Jennifer Brown is the Managing Editor of Canadian Lawyer InHouse and Law Times. She has been a business magazine writer and editor for 10 years covering the IT, occupational health and safety, and security sectors for the business-to-business press prior to arriving at InHouse. She was also a newspaper reporter for five years in the Greater Toronto Area covering health care and education before going to work at a daily news online portal reporting on the technology sector.
|Tom Cumming says that while the inactive well count in Alberta has been increasing, the solution is not to upend federal insolvency law because of regulatory choices made by the province over the years.|
In a case closely watched by the insolvency industry and the oil and gas industry, the Alberta Court of Appeal held that Grant Thornton Limited, the receiver and trustee in the Redwater receivership and bankruptcy proceedings, was entitled to disclaim Redwater's non-producing oil wells and sell its producing ones.
Redwater was a junior oil and gas producer that went into insolvency in the spring of 2015. It owed its bank, ATP Financial, about $5 million.
Upon appointment, the receiver conducted an assessment of Redwater’s assets and advised the AER that of the 91 wells in which Redwater held licences, it would only be taking possession of 20 wells, facilities and associated pipelines.
At issue was whether the provincial regulatory regime under the Oil and Gas Conservation Act and the Pipeline Act conflicted operationally with the federal Bankruptcy and Insolvency Act.
The decision in May 2016 dismissed the application of the AER and Orphan Well Association, which argued that Grant Thornton should have to carry out the abandonment, reclamation and remediation obligations of Redwater’s non-producing wells or perform abandonment orders as issued by the AER, which included paying a security deposit.
Cassels Brock & Blackwell LLP and Gowling WLG served as joint counsel to Grant Thornton on the proceedings and successfully defended it on the appeal.
Arguing the applications on behalf of Grant Thornton were Jeffrey Oliver of Cassels Brock & Blackwell LLP and Tom Cumming of Gowling WLG.
“It’s very unfortunate this issue has come to a head when the industry itself is in a very difficult position, although I think it’s not surprising it would go together because when things are going great people don’t think of the underlying problems that can arise,” says Cumming.
The decision dismissed the appeals of the AER and the OWA, which argued that Chief Justice Neil C. Wittmann erred in finding that Grant Thornton should not have to carry out the abandonment, reclamation and remediation obligations of Redwater's non-producing wells or perform the abandonment orders as issued by the AER.
Cumming says the issue has evolved out of policy decisions made decades ago.
“There were public policy choices that brought us to this point,” says Cumming. “The AER and OWA — their position was essentially that this problem is caused by the lenders. I don’t think that is realistic and there is the reality that if the lenders can’t recover anything on their security they aren’t going to lend to this industry at all.”
In 1989, there were 20,000 inactive wells in Alberta; 27 years later, there are 81,000 inactive wells and Cumming says that, by the AER’s own numbers, only two per cent of those wells will ever be reactivated.
Not all the companies that hold those 81,000 wells are going to become insolvent, but changes to the legislation in the 1990s essentially permitted big producers that drill the wells and then develop them to later sell the wells to smaller cap producers and then have no further liability. It was thought the policy would encourage drilling of wells and development of the oilpatch.
“There was a policy choice not to put a specific timeline on when companies had to carry out abandonment and remediation work with respect to inactive wells,” says Cumming.
The companies have to make the wells safe and turn the valves off within a year of being inactive, but in terms of full abandonment and reclaiming the site, that can — unless ordered otherwise by the AER — be deferred for “decades and decades.”
The result of that is that rather than decreasing from 1989, the number of inactive wells became four times worse.
Most environmental legislation in Canada says if you were in management and control of a well you are stuck with that obligation.
“If you contrast it with other jurisdictions, there are timelines when you have to carry out abandonment and reclamation work,” says Cumming.
“There is the reality that it is the secured creditors who are appointing the receivers, typically. If the secured creditor simply stopped lending to an insolvent producer and walked away, it would mean instead of it at least being the inactive wells going into the orphan well funds, it will be all of the wells. Even if the AER’s vision of the priorities was correct, it still would be a drop in the bucket in terms of the real risk to the orphan well fund as a result of the way the economy has gone.”
The majority of the Court of Appeal held that:
• By attempting to extract security deposits or the performance of abandonment obligations on a transfer of AER licenses, the AER was in effect transferring the proprietary value in the bankrupt estate from the underlying real property assets of Redwater (which were interests in its oil and gas properties) to the AER licenses, contrary to the scheme of distribution contemplated under the Bankruptcy and Insolvency Act.
• A trustee and receiver is entitled to abandon or renounce oil and gas assets encumbered with environmental obligations.
• The AER's requirement that security be posted for abandonment obligations, or diverting value from the bankrupt estate to ensure that remediation is performed, is sufficient to classify the claims of the AER as financial in nature, making them a “creditor” whose claims are subject to the priorities prescribed by the BIA.
• The AER cannot indirectly interfere with the value of assets in a bankruptcy by placing financial preconditions on the transfer of AER licences.
