January 2018 copy - Fernandes Hearn · Dan Ujczo, an internaonal trade and customs lawyer with...

INTHISISSUEPAGE1RIBOCOMPLAINTS&DISCIPLINEPROCESSOPEN

PAGE2FIRMANDINDUSTRYNEWS

PAGE3FERNANDESHEARNANNUALSEMINAR-NAFTAPANEL

PAGE5MESA2018

PAGE10DOINGBUSINESSINCANADA-PART4-SECURITIESREGULATION

PAGE13COCKPITVOICERECORDERPROPOSEDREGULATIONPAGE14FREIGHTBROKERAGEEMPLOYMENTCONTRACTSANDNON-SOLICITATIONCLAUSES

PAGE20LUKACSADVOCATINGFOROBESEPASSENGERS-SCC

PAGE22IMPORTANCEOFWELL-DRAFTEDSHAREHOLDERAGREEMENTS

PAGE25CONTEST

FERNANDES HEARN LLP NEWSLETTER JANUARY 2018

The Registered Insurance Brokers of Ontario (“RIBO”) is the self-regulatory body for insurance brokers in Ontario. It regulates thelicensing,ethical conduct,andinsurance relatedfinancial obligaAonsofall independent general insurance brokers in the province. Thecomplaints anddiscipline processcanbe aminefield for the brokerbeing invesAgated. In the fall of 2017 the Government of Ontarioreleasedit2017FallEconomicStatementandBill 177.Bill 177receivedRoyal Assent on December 14, 2017, and amended the RegisteredInsuranceBrokersAct(the“Act”)sothata broker’s disciplinaryhearingis open tothepublic. It is important for brokerstounderstandtheirduAesandobligaAonsunder theAct and their rightswhen facing acomplaintordisciplinaryhearing.

RIBOis acorporaAonthatis managedandadministeredbya“Council”.TheCouncil is the governingbodyandtheboardofthedirectors ofthecorporaAon.Itconsists ofeightpersons whoare individual membersoftheCorporaAon.Everypersonwhoisa registeredbroker is a memberof the CorporaAon. In addiAon to the eight members who areregisteredbrokers,theCouncil is composedof threemembers ofthepublicappointedbytheGovernmentofOntario.

TheActprohibits anyonefromacAngas aninsurance brokerunless theperson is a registered broker under theAct. There are excepAons.Lawyers and accountants acAng in their professional capacity (forexample,providingriskmanagementorclaimsassistance)are exempt.Soare insurance agents licensedundertheInsuranceActwhile acAngwithintheauthorityoftheirlicense.

Brokers have duAes under the regulaAons to the Act, to clients,members ofthe public, fellowmembers andinsurers. RegulaAon991setsoutthecodeofconduct:

14. All members shall act as insurance brokers in accordancewiththefollowingcodeofconduct:

RIBOComplaints&DisciplineProcessNowOpentothePublic

THENAVIGATOR

FERNANDES HEARN LLP NEWSLETTER JANUARY 2018 PAGE 2

FIRMANDINDUSTRYNEWS• TheFernandesHearn LLPAnnualConferencetookplaceonJanuary17thattheAdvocates’Society EducaAonCentre. Thesoldout seminar featuredpanels onNAFTA,AutonomousVehicles,Blockchain,SocialMedia,Cannabis,Online Insurance andClimateChange.TheconferencewascoveredbyJohnG.Smith,editorofToday’sTrucking. [SeePage3]

• OnJanuary26th,2018RuiFernandespresentedona panelon“CargoInsurance”totheBankers AssociaXon for Finance and Trade Canada TradeFinanceWorkshop inToronto.

• ABA Midyear and TIPS Admiralty Law CommiYee MeeXng, January 31 toFebruary6,2018,Vancouver.

• CargoLogisXcsExpo,February6–8,2018,Vancouver.

• BB&TCapitalMarketsLogisXcsandTransportaXonConference,February13-14,2018,CoralGablesFlorida.

• MeettheBuyersForumMarineTrade,February28toMarch3,2018,Virginia.


TODAY’STRUCKING[AUTHORIZEDREPRODUCTION]NAFTAdealsXllinquesXon-NAFTAPanel-FernandesHearnLLPSeminar

Shoan,Snowden,andUjczodiscussthefutureofNAFTA.

