Legal Feeds Blog
A mistaken impression on the part of a Fairmont Hotel Inc. executive in 2007 will see a large tax payment to the Canada Revenue Agency, the result of a recent judgment by the Supreme Court of Canada that will influence future rectification cases.
In Canada (Attorney General) v. Fairmont Hotels Inc., the majority of the Supreme Court found that two Ontario courts had erred in holding that the respondent’s intention of tax neutrality could support a grant of rectification.
“A common continuing intention does not suffice,” Justice Russell Brown wrote for the majority. “It is limited to cases where a written instrument has incorrectly recorded the parties’ antecedent agreement. In other words, rectification is not available where the basis for seeking it is that one or both of the parties wish to amend not the instrument recording their agreement, but the agreement itself.”
Fairmont Hotels Inc. had been involved in financing the purchase of two U.S. hotels, in U.S. currency, by Legacy Hotels REIT, in which Fairmont held a minority interest; the hotels were accordingly purchased in 2003. The financing arrangement was intended to operate on a tax-neutral basis. But when Fairmont was later acquired, in 2006, that intention was frustrated, as the acquisition would cause Fairmont and its subsidiaries to realize a deemed foreign exchange loss.
Legacy Hotels later asked Fairmont to terminate their financing agreement in order to allow for the sale of the two hotels it had purchased. Fairmont subsequently redeemed its shares in its subsidiaries, which resulted in an unanticipated tax liability that Fairmont then sought to avoid by rectification of the directors’ resolutions. (Fairmont’s vice president of tax had been under the mistaken assumption that the subsidiaries’ foreign exchange tax neutrality had been secured, and so had instructed the directors of Fairmont’s subsidiaries to pass resolutions that would unwind the reciprocal loan structure with a share redemption.)
At issue for the majority was that “Fairmont has not demonstrated how its intention, held in common and on a continuing basis with its subsidiaries, was to be achieved in definite and ascertainable terms while unwinding the financing arrangement,” Justice Brown wrote. “Fairmont refers to a plan to protect its subsidiaries from foreign exchange tax liability, but that plan was not only imprecise. It really was not a plan at all, being at best an inchoate wish to protect the subsidiaries, by unspecified means.”
In dissenting reasons, Justice Rosalie Abella, also writing for Justice Suzanne Côté, found that a “common, continuing, definite and ascertainable intention to pursue a transaction in a tax-neutral manner has usually satisfied the threshold for granting rectification.
“Allowing the tax authorities, a third party, to profit from legitimate tax planning errors, when its own rights have not been prejudiced in any way, amounts to unjust enrichment,” Justice Abella wrote.
The majority of the court took a restrictive approach to rectification in reaching its conclusion, Scott Rollwagen, the research partner at Lenczner Slaght in Toronto, told Legal Feeds. (A companion decision, Jean Coutu Group (PJC) Inc v Canada (Attorney General), considered the corresponding principles under Quebec law, and took the same approach.)
“A tax-efficient result will often form the motivation for entering into an agreement, but the question of intention is much more specific than that,” Rollwagen says of the court’s decision. “The only common intention that will support rectification is proof that the parties actually had a prior intention of entering into a transaction having a definable structure.
“Intention is the thing that you actually want to do,” he says. “The motive is why you want to accomplish it. You can get rectification when you can clearly show that there was an intention that the written agreement doesn’t effect. . . . What was really a problem in Fairmont was not the intention but the motive.”
Fairmont executed some directors’ resolutions to redeem some shares, which wasn’t what they would have done if they knew what the tax consequence would be, he says. “The motive was to avoid tax, but [Fairmont] mistakenly formed the wrong intention in effecting that motive.” The result of the Fairmont Hotels decision is “that you can’t rectify for motive.”
One implication of the decision will be increased transaction costs for corporations, Rollwagen predicts, to “make sure they get it right.” Mistakes such as occurred in Fairmont often occur when dealing with real-time commercial decisions. “Some things may need to be slowed down.
Despite an injunction to stop Montreal’s controversial pit bull ban being dismissed, opponents to breed-specific legislation aren’t giving up the fight.
|Rebeka Breder, of Breder Law Co., says lawmakers need to ‘look at the person on the other end of the leash’ when developing dangerous dog legislation.|
Camille Labchuk, animal rights lawyer and executive director of Animal Justice in Toronto, says the reality of the latest decision means pit bulls — and really all dogs in Montreal — are at risk from this “vague, discriminatory and ineffective bylaw.”