• Based on the doctrine of federal paramountcy, the obligations of trustees and receivers under both the Oil and Gas Conservation Act and the Pipeline Act to abandon oil wells and pipelines; pay the costs of remediation performed by other persons; and to obey any order of the AER is in operational conflict with section 14.06 of the BIA. Section 14.06 of the BIA exempts a receiver or a trustee from personal liability, allows a trustee and receiver to disclaim assets, and prescribes the priority of environmental remediation costs.
• The applicable sections of the OGCA and PA frustrate the federal purpose of the BIA of managing the winding up of insolvent corporations and settling the priority of claims against them. The majority of the Court of Appeal therefore confirmed that such obligations of the AER are unenforceable as against the Receiver and Trustee.
Cumming says that while the inactive well count has been increasing, the solution is not to upend federal insolvency law because of regulatory choices made by the Alberta government over the years.
“That’s a tough argument to put forward and I don’t agree with it,” says Cumming.
“If you want a functioning credit system for oil and gas producers, you have to respect the federal rules with respect to priorities,” Cumming says. “The AER was doing everything possible to avoid those rules.”
|Riyaz Dattu says the whole area of government procurement is contentious and Trump’s executive order makes it even more so.|
At his press conference in Wisconsin last week, Trump zeroed in on Canadian dairy producers using anti-NAFTA rhetoric. Now the U.S. Commerce Department has hit softwood lumber imports with duties ranging from three to 25 per cent.
“Canada should brace for a lengthy trade dispute with the U.S. on softwood lumber because of the entrenched positions on both sides of the borders,” says Brenda Swick, lawyer with Dickinson Wright LLP in Toronto.
Swick has represented clients in numerous government contracting disputes. She says “this is a perennial dispute and will eventually be resolved through an agreement though at greater costs for Canada perhaps this time.”
All the uncertainty is extremely “unhelpful” for planning purposes for businesses, and there are a number of areas of great concern to Canadian businesses, says Riyaz Dattu, partner, international trade and investment law at Osler Hoskin & Harcourt LLP.
After the presidential inauguration in January, Dattu said he received calls from clients asking if they needed to move their business into the U.S. to stay competitive. Dattu says the “Buy American” plan adds another layer of complexity for businesses trying to sell into the U.S. market to governments. For example, a component of the Order singles out the steel industry, directing a review of procurement rules favouring U.S. companies to see if they are actually benefiting from the existing “Buy American” provisions.
“Initially we said ‘hold off’ but the evidence is mounting that over the next few years things are going to be in flux. The whole area of government procurement is most contentious and this makes it even more so,” he says.
His phone began ringing more this week with questions on procurement rules and concern on higher levels of trade enforcement. Customs enforcement is also becoming stricter.
“For business looking at what side of the border should they invest with in all the uncertainty things are puling in the direction of the U.S. at this point in time,” he says.
The faster Trump moves, the more uncertain Canadian suppliers are becoming.
“It’s pretty clear we’re not quite at ‘tear up the agreement’ but we’re certainly more than ‘tweak’ right now in his eyes,” says international trade and customs lawyer Dan Ujczo of Dickinson Wright based in Columbus, Ohio.
“Be careful what you ask for is the message here — we wanted them to take a very rational approach but now it’s very data driven and that’s going to be creating evidence for these negotiations and for the U.S to take unilateral action.”
Ujczo says issues such as dairy and lumber are “the last bastion of protectionism” — 20th century trade fights, or in the case of softwood lumber a 19th century trade fight. Last week’s “Buy American, Hire American” edict from Trump has set a chilling tone when it comes to how foreign bidders and suppliers will factor into Trump’s America.
The “Hire American” focuses on guest worker programs, particularly, the H-1B visas for highly skilled workers. Last week’s executive order calls for a multi-agency review for changes to the program.
“Any of those issues around supply management and procurement are areas the administration is going to point to. Anytime Canada says we want access to the U.S. market, we want free trade, the U.S. is going to point to that,” he says.
There are several problematic areas Canadian businesses must consider if they are looking to continue doing business with the U.S. For example, the rules of origin to qualify for tariff free treatment. Dattu says there are “clear signals” those rules are going to change.
“The rules of origin is an area of concern because supply chains have been built up over the last 23 years under NAFTA based on certain content requirements and transformation requirements from components to finished products,” he says. “That was going to be a very problematic issue for many companies built on North American and international supply chains.”
The rules of origin apply for exporting product into the U.S. to get free tariff treatment. That would be the case for non-government as well as government purchases.
“They need to know whether their goods will qualify under the rules of origin and whether they will meet any waivers under free trade agreements with the Buy American provisions,” Dattu says.
As well, there will be tighter procurement rules and greater emphasis on enforcement of trade laws and immigration rules will also become tighter.
Ujczo says the biggest risk to Canadian companies is for those in a supply chain where it’s going to be a U.S. company bidding on the project and they are supplying that customer.
“What you will start seeing is U.S. companies saying ‘We can’t have those Canadian suppliers in our supply chain.’ Canadian companies may have to look at whether it makes sense to set up operations in the U.S. We saw that after the Obama stimulus package — a number of Canadian companies picked up stakes and moved a component of production to the U.S.”
