August 2012 Ontario Take Five

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604-879-4280 | [email protected] August 2012 ONTARIO EDITION EDITION INSIDE THIS ISSUE: Featured Cases: Employment Contracts; Consideration; Confidentiality Agreements Labour Relations; Grievance Arbitration; Limitation Periods Crown Liability; Negligence: Public Law Duty of Care; Private Law Duty of Care - With Counsel Comments Indian Residential Schools Litigation; Administrative Law; Appeal or Review of Chief Adjudicator’s Legal Fee Determination -- With Counsel Comments Insurance Law; Liability Coverage; Services Contracts op Prepare to Win. ONPOINT LEGAL RESEARCH Learn and Earn 6 CDP credits for 2012 (Law Society of Upper Canada). Video available of our legal research course, “From Problems to Solutions” . See pp.15-16 02 04 06 10 13

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Ontario Take Five case summaries

Transcript of August 2012 Ontario Take Five

Page 1: August 2012 Ontario Take Five

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August 2012

ONTARIO EDITION EDITION

INSIDE THIS ISSUE:Featured Cases: Employment Contracts; Consideration; Confidentiality Agreements

Labour Relations; Grievance Arbitration; Limitation Periods

Crown Liability; Negligence: Public Law Duty of Care; Private Law Duty of Care - With Counsel Comments

Indian Residential Schools Litigation; Administrative Law; Appeal or Review of Chief Adjudicator’s Legal Fee Determination -- With Counsel Comments

Insurance Law; Liability Coverage; Services Contracts

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Prepare to Win.

ON PO I N TLEGAL RESEARCH

Learn and Earn 6 CDP credits for 2012 (Law Society of Upper Canada).Video available of our legal research course,

“From Problems to Solutions” . See pp.15-16

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Downey v. Encore International Inc., 2012 ONCA 480Areas of Law: Employment Contracts; Consideration; Confidentiality Agreements

The appellant Encore International

Inc. (“Encore”) was a Pennsylvania-based manufacturer of rubber products. The respondent Paul Downey (“Downey”) was a professional engineer residing in Ontario who worked for a competitor of Encore. Downey entered into a business arrangement with Encore whereby Downey’s corporate vehicle, CSR Industries Inc. (“CSR”), would become a consultant for Encore. The arrangement was proposed by Downey as a necessity given Canadian tax law. The consulting agreement provided that CSR would enter into a confidentiality agreement to protect Encore’s proprietary interests. On September

BACKGROUND

14, 1999, CSR and Encore entered into a consulting agreement, with Encore as the “client” and CSR as the “consultant”. Downey was not named in the consulting agreement, although he was described in the agreement as a “Key Person of the Consultant”. On October 4, 1999, Downey, in his personal capacity, signed a confidentiality agreement in favour of Encore. The confidentiality agreement, which referred to Downey as an “employee” of Encore, included a forum selection clause (“FSC”) in favour of the Pennsylvania courts. In February 2011, Downey sued Encore in Ontario, claiming that Encore had reneged on an oral promise to reasonably compensate Downey for his assignment of certain inventions. Encore moved under Rule 21 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, to dismiss Downey’s action on the ground that the Pennsylvania courts had exclusive jurisdiction under the FSC in the confidentiality agreement. The motion judge held that the Ontario court had jurisdiction on the ground that the confidentiality agreement failed for lack of consideration flowing to Downey. Encore appealed.

CLICK HERE TO ACCESS THE JUDGMENTConsulting agreement and confidentiality agreement cumulatively

forming legal employment contract

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Downey v. Encore International Inc., (cont.)

APPELLATE DECISION

The appeal was allowed and Downey’s action was stayed

on the basis of the FSC in the confidentiality agreement. The transactions among Downey, Downey’s corporate vehicle CSR and Encore must be assessed in their entirety in order to have a full appreciation of the parties’ designs and of the cumulative legal nature and consequences of the parties’ agreements. Throughout the negotiations, Encore wanted Downey to join its management team. Downey arranged for CSR to sign a consulting agreement with Encore solely as a means of minimizing Canadian income tax consequences. The consulting agreement and the confidentiality agreement must be read together, as the agreements formed an integrated whole - the consulting agreement was entered on the faith of the confidentiality agreement being executed. By naming Downey as the “Key Person of the Consultant”, Encore recognized that Downey would perform all essential contractual services. As the “Key Person” of CSR, Downey had access to Encore’s proprietary information and was thus a necessary party to the confidentiality agreement. The

fact that Downey was named as an “employee” in the confidentiality agreement, while CSR was named as a “consultant” in the consulting agreement, had no bearing on the true legal nature of the contractual relationship between Encore and Downey. The motion judge erred in holding that the confidentiality agreement failed for lack of consideration flowing to Downey. The confidential agreement disclosed mutual promises: Downey would have access to Encore’s proprietary information, and the information disclosed to Downey would be subject to confidentiality protections in favour of Encore. The mutual promises contained in the confidentiality agreement afforded good and valid consideration for Downey’s execution of that agreement.

