The Supreme Court of Canada will hear the following five appeals this week:

Feb. 13 — Quebec — City of Westmount v. Richard Rossy
Commercial law: The family of a man who was killed when a tree fell on his car sued the City of Westmount for $1.3 million, claiming it was liable for not maintaining the tree. The city sought to dismiss the action on the grounds that the damage was caused by an automobile and compensation was governed by the Automobile Insurance Act. The family is also seeking changes to the province’s no-fault automobile insurance law. The Quebec Superior Court allowed the city’s motion and dismissed the family’s claim. That decision was later set aside by the Quebec Court of Appeal.

Feb. 14 — Newfoundland & Labrador — R. v. T.L.M.

Criminal law: The complainant’s uncle was convicted of sexually assaulting her when she was eight to 10 years old. The trial judge admitted an agreed statement of facts relating to his prior conviction for sexually assaulting another eight-year-old girl. The Court of Appeal allowed the uncle’s appeal and ordered a new trial. The issue is whether the trial judge erred in admitting the similar fact evidence. There is a publication ban in the case.

Feb. 15 — British Columbia — Sam Tuan Vu v. R.

Criminal law: After forcibly confining a man for eight days after he was abducted by others, Sam Tuan Vu was convicted of forcible confinement but acquitted of kidnapping. The Crown appealed the acquittal and the B.C. Court of Appeal convicted him of kidnapping on the basis that he was a party to the offence. There is a publication ban in the case.

Feb. 16 — Quebec — Riccardo Bellusci v. R.

Criminal law: Inmate Riccardo Bellusci was charged with assaulting a correctional officer. He claimed he had been assaulted by the officer and was acquitted at trial. Bellusci had also been charged with using violence against a justice system participant but the trial judge granted a stay of proceedings. The Quebec Court of Appeal set aside the stay of proceedings and remitted the case back to the trial judge.

Feb. 17 — British Columbia — Joan Clements, by her Litigation Guardian, Donna Jardine v. Joseph Clements

Torts: Joan Clements sued her husband after she was severely injured while riding on a motorcycle he was driving. The trial judge found the husband was negligent and therefore liable for his wife’s injuries. The B.C. Court of Appeal ruled in favour of Joseph Clements by setting aside the trial judge’s order and dismissed Joan’s action.

Update: The Supreme Court will also release its decision in S.L. v. Commission scolaire des Chênes on Feb. 17 at 9:45 a.m. The case, originating in Quebec, questions whether parents have the right to choose their children's education as it relates to religious instruction. The appeal was heard on May 18, 2011.

The years-long delay in bringing three former Nortel Networks executives to trial for fraud has reinforced Canada’s well-earned reputation as a laggard in markets enforcement, particularly when compared with the United States, its critics say.

Jurisdictional issues, lack of personnel, and a national police task force that has not produced results all contribute to what lawyers and academics say is Canada’s dysfunctional approach to prosecuting white-collar crime.

“There is no question that the U.S., if you look empirically, is way better at enforcing these kinds of things,” said Ramy Elitzur, a professor at the University of Toronto’s Rotman School of Management.

Nearly eight years has passed since former Nortel chief executive Frank Dunn, former chief financial officer Douglas Beatty, and former controller Michael Gollogly were fired from the one-time tech industry heavyweight. Accused of altering financial statements to ensure lucrative bonuses, they only stepped in court to hear opening statements in their trial on Monday.

If the proceedings last the expected six months, it will prove to be a shorter ordeal than the prosecution of fraud at theatre company Livent, which went bankrupt in 1998, a few years before the U.S. scandals at Enron and WorldCom.

Livent founders Garth Drabinsky and Myron Gottlieb were convicted in 2009, and were not jailed until they lost an appeal last fall. The principles at Enron and WorldCom went to prison more than five years ago.

“It does take longer here,” said P.M. Vasudev, a law professor at the University of Ottawa. “There is a perception that enforcement on this side of the border is not as rigorous and it is more difficult to secure convictions.”

PATCHWORK REGULATION

Vasudev and others point to the Canadian securities regime, which is a patchwork of 10 provincial regulators, rather than the single-regulator system of the U.S. Securities and Exchange Commission.