But setting up shop in the U.S. is not necessarily an easy decision for Canadian companies to make with the low loonie. And, by tightening the immigration programs Canadian companies use to go into the U.S. it’s going to make it very difficult.
There are now strong disincentives for a U.S company to use Canadian supplier.
Ujczo says it is “imperative” that the Trudeau government look at the NAFTA renegotiation in a new way.
“Instead of talking about it terms of how much stuff Canadians buy from the United States, or ‘We’re you’re largest export market’ — the message should be that ‘We’re the world’s most integrated trading relationship and so we’re different than any other relationship the U.S. has’,” he says.
Dattu adds that not only does one need to be concerned about the federal government rules but each state has their own rules. Recently Ontario was able to convince New York state not to pull back on the exemption for Ontario on the New York State rules of procurement.
“That was seen as a big win for Ontario, but what [Buy American] does for the federal government may increase incentive for some state level governments to be more protectionist. Many of the infrastructure projects the federal government funds for states such as highways require a certain amount of U.S. content,” he says.
|“The case is a reminder that even the largest companies in Canada are subject to the same laws relating to the treatment of their workers,|
The court gave lawyers for the plaintiffs until June 12 to find a new representative plaintiff or the action will be dismissed.
Sondhi v. Deloitte Management Services LP, Deloitte & Touche LLP and Procom Consultants Group Limited was first filed in March 2015 and sought $384 million on behalf of hundreds of lawyers working at a document-review company Deloitte acquired in 2014.
The action alleges that document reviewers working for Deloitte were misclassified as independent contractors and should have been employees. The claim seeks compensation for unpaid vacation, unpaid statutory holiday pay and unpaid overtime.
Sondhi, a former Toronto lawyer who now lives in British Columbia and is expecting her first child, claimed she and colleagues were denied statutory labour protections such as notice of termination, as well as deprived of entitlements such as vacation pay and overtime.
However, in his decision issued last week, Belobaba said he is “not satisfied that Ms. Sondhi will vigorously and capably prosecute the interests of the class. Or that she will do so in a diligent and responsible fashion.”
Belobaba called Sondhi’s evidence on the motion “at best unreliable and at worst untruthful.” He indicated that the affidavit provided by her contains a “number of significant misstatements that were recanted on a cross-examination.”
For example, that every document reviewer worked the same number of hours and that her hours were predetermined (she admitted on cross-examination that neither points were true); or that she was subject to quotas of documents to review (she admitted on cross-examination that this was not true.) Having recanted the evidence on cross, she proceeded to repeat the same misstatements in her factum on the motion.
“. . . I find in all of this a disturbing level of unreliability, disinterest and even indifference on the part of the proposed representative plaintiff,” Belobaba wrote. “The proposed class members are entitled at the very least to a representative plaintiff who can be counted on to take her job seriously, review key documents and demonstrate an appropriate level of interest in a class action that is being brought in her name and that is claiming hundreds of millions of dollars in damages.”
Class counsel Sam Marr and David Fogel of Landy Marr Kats LLP said that the decision “reflects the economic realities of workers in today’s economic climate” and “it would be a loss to all workers if a new representative plaintiff is not found resulting in the dismissal of this action.”
The proposed class consists of 418 lawyers who were doing document review at Deloitte since Deloitte purchased document review company ATD Inc.
Belobaba wrote that he found the common issues hurdle was cleared, but only with respect to Deloitte, not ATD or intermediary Procom Consultants Group originally also named in the suit.
“I find some basis in fact for the allegation that the Deloitte document reviewers were employees. But I can find no such basis in fact relating to the defendant Procom. And certainly no basis in fact or in law for involving ATD . . . ”
“I therefore find there is some basis in fact for the core allegation that the document reviewers were not carrying on a document review business for themselves but were being compensated to carry on Deloitte’s document review business.”
Of seven proposed common issues Belobaba certified only three, including the employer/employee relationship with Deloitte, the unpaid vacation pay and public holiday pay and overtime and for compensation of improper remittances and, if liability is established, whether aggregate damage would be available.
“It goes without saying that certification has nothing to do with the merits of the claims that have been made, Deloitte may well prevail when all of the evidence is presented and assessed at trial or on a summary judgment motion,” he wrote.
Lawyers for the plaintiff class said in a press release that the ruling is a “significant step forward for misclassified workers who do not have the same protections as employees.”
“This certification motion shows that employers who misclassify employees as contractors can have substantial liability towards those workers, no matter what the contract says,” said plaintiff class lawyer Andrew Monkhouse. “The case is a reminder that even the largest companies in Canada are subject to the same laws relating to the treatment of their workers.
“Justice Belobaba considered the changing employment landscape, noting that companies are increasingly labelling employees as self-employed in an effort to reduce operating costs. Justice Belobaba also clarified that having two jobs does not mean that a worker is not an employee.”
Monkhouse said they do not expect it to be a "high hurdle" to find a new representative plaintiff.
"We do expect we will be contacted by some people who may be interested and they can contact us if that's the case," he says.
None of the allegations has been proven in court, and Deloitte denies liability.
