Legal Feeds Blog
In what lawyers are calling an “extremely rare” move, the Ontario Court of Appeal has expressly overruled one of its own past decisions.
|‘To expressly overrule a former decision is extraordinary,’ says James Morton.|
“As an intermediate court of appeal, we are ordinarily bound to follow our past decisions, even decisions with which we disagree. It is important that we do so. Our common law legal tradition rests upon the idea that we will adhere to what we decided in the past. As expressed by the Latin phrase stare decisis, we stand by things that have been decided,” wrote Justice Robert Sharpe in a ruling earlier this week.
But, Sharpe said, in this case, the faulty jurisprudence, from 1953’s Newman and Newman v. Terdik, isn’t logically consistent with “a steady string” of decisions that found an owner of a motor vehicle who consents to the possession of their vehicle by someone else will be vicariously liable for the negligence of the other person even if there is a breach of a condition imposed by the owner about the use or operation of the vehicle.
In a starkly different stance, Newman had found consent to possession does not translate to consent to operate a vehicle if the owner has placed restrictions on the operation of their vehicle.
“There comes a point at which the values of certainty and predictability must yield to allow the law to purge itself of past errors or decisions that no longer serve the interests of justice,” Sharpe wrote. “Moreover, decisions that rest on an unstable foundation tend to undermine the very values of certainty and predictability that stare decisis is meant to foster.”
It’s so rare for the appeal court to overrule itself that civil litigation lawyer James Morton says he’s only come across a similar move two or three times over the last 20 to 25 years.
“To expressly overrule a former decision is extraordinary,” says Morton. “The court of appeal often overrules earlier decisions without saying they’re doing it; they just kind of narrow the case or say, ‘Well, that’s not what it really means,’ but in this particular situation, it was black and white.”
Adds Morton: “The court was correct to overturn [Newman], I don’t have a problem with that, but it’s an extremely rare situation.”
While the Supreme Court of Canada more freely overrules its own decisions, as it did recently in R. v. Bedford, appellate lawyer Allan Rouben says it’s unusual for an intermediate court to do so. Still, Rouben says the court in this case made “a very well-reasoned decision.”
“It goes through the circumstances in which it’s appropriate to consider overruling, and here they found that the virtues of certainty and predictability were...outweighed by the other considerations,” he adds.
Part of the court’s unspoken motivation could have been that it’s difficult to obtain leave to the top court on an issue as narrow as the one considered in this case, says Morton.
“So if the Court of Appeal didn’t overturn Newman, it just would never get overturned.”
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When bringing a motion to set aside default judgment defendants better have good evidence and respond quickly, according to a recent Ontario Superior Court decision.
In Marina Bay Sands Pte, Ltd. v. Jian Tu aka Tu Jian, Justice Sean Dunphy wrote on Aug. 7:
The Superior Court is not a sandbox playground where ‘do-overs’ can be expected on demand. The stakes are high and this is no time to keep powder dry. If there is any reason the judgment ought not to stand, any and all reasons must be diligently and properly placed before the court.”
In the Marina Bay case, the defendant, Jian Tu, created a claim to set aside default judgment on what Dunphy called “two slender straws” — a procedural argument based on the exclusive jurisdiction clause in the underlying contract in favour of Singapore laws and courts, and a “bald, second-hand assertion” of failure to receive the statement of claim by means of the substituted service authorized by an order of the court.
Tu brought a motion to set aside the default judgment dated June 28, 2014, and to strike the statement of claim or for leave to file a statement of defence.
Marina Bay, a Singapore hotel, issued the statement of claim on Feb. 18, 2014, for amounts owing under a credit agreement between it and the defendant. The amount claimed was the Canadian dollar equivalent of SGD $9,940,683, plus prejudgment interest arising from advances made in February 2013 that the defendant had failed to repay.
The debts arose from markers given to support gambling at the plaintiff’s casino. A credit history obtained by the plaintiff showed Marina Bay was not the only casino the defendant has obtained credit from — there was a list of other casinos in Ontario and abroad.
Marina Bay had difficulty serving the statement of claim. Three unsuccessful attempts at service were made between March 6 and March 15, 2014, at an address in Markham, Ont. The process server received no reply.
Several other attempts were made to the same address.
On June 28, 2014, default judgment was obtained in the amount of the Canadian-dollar equivalent of SGD $11,127,028.62 plus $2,000 for costs, both amounts bearing post-judgment interest at the rates of 13 per cent and three per cent respectively.
Marina Bay proceeded to register writs of seizure and sale on July 21, 2014, and made a number of attempts to serve the judgment upon Tu via regular and registered mail and courier on several dates from July 23, 2014 to Jan. 2015.
Tu claimed he did not reside at the Markham property during the time the statement of claim was said to be delivered.
The case raised the following issues to be determined:
a) Is the existence of an “exclusive jurisdiction” clause in the contract underlying the default judgment sufficient grounds to warrant setting aside a default judgment?
b.) Does a bare hearsay allegation that the defendant failed in fact to receive a copy of the statement of claim warrant the exercise of the court’s discretion to set aside default judgment under Rule 19.08(1) of the Rules of Civil Procedure?