January17,2018byJohnG.Smith

TORONTO,ON–ThefutureofNAFTAremains uncertainasnegoAatorspreparefortheirlatest roundofmeeAngs, this AmeinMontreal.Monthsintodiscussions, nobody evenknows ifU.S.PresidentDonaldTrumpwill decide tooutrightscrapthedeal thatgovernseveryloadofcross-borderfreight.Withabout 10milliontrucks crossingbetweenCanadaandthe U.S.eachyear, there isplenty ofbusiness atstake.Arecentsurvey byExportDevelopmentCanadaevenfoundthat 26% of exporters would shii their business to the U.S. if the agreement wasrevoked.Trade between the U.S. and Canada tripled between 1986 and 2017, CanadianInternaAonal FreightForwardersAssociaAonexecuAve directorRuthSnowdenobserved,during a January 17 seminar hostedby theFernandes Hearn lawfirm inToronto. “If[NAFTA]goes,itcouldbeverysignificant.”The Canadian Trucking Alliance was among groups discussing NAFTA with TransportMinisterMarc Garneau at the sameAmethe seminar washeld, and the alliancehasopenly lobbied for changes to help address barriers like restricAons on reposiAoningforeigntrailers,inaddiAontocallingforfurtherinvestments inregional borderstaffandsystemsalike.“Border fees is another bigone,” addedLakShoan, theOntarioTrucking


TODAY’STRUCKING[AUTHORIZEDREPRODUCTION]

AssociaAon’s director – policy and industry awareness, while sharing the stagewithSnowden.AdministraAve MonetaryPenaltySystem(AMPS)costs linkedtoproblems withAdvanceCommercialInformaAon(ACI)dataareanexampleofthosebarrierstotrade.Butthatwishlistispartofa best-casescenario.IfNAFTAwas actuallyscrapped,thecostsofcross-bordertruckingcouldactuallybecome“tooprohibiAve”tobeviable,hesaid.

ThetalksDanUjczo,aninternaAonal trade andcustoms lawyerwithDickinsonWright,expects theMontreal roundof talkstofocus on sAckingpoints aroundrules of origin,as theU.S.lookstorequirealargershareofdomesAcvehiclecontent.Vehicles that aremadewithat least 62.5%ofNorthAmericancontentcanmoveduty-freebetweenCanada,theU.S.,andMexico.ButtheU.S.CongressionalResearchServicehas determined that the real share is closer to 45%, he said during the panelpresentaAon.Rawmaterial fromChina is beingtransformedintovehicleparts inMexico,for example.His guess is that negoAators will semle ona target closer to70%NorthAmericancontent.Ujczobelieves biggerthreats toa deal havemoretodowithchallengesaroundseasonalproduce fromMexico. Then there’s theneed for Trump to securea poliAcal win toappeaseanA-NAFTAsupporterswhohelpedtopropelhimintooffice.“ThepoliAcs oftrade, thepoliAcs ofNAFTA,are terribleintheU.S.,”Ujczosaid.“Therearen’tenoughvotesinCongressforanewNAFTArightnow.”“Theone consistency that’s beenveryquiet rightnowis the anA-NAFTAconsAtuency,”headded.WhatwouldthevotersofMichiganandOhiosay ifTrumpdecides toextendtheNAFTAdiscussions?They might decidetovoteforDemocratswhohaveanA-tradeposiAonsoftheirown.Provisions that requireconsultaAons withmembersoftheU.S. Congresscouldfurtherdragdownthealready-troubleddiscussions, especially as thepoliAciansmoveclosertomidterm elecAons. “Keepaneye onmembers of Congress saying, ‘We haven’t beenconsultedwith,’” hesaid, suggesAng that the endofMarchisa key deadlinefor thenegoAaAons.Ujczosaidit’salsoAmeforCanadianpoliAcians topull backontheirvisits tostate leadersintheirbidtosecure moresupport.“IthelpedfacilitateandgotamenAonontheissue,”hestressed.“Youcouldn’tgotoanairportinthe U.S.withoutbumpingintoaCanadianminister somewhere.”Butnowhebelieves the extra faceAmecouldsimply feedmorediscussionsaboutlongstandingtradedisputes.InthemeanAme,thereareevenquesAonsaboutwhata withdrawal fromNAFTAwouldlooklike.“Is itCongressorthepresidentthathas theauthority towithdraw?”heasked.And there are quesAons about whether the pre-exisAng Canada-U.S. Free TradeAgreementwouldsnapbackintoplaceiftheNorthAmericandealwasscrapped.Nomamer what is decided, though, one thing is certain. Thediscussions promise toreshapenorth-southfreight.