A spokesperson for Deloitte said: "We believe that the claim has no merit and we will vigorously defend the class action. As the matter is now before the courts, it is not our intention to discuss the matter publicly."
Updated on April 18, 2017 at 3:45 p.m. to add comments from Andrew Monkhouse.
|Peter Clausi, EVP GC of GTA Resources and Mining calls CASL a “horrible, pervasive, invasive piece of legislation.”|
“I have met with a couple of the plaintiff class action firms who are counting the number of sleeps until July 1,” said Peter Clausi, executive vice president corporate affairs and general counsel at GTA Resources and Mining Inc. “I think they are going to wind up being the Wade Boggs of litigation — they’re going to go to the hall of fame hitting singles.”
Clausi was speaking Monday as part of a panel entitled Get Smart: Conquering CASL and the New Private Right of Action at the Canadian Corporate Counsel Association’s national conference in Toronto. He doesn’t think there will be multiple multi-million dollar settlements, but does predict there will be “strike suits” given the standard that the plaintiff has to meet which is “almost nothing and then damages are assumed.
“I have never seen a greater dichotomy between the pervasiveness of the legislation and the lack of knowledge about it than with CASL,” said Clausi. “We all think we’ve complied with CASL but I can pretty much guarantee you that there’s no one in the room in compliance with CASL today. It is a horrible, pervasive, invasive piece of legislation. It ought to keep you awake at nights.”
Clausi first started following CASL in 2011 and “thought they were kidding.” He stayed on top of the legislation and in July 2014 when CASL came into effect he saw the enforcement start to roll in.
He went on to say that the biggest risk in any business is actually every single person in that business who sends commercial electronic messages. “Every commercial electronic message you send is subject to CASL and odds are you are not in compliance,” he said.
CASL is not covered on cyber insurance riders and Clausi pointed out that there is no insurance policy yet available in Canada to cover CASL violations, further compounding the concern that it is coming into force in a matter of months.
“Without an insurance policy it’s coming out of your equity,” he cautioned the audience of in-house lawyers. “I know two insurance companies working on it and they’re struggling to get the wording right. From a businessperson’s perspective I find that a compelling reason for the PRA to be delayed. Not every business can afford to have it come out of its equity.”
In terms of trying to prepare for the PRA, the task should be shared by a number of stakeholders including HR and risk management.
“This is not an IT problem, this is not a law problem. The person who should be worried about this is the person responsible for risk management. They have to pull in human resources. You have to update policies and train employees and stress test the system,” he said.
The software updates section of CASL scares Clausi the most. A section of the legislation says you can’t install software on someone else’s device without prior consent. You are also not allowed to have software that “broadcasts” information without the person’s consent.
What really has Clausi uneasy about the pending PRA is software applications on phones. Apps that can access contacts on phones or GPS could be a problem.
“If you’re in a company that has your own app or an app developer, this might bring down your entire business,” he said. “The instant that app squirts the least bit of data back to the mother ship that’s a CASL breach.”
Heather Innes, former chief privacy officer with General Motors Canada and now retired, said the CRTC has “many investigations underway.
“What I’ve heard is if you are pulled into an investigation, whatever the ultimate outcome you will have spent thousands of hours trying to manage the investigation and respond to the inquiries made by the CRTC. It is rigorous,” she said.
So far several companies and one individual have been fined for alleged CASL violations. In September Kellogg Canada entered into an undertaking agreeing to pay $60,000. Dating site Plenty of Fish paid $48,000 for a violation in 2015 and the largest fine to date was $1.1 million in the Compu-Finder violation.
Most of the transgressions have been simple including unsubscribes didn’t work or didn’t have proof of consent.
“You can see that they mean business,” said Innes. “They are going to fine and even where people have simply made mistakes and promised to undertake to correct the mistakes and move forward which seems harsher than what most of us expected. These are companies that make good faith, often robust efforts to comply with CASL but something didn’t work in the early days.”
William Abbott, assistant general counsel and privacy ombudsman with Bell Canada, suggested the CRTC should consider a delay or suspension of statutory damages until after the statutory review of CASL in July.
“I know the minister’s office is considering that now,” he said.
To avoid such violation organizations will need to have good compliance programs with detailed record keeping.
“It’s not enough to do the right thing. Document it and understand the importance of consent including the fact people took training. Gather consents and keep them squirreled away,” said Abbott.
“We know for sure they’re going to enforce, that they’re watching, investigating and focusing on complaints. We know no organization is too small, they will go after individuals who make mistakes or who don’t know about the law,” said Innes.
She advised that there be one or more people in a marketing department responsible for testing every unsubscribe link before any email campaign is implemented.
“The big takeaway is if you’re issued a notice of violation you jump in during the first 30 days and get submissions into the CRTC. It can make a big difference on the penalties imposed upon you,” said Innes.
Updated April 18, 2017: Change in title for Heather Innes to former privacy officer, General Motors Canada.
|Alan Young argued the City of Vaughan’s bylaw was outside of the municipality’s jurisdiction because it constituted criminal law.|
In Her Majesty the Queen and The Regional Municipality of York v. Tsui Justice Sarah Pepall of the Court of Appeal for Ontario last week overturned previous lower court rulings and ruled in favour of the municipality and ordered a new trial.