“What we know about keeping the public safe is strongly related to education and dog licensing,” she says. “This is a draconian measure that’s not going to work and is going to be expensive.”
Quebec Superior Court Justice Louis Gouin granted the temporary suspension stopping parts of the new law from going into effect on Oct. 5 in Lours v. Montreal (City of), but on Dec. 1 the injunction was dismissed by the Quebec Court of Appeal and the bylaw came into full effect.
In a statement on its website, the Montreal SPCA said the appeal court is “holding the City of Montreal to the concessions it made during the appeal hearings.”
“Importantly, the City of Montreal cannot issue euthanasia orders based on breed or physical appearance, prohibit someone from reclaiming their lost dog based on breed or physical appearance, and must allow all dogs to continue to be adopted to families residing outside of Montreal,” the Montreal SPCA stated.
According to both lawyers, Ontario is a good example of how breed-specific bans are ineffective. Labchuk says research from 2012 shows there was a 40 per cent increase in dog bites reported in Ontario hospitals since the ban was enacted in 2005.
On Dec. 10, Toronto City Council unanimously passed amendments to the city’s bylaw regulating dangerous dogs. According to the amendments, which stem from a Sept. 7 report for action called Responsible Dog Ownership: Mitigating Risks of Dangerous Dogs, dogs classified as dangerous will need to be muzzled and microchipped, will not be allowed in a leash-free area and the owner must purchase a dangerous dog tag from the city and also post warning signs on their property.
Anyone found to be in violation of the bylaw, which comes into force on March 1, 2017, could face fines up to $100,000.
Labchuk calls the changes positive, saying many of the local animal activists in Toronto “pushed quite hard” to get these amendments through.
While Breder acknowledges these amendments are steps in the right direction, she says Toronto didn’t go far enough.
“Any city that really wants to go to the root of the issue should start with education or have education as part of their dangerous dog regulations,” she says.
Additional amendments to the Toronto bylaw, especially making it illegal to tether a dog outside for longer than three hours and banning choke and pronged collars, are excellent Labchuk and Breder agree.
Breder says there are a number of examples from cities in B.C. in the last decade that have reversed breed specific legislation including Vancouver in 2005, North Vancouver in 2009, Delta the year after that, Castlegar, Cumberland, Coquitlam and White Rock in 2011 and New Westminster in 2013.
“Forget activists or pit bull lovers,” Breder says. “Looking at objective data that’s out and talking to animal behaviourists, we shouldn’t be dealing with a band-aid solution that isn’t a solution at all. Look at the people on the other end of the leash.”
But the gold standard in North America is Calgary, Breder says. In 1985 the city had just over 2000 aggressive dog incidents. By 2014, that number went down to 641. The number of trials where the city tries to get a destruction order for an aggressive dog has “decreased astronomically” in that time as well, she adds.
“They moved away from an ‘animal control’ model to a ‘responsible pet owner’ model. They did this in early 2000s and what that means is they take public education very seriously. They start by educating kids in their formative years, in elementary school, on how to approach dogs, how not to approach them. Because dogs are such a part of society they worked it right into the curriculum,” Breder says.
“Essentially what that legislation does in Calgary is it targets known risk factors and known behavioural problems so that they can nip it in the bud. It’s progressive,” Breder says. “We have to remember — in the 1960s it was the Shepherd, then the Doberman, now pit bulls and the latest trend is towards banning Cane Corsos and Bull Mastiffs. Where do we stop? We, as human beings, are supposed to be intelligent and learn from our mistakes — and it’s beyond me why we’re not.”
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A judge in Alberta who was criticized by its Court of Appeal two years ago for interpreting submission as consent in a sexual assault case is retiring in January after 10 years on the bench.
A notice issued by the federal Privy Council office Dec. 9 states that Alberta Court of Queen’s Bench Justice Kirk Sisson has “elected early retirement with an immediate annuity” under the provisions of the federal Judges Act. The resignation takes effect Jan. 3 and the judge will receive an annuity of $142,392 each year for the rest of his life.
Sisson, 65, was eligible to continue sitting as a Court of Queen’s Bench until he is 75. He was a lawyer in Red Deer when he was appointed in the fall of 2006 by then-Prime Minister Stephen Harper. The current salary for federally appointed judges is $308,200.