INVITATIONTOMESA2018CONFERENCEFernandesHearnLLPis one ofthesponsors for theMarine&EnergySymposiumoftheAmericas2018(“MESA2018”)conferenceinTorontoApril 18-20,2018 inToronto.Thefollowingistheprogramfortheconference.

Where?OmniKingEdwardHotel,TorontoCanadaWhen?18-20April2018

Registra.on:hmp://www.mesa2018.com

Wednesday,April18,2018

6:00-8:00pmRegistraAon-Mezzanine,OmniKingEdwardHotel6:30-8:00pmOpeningRecepAon-PalmCourt,OmniKingEdwardHotel8:00pmDinneronyourown-orjoinusatapre-arrangedrestaurantThursday,April19,2018

8:00amtonoonRegistraAon-Mezzanine, Omni King Edward Hotel

Time JointSession-VanityFairBallroom

9:00to10:00am Arctic Exploration and Shipping / The Polar CodeModerator: Rui Fernandes, Partner Fernandes Hearn LLPPeter Pamel – Partner Borden Ladner Gervais,Aldo Chircop – Professor of Law; Canada Research Chair (Tier 1) in Maritime Law and Policy Dalhousie University

10:00to11:00am NAFTA Modernization and Impact on Energy and TradeDan Ujczo – Dickenson Wright (USA)

11:00to11:15 CoffeeBreak

11:15amto12:15pm Catastrophes and Crisis ManagementModerator: Kim Stoll – Partner, Fernandes Hearn LLPMark Newcomb – Counsel and VP Claims & Insurance, Zim Integrated Shipping Services Ltd.Bruce Hennes, Managing Partner, Hennes Communications (USA)

12:15pmto1:15pmLunch-KeynoteAddress-TBAConcurrentSessionTime SessionA-VanityFair SessionB–Kensington

1:15to2:15pm Application of Jurisdiction Clauses in Different CountriesShelley Chapelski – Partner Norton Rose FulbrightRobert Reeb – ShareholderMarwedel, Minichello & ReebFabiana Simões Martins – Siano & Martins

LNG Contracts and TransportationJason Hicks – Bernard LLP

http://www.marineenergysymposium.com

http://www.marineenergysymposium.com


MESA2018CONFERENCE

2:20to3:20pm Arrest of Vessels in Various Jurisdictions Susan Dorgan – AIG (USA)Jorge Luis Cordoba – Cordoba & Associates (Colombia)

Seabed MiningModerator: James Manson – Associate, Fernandes Hearn LLPWylie Spicer – Counsel – McInnes Cooper

3:25to4:25pm Issues Arising from Project Cargo John Evans – Berkshire Hathaway

Blockchain & Smart Contracts Craig Fuller – Transrisk

6:00PMMESA2018CocktailRecepAonandDinner–Hotel

Friday,April20,2018ConcurrentSession SessionA-VanityFair SessionB-Kensington

9:00to9:55am Limitation of Liability by Statute – Conventions and in ContractsGeorge Arghyrakis – E.G. Arghyrakis & Co. (UK)Heneghan, Elizabeth – Federal Court of CanadaSteven W. Block – Foster Pepper LLC (USA)

Impact of Climate Change on Shipping and Energy ProjectsDr. Panyaotis Tsantrizos – Terragon Environmental Technologies Inc. (Can)


Friday,April20,2018

10:00to10:45am Autonomous Ships and

EquipmentLaura Hill – Perkins Coie LLP (U.S.)Roger Adamson – Futurenautics (U.K.)