“Obviously I’m pleased with the decision. I think it was a big win for municipalities. It clarifies the scope in which municipalities can legislate to suppress conditions that are conducive to crime. It kind of expanded upon the scope in which municipalities can regulate,” says Chris Bendick, senior counsel, prosecutions, court services with the Regional Municipality of York.
The case is a constitutional battle over a municipal bylaw and a body rub parlour owned by Eric Tsui. The City of Vaughan passed a bylaw in 2005 regulating the operation of body rub parlours in its jurisdiction. Tsui was charged with contravening that section of the bylaw governing operating hours — permitting a body rub parlour to be open outside permitted times on July 8, 2012.
A justice of the peace accepted Tsui’s arguments and held that the bylaw’s provisions relating to hours of operation and dress were criminal in scope and invaded federal authority. The justice of the peace noted that the hours of operation provisions were “unfairly discriminatory” because strip clubs are permitted to stay open until 2:00 a.m., whereas body rub parlours must close at 10:00 p.m.
As such, the JP struck the provisions as being ultra vires the municipality. The Ontario Court of Justice dismissed the city’s appeal.
The Attorney General of Ontario then intervened in the appeal to challenge the Ontario Court of Justice’s treatment of the scope of the provincial power to legislate to suppress conditions conducive to crime.
Tsui, who was represented by law students led by Alan Young, a law professor at Osgoode Hall Law School and co-founder of Osgoode’s Innocence Project, challenged the bylaw on the basis that it was unconstitutional. He argued the bylaw was outside of the municipality’s jurisdiction because it constituted criminal law; specifically, that the bylaw’s provisions governing hours of operation provision was a prohibition against prostitution.
Young says Tsui is considering whether to accept the Court of Appeal decision or seek leave to the Supreme Court of Canada.
The same regulations apply in almost every jurisdiction in Ontario, it’s just a question about whether it’s enforced, says Young.
“York Region seems to care. They have a lot more moral virtue enforcement than other jurisdictions,” he says. “The city knows there is a sanctuary called the Court of Appeal which pretty much upholds all municipal bylaws in this area and so it was somewhat inevitable they would appeal and get it reversed,” says Young.
Young says he took the case because in his view, the City of Vaughan was using municipal regulation for a prohibitory purpose.
“I wanted to challenge what I perceive to be the hypocrisy of municipalities saying that they are just regulating a business when in fact they are supplementing the criminal law because criminal law is highly under-enforced in this area and they get very little satisfaction,” he says. “I really don’t think municipalities have that criminal law power.”
Bendick says the decision recognizes that municipalities and provinces have a role to play in “overlapping federalism.”
“It’s not the water-tight compartment approach that is the old way of doing things in the case law from many years ago. I think there is an acknowledgement starting with Canadian Western Bank [v. Alberta] that there is supposed to be overlapping federalism and has to be an acknowledgement and respect of both areas both federal and provincial,” he says.
Body rub regulations have been challenged over the last 10 years with a few lower court successes but no higher court success.
“A lot of people in the business were waiting for this decision to determine whether they would get a red or green light in terms of hours of operation,” says Young.
“There has been a slow expansion of provincial and municipal authority in the area of criminal law,” says Young. “Even though I understand that’s the nature of our federalism I do believe duplicative laws are Kafkaesque for the public. Sure, maybe our constitution allows it but we should minimize the amount of over-regulation by different levels of government because it becomes confusing even if not contradictory. It’s perhaps time for the Supreme Court of Canada to look to see whether or not this trend to increasing provincial power is what they view is the proper perspective on federalism.”
Young was recommending Tsui combine with other body rub parlour operators interested in the issue if he decides to seek leave to appeal to the Supreme Court.
|Norm Keith says prosecutors at the Ministry of Labour and other government departments have not been paying attention to corporations who are in the process of being prosecuted simply because they assumed maybe that Jordan didn’t apply.|
“The defendant’s trial has clearly been unreasonably delayed whether the analysis is under the Jordan framework or that of Morin. The Crown principally due to its ongoing failure to provide timely disclosure and its overall complacency about the pace of the litigation is responsible for the vast majority of the delay with the rest accounted for by institutional time constraints,” Wilkie wrote.
Justice Wilkie also stated: “In my view it is apparent from the court’s summary of the chronology of the trial itself, that the Crown made no efforts to manage the case so as to improve the pace of litigation but in fact through lack of focus and inaction further contributed to the delay.”
While there have been a couple of other stays issued under Jordan, Fasken Martineau DuMoulin LLP lawyer Norm Keith predicts there may be more to come.
“I think prosecutors at the Ministry of Labour and other government departments have not been paying attention to corporations who are in the process of being prosecuted simply because they assumed maybe that Jordan didn’t apply, but this case definitively asks does Jordan supersede CIP [R. v. CIP Inc.], which sets a higher test for prejudice for a corporation than an individual.
“CIP basically said you can’t presume prejudice just because of a long delay under s. 11(b) — you have to prove as the corporate defendant that you have suffered irremediable prejudice,” says Keith, who represented Stephenson’s Rental in the case.