Sissons could not be reached for comment. The executive legal officer to the chief justice of the Court of Queen’s Bench in Alberta says it is not known why Sisson is stepping down. “The Court is unaware of Mr. Justice Sisson’s reasons for choosing to retire,” says Michelle Somers.
The sexual assault case where the Alberta Court of Appeal quashed an acquittal and substituted a conviction is R v. Adepoju. Since that appellate decision in March 2014, Sisson has been overturned in three other cases.
The appellate court, in a 2-1 decision, overturned an impaired driving causing death conviction earlier this year after finding that Sisson breached a requirement to provide procedural fairness. Last fall, the Court of Appeal concluded that he made a number of legal errors in denying an application for increased spousal support following a material change in circumstances. A first-degree murder conviction in a trial presided over by Sisson, without a jury, was overturned by the Court of Appeal in 2014. The court stated that “it cannot follow the pathway to conviction of the trial judge in this case” and the reasons did not withstand appellate scrutiny.
In the Adepoju trial, the complainant testified that she knew the accused and, while at her home, he began to kiss the woman. She told him that she did not want to engage in any sexual activity. Instead, he continued to use force, grabbed the woman and pulled her pants and underwear off. The court heard that after trying to resist his advances for 15 or 20 minutes, she felt he was not going to take no for an answer so she gave in to “get it over with.” On that basis, Sisson found that the Crown had failed to prove the absence of consent, the Court of Appeal noted in its decision.
Text messages were exhibits at the trial. “I had to force you, you didn’t want it,” was one of the messages sent by the accused.
The Court of Appeal, in overturning Sisson and entering a conviction, cited the Supreme Court of Canada’s decision in 1999 in R v. Ewanchuk, rejecting the concept of “implied consent” as a defence in an assault or sexual assault trial.
“In his analysis, the trial judge considered only the sexual intercourse that took place after these protests. This is an error. Sexual assault is not confined to intercourse,” stated the Court of Appeal panel of Justices Marina Paperny, Peter Martin and Brian O’Ferrall.
“The Criminal Code makes clear that acquiescence or submission is not consent. As stated in Ewanchuk, to be legally effective, consent must be freely given,” the Court of Appeal wrote. “The trial judge erred in defining sexual assault to include only sexual intercourse and in failing to consider all of the previous acts as assaultive and sexual in nature,” the court added.
The decision of the Court of Appeal received some local media coverage in 2014 when it was issued. It was highlighted again in an article in September of this year in The Globe and Mail. That article was about the Canadian Judicial Council hearing into the conduct of Federal Court of Canada Justice Robin Camp, as well as reviews ordered of two provincial court judges in Alberta as a result of findings in sexual assault cases. A Canadian Judicial Council panel concluded last month that Camp was unfit to serve on the bench as a result of his conduct and comments in a sexual assault trial in 2014 when he was a provincial court judge in Alberta.
An Ontario Superior Court of Justice judge has ruled that a family law clerk with 27 years experience at a law firm did not resign from the firm at which she worked, even though she removed all her belongings and returned her security pass to one of the firm’s lawyers.
|Jed Blackburn says a recent Ontario Superior Court of Justice ruling illustrates that for a resignation to be accepted, it must be ‘clear and unequivocal.’|
In the case, senior family law clerk Rajinder Johal had been working for Simmons da Silva LLP for 27 years, and said she had been wrongfully dismissed.
“[T]he main issues in this case, aside from the issue of damages is whether or not the plaintiff resigned and if she did resign did she effectively resile from that resignation,” said Sloan in the ruling.
In June 2015, the then-62-year-old clerk went to a meeting on a Wednesday with one of the firm’s lawyers and the firm’s human resources manager.
The plaintiff and defendant had differing versions of what happened at the meeting. According to a lawyer at the firm, Johal said she was displeased with a new staffing arrangement discussed at the meeting, and the day after, she removed her belongings and then went to the lawyer’s office, returning her security pass and saying she had “hit the end of the road.” She then left.
According to Johal, before she went to the lawyer’s office the day after the meeting, she overheard the lawyer telling another clerk they’d be working together closely.
She said she then went into his office and returned the security pass to him, but she denied saying she “was at the end of the road,” according to the ruling.
No written resignation letter was ever handed in and the clerk never said goodbye to any of her colleagues, said Johal’s lawyer, Philip White, of Grosman Grosman & Gale LLP.
“The following Tuesday, she attempted to return to work after she calmed down, collected her thoughts and received legal advice,” said White. “The firm did not let her return.”