Cyberterrorism in Transportation and Energy ProjectsCaroline Leprince – Canadian Cyber Incident Response Centre – Public Safety Canada

10:45to11:00am Coffee Coffee

11:00to11:45am Offshore Exploration and Exploitation: Liability and Compensation IssuesLawrence Malizzi – Senior Manager – O’Brien & GereLucas Leite Marques – Partner, Kincaid Mendes Vianna Advogados (Brazil)

Pipeline Technologies, Development Issues and Litigation Joshua Jantzi, Partner, Dentons Canada LLPKori Patrick, Technical Manager, Research & Development, Enbridge, Edmonton Alberta

11:55amto12:45pm Emerging Issues in Insurance in Marine and EnergySimon Swallow – Chief Executive Shipowner’s ClubBrian Murphy – Vice President, Berkley Offshore

Wind Turbine LitigationSarah Powell – Partner – Davies Ward Phillips & Vineberg LLP

12:45pmto2:00pmLunch–EthicsPresentaAon

1.Amembershall dischargethemember’sduAestoclients, membersof thepublic,fellow members and insurers withintegrity.

2.Amemberowes adutytothemember’sclient to be competent to perform theservices whichthememberundertakesontheclient’sbehalf.

3. A member shall serve the member’sclient in a conscienAous, diligent andefficient manner and shall provide aquality of service at least equal to thatwhichmembers wouldgenerallyexpectofamemberinalikesituaAon.

4. A member shall be both candid andhonest when advising the member’sclient.

5.Amembershall holdinstrictconfidenceall informaAon acquiredin the courseofthe professional relaAonship concerningthebusiness andaffairs ofthemember’sclient, and the member shall not divulgeanysuchinformaAonunless authorizedbytheclienttodoso,requiredby lawtodoso or required to do so in conducAngnegoAaAons withunderwriters orinsurersonbehalfoftheclient.

6. A member shall observe all relevantrulesandlaws regardingthepreservaAonandsafekeepingof propertyof the cliententrustedtothememberand,whentherearenosuchrulesorlaws orthememberisindoubt,themembermusttakethe samecare of such property as a careful andprudent person would take of theperson’sownpropertyoflikedescripAon.

7. A member who engages in anotherbusiness or occupaAonconcurrently withthe pracAce of the member’s vocaAonshall not allow such outside interest tojeopardize the member’s integrity,independenceorcompetence.

7.1Amembershall discloseinwriAngtoaclientorprospecAveclientanyconflictofinterestorpotenAal conflictofinterestof

the member that is associated with atransacAonorrecommendaAon.

8.Amembershall notsApulate,chargeoraccept any fee that is not fully disclosed,orthe basis forwhichis notfullydisclosedprior to the service being rendered, orwhichis sodisproporAonatetothe serviceprovidedastobeunconscionable.

9. A member shall encourage publicrespect for and try to improve thepracAceofthemember’svocaAon.

10. A member shall make the member’sservices available to the public in anefficient and convenient manner whichwill commandrespectandconfidenceandwhich is compaAble with the integrity,independence and effecAveness of themember’svocaAon.

11. A member shall assist inmaintainingthe integrity of the member’s vocaAonandshouldparAcipateinitsacAviAes.

12. A member shall assist in prevenAngthe unauthorized pracAce of themember’svocaAon.

13. A member’s conduct towards othermembers,members ofthepublic,insurersa n d t h e C o r p o r a A o n s h a l l b echaracterizedbycourtesyandgoodfaith.

UndertheAct,afailure tocarryonbusiness inamanner consistentwiththecodeof conduct is“misconduct” under secAon 15 of RegulaAon991. Misconduct canresult in acomplaint anddisciplinary hearing with resulAng penalAesincluding the loss of a broker’s cerAficate tocarryonbusiness.

The complaints and discipline process isdescribedby RIBOas follows(mirroringtheAct)(*1)

There are two Commimees involved inthe complaints process, the ComplaintsC omm im e e a n d t h e D i s c i p l i n eCommimee. The commimees arecomposed of brokers and publicmembers, appointedby thegovernment


toprotect the public interest. All ofthelamerproceedingstake placeatthe RIBOoffice, however RIBO staff are notinvolvedinthedecisionmakingprocess.

The Complaints Commimee consists oftwoBrokers anda PublicMember. Theyevaluate the evidence and merit of acomplaint. If it is determined that thereis sufficient evidence to indicate apossible misconduct, the mamer isreferredtotheDisciplineCommimee.