And in his decision, Wilkie states: “. . . at the heart of Jordan is the objective to change the culture of delay in the justice system as a whole and to require all trials to function as efficiently as possible. In this sense they have signaled that when section 11(b) is breached it is not just the particular defendant who is prejudiced but the justice system and by extension the community as a whole. There is no basis for concluding that this objective applies only to trials of individuals.”
The charge against Stephenson’s Rental Services, issued under the Occupational Health and Safety Act, arose from a workplace fatality that occurred at the General Motors plant in St. Catharines, Ont. on Nov. 18, 2011. The worker was an employee of Procon Niagara, contracted by GM to do work at its plant. At the time of the incident that caused his death, the person was operating an electric-powered elevated work platform also known as an articulating boom lift, which had been rented by Procon from Stephenson’s Rental Services. The allegation was that the equipment provided by Stephenson’s was mechanically defective and not in proper working order.
At the time the delay application was heard in January 2017, the case had been in the system for more than 55 months and the trial was more than two years old. But that was not the first time there had been an assertion by Keith that the proceedings breached his client’s right to trial without reasonable delay.
There was a 30-month delay from the laying of the charge in June 2012 to the beginning of trial in December 2014. Keith brought an 11(b) application returnable on the trial date.
The two-and-a-half years leading to the trial included a 19-month period involving 13 appearances before the trial was set including one, where with no explanation, no one appeared for the Crown.
Keith says the Crown was arguing it was a complicated case with expert witness material involved. However, the judge pointed out the Crown had taken too long to turn its mind to the expert witness material.
“There is no question that the expert disclosure did take the Crown by surprise, but only because they had to that point, well into the trial, at least 2 years after he had been retained by the Ministry to provide critical expert testimony, inexplicably in my view, failed to turn their mind to it,” said Wilkie.
Keith admits he himself was responsible for a about nine days of the delay in August 2015 due to a scheduling issue, but other than that, the judge said when it came to the defence, “there was no waiver and no tactic calculated to cause delay.”
It then took about a year from the time the expert first gave evidence to get him back on the witness stand.
“Even the witness himself seemed surprised that he had never been asked to produce his work product beforehand or to bring supporting documentation with him to court,” Wilkie stated in his decision. “And of course when alerted to the issue, the Crown readily agreed that the defence was entitled to disclosure of the material and conceded the case would have to be adjourned to enable the defence to receive and review it.”
Given the way the case unfolded, it seems like a more “unique matter”, says Jeremy Warning, partner with Mathews Dinsdale & Clark LLP in Toronto.
“Typically you don’t see protracted disclosure issues like it appears occurred in the Stephensons case where the defence had been chasing material, it appears, for quite some time and then on the eve of trial is disclosed a fairly voluminous amount of documents and materials to review,” says Warning.
In terms of the facts set out, Warning says the case is “different from what one normally sees” with Ministry of Labour cases.
“It’s unfortunate that this case didn’t proceed as expeditiously as the law says it should because a stay of proceedings has denied a verdict on the merits — I’m not suggesting there had been an offence — but the merits were never determined and never will be determined,” says Warning.
“In terms of the administration of justice there is some erosion of the judicial process in the fact the charges had to be stayed but one has to balance the societal interest in achieving a verdict on the merits against the individual interest of the defendant to have a trial in a reasonable time when they can fairly challenge the evidence advanced by the prosecution. That’s an equally compelling consideration.”
The net delay was at least 60 months — 41 months above the presumptive ceiling.
As Jordan was decided the first week of July 2016 and the Stephenson’s case started in December 2014, the Crown had argued the Jordan 18-month rule didn’t apply.
But the judge disagreed, even noting that the Region of Niagara was not one where a culture of long delays was the norm.
“Ultimately, the right to trial within a reasonable period of time of the accused, be it individual or corporate, is superseding the social interest of a trial going to final decision,” says Keith.
Crown officials say they are “carefully reviewing” the Court’s decision to determine if there will be an appeal. “The matter remains before the court during the appeal period, and in order to preserve the fairness of the process, we will not comment on the case, specifically,” said spokesperson Janet Deline.
“Without commenting on the merits of the decision, we do want to assure families and loved ones that we continually review our processes to ensure we do everything we can to protect workers and ensure just results.”
In a case such as this, a corporation facing conviction could face a fine in the range of $100,000 up to $500,000.
Update: March 29, 2017: Comments added from Jeremy Warning of Mathews Dinsdale & Clark LLP, and Ministry of Labour.
|Jordan Furlong says future advances by international firms into Canada are more likely to be the kind of expansion Freshfields is exploring as opposed to involving international mergers with Canadian firms.|
Last week, both The Lawyer online and Legal Week reported that London-based Freshfields Bruckhaus Deringer LLP might be looking at Toronto, not Vancouver, for a future services centre.
Reports of a Freshfields location in Canada first surfaced a year ago when one of the firm’s executive partners hinted a plan was in the works to open a second “legal services centre” in Vancouver at the end of 2016. The centre would largely be staffed initially by paralegals. The firm has a similar kind of centre in Manchester employing 250 people.
