could nevertheless seek payment of an indemnity for disguised expropriation, in appropriate cases and if the claim is supported by the evidence, noted Blanchette.
According to Tommy Tremblay, a partner with Langlois lawyers, LLP in Montreal, the ruling raises yet more questions. The case, points out Tremblay, will continue in Quebec’s Superior Court for the claim for indemnity for disguised expropriation.
“It will be “interesting to see if the notion of prescribed limits will also apply” when the Superior Court will hear the case, said Tremblay. “One thing is certain. It will be very important to stress to our clients over the need to act as rapidly as possible, and for property owners to regularly follow municipal developments that could impact their properties.”
This story was originally published in The Lawyer’s Daily.
Rioters who damaged police cars after a Montreal hockey game can only be held liable for the specific damage they caused personally, and cannot be held responsible for damage caused by other rioters to the same vehicle, ruled the Supreme Court of Canada, capping off a week to forget for the City of Montreal.
In a 6-1 decision, the nation’s highest court provided guidance on when solidary liability attaches to wrongful acts under the Civil Code of Quebec, days after the city lost two major decisions dealing with pension matters before the Quebec Court of Appeal.
The riot, now part of Montreal’s infamous lore, took place on April 2008 after the Canadiens beat their arch rivals, the Boston Bruins, in the seventh game of the NHL playoff series. Nine police cars were set ablaze and destroyed and six others were damaged after festive celebrations turned into a riot as the evening progressed. Many of the incidents were caught on video, allowing police to determine what damage individual defendants caused to specific cars. All told, about 20 people were arrested.
The city sued the rioters, launching one civil action per vehicle, asking the courts to find them liable for the value of each vehicle they participated in destroying. In each action, it grouped together all the identified rioters who had done damage to the vehicle or vehicles and sought to have the defendants in each case held solidarily liable for the whole of the damage done to the specific patrol car and to its equipment, regardless of the nature or seriousness of the wrongful act each of them had committed.
In 2014, Court of Québec Judge Sylvain Coutlée ordered each of the rioters to pay the city the cost for the specific damage they caused to the vehicles, plus punitive damages. But Judge Coutlée declined to find the rioters in each action solidarily liable. The Quebec Court of Appeal upheld the decision, finding that the application of articles 1480 and 1526 of the Civil Code, which provides for solidarity in cases of extracontractual fault, did not apply to the facts of these cases.
Under the Civil Code, solidarity is not presumed. A person who does something wrong will only have to pay for the exact harm that he causes. But there are two exceptions. Articles 1480 and 1526 of the Civil Code set out the circumstances in which there is a solidary obligation to make reparation for injury caused by an extracontractual fault.
Making matters even more complicated, two conditions must be met for article 1480 to apply: It must be impossible to determine which person actually caused the injury, and there must have been either “joint participation in a wrongful act which has resulted in injury” or “separate faults each of which may have caused the injury”. In short, the two conditions that must be met are cumulative.
“In determining whether there was a common intention, a court should avoid defining the wrongful act so broadly that the common intention no longer bears any relation to reality,” noted SCC Justice Clément Gascon. “The specific circumstances of the cases at issue in this appeal do not show that the rioters acted with a common intention, either express or tacit.”
Natalie Gauvin of Montreal Legal Aid told The Lawyer’s Daily that the SCC’s ruling “clearly states the criteria applicable to the opening up of solidarity in the context of an event involving several faults. This decision is of great importance for the application of solidarity in the area of Quebec civil liability.”
In a decision that is bound to spur much debate, the Supreme Court of Canada dismissed a series of complaints against a Toronto securities litigator who was found to have breached the rules of civil courtroom behaviour during his aggressive but successful defence of a man charged in the billion-dollar Bre-X mining fiasco.
The 6-3 landmark ruling in Groia v. Law Society of Upper Canada, 2018 SCC 27 establishes an incivility test for when courtroom conduct crosses the line. It endorses a “flexible and precise” approach which employs a context-specific inquiry as opposed to a stand-alone test and rigid definition. When conduct compromises trial fairness and diminishes public confidence in the administration of justice then lawyers could be at risk for being sanctioned for incivility.
“Trials are not — nor are they meant to be — tea parties,” said SCC Justice Michael Moldaver, a former criminal defence barrister. “Care must be taken to ensure that free expression, resolute advocacy and the right of an accused to make full answer and defence are not sacrificed at the altar of civility.”
Reaction has been swift.
The Canadian Armed Forces’ failure to administer the military justice system efficiently has led to 10 court-martial cases to have been dropped since January 2016, revealed a damning report by the federal auditor general.