Records and DocumentationIf you are carrying on a business, you are required to keep adequate records that provide sufficient details and support to determine how much tax you owe. Estimates and incomplete information are not acceptable to CRA. In this regard, I refer you to CRA’s Guide RC4409 Keeping Records, which can be found on CRA’s Website.

A CompanyAnother way to do business is through a company. A company is a separate legal entity that can undertake to do business and own property in its own name. A company has its own requirements to file tax returns, pay taxes, and meet other obligations. A company pays tax at different rates than does an individual proprietor.

There may be circumstances where it is tax-efficient to do business through a company or where liability issues make incorporation a prudent choice.

There are costs associated with incorporation, however. Before making a decision, you should carefully consider the costs of incorporating and carrying on an incorporated business and compare them to the benefits that would be gained by doing so.

Professional advice is recommended to assist you in making this assessment.

CautionThis article is not intended to provide a complete summary of issues and requirements relating to individuals in business; it highlights a few preliminary considerations. The comments provided herein are based on information available at the time of writing and are general in nature. We recommend that individuals consult their own tax advisors before acting on information contained in this article, to ensure that their own specific circumstances and current tax legislation are taken into account. s

Kathryn G. Edwards, CA, is a Partner with Pagnanini Edwards Lam Chartered Accountants.

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On July 27, 2004, the appellant United

Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry of the United States and Canada, Local 552 (“Union”), filed a grievance with the respondent Ontario Labour Relations Board (“OLRB”) against the respondent Greater Essex County District School Board (“Board”), alleging that the Board had hired non-union workers to do work at two schools. The Union did not refer the grievance to arbitration before the OLRB until December 9, 2004,

more than four months beyond the 14-day limit for referral of an arbitration matter under the collective agreement. The Vice-Chair of the OLRB ruled that he had authority to hear the grievance, finding that the arbitration process in the collective agreement was entirely separate from the grievance procedure, and, as a result, the 14-day time limit in the collective agreement was directory, not mandatory. In the alternative, the Vice-Chair ruled that s. 48(16) of the Ontario Labour Relations Act, 1995, Sched. A (“Act”), permitted the OLRB to extend the time for referral of a grievance to arbitration. The Vice-Chair held in the further alternative that, notwithstanding any other terms of the collective agreement, he had authority under s. 133 of the Act to hear the Union’s grievance. The School Board applied to the Divisional Court for judicial review. The Divisional Court held that the OLRB had no jurisdiction to hear the grievance. The Union appealed to the Court of Appeal, contending that the Divisional Court erred in applying the correctness standard of review to the OLRB decision, and further erred in declaring the Vice-Chair’s rulings to be unreasonable.

Greater Essex County District School Board v. United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry of the United States and Canada, Local 552, 2012 ONCA 482Areas of Law: Labour Relations; Grievance Arbitration; Limitation Periods

BACKGROUND

Court limits jurisdiction of Ontario Labour Relations Board in grievance procedure

CLICK HERE TO ACCESS THE JUDGMENT

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Greater Essex County District School Board , (cont.)

APPELLATE DECISION

The appeal was dismissed. There was no live grievance at the time of the referral under the relevant terms of the collective agreement. The collective agreement clearly provided that there was a 14-day time limit to refer a grievance to the OLRB. The Union referred the grievance to the OLRB four months after the expiration of the 14-day period. Section

133 of the Act requires a grievance; if there is no grievance, s. 133 is not engaged. The Vice-Chair’s expansive interpretation of s. 133 of the Act was unreasonable since it ignored the mandatory timeline agreed upon by the parties to the collective agreement. Section 133 cannot reasonably be interpreted to mean that the OLRB may in its own unfettered discretion revive a dead grievance by extending the parties’ agreed-upon time limits for referral to arbitration.