Investigations of major cases are carried out by the Royal Canadian Mounted Police’s Integrated Market Enforcement Teams, established in 2003 to beef up the country’s approach to prosecuting corporate crime.

The several layers of authority lead to delays, critics say, while the RCMP has not lived up to expectations. “I think that the RCMP is a great organization, but I mean the skills you need to investigate something like this are very very different than, say, a homicide,” says Elitzur, echoing a common perception.

Also a problem is the fuzzy line between the authority of provincial regulators, which have powers to lay quasi-criminal charges, and Crown prosecutors.

IMPROVEMENT

Even so, observers say the record of prosecutors in Canada has improved in recent years. The Livent case, after all, did end in a conviction, as did the prosecution of lawyer Stan Grmovsek, who pleaded guilty to insider trading in 2009.

Looming large in the rearview mirror, however, are debacles such as Bre-X, the largest corporate fraud in Canadian history, involving a gold-salting scam at the company’s Busang property in Indonesia. Enthusiasm over the supposed worth of the deposit drove Bre-X’s market value to nearly $6 billion in the mid-1990s, before independent surveys showed the deposit was worthless, prompting the shares to plummet to nothing.

Chief geologist John Felderhof, the only figure in the fraud ever charged with the crime, was acquitted of insider trading 2007.

Such cases have long stuck in the craw of Canadian market watchers, who say the impression that market security is lax is a deterrent to foreign investment.

Asked about delays in the system, Brendan Crawley, a spokesman for Ontario’s attorney general, said his office takes white-collar crime very seriously. “This ministry has a number of experienced counsel dedicated to providing advice to police and to prosecuting difficult, lengthy and complex criminal cases involving white collar crime,” he said.

Cristie Ford, a law professor at University of British Columbia, said the approach of Canadian prosecutors is not the same as the “get the bad guys” approach of their U.S. counterparts.

“In Canada, the Crown is taught not to think of its job as being to win. . . . They are representatives of the Crown and are charged with administering justice,” she said.

“I’ve often defended the Canadian approach, which is more about compliance before the fact and less about enforcement after the fact, but a compliance-oriented approach is only going to work where the reality of meaningful enforcement is there in the background.”

(Additional reporting by Alastair Sharp)

Canadian companies should think about succession planning for their boards and consider efforts to attract a more diverse slate of directors with international experience and a younger profile, according to a new report on governance.

As Canadian issuers prepare for the 2012 proxy season, they should expect continued focus on the individuals being put forward for election as directors — and those directors should expect heightened demands for accountability from shareholders — according to the report "Davies Governance Insights 2011" from Davies Ward Phillips & Vineberg LLP.

The report looks at governance trends, practices, and board profiles of the 360 Canadian issuers that make up the Standard & Poor’s/Toronto Stock Exchange Composite and S&P/TSX SmallCap indices and the issues that are expected to shape the 2012 proxy season.

The report analyzes the composition of Canadian boards, concluding they are largely homogenous. It found that directors of TSX 60 companies are typically men in their early 60s while directors of smaller companies tend to be slightly younger. And despite the capital markets being global, almost 80 per cent of directors of issuers on the S&P/TSX Composite Index are resident Canadian.

“There’s a good reason these people have achieved success, but in terms of succession planning it is useful to try and draw to a board people who are younger and have a diverse profile,” says Carol Hansell, a senior partner at Davies and the only Canadian who sits on the International Corporate Governance Network.

She says if a company feels its board is a perfect size, it may be an excellent time to bring someone new on to begin succession planning so they can contribute in a meaningful way when the time comes.

“The last thing a board wants to be doing is addressing the skill gap only when someone retires. A board is there to provide oversight and with companies becoming increasingly global in nature someone with international experience may have experience with other issues such as how compensation may be different around the world.”

The report also found that women are making slow progress on many Canadian boards — and even slower progress in assuming leadership positions. Women chaired just seven (three per cent) of the 360 issuers on the combined S&P/TSX Composite and S&P/TSX SmallCap indices in 2011 and only 53 of the more than 1,500 board committees across those same public companies.

“We’re not seeking to criticize existing boards,” says Hansell. “It may be though that some of these boards aren’t drawing the best possible candidates and board turnover is relatively slow.”

The report notes that directors who were being put forward for another term had already been serving on the board for an average of eight years and some have term limits up to 10 to 15 years.