Dunphy said he did not accept “the evidence that the defendant in fact had no notice of the claim.”
He noted that Marina Bay has been unpaid for almost three years on its liquidated claim, and “had to engage lawyers in Ontario to track down the defendant and has now found property that he owns and has secured a judgment.”
Bald, hearsay statements to that effect which have been made without explanation of the circumstances carry little weight in these circumstances. . . . Secondly, there is a great distinction to be drawn in my mind between an irregularly obtained default judgment and a properly obtained judgment following substituted service in accordance with a validly-obtained order of the court. In the latter case, the judgment is regular. While the interests of justice may well favour setting such a judgment aside if credible evidence is led to establish that the alternative to personal service employed was actually ineffective, such is not automatically the case. Even if I accepted the defendant’s assertion (which I do not), the defendant would have still to explain his delay in responding to the judgment and to provide the court with some indication that he has a bona fide defence on the merits."
Dunphy dismissed the motion with costs.
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The Ontario Court of Appeal has rejected the superintendent of financial services’ bid to provide greater security for pension provisions during the restructuring proceedings of an Ontario wood manufacturing company.
The case once again raised questions about the deemed-trust provisions in Ontario’s Pension Benefits Act that the superintendent argued works in combination with the Personal Property Security Act to create a priority over the claims of secured creditors during Companies’ Creditors Arrangement Act proceedings.
“The Superintendent submits that the CCAA judge erred in concluding that no wind up deemed trusts arose during the CCAA Proceeding,” wrote Ontario Court of Appeal Justice Eileen Gillese in setting out one of the key issues in Grant Forest Products Inc. v. The Toronto-Dominion Bank on Friday.
“He contends that where a pension plan is wound up after an initial order is made under the CCAA, but before distribution is complete, unpaid contributions to the pension plan constitute a wind up deemed trust under the PBA.”
The case dealt with Grant Forest Products, a manufacturer with facilities in Ontario, Alberta, and the United States. It sought protection under the federal restructuring act after GE Canada Leasing Services Co. applied for a bankruptcy order against it in 2009.
During the ensuing years, the company sold off the bulk of its assets and was able to pay off its first lien lenders in full in January 2012. But there was little left for the second lien lenders and growing deficits in the pension plans for both salaried employees and executives.
In early 2012, the superintendent ordered the wind up of both plans with an effective date of June 10, 2010, for the executive plan and March 31, 2011, for the salaried plan. Later that year, Grant Forest Products and related companies brought a motion for a declaration that they no longer had to make contributions to the pension plans.
In the meantime, one of the creditors, West Face Capital Inc. sought to petition Grant Forest Products into bankruptcy. In 2013, former Ontario Superior Court justice Colin Campbell issued a transition order adjudging the companies to be bankrupt. The order stated that none of the companies’ funds were subject to a deemed trust under the Pension Benefits Act.
In deciding whether Campbell had erred, the appeal court returned to a familiar them: federal paramountcy under the Bankruptcy and Insolvency Act. “As I have explained, at the time that the Motions were heard, it was open to the CCAA judge to order the Remaining Applicants into bankruptcy,” wrote Gillese.
“Once the CCAA judge exercised his discretion and made that order, the priorities established by the BIA applied to the Remaining Funds and rendered the wind up deemed trust claims inoperative.
“Because wind up deemed trusts are created by provincial legislation, their payment could not be ordered when the Motions were heard because payment would have had the effect of frustrating the priorities established by the federal law of bankruptcy.”
As part of Friday’s ruling, Gillese included some comments about the merits of Companies’ Creditors Arrangement Act proceedings versus the bankruptcy process when it comes to pension funds. As she noted, all pension contributions continued to the plans during the bulk of the restructuring proceedings. Second, she pointed out that the company that bought some of the assets continued one of the pension plans. And third, she said the restructuring proceedings bought the company “breathing space” to ensure proper administration of the pension plans with orders authorizing the monitor to hold back some funds for pension claims.
“I hasten to add that these remarks are not intended to suggest a lack of sympathy for the position of pension plan beneficiaries in insolvency proceedings,” wrote Gillese.
“Rather, it is to recognize that while no panacea, at least there is some prospect of amelioration of that position in a CCAA proceeding.”
While the appeal court rejected the superintendent’s position, Andrew Hatnay, a partner at Koskie Minsky LLP who acted for an intervener in the case, says he was very happy with the decision.
While “it certainly disadvantages the Grant Forest pension plan members,” the decision was a narrow one that doesn’t create new law, says Hatnay, whose clients include non-union active employees and retirees of U.S. Steel Canada Inc. in its own restructuring proceedings.
The appeal court, he adds, dealt with the narrow issue of whether Campbell had erred in granting the bankruptcy application.
“Timing is always critical in CCAA proceedings,” he says.
“The courts have always made clear that creditors should make the rights on which they intend to rely known early in a CCAA proceeding.”