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Taylor v. Canada (Attorney General), 2012 ONCA 479Areas of Law: Crown Liability; Negligence: Public Law Duty of Care; Private Law Duty of Care

BACKGROUND

Class action against Federal Crown for alleged misrepresentation of health risks posed by temporomandibular joint implants meeting threshold for establishing possibility of private law duty of care

The plaintiff Kathryn Anne Taylor

(“Taylor”) brought a representative class action against the defendant the Attorney General of Canada (“AG Canada”) in damages for personal injuries suffered as a result of implantation of temporomandibular joint implants (“TMJ implants”) after 1968. On April 22, 1988, a TMJ implant was inserted into Taylor’s right temporomandibular joint. She alleged that the insertion of that device

resulted in physical and mental damages, including permanent total disability and loss of enjoyment of life. Taylor alleged that Health Canada was negligent in the exercise of its responsibilities under the Food and Drugs Act, R.S.C. 1985, c. F-27 (the “Act”). On the original certification motion, the motion judge held that the statement of claim disclosed a reasonable cause of action in negligence. Parallel class action motions for certification in TMJ implant claims resulted in contradictory rulings. Taylor and AG Canada applied before the Court of Appeal as a special case under Rule 22.03 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. Two issues were before the court: 1) the requirements in a statement of claim to establish sufficient proximity between Taylor and the AG Canada in a claim brought against a governmental body for regulatory negligence; and 2) whether Taylor’s amended statement of claim satisfied those requirements.

CLICK HERE TO ACCESS THE JUDGMENT

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Taylor v. Canada (Attorney General), (cont.)

APPELLATE DECISION

Taylor was entitled to pursue an action against AG Canada, provided the statement of claim was redrafted to reflect the guidance provided by the present court. At the present stage of proceedings, it was not plain and obvious that the allegations in the fresh statement of claim could not support a finding that AG Canada owed Taylor a prima facie private law duty of care. Taylor’s claim depended primarily on the allegations of Health Canada’s misrepresentations as to the status of the Taylor’s TMJ implant between 1988 and 1990 and Health Canada’s failure to correct those misrepresentations in the years following. During those following years, Taylor’s

TMJ implants were sold in Canada without proper authorization and there was mounting evidence of the danger posed by those implants. Health Canada’s misrepresentations, combined with its failure to correct those misrepresentations in the face of knowledge of the serious and ongoing risk posed, could prove actionable. The nature of representations made by a regulator, and the nature of any reliance placed on those representations by the plaintiff, were part of the factual and legal circumstances to be considered in determining the proximity of the relationship between the regulator and the plaintiff. Representations made specifically to a plaintiff and relied on by that plaintiff could create a direct connection between the regulator and the plaintiff sufficient to support a finding of a private law duty of care. General representations made by the regulator to the public and relied on by the plaintiff as a member of the public could not, standing alone, create a direct, proximate relationship. However, general representations and reliance on those representations, in combination with other factors, could give rise to a relationship between the regulator and the plaintiff sufficiently close and direct to establish a prima facie private law duty of care owed to the plaintiff.

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“The central question in Taylor v. Canada (Attorney General) was: ‘What are

the requirements in a statement of claim to establish sufficient proximity between the plaintiff and the defendant in a claim brought against a governmental body for regulatory negligence?’

The unique role of government as a regulator raises the novel question of what facts are necessary for it to be held liable for the defective products of others. The question posed in Taylor, and the answers provided by the Court, are of significant importance, particularly when one considers the breadth of products regulated by governmental agencies. Government regulates everything from medical implants, as in Taylor, to dairy milk. If the regulation of products is negligently carried out, the results can be catastrophic, and can be multiplied across thousands of individuals.

COUNSEL COMMENTS Taylor v. Canada (Attorney General)

The key issue in Taylor was proximity. Taylor did not consider proximity

by statute, but proximity by relationship. The Court clearly accepted that proximity can be established by relationship, and the question was left to what type of relationship must exist between the Crown and the plaintiff.

The central question as posed by the Court in Taylor was, “What is there in the factual

allegations that distinguishes the relationship between this plaintiff and the regulator from the relationship that exists between the regulator and all those affected by the regulator’s actions?”