TheDisciplineCommimeeconsists offourBrokers and a Public Member andconductshearings very similartothatofa court of law. Evidence is introducedduringthe hearingandtesAmonyisgivenunder oath in the presence of a courtreporter.TheCommimeedeterminesthefacts andmakesfindingsofinnocenceorguiltbasedontheevidencepresented.Inthe event a broker is found guilty ofmisconduct, this Commimee has theauthor i ty to repr imand, imposeaddiAonal educaAonal or financial

reporAng requirements, restr ict ,suspend,fineorrevokearegistraAon.

There are two types of complaintsaddressed by RIBO: consumer andfinancial. Consumer inquiries mayoriginate fromvarious sources includingbrokers, consumers, lawyers and lawenforcement. Of these complaints, 95%may be resolvedinformallybymediaAngthe issues while the remaining 5%require the formal complaint process.F inancial complaints are usual lygenerated by RIBO and result fromfinancial reports submimed by thebrokerageor fromarandomspot-checkpe r fo rmed by a R IBO financ i a linvesAgator.

Every wrimen complaint that allegeswrong-doing on the part of a broker iscarefully invesAgated. When a formalinquiryintoacomplaintis necessary,theprocessisasfollows:

- A copy of thewrimen lemer ofcomplaintora summaryofthecomplaintis sent to the broker with the request

INVESTOR NEWSLETTER ISSUE N°3 FALL 2008FERNANDES HEARN LLP NEWSLETTER JANUARY 2018 PAGE 9

that the broker provide a wrimenresponsetothe allegaAon.The brokerisalso advised of who the assignedinvesAgatorwillbe.

- During the invesAgaAon, ifm a m e r s c a n b e c l a r i fi e d b ycorrespondence and phone calls, acompleted invesAgaAon report issubmimedtotheManagerofComplaints& InvesAgaAon for direcAon andauthorizaAon to close the complaintinvesAgaAon file and to noAfy thecomplainantsoftheresult. - I f m a m e r s c a n n o t b esaAsfactorily concluded, the complaintand invesAgaAonfilemay then be filedwiththeManager for consideraAonby aComplaintsCommimee.

- A NoAce of Complaint is thensenttothebroker involvedoutliningtheallegaAons, the secAon of the RIB Actthatmayhavebeenviolated,thedate ofthe hearing and opportunity for thebroker to submit further wrimenexplanaAon/informaAon.

- At the Complaints Hearing,evidencefromall parAesis presentedtothe panel by RIBO staff andany of theparAes whoarepresenttospeaktotheirclaims. A copy of all documentaAonprovidedby theparAes is distributedtothepanel membersfor their reviewanddeliberaAon.

- Following deliberaAon by thepanel members, the mamer may bedismissed,resolvedona Consentbasis orreferredtoaDisciplineCommimee.

During a Complaints Hearing, a brokerhas anopportunity toacknowledge guiltor“Consent”toaguiltyfindingandagreeto a penalty. Before a Consent canbecomeofficial,theDisciplineCommimeemust first agree to the Consent andpenalty.OnceaConsentis approved,theConsent becomes an Order of theDiscipline Commimee. Should theCommimeenotagree totheConsent,themameris scheduledforhearingatalater

date before a different panel of theDiscipline Commimee. This Consentprocedure saves both Ame and theexpenseofaDisciplineHearingatalaterdate.

When a mamer is referred to theDiscipline Commimee, a NoAce ofHearing is sent tothebroker30 days inadvance ofthehearingdate toallowthebroker sufficient Ame to prepare. ItincludesanexplanaAonofthepowers oftheCommimeeanda DirecAonfromtheComplaints Commimee outlining thecha rge s and pa rAcu l a r s o f t heallegaAons. The broker is usually inamendance at the Discipline Hearing,however,theproceedingsmaytakeplaceeven in the broker’s absence if there isnoresponsetotheNoAceofHearing.

It is important to realize that in allcomplaint cases there is a presumpAonof innocence and RIBO is required toprovetheallegedmisconduct.