But Freshfields still isn’t officially tipping its hat one way or the other.
“We haven’t made any final decisions about a second centre and are continuing to investigate a number of options,” said Nick Bell, a spokesman for Freshfields, via email.
Freshfields has more than 2,500 lawyers in offices around the world.
Jordan Furlong, an analyst of the legal market, says there has been talk for a long time of “the Magic Circle sniffing around Canada” — in the past, it has typically been Allen & Overy LLP.
“It’s interesting for a couple of reasons — for one, they’re clearly not looking for the cheapest location,” says Furlong. “If you’re looking for competent legal personnel, Calgary is great, Halifax is great. So far, they have hinted at the two most expensive cities in the country.”
Past reports have always tied a Canadian expansion to the firm’s Manchester services centre. It has 40,000 square feet on four floors of a major office building with plans to hire up to 700 people.
“It suggests Freshfields is serious about taking the functions that can be moved into that kind of centre — HR, IT, marketing and business development — it’s like they want the people doing legal work in one location and everything else the firm does in another,” says Furlong who recently published a new book: Law Is a Buyer’s Market.
He notes that because Ontario has a full-fledged paralegal licensing and training program that might be why Freshfields may have its sights set on Toronto for staffing the centres.
Future advances by international firms into Canada are more likely to be the kind of expansion Freshfields is exploring as opposed to involving international mergers with Canadian firms, he says.
“There aren’t necessarily that many attractive large law firms — at this point, it’s either firms that are top of the grade that are not going to be open to a merger in which they lose their brand and firms that don’t have as much attractiveness for the global market,” he says.
“Expansions in the future will be less about huge link-ups of major firms and more about looking for qualified legal support personnel and technology.”
Peter Carayiannis, partner at Deloitte Conduit Law, says if Freshfields is looking at Canada again, it could have a negative impact on certain levels of the Canadian legal market.
“The big get bigger, the small get focused and the middle get squeezed,” he says. “This is where you see the truly global players in the market will continue to grow and expand and extend capabilities and grow to better serve clients and not just grow for the sake of growth. If that’s the case, it will be a winning strategy.”
Creating competition in the market will create a net benefit for those needing services in the market, he says.
Carayiannis says Toronto has also started to develop a reputation internationally as a hub for legal innovation.
Ryerson University’s Legal Innovation Zone and Legal X are viewed as attractive centres of technology innovation that may also be appealing to firms outside Canada.
Furlong’s book talks about productivity engines and traditionally law firms have only had one engine and that is a lawyer — now it will be people, machines or systems to amplify the expertise their lawyers provide.
“That to me feels like the direction the big firms are starting to move towards and maybe Freshfields is a sign of that,” Furlong says.
While still early days, use of technology is increasingly how firms are adding revenue-generating tools to their portfolios.
U.S. labour and employment firms Littler Mendelson PC and Ogletree Deakins Nash Smoak & Stewart PC, which recently set up shop in Toronto, are very focused on cost containment, efficiency and especially automation technology.
“I think future advances into Canada might be more along those lines,” says Furlong.
In Canada, Freshfields has advised clients such as Bank of Montreal, Canada Pension Plan Investment Board, Province of British Columbia and Ontario Teachers’ Pension Plan.
|Kevin Dane says growing in-house capabilities with large corporations is leaving law firms to do more niche work and that requires firms to be more innovative in the way they seek clients.|
Wildeboer Dellelce is a corporate business finance transactional firm based in Toronto while Moodys Gartner Tax is based in Calgary but has offices across Canada and Buffalo, N.Y.
“We have a number of law firms we refer business to that are also not full-service firms, but this is more structured in that they [Moodys] are making a commitment to be in Toronto on a regular basis and we’re making a commitment to be in Calgary on a regular basis,” says Kevin Dane, chief operating officer with Wildeboer Dellelce LLP.
Moodys Gartner provides tax advisory, planning, dispute resolution and compliance services for individuals and businesses with interests in Canada, the U.S. or both.
“We’ve agreed to introduce our clients to their lawyers and accountants and likewise they’ve agreed to do the same,” says Dane. “They deal with a lot of high-net-worth individuals who need cross-border tax advice, and behind those types of individuals are generally corporations and companies, so we see a natural opportunity to be introduced to some of their clients and vice versa.”
In early January, Moodys Gartner announced it was also entering a “collaborative agreement” with Andersen Tax. That relationship is a two-way referral agreement in which Moodys Gartner will join numerous other global tax practitioners as part of Andersen Tax’s international association of member firms, Andersen Global.
Dane says the arrangement with Moodys is a way of responding to the way the business of the profession is evolving and how firms can retain specialized work.
“The legal profession is undergoing significant change,” he says. “Growing in-house capabilities with large corporations are leaving law firms to do what I would say is more niche and novel work and that requires us to be more innovative in the way we seek clients that can get value from our service,” says Dane. “This is a way of doing that.”
The two firms will continue operating as separate entities and Dane says there is no intent to go further than the alliance they announced March 8.