While the court held that each case must turn on the specific facts of the relationship, several specific statements provide future guidance:

• if the pleadings disclose that a “. . . regulator was fixed with knowledge of a clear, present, and significant danger posed to a discrete and identifiable segment of the community” and failed to

Comments provided by Kirk Baert, counsel for the Plaintiff

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COUNSEL COMMENTS, Cont.act, proximity is more likely to be found;

• “an individual’s reliance on public representations that the regulator will do its public and statutory duty cannot by itself create . . .” a relationship of proximity, but are still part of the overall consideration and “factual matrix”; and

• a private law duty of care can co-exist with duties and obligations owed to the wider public.

Ultimately, the pleadings in Taylor were found to be sufficient by the Court. Apart from the specific holding related to the pleadings at issue, the above general comments from the Court help to highlight some of the key elements for a private law duty of care in a regulatory negligence claim. The comments were provided by a unanimous five judge panel of the Court of Appeal for Ontario, and should be accorded significant weight.

The deadline for the Federal Crown to seek Leave to Appeal to the Supreme Court of Canada is October 1, 2012. To date, the Federal Crown has not filed leave material.

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Fontaine v. Duboff Edwards Haight & Schachter, 2012 ONCA 471Areas of Law: Indian Residential Schools Litigation; Administrative Law; Appeal or Review of Chief Adjudicator’s Legal Fee Determination

BACKGROUND

Court providing guidelines on grounds for review of legal fee decisions within context of Indian residential schools national settlement procedure

The appellant Duboff Edwards Haight

& Schachter (“DEHS”) was a Manitoba law firm representing a class action plaintiff in Indian residential schools litigation. Under the national settlement regime established by the Canadian judiciary for Indian residential schools litigation, an independent adjudicator (“adjudicator”) may be appointed to assess the fairness and reasonableness of legal fees. Claimants or their legal counsel may request a chief adjudicator to review an adjudicator’s ruling. In July 2006, DEHS entered into a contingency fee agreement with one of its clients for 30% of compensation awarded. The client’s claim was heard in April 2009 and the adjudicator awarded damages of $103,000. DEHS claimed legal fees of 30%

of the award, or $30,900. On June 30, 2009, the adjudicator issued a ruling adjusting DEHS’s proposed fee down to $20,600. The approved fees reduced the 30% contingency fee to 20%, with 15% to be paid by Canada, and 5% to be paid by the client. On July 29, 2009, DEHS appealed the decision of the adjudicator to the chief adjudicator. On September 17, 2009, the chief adjudicator issued a ruling dismissing DEHS’s appeal and upholding the adjudicator’s decision to reduce the legal fees. DEHS and the respondent, the chief adjudicator, jointly brought a Request for Direction to the administrative judge. In his directions, the administrative judge declared that there was no right to appeal from, or to obtain judicial review of, decisions of the chief adjudicator in the fee review process. DEHS appealed to the Court of Appeal from the administrative judge’s directions, contending that, as the chief adjudicator performed a quasi-judicial function, his rulings were generally reviewable or appealable to the administrative judge. The chief adjudicator moved before the Court of Appeal to quash the appeal on the ground that the court lacked the jurisdiction to hear an appeal from an administrative judge’s order giving directions under the Indian residential schools settlement regime.

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Fontaine v. Duboff Edwards Haight & Schachter, (cont.)

APPELLATE DECISION

The appeal and the motion to quash were dismissed.

With respect to the motion to quash, the Court did not accept the chief adjudicator’s contention that, when the administrative judge issued directions, he was acting pursuant to the Indian residential schools national settlement regime and not in his capacity as a judge of the superior court. Rather, the Court held that the Request for Direction was made to the administrative judge acting in his capacity as a superior court judge appointed pursuant to s. 96 of The Constitution Act, 1867 (U.K.), 30 & 31 Victoria, c. 3. With respect to the appeal, the Court went on to say that there was no broad-based right to review from a legal fee review decision of the chief adjudicator. The Judicial Review Procedure Act, R.S.O. 1990, c. J.1 (“JRPA”) had no application as the chief adjudicator did not exercise a statutory power pursuant to s. 2(1) 2 of the JRPA. The chief adjudicator exercised power pursuant to the authority derived from

the judiciary’s national settlement regime. As the chief adjudicator was a creature of the judiciary’s settlement agreement, the procedure for reviewing a chief adjudicator’s legal fee review decision was to be found exclusively within the terms of the national settlement agreement. It was only in the narrow circumstances where the chief adjudicator failed to comply with the terms of the national settlement agreement that aggrieved parties may apply to the administrative judge for review. DEHS failed to establish that the chief adjudicator’s decision to affirm the adjudicator’s fee review ruling had run afoul of the terms of the national settlement.