Abroker is enAtled tohavealawyer representthem at complaints or disciplinary hearings.Havinga lawyer will ensure that theprovisionsof theAct areproperly applied, that the rulesandproceduresforthehearingas setoutintheRIBO by-law are followed, and that naturaljusAce is paramount. It starts with a brokerreceiving a copy of the wrimen lemer ofcomplaint or asummary of thecomplaintwiththe request that the broker provide a wrimenresponse to the allegaAon. The broker is alsoadvised of the idenAty of the assignedinvesAgator.Itis recommendedthatalawyerbeinvolvedfromthestart. Thewrimenresponseisveryimportant,but,ifnotvemedbya lawyer,itmaymakemamers worse.Self-incriminaAonis arisk.Theresponsecanbe usedasevidence inacomplaints ordisciplinaryhearing.Thedisciplinecommimeehas thepower to imposepenalAes,includingthe loss of thecerAficate to carry onbusiness asa registeredbroker.Compliance withthe penalty imposed by the Discipline


Commimee can be enforced by an order of ajudgeoftheSuperiorCourtofJusAceofOntario.

A broker is enAtled to full disclosure beforehearings.SecAon19oftheActprovidesthatthebroker shall beenAtledtoexamineanywrimenor documentary evidencethatwill beproducedor any report, the contents of which will begiveninevidenceatthehearing.

AfinaldecisionoftheDisciplineCommimeemaybeappealedtotheDivisionalCourtinOntario.TheappealmaybemadeonquesAonsoflaworfactorboth.

RuiM.FernandesFo l l ow Ru i M . Fe rnandes on Tw i9er@RuiMFernandesandonLinkedin. Seealsohisblogathmp://transportlaw.blogspot.ca

Endnotes( *1 ) hmp : / /www. r ibo . com/ index .php?opAon=com_content&view=arAcle&id=521&Itemid=377(*2)NaturaljusAcereferstotheruleagainstbias(actualbias,imputedorapparentbias)andtotherighttoafairhearing.TherighttoafairhearingrequiresthatindividualsshouldnotbepenalizedbydecisionsaffecAngtheirrightsorlegiAmateexpectaAonsunlesstheyhavebeengivenpriornoAceofthecase,afairopportunitytoanswerit,andtheopportunitytopresenttheirowncase.ThemerefactthatadecisionaffectsrightsorinterestsissufficienttosubjectthedecisiontotheproceduresrequiredbynaturaljusAce.


http://transportlaw.blogspot.ca


http://www.ribo.com/index.php?option=com_content&view=article&id=521&Itemid=377






2. DoingBusinessinCanada–Part4(*1)–SecuriXesRegulaXonCanada's debtcapital marketis acAve,withbothinvestment grade and sub-investment gradecorporateissuers,as well asgovernmentissuers,engaging in a wide range of offerings ofconverAbleandnon-converAbledebtsecuriAes.In 2016, it was esAmated that Canadian debtissuance acAvity generatedanaggregateofCan$163.6billion.(*2)InCanada, securiAes law is currently regulatedunder provincial jurisdicAon. Eachprovinceandterritory has enacted its own securiAeslegislaAon and has established a regulatoryauthority to administer it. NaAonal securiAestransacAons require compliance with severalregulatory regimes administered by differentauthoriAes.

Nonetheless, securiAes legislaAon in Canada islargely harmonizedthroughtheuseofnaAonaland mulAlateral instruments adopted by theCanadian SecuriAes Administrators (CSA), anumbrella organizaAoncomprising all of thetenprovincial and territories securiAes regulators,and implementedas lawby theprovinces. TheCSA has developed the “passport system"throughwhicha market parAcipant hasaccesstomarketsin all passportjurisdicAonsbydealingonly with its principal regulator andcomplyingwith oneset of harmonizedlaws. It isa majorstep forward in improving Canada’s securiAesregulatory system by providing marketparAcipants withstreamlinedaccess toCanada’scapital markets.Ontario,Canada’s largestcapitalmarket, does not parAcipate in the passportregime. Ontario is recognized by the otherjurisdicAons as a principal jurisdicAon forpassport decisions but the Ontario SecuriAesCommissionhas not adopted thepassport ruleitself. As a result, Ontariomarket parAcipantshave access to other jurisdicAons through thepassport system but parAcipants from otherjurisdicAons do not have access to Ontario.Instead, the Ontario SecuriAes Commissionfollows a "mutual reliance" policy in which itdecides in each case whether to accept thedecision of the principal regulator. Ontario

supports the harmonizaAon and improvedcoordinaAonof securiAes regulaAon inCanada;however,itdoes notparAcipateinthepassportsystem because of the preference for thecreaAonofanaAonalsecuriAesregulator.