As well, most boards are comprised entirely of directors who are independent of management, with the exception of the CEOs.

“Global challenges present an excellent opportunity to rethink some of the accepted practices that may be preventing boards from moving to the next level of effectiveness,” says Hansell. “Are boards sacrificing industry knowledge by insisting on the highest levels of independence? Would more international experience at the board level support the company’s strategic planning? Are nominating committees considering the best possible candidates from the global talent pool? These are some of the questions boards should be discussing.”

The report also identifies a number of trends for 2012:

• Shareholder engagement on composition of the board, strategic direction, and the alignment of compensation with performance will continue.
• Adoption of majority voting (already strong in 2011) will continue, becoming a generally accepted best practice in the next few years.
• Shareholders will have “say on pay” at more annual general meetings. More than two-thirds of TSX 60 issuers are expected to put say-on-pay resolutions to their shareholders during the 2012 proxy season, up from a little more than half in 2011.
• Companies will continue to receive shareholder proposals on a wide variety of issues, although they are expected to have little influence on governance practices in 2012.
• Concerns with the integrity of the proxy voting system will continue to grow, particularly among institutional investors.

“Investors will continue to focus on compensation, particularly with the growing adoption of say on pay,” notes Davies partner Jason Saltzman. “In addition, we also expect increased focus on director compensation. Directors of some TSX 60 issuers earn well over $150,000 annually, with some chairs receiving in excess of $500,000. Investors will want to know that these directors are devoting the appropriate time to the company’s business. Share-based compensation for directors will also continue to be an issue, particularly the size of equity grants to directors and the form of those grants. Option grants are subject to particular criticism.”

Hansell also says very little change has happened in Canada since 2005 with respect to governance issues. “Other jurisdictions have updated their governance practices. We need a fresh perspective on governance in Canada.

Corporations need to pay more attention to information governance, a recent survey has found.

The survey shows 70 per cent of respondents are unsure if board members comply with the corporation’s document-retention policies. Photo: Nenad Djedovic

A survey of global corporations' corporate and company secretaries and general counsel, conducted by Thomson Reuters Governance, Risk & Compliance, found that corporate boards aren’t necessarily in compliance with their corporations’ document-retention policies.

“Information governance, which in practice can be very difficult, may not be a major priority for many corporations, but needs to be applied and practised,” said Ely Razin, head of business law and governance at Thomson Reuters.

“When sharing business-critical information with their boards, corporations must be able to manage their information effectively and appropriately, and also know where the information resides. And information governance is critical so that directors and executives can manage and authenticate the information’s validity and chain of custody.”

Eighty-one per cent of those surveyed said board e-mails and communications are included in the corporation’s document-retention policy. But 70 per cent were unsure if board members are in compliance with the corporation’s document-retention policies. More specifically, 70 per cent didn’t know if board members destroyed all paper copies of board-related e-mails, etc.

This poses a security threat to corporations. For example, if a corporation was required to conduct a discovery process, it would need to check all board members’ computers, files, and other data storage, which would likely be time-consuming and expensive.

“As corporations face daily challenges surrounding their information and its security, document retention and discovery at the board level is emerging as an increasing issue,” added Razin.

“Many corporations have not harnessed all the benefits that technology can provide to protect the organization and its board members.”

Get the full 2011 Thomson Reuters Board Governance Survey here.

Despite uncertainty in the financial markets, a report from Robert Half International in Canada indicates in-house departments and law firms will continue to be hiring in the fourth quarter with corporate law and litigation predicted to see the most growth in the next three months. Intellectual property is also expected to be strong in certain markets.

43 per cent of lawyers surveyed at law firms and corporations indicated they are likely to increase hiring in the fourth quarter of 2011.

Many law firms say they are hiring senior-level associates to meet renewed demand for their services, particularly those specializing in the hottest practice areas, according to "The Robert Half Professional Employment Report" released last week. According to the report, 43 per cent of lawyers surveyed at law firms and corporations indicated they are likely to increase hiring in the fourth quarter of 2011. Most of the hiring is expected at law firms. That is down six per cent from the third quarter when 49 per cent of lawyers indicated they planned to increase staff levels.

Among the 150 lawyers surveyed for the report, 93 per cent said they are at least somewhat confident in their organizations' ability to expand in the fourth quarter.