As for the court’s comment on the advantages of the restructuring legislation in general, Hatnay says he largely agrees. “Generally, we agree with the courts’ comments because the CCAA permits greater flexibility than a bankruptcy proceeding and encourages stakeholders to reach resolutions and settlements,” he says.
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Global legal giant Dentons will be partnering with global IT giant IBM to invest in a Toronto-based startup, the company announced yesterday.
Under the deal, the legal technology startups will be able to access IBM Cloud and related technologies such as IBM Bluemix, which contain more than 100 tools and services for developers.
The program is “really just a menu of all sorts of options and tools you can use,” ranging from the relatively simple to the complex, says NextLaw Labs CEO Dan Jansen.
“It’s really just a broad-based partnership, and one that will allow us to leverage their tools, from the basic to the sophisticated, to solve problems that basically allow us to come up with faster, better, cheaper solutions for our clients,” Jansen says.
Among the startups using the service will be ROSS Intelligence Inc., a company founded by a group of University of Toronto students. ROSS is developing an application that uses IBM’s Watson artificial intelligence technology to automatically spit out answers, based on existing law and evidence, to legal questions.
“Basically you teach Watson an area of law and you do these natural language queires and it comes back with answers,” says Jansen. “It’s kind of at the sexy end of the spectrum, so folks love to talk about it, but it’s the broader range of tools that we’re kind of interested in working with IBM.
He says, “some of them aren’t quite as glamourous but equally compelling” because of their ability to save lawyers time and money.
Under the deal announced yesterday, Dentons is investing money in ROSS Intelligence, but the company declines to say how much.
“Like any private equity investor, we don’t obviously announce the amount of money that we’re putting into any individual company,” says Dentons global chairman Joe Andrew.
Dentons’ Canadian partners have shown a great interest in new legal technology and d an unusually high number of innovative ideas have come from Canadian legal tech startups, say Andrew and Jansen.
“In Canada, there’s a very sophisticated legal market, a very competitive legal market, where there is a particular attention to cost” partly because the country is seen to be “over-lawyered,” says Andrew. “And so you see a real attention to new uses of technology inside Canada, more so often than in many other places around the world.”
“I have to tell you, we’ve gotten disproportionate ideas and flow out of Canada,” says Jansen. “ROSS came out of Toronto. Stay tuned . . . we have other opportunities we’re developing with our colleagues in Canada. So there will be more news.”
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A year after its release, the most controversial element of the Canadian Bar Association’s report, "Transforming the Delivery of Legal Services in Canada," remains its recommendation to allow alternative business structures, says the initiative’s chair.
|‘I think if we were to forego ABS as we sit here today, that would be an unfortunate development,’ says Fred Headon.|
“It’s a question that I think we’re going to continue to grapple with in the coming weeks and months . . . there’s not a unanimous view out there in the profession.”
The report calls for allowing “non-lawyer investment in legal practices,” albeit on a carefully regulated basis, and for allowing businesses or not-for-profit corporations to register as ABSs providing legal services.
The recommendation has attracted considerable resistance, especially from personal injury firms. It became one of the most contentious issues in the Law Society of Upper Canada’s bencher elections this spring. Most of those voted in as benchers oppose the idea.
But Headon says he thinks the debate around ABSs will continue — and ought to.
“I think if we were to forego ABS as we sit here today, that would be an unfortunate development, at least as we see the equation today, because the rationale for our recommendation, of course, was that we thought that would be a helpful way to encourage innovation and help the profession adapt to change,” he says.
“If this were not to come to light it may be more difficult for the profession to integrate that kind of knowledge and expertise and skill into what we do.”
In a Globe and Mail article this week, Australian personal injury giant Slater & Gordon Ltd. — a publicly traded corporation — confirmed it is looking at expanding into Canada if regulations here change to allow it. According to the article, Slater & Gordon already serves an estimated one-quarter of Australia’s personal injury market.
The Canadian legal profession, Headon says, could learn a lot about innovation from looking at Slater & Gordon.
“They certainly have been a bit of a trailblazer, in a number of different ways in providing alternative career paths — it’s led to one of the most diverse firms in the marketplace,” says Headon.
“Certainly I think whatever their accounting troubles, we can look to what else they’ve done as a bit of an example to consider as to what opportunities are out there.”
Slater & Gordon, the article reports, is facing an investigation into its accounting practices after its acquisition last year of part of a British insurance claims processing company.
For now, the report’s recommendation on ABSs has the backing of the CBA’s Futures Initiative — but is not the official policy CBA as it has not yet been put to a vote before the association’s council. Nor is a vote likely to happen at next week’s annual meeting in Calgary, says Headon.
“It’s not on the agenda this time — we have a pretty heavy agenda already — and so we will continue to dialogue within CBA,” he says.
“We’ve talked about the hows and whens, but certainly had no particular timeline [for a vote]. . . . We’re comfortable that the work of the initiative is on track, is getting a good reception, and if and when resolutions are the way to go we certainly won’t be shy to bring them to council.”
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