Provincial securiAes laws are generally verysimilar (and, in many cases, uniform) and theregulatory authoriAes have implementedprocedures toreduce the difficulAes of dealingwith mulAple regulators . The federa lgovernment,fiveprovinces andoneterritoryarepushingaheadwiththeestablishmentofasinglesecuriAes regulaAon system, the CooperaAveCapital Markets Regulatory System(CCMR).TheCCMRhas releasedand receivedcommentsonconsultaAon drais of the uniform provincialcapital markets legislaAon and complementaryfederal legislaAonproposedforenactment.TheparAcipaAngjurisdicAonshavetargeted2018asthenewimplementaAondatefortheCCMR.

Most regulators’ mandates include the reviewand receipt of prospectuses, compliance withconAnuous disclosure obligaAons andobtainingexempAonsfromvariousprovisionsofsecuriAeslaw. ThesecuriAesregulator relies on theworkoftwonaAonal self-regulatoryorganizaAons,theInvestment Industry Regulatory OrganizaAonofCanada (“IIROC”) andtheMutual FundDealersAssociaAon (“MFDA”) for most aspects ofregulaAon of the organizaAons' member firmsand their employees. Accountability forsecuriAes regulaAonextendsfromthesecuriAesregulator to the Minister responsible forsecuriAes regulaAon and, ulAmately, thelegislature, ineachprovince. Thelargest oftheprovincial regulators is the Ontario SecuriAesCommission.

Generally,personsor companiesthatengageinthebusiness oftradinginsecuriAes are requiredtobe registered asdealers intheprovinces orterritories in which the dealers carry onbusiness. Personsor companies that engage inthe business of providing investment advice(including providing por}olio managementservices) are required to be registered asadvisers intheprovinces or territories in which


theadvisersdobusiness.Persons or companiesthat act as investment fund managers arerequiredtoregister as suchintheprovinces orterritories in which the investment fundmanagersdobusiness.

When debt or equity securiAes are offered tothe public in Canada, whether as part of aniniAalpublicoffering(“IPO”)ornot,a prospectusmust be filed with the securiAes regulatoryauthoriAes in those provinces and territorieswhere the securiAes are being offered. Theprospectus is reviewed by the principalregulator.In connecAonwithanypublicofferingof debt securiAes, an issuer must file anddisseminate to potenAal investors both apreliminary and final prospectus and obtainreceipts for those prospectuses from theapplicable Canadian SecuriAes Administrator.Debt securiAesare most commonly offeredbyp r i v a te p l a cement (w i th an offe r i ngmemorandumortermsheet).Ifusingthepublicmarket, they are most commonly offeredvia abase shelf prospectus or a short formprospectus. The prospectus must contain full,true and plain disclosure of the nature of thesecuriAes beingofferedandthebusinessoftheissuer. Canadian securiAes laws permit certainlimited markeAng-related acAviAes to occurbetween the issuance of a receipt for apreliminary prospectus and the issuance of areceipt for a final prospectus (waiAng period).The only wrimen informaAon that issuers andinvestmentdealers candisseminatetopotenAalinvestorsduringthewaiAngperiodis:

-Thepreliminaryprospectus.- A skeletal prospectus noAce (idenAfying thesecuriAes, their price anda contactfromwhomtheywillbeavailableforpurchase).-Standardtermsheets.-MarkeAngmaterials.

Each of these items must also include certainprescribed disclosures. For example, markeAngmaterials mustcontaininformaAondisclosedin,or derived from, the preliminary prospectus.Issuers anddealers arealsopermimedtoputon

presentaAons to potenAal purchasers of theissuer'ssecuriAes,alsoknownas"roadshows".

Issuers can offer or issue their securiAes in amanner that is exempt from the prospectusrequirements.Forexample,anexempAonwouldbe available for sales to those defined as“accredited investors” or those who spend atleast C$150,000 to purchase the securiAes. Inthese cases, there are filing requirements andtheremayalsobespecificdisclosureobligaAons.ExempAonsarealsoavailable forcertainsales tofamilyandfriends,sales toemployees,andsalesmade under a prescribed form of offeringmemorandum. SecuriAes sold on an exemptbasismaybesubjecttoresalerestricAons.