In fact the legal sector had the largest number reporting plans to increase hiring compared to other professions such as advertising and marketing (27 per cent), sales and business development (25 per cent), information technology (24 per cent), accounting and finance (13 per cent) and human resources (11 per cent).

However, filling those positions won't be easy. Those interviewed acknowledged challenges in locating top candidates: 81 per cent said they thought it was somewhat or very challenging to recruit skilled legal professionals today.

Lawyers, law clerks, paralegals, and legal assistants are the positions in greatest demand for the fourth quarter. Lawyers cited corporate law and litigation as the areas that will experience the most growth in the next three months. In addition, intellectual property is strong in certain markets.

Increased business activity is stimulating demand for lawyers and legal support staff with experience in a broad range of matters related to general corporate and business law, states the report. A rise in legal disputes and litigation is fuelling hiring of associates, law clerks, paralegals, and legal secretaries with backgrounds in labour relations and employment, commercial litigation, and insurance defence.

An increase in patent filings and applications is prompting law firms and corporations to hire IP lawyers, patent agents and paralegals with three to five years of experience.

The quarterly report is based on more than 1,000 telephone interviews with executives from a random sample of Canadian companies across a number of industries, including 75 lawyers at law firms with 20 or more employees and 75 corporate lawyers at companies with 1,000 or more employees.

During the American Bar Association in Toronto last month a panel of in-house counsel was asked about the current state of hiring in their respective areas. Terrie-Lynne Devonish, chief counsel of AON Canada Inc., said her department is looking to hire two additional lawyers to add to the current department of two.

"I would say if you're a mid-level associate in Toronto, right now, it's not too bad a market. Most companies see the value of having in-house counsel both to manage their legal risk and their legal spend and definitely value they can see off the bottom line," said Devonish.

Compared to the U.S., the Canadian landscape looks promising for those seeking employment in the legal field. Graduates coming out of law school in the U.S. are having a tough time, said Michelle Coleman Mayes, and that has a ripple effect.

"It's kind of a crazy market and it kind of depends on what business cycle your industry is in," said Coleman Mayes, executive vice-president and general counsel with Allstate in Northbrook, Ill. "If you're at Google, they're hiring. We happen to be hiring sporadically, not aggressively, but we don't have a freeze on. We are watching our dollars and cents very closely. Our market share has been eroding but the department has been the same size for several years. I would say it is still really tentative."

A new survey is sounding the alarm on the plummeting portion of Quebec companies listing on Canadian stock exchanges.

The study released yesterday by Fraser Milner Casgrain LLP and PricewaterhouseCoopers shows that companies in the province accounted for 26 per cent of new listings on the TSX Venture Exchange in 2004-2005. That number has since taken a nosedive, dropping to just nine per cent in 2008-2009. The decline is particularly distressing when you consider that Quebec makes up 23 per cent of Canada’s population, and 21 per cent of the country’s economy.

“We know that companies that will really grow and create jobs are those that are well capitalized,” FMC president Michel Brunet tells Legal Feeds. He adds that the province must pursue a growth policy that targets companies that are best positioned to grow quickly.

The survey flowed from interviews with about 60 senior executives from private companies, public companies, private investment funds, and brokers. The authors believe it offers decision-makers a sophisticated look at the circumstances that have led to the trend, and presents solutions to reignite economic growth in the province. They say a quick fix is particularly important in light of Quebec’s aging population and the government’s rebalancing of public coffers due to high debt levels.

The report recommends the following key steps to help turn the situation around:
• Conditions must be created to ensure liquidity on the TSX Venture Exchange;
• capital gains must be eliminated for those who purchase shares of qualifying companies and later sell them;
• the misperception among owners of private companies that going public is inconvenient must be corrected;
• levels of entrepreneurship within the province must increase.

PwC managing partner Guy Leblanc acknowledged that listing on the stock exchange is not a cure-all for Quebec businesses, but it is generally viewed as a positive step.

“The executives questioned are unanimous that listing on the stock exchange is certainly not a panacea and creates pressure on operations due to regulatory requirements of disclosure and accountability, but they also say that the contribution of public capital allowed them to grow quickly when they could not have achieved this otherwise,” he said in unveiling the report.