The military justice system is plagued by persistent and unnecessary delays as well as by “systemic weaknesses” that have compromised the timely and efficient resolution of cases, according to Michael Ferguson, the auditor general. What’s more, the Canadian Forces has known about the problems for at least a decade “but failed to correct them.”
“In our opinion, it often took too long to decide whether charges should be laid and to refer cases to prosecutors,” said the auditor’s report. “Prosecutors did not meet their time standards for making decisions to proceed to court martial. Where they did proceed, it took too long to schedule the court martial.”
The auditor general found that in fiscal 2016–17, a court martial dismissed charges in one case because of delay, and delay was a reason why military prosecutors decided not to proceed to trial in an additional nine cases. Moreover, the auditor general found that commanding officers did not immediately inform Defence Counsel Services of the accused’s request for defence counsel, and prosecutors did not provide the accused with all relevant information for their defence as soon as was practical.
The auditor general urges the Canadian Armed Forces to review its military justice processes to identify the causes of delays and to implement corrective measures to reduce them. The auditor general also recommends that the Canadian Armed Forces
The auditor general report comes on the heels after the federal government unveiled proposed legislation aimed at streamlining parts of the military justice system.
Private sector organizations following federal privacy law will have to provide breach notifications to customers and the privacy commissioner where it is reasonable to believe that the breach creates a “real risk of significant harm,” under long-awaited proposed regulations to Canada’s Personal Information Protection and Electronic Documents Act (PIPEDA).
The draft regulations, if and when they come in force, are expected to provide Canadians with better protection while providing organizations with yet another compelling incentive to adopt better security practices to thwart a phenomenon that is occurring with alarming frequency, according to privacy experts.
Early this month, a security breach at credit-monitoring company Equifax Inc., one of three major credit bureaus in the United States, could affect up to 143 million Americans and an undisclosed number of Canadians. More recently still, the personal information of some one million users from the news and entertainment website Canoe.ca were exposed after some of its databases were hacked.
“When a data breach takes place it places the individuals whose personal information has been breached at considerable harm at times, depending on the scope of the breach and the sensitivity of the information,” noted Ann Cavoukian, one of the world’s leading privacy experts who served three terms as the Information and Privacy Commissioner of Ontario. “So individuals have a right to know that their information has been breached and what measures they can take to hopefully minimize the harm and take collective action. This is why the proposed regulations are so important.”
The projected changes flesh out the Digital Privacy Act (also known as Bill S-4) which amended PIPEDA, Canada’s privacy law, on June 2015. While the Bill S-4 introduced an explicit obligation to notify individuals and report to the Office of the Privacy Commissioner of Canada (OPC) in cases of breaches, the amendments have not come into force. Published on September 2nd the draft regulations are open for comments for a period of 30 days.
The draft regulations, while widely lauded by privacy experts, also raises questions. Under the proposed regulations, organizations who have been the target of a “breach of security safeguards” have to conduct a risk assessment to determine if the breach poses “a real risk of significant harm” to any individual whose information was involved in the breach. The assessment must consider the sensitivity of the information that was breached, and the probability that the information will be misused.
“That concerns me a little,” said Cavoukian, who is leading the Privacy by Design Centre of Excellence at Ryerson University. “It has to be a real risk, whatever that means, and must cause significant harm, whatever that means. If I was the Commissioner I would urge organizations to err on the side of caution because you don’t know what risks may arise in the future. Guidance will need to be provided so that people just don’t sweep it under the cover.”
When an organization determines that a breach poses real risk of significant harm, they must notify affected individuals either directly or indirectly as well as report to the federal privacy commissioner. The contents of what is expected to be contained in the notifications are “rather standard,” said Eloïse Gratton, the national co-leader of the privacy and data protection practice group with Borden Ladner Gervais LLP.
Besides providing a description of the circumstances of the breach, the day or period in which it occurred, the organization is expected to provide a description of the steps it is has taken to reduce the risk of harm to the affected individual and steps that the affected individual can take to reduce the risk of harm resulting from the breach or to mitigate the harm.
“It would appear to be good business practice for organizations affected by a breach to follow this section of the proposed regulations if they choose to notify affected individuals until the new sections come into force,” said Gratton. These requirements, added Gratton, echo those recommended by the OPC in a document entitled “Key Steps for Organizations in Responding to Privacy Breaches.”