Issuers whowishtolist their securiAes onstockexchanges,suchas theTorontoStockExchangeor the TSX Venture Exchange, must saAsfyminimum lisAng requirements relaAng to theirmanagement, issued capital, distribuAon ofsecuriAes and financial resources. They mustalso sign a lisAng agreement with the stockexchange and agree to comply with its rules.Listedissuers mustmakeregularfilingswiththeexchanges, pay annual fees and saAsfy Amelydisclosurerequirements.

Issuers with equity securiAes listed on certainCanadian exchanges can take advantage ofCanada’s short-form prospectus distribuAonsystem,whichenables capital tobe raisedinthepublicmarkets quickly by preparingandfilingashorter prospectus that incorporates byreference the issuer’s most recent financialstatements and other conAnuous disclosuredocuments.

Anissuerfilinga prospectus,lisAngits securiAeson a Canadian stock exchange or acquiring aCanadian reporAng issuer through a shareexchangetransacAon,will becomea“reporAngissuer,”andthereby becomesubject tovariousconAnuous and Amely disclosure obligaAons.Theseinclude the requirement toprepare andfile quarterly and annual financial statementsand the relatedmanagement’s discussion andanalysis, as wellasanannual informaAonform


andreports with respect tomaterial changes inthe affairs of the issuer. Directors, officers andother“insiders”oftheissuerwill be requiredtofile reports with respect to any trading theyconduct in securiAes of the issuer and will beprecludedfromtradingin theissuer’s securiAes iftheypossess anymaterial non-publicinformaAonabouttheissuer.

A personthatoffers toacquirevoAngor equitysecuriAes which, if acquired, would cause theofferor’s holdingsof thesecuriAestoexceed20per cent of the outstanding securiAes of thatclass is considered to be making a “take-overbid”. Unless it can avail itself of one of theexempAons,a take-overbiddermustcomplywithcertain rules, including that it send a take-overbidcircularwithspecifieddisclosure toall holdersin Canada of securiAes of the class concerned,offeringtobuytheirsecuriAes.

Anissuerthatoffers toacquire its ownsecuriAes(otherthannon-converAbledebtsecuriAes)fromholders inCanada is consideredtobemakingan“issuerbid”inCanada.UnlessanexempAonfromthoserequirements is available,anissuerbiddermust comply with certain rules, including therequirement to sendanissuer bid circular withspecifieddisclosuretoall holders ofsecuriAes ofthe class concerned, in Canada, offering tobuytheirsecuriAes.

Foreignissuersthatmeetcertain condiAons andhave become reporAng issuers in Canada,whetherby lisAngona Canadianexchange or byacquiring a Canadian reporAng issuer through ashareexchangetransacAon,maygenerallysaAsfytheirongoingconAnuous disclosure obligaAonsinCanada by filing their home jurisdicAondocuments.

Private placements provide a relaAvely simpleandcost-effecAvemeans bywhichforeignissuerscanaccesstheCanadiancapital market. Privateplacements are made in reliance uponexempAons from the requirement to deliver aprospectus to prospecAve Canadian purchasersand provide dealers and issuers with benefitsincluding, offeringdocuments arenot subject to

review by provincial securiAes commissions,financialstatements donot havetoconform toInternaAonal Financial ReporAng Standards(“IFRS”), issuers do not become subject toCanadianconAnuousdisclosureobligaAons,costsare low due to a simple offering process, andinformaAon relaAng to the offering is notgenerallydisclosedtothepublic.Thetwoprivateplacement exempAons most commonly reliedupon by foreign issuers are the accreditedinvestor exempAon (the "Accredited InvestorExempAon") and the minimum amountinvestment exempAon ( the "Min imumInvestmentExempAon").Accreditedinvestors arepu rchase r s who a re p resumed to besophisAcatedduetocertain characterisAcs theypossess thatminimizetheneedfortheaddiAonalinformaAon contained in a prospectus.Accredited investors include insAtuAonalinvestors, por}olio managers and advisers,investmentfunds andpersons orcompanies thatmeet incomeor asset test.Under theMinimumInvestment ExempAon securiAes canbeofferedwithout a prospectus to any purchaser whopurchases, as principal, securiAes of a