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“The most important aspect of the case,

and the reason why the appeal was pursued, was the lower court’s conclusion that it had no legal jurisdiction to correct errors of law made by the quasi- judicial body tribunal that had been created pursuant to the Indian Residential School class action settlement agreement.

The core of our argument was that the courts have a constitutional responsibility to ensure that the law is obeyed, and that without the courts taking on that supervisory role, the rule of law, a fundamental pillar of our Constitution, would suffer.

We were of the view that no tribunal, no matter how well intentioned and no matter how well respected, (as the tribunal was in this case,) can or should be beyond the supervisory jurisdiction of the courts.

COUNSEL COMMENTS Fontaine v. Duboff Edwards Haight & Schachter

We submitted that the court’s supervisory jurisdiction might be engaged by judicial review proceedings, by way of appeal proceedings, or pursuant to the courts supervisory jurisdiction under the settlement agreement. We did not really care which, but were adamant that there must be some way that the courts can deal with alleged errors of law.

Thankfully, the Ontario Court of Appeal ruled that the lower court did retain jurisdiction to correct errors in appropriate situations. This, we argued, is as it should be.

Comments provided by Harley Schachter, counsel for the Appellant Duboff Edwards Haight & Schachter

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Papapetrou v. 1054422 Ontario Limited, 2012 ONCA 506Areas of Law: Insurance Law; Liability Coverage; Services Contracts

BACKGROUND

Snow removal contractor not exclusively liable under services contract to property owner in slip and fall claim

The appellant Collingwood Landscape

Inc. (“Collingwood”) had contracted with respondent The Cora Group to provide winter maintenance and snow removal services for The Galleria, a building owned by The Cora Group. Under the terms of the contract, Collingwood agreed to indemnify “the Owner” and its agents “against all claims, losses, liabilities, demands, suits and expenses … arising out of the performance or nonperformance of the contract.” Collingwood agreed to obtain comprehensive general liability insurance “covering

the liability of the Contract [sic], his employees, agents and representatives for bodily injury … for a minimum of $2,000,000” and to “include the Owners as an additional insured” on the policy. The respondent Maria Papapetrou (“Papapetrou”) brought an action against The Cora Group and Collingwood, claiming she was injured when she slipped and fell on black ice that had accumulated on stairs of The Galleria. The Cora Group moved for summary judgment, requesting that Collingwood assume The Cora Group’s defence of Papapetrou’s action on the basis of the service contract. The motion judge ordered that Collingwood assume the defence of the action on behalf of The Cora Group and indemnify The Cora Group with respect to any damages awarded in the action. Collingwood appealed, contending that it was premature for the motion judge to order Collingwood to indemnify The Cora Group, and that the motion judge further erred in ordering that Collingwood assume the defence of The Cora Group in the absence of any contractual duty to defend.

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Papapetrou v. 1054422 Ontario Limited, (cont.)

APPELLATE DECISION

The appeal was allowed, the motion judge’s order was

set aside, and Collingwood was ordered to pay for The Cora Group’s defence of Papapetrou’s action, save for any costs incurred exclusively to defend claims that did not arise from Collingwood’s performance or non-performance of the service contract. Contrary to the motion judge’s finding, the service contract did not provide that Collingwood will, in the words of the motion judge, “assume sole responsibility … to protect persons and property from injury and damage.” The service contact provided that Collingwood “assumes sole responsibility for all persons engaged or employed in respect of the Work” and that it shall “take all reasonable and necessary precautions to protect persons and property from injury and damage.” Collingwood’s obligation to indemnify The Cora Group under the terms of the service contract was not absolute, but was limited to claims based upon, incidental to or arising out of Collingwood’s performance or non-performance

of the service contract. To issue a declaration that Collingwood must indemnify The Cora Group, a court would first have to determine whether Collingwood’s contractual obligation to indemnify had been triggered. No evidence concerning the issues of liability or damages was led on the motion. The motion judge erroneously held that the claims in Papapetrou’s action can be characterized generally as claims in negligence for failing to maintain an ice-free stairway; and that, as a consequence, all claims in the action would be captured under Collingwood’s duties under the service contract. Papapetrou’s pleadings related to negligent maintenance due to Collingwood’s performance or non-performance of the service contract, as well as negligent conduct on the part of The Cora Group extending beyond Collingwood’s contractual obligations.

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