Though it is widely expected that the majority of organizations will provide direct notification such as by emails, the proposed regulations does allow organizations — under certain circumstances — to inform clients indirectly such as by posting information on their website. Under section 5 of the proposed regulations, organizations can provide indirect notification if giving direct notification will cause further harm to the affected individual, if the organization does not have the contact information of the affected individual or if the cost of giving direct notification is “prohibitive” for the organization. “Basically you are going to do an email blast to all of your customers or whoever is implicated and say that we would like to notify you of this breach that happened on this day so how is the cost of that prohibitive,” rhetorically asked Cavoukian.
But according to privacy expert Daniel Michaluk, the regulations “make it clear” that direct notification will be the “default way” that organizations will be expected to inform affected individuals of a data breach. “When a corporation wants to provide indirect notification in lieu of direct notification, they will need to meet this prohibitive cost standard,” said Michaluk, a Toronto lawyer whose practice with Hicks Morley Hamilton Stewart Storie LLP focuses on information security and data management, anti-spam, privacy and freedom of information matters.
The draft regulations also introduces requirements over the content, form and manner to report a breach to the OPC. Organizations will have to keep a record of the breach for 24 months after the incident occurred. It also compels organizations to provide, in writing, a description of the circumstances of the breach and, if known, the cause as well as the day or period in which the breach occurred, a description of the personal information that was the subject of the breach and an estimate of the number of individuals that now face a real risk of significant harm following the breach.
Some have speculated whether the record of the breach in the hands of the OPC could be used against organizations before the courts, but Michaluk dismisses that contention. He points out that the reporting and record-keeping obligations under the draft regulations are geared towards the collection and conveyance of facts and not an analysis of those facts or legal or risk-related conclusions about those facts. “That type of information which is far more sensitive can be kept out of these records that are very open to disclosure in any kind of fora,” said Michaluk. “That’s a good thing. That’s done in a manner that respects the kind of difficult issues companies face that have to respond to incidents.”
This article originally appeared in The Lawyer’s Daily, published by LexisNexis Canada Inc.
Canadian financial regulators, in lockstep with a growing number of jurisdictions, has put the cryptocurrency world on notice after confirming the potential applicability of Canadian securities laws to virtual currencies and related trading and marketplace operations.
Cryptocurrency offerings can provide new opportunities for business to raise capital and for investors to access a broader range of investments but they also raise investor protection concerns due to its volatility, lack of transparency, custody, liquidity and the use of cryptocurrency exchanges, notes the Canadian Securities Administrators in a recently published Staff Notice 46-307.
“Investors may (also) be harmed by unethical practices or illegal schemes, and may not understand the properties of the investment products that they are purchasing,” said the notice.
Cryptocurrencies like Bitcoin and Ether have become increasingly popular over the past decade which in turn has sparked an increase of cryptocurrency offerings such as initial coin offerings (ICO), initial token offerings (ITO) and sales of securities cryptocurrency investment funds. They can be purchased using either another cryptocurrency or a fiat currency.
But while many businesses market their coins or tokens as software products that are not subject to securities laws, the CSA staff notice warns that they may still be viewed as securities. Though new technology is involved, the existing definitions that establish whether an instrument is a security also apply to coins or tokens generated from an ICO or ITO, added the notice.
“The notice is helpful and welcome because it tells us that the securities regulators are looking into this,” said Manoj Pundit, a securities and capital markets lawyer with Borden Ladner Gervais LLP in Toronto. “At least they are speaking to the need of having a balanced approach to making sure that our regulations are enforced for the purposes of investor protection but at the same time recognizing that this is an innovative and legitimate business that is evolving in our economy.”
Heeding guidance from case law, and in particular from a Supreme Court of Canada decision in Pacific Coast Coin Exchange v. Ontario (Securities Commission), [1978] 2 S.C.R. 112, the CSA points out that it has found “many instances” of cryptocurrency offerings that constitute securities for the purposes of securities laws, including because they are investment contracts. Although the term “investment contracts” is not defined in legislation, the SCC in Pacific Coast Coin Exchange held it to be “an investment of money in a common enterprise, with a reasonable expectation of profits to be derived from the entrepreneurial efforts of others.”
The implications for cryptocurrencies to be considered as a security are significant. If cryptocurrencies offered through an ICO or ITO constitutes securities, they will need to file a prospectus, which provides details of the venture and the securities being offered, with securities commissions. There are however prospectus exemptions that allow issuers to offer securities on a private placement basis without a prospectus. While so far no business has used a prospectus to complete an ICO or ITO in Canada, the CSA anticipates that businesses looking sell coins or tokens “may do so” under prospectus exemptions.