“We’re both very happy with the state of our business, but we feel that together we can do more than we can apart,” says Dane.
“We have been servicing our clients in Toronto for a long time and this alliance with Wildeboer Dellelce will only strengthen our ability to serve those clients. Our firms offer quite different, yet complementary, services and we look forward to a long-lasting and fruitful relationship with Wildeboer Dellelce,” said Kim Moody, director, Canadian Tax Advisory at Moodys Gartner, in a statement.
“Our alliance with Moodys Gartner helps to reinforce our strong tax foundation by adding another layer of private client and U.S. and cross-border tax expertise. It also represents a significant milestone in our goal to be a service leader in Calgary, one of Canada's largest financial centres. The alliance also allows our firm to extend its services into Western Canada generally and Edmonton and Vancouver specifically. We are very excited to work with Moodys Gartner and to connect with existing and new contacts in these very important geographical markets,” said Perry Dellelce, managing partner of Wildeboer Dellelce, in a statement.
|Meerai Cho pleaded guilty in Ontario provincial court Wednesday to one count of criminal breach of trust.|
The matter was heard before Justice Jamie Chaffe at the 1000 Finch Avenue West court.
As Law Times reported in September 2014, Cho was arrested and faced 75 charges related to fraud over $5,000, possession of property obtained by fraud and breach of trust. At that time, she said she transferred the condo purchasers’ deposit funds, which she was holding in trust, to her client who was the developer of a North York building. The transfer of the funds to the developer was contrary to the rules of the Condominium Act.
“What it came down to was a breach of trust — all the facts went into the one count as opposed to 75 counts,” Trudell says. “She didn’t set off to defraud anyone. She didn’t put any of the money in her own pocket.”
Cho claimed she transferred the money to the developer, Joseph Lee, through an “honest mistake” due to her inexperience.
Trudell says $13.5 million went through her trust account to the developer. The money came from purchasers of condo units in the Centrium condo project at 5220 Yonge Street in Toronto. The project had about 140 investors — at least 50 of them were in court on Wednesday.
“Unfortunately, she trusted him completely, unquestionably and he took off with all the money and is hiding somewhere,” Trudell told Legal Feeds.
As late as 2014, the developer would send Cho emails indicating he was sending her the money back.
“She kept feeding his demands to save the project and continued to do that because she thought he was going to send the money back and the project would work,” says Trudell.
At one point, Cho mortgaged her own home and gave $400,000 of her money to try and save the condo project.
Trudell says Cho received none of the money and that was a significant factor in the court not ordering restitution.
“If you get the fruits of the crime, then obviously restitution is appropriate, but in this case, because she got nothing, she has nothing and chances of repaying it are negligible and she was receiving a penitentiary sentence on the scale of large-scale fraud,” he says.
Cho stopped practising law and agreed to temporary suspension of her licence in 2014 and will now lose her right to practise.
Trudell described it as an “emotional day in court” as seven people read victim impact statements.
“The victim impact statements were raw and emotional,” says Trudell. “They are people who are still angry, of course, but when they realize she got not one penny, people might look at her a little differently.”
Trudell said some victims have made applications to the Law Society of Upper Canada compensation fund and it is "anticipated the victims will be compensated."
In a statement, the LSUC said its Compensation Fund "will move as quickly as possible to provide claimants with any grants for which they may be eligible, on the basis of the lawyer’s dishonesty. The process is already underway and, if grants are approved by the Compensation Fund Committee, eligible claimants should begin receiving fund grants in the spring."
Cho’s guilty plea and the evidence provided will be used to complement the LSUC's own evidence during the law society hearing, which is currently scheduled for March 8, 2017.
There is no limit on the total number of grants paid in respect of an individual lawyer. The Compensation Fund has per claimant limit of $150,000 for losses resulting in the period between September 2010 and July 2013, when Cho transferred monies held in trust for the purchasers to the developer of the condominium project. Each claim is assessed on its own merits to ensure it conforms with the Law Society Act and the Compensation Fund Guidelines.
Cho, originally a journalist in Korea, came to Canada and became a lawyer. Trudell says many of the victim impact statements came from people who also came to Canada to invest and lost everything.
“A lot of the victims said they had no faith in Canada and the justice system and legal system because lawyers are supposed to protect them,” says Trudell. “She [Cho] stood up, apologized to them and told them not to lose faith in the legal system . . . She said there are a lot of wonderful lawyers; don’t use me as an example.”
Cho will serve the sentence in a federal institution, likely Grand Valley Institution for Women in Kitchener, Ont.
Lawyers for the victims are also pursuing civil actions.
Trinity Western University et al. v. Law Society of Upper Canada will be heard with Law Society of British Columbia v. Trinity Western University, et al.
The university won in British Columbia, where an appeal court overturned a law society refusal to accredit its graduates, but it lost in Ontario, where the law society refused accreditation. The Nova Scotia Barristers’ Society lost twice in court against Trinity Western and has said it doesn’t plan to appeal.
Read more about the Trinity Western law school proposal and the debate that has taken place in the profession around the issue in the Canadian Lawyer magazine February cover story "Dividing the bar."
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