As part of her case against the firm, Johal said her employer did not make sure she understood the new staffing arrangements and did not question her sudden departure or emotional state when she handed back her security pass.
Ultimately, Sloan agreed with Johal, saying she did not resign and “. . . when viewing this matter contextually, a reasonable person would not have viewed the Plaintiff’s action as a voluntary resignation.”
“With respect to what transpired . . . if viewed narrowly, the Plaintiff returning her security pass and removing her belongings might look like a resignation. However, it is incumbent upon the employer to look at the larger picture,” said Sloan.
He also said “. . .the circumstances here cried out for further inquiry by the defendant.”
“While I agree with the Defendant that it does not owe a paternalistic duty to the Plaintiff, on the facts of this case, it was required to do more to determine the Plaintiff’s true and unequivocal intention,” he said in the ruling.
“On the evidence before me, it was to the Defendant’s financial advantage if the plaintiff resigned, since the evidence is clear that at least currently, the firm was top-heavy with family law clerks.
“Therefore if one resigned ‘of her own free will’ the firm would not have to pay any severance and of course if she resigned the defendant would not have to continue to find work for her and pay her ongoing salary,” said Sloan.
“So when the ‘opportunity’ of accepting the plaintiff’s resignation arose, Mr. Clark and/or the remaining management members of the firm, by their inaction decided to let ‘sleeping dogs lie’ and simply accept what they thought was a resignation, after what they thought was a reasonable length of time,” Sloan added.
To that end, Sloan ordered a trial on the quantum of damages — Johal has asked for 22 to 26 months of salary, while the firm said if Johal received damages, it should be limited to 16 months.
White says the case is “an example of an employer who is so focused on saving money that they sort of let common sense and compassion slip to the side a bit and they made a big mistake.”
Jed Blackburn of Cassels Brock & Blackwell LLP said the decision shows that “in order to be accepted, a resignation must first be clear and unequivocal and must objectively reflect an intention to resign when viewed in the entire context.”
“Factors such as an employee’s emotional/mental distress, history with the company, age, financial circumstances, job prospects and the manner of resignation may all be considered in determining whether a resignation was truly voluntary,” he said in an email to Legal Feeds.
Nicole Simes, who represented Simmons da Silva, said she could not provide comment.
The New Year could bring a steady increase in hiring for Canada’s legal landscape, according to a new survey.
|Sara Lutecki, division director of Robert Half Legal, says in-house legal departments are looking to take on more work themselves.|
“In-house legal departments especially are looking to take on more of the work themselves as opposed to outsourcing. Because of that law firms have to be more competitive to offer more,” says Sara Lutecki, division director of Robert Half Legal.
“So they want the top talent with each… it’s a lot harder for them to retain that top talent. So that’s why they have to add a little bit more.”
The survey canvassed 150 lawyers in hiring positions, half of which are employed at law firms with 20 or more employees and the other half are in-house lawyers at companies with more than 1,000 employees.
Of those surveyed, 48 per cent said they expect their organizations will maintain and fill vacated positions. Only 12 per cent said they expected a freeze on hiring and three per cent said they expect a reduction in positions.
The survey also found most new job opportunities are expected to come from litigation. When asked which practice area lawyers think the most new jobs will come from, 31 per cent of respondents said litigation and 26 per cent said corporate law.
The survey found respondents expected 14 per cent of the new legal jobs would be in real estate.
Lutecki says a rise in in-house legal departments taking on their own insurance defense likely accounts for some of the increase.
Warren Bongard, president and co-founder of ZSA Legal Recruitment, says the survey is fairly consistent with what he expects to see in the coming year, but he does not think the rise in litigation positions will come at big firms.
“I see more alternative options to getting litigation done,” he says.
Both Lutecki and Bongard say they expect a higher increase of real estate jobs than is reflected in the survey because of the ever-booming real estate industry.
“There’s been a shortage of well trained real estate lawyers in the country,” Bongard says.
The survey also found that 55 per cent of lawyers said finding skilled legal professionals is somewhat or very challenging. A further 33 per cent said they were concerned about losing lawyers to other opportunities in the next six months.
This may sound like welcome news to young lawyers looking for a job, but Lutecki says they have found most firms hiring are looking for highly skilled lawyers with at least five years of experience in areas such as commercial litigation and insurance defense.
“The one trend that we have seen firms do is hire on a project basis and that is to see what needs they have and if they do have an opening for a permanent position. I have had a lot of more junior lawyers start out in roles like that,” she says.
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