Whitepapers, which may describe things such as the fundraising goal, the business, the project for which the capital is being raised, and how long the offering will remain open, are a form of disclosure but are not prospectuses and do not fulfill the disclosure requirements under Canadian securities laws, warns the CSA.
Moreover businesses completing ICOs or ITOs may be trading in securities for a business purpose (referred to as the business trigger) are required to register as a dealer or to seek an exemption from the dealer registration requirement. Whether or not an activity meets the business trigger is fact specific. But if individuals or businesses meet the business trigger, then they must comply with fundamental obligations to investors such as know-your-client and anti-money laundering requirements.
Cryptocurrency exchanges, online exchanges that allow investors to buy and sell cryptocurrencies, also come under scrutiny by the CSA. These exchanges operate across the world, in many cases without government oversight or regulation. But the CSA states that such exchanges that offer securities must determine whether it is a marketplace. That’s important because marketplaces are required to comply with the rules governing exchanges or alternative trading systems. “If an exchange is doing business in a jurisdiction in Canada, it must apply to that jurisdiction’s securities regulatory authority for recognition or an exemption from recognition,” states the notice. So far, no cryptocurrency exchange has been recognized in any jurisdiction in Canada or exempted from recognition.
But points out Simon Romano, a Toronto lawyer whose practice focuses on securities, public and private mergers and acquisitions, and corporate finance, the CSA notice makes it a point of encouraging these new businesses to use the regulatory sandbox, which allows firms to register and obtain exemptive relief from securities law requirements under a faster and more flexible process than through a standard application to test their products or services.
“There are costs to regulating things and it may discourage some people,” said Romano. “But regulatory authorities are willing to work with you to achieve goals in a carefully structured arrangement designed to protect investors. Hopefully it stops the Wild West, at least coming out of Canada.”
According to Pundit, the CSA staff notice is a step in the right direction.
“It’s good they came up with this staff notice because it shows they are on it, that they are considering these issues, that they’re open to consultation, and that they are granting some discretionary and exemptive relief in certain fact situations,” said Pundit. “It didn’t present anything that was adverse or that’s not conducive to allowing these innovative products to be made available to Canadian investors.”
This article originally appeared in The Lawyer’s Daily, published by LexisNexis Canada Inc.
The Supreme Court of Canada shed new light on the Crown’s constitutional duty to consult with Aboriginal communities and clarified the role and obligation of decision-making bodies in two separate decisons that has the potential of providing greater predictability for natural resources companies seeking regulatory approval.
Continue reading “Supreme Court of Canada clarifies duty to consult”
The Canadian Judicial Council has dismissed allegations of conflicts by three judges who attended privately sponsored receptions or conferences.
The three judges, all of whom hear tax cases, landed in hot water after the CBC and Radio-Canada reported that they had attended social events at an International Fiscal Association Conference in Madrid in September 2016. The conference was approved by the CJC as a continuing education opportunity for judges involved in tax law matters.
Federal Court of Appeal Justice Denis Pelletier was under scrutiny for attending two evening social events organized by the conference, which was in part sponsored by accounting giant KPMG. But since KPMG is not a party to disputes before the Tax Court of Canada and no dispute involving KPMG is or was pending before the Federal Court of Appeal in the days or months preceding the conference, “any suggestion of conflict of interest that would approach misconduct must be dismissed,” said a CJC letter to an unidentified complainant.
Tax Court of Canada Justice Randall Bocock was investigated for having attended a cocktail organized by the law firm Dentons LLP while he was the case manager of an appeal before the Tax Court of Canada involving KPMG and the Victoria-based Cooper family. Justice Bocock said he was unaware of Dentons’ involvement in the Cooper matter. But when he did find out, he recused himself.
“The potential for a conflict of interest in this matter seems remote,” said Justice Bocock in a letter to the complainant. “ “However, through inadvertence, the portrayal of a potential conflict, where all the facts are at first unknown, is possible.”
He added that “prudence and best practice would suggest that, in future, refraining from attending such off site sponsored conference receptions is a better and wiser choice. I certainly intend to follow this prudent conduct in the future.”
Tax Court of Canada Chief Justice Eugene Rossiter was the subject of a complaint because he had briefly attended a reception at the conference, and because he defended the practice at a Canadian Tax Foundation conference held in November 2016. He said he would continue to attend receptions, adding that “we will have pizza and we will have wine, and lots of it.”
The Chairperson of the Judicial Conduct Committee of Council, Michael MacDonald, mildly rebuked Rossiter for making such remarks in jest, calling them regrettable. “His controversial remarks were meant as a joke as part of his address on accessibility and involvement of judges in public events,” said the letter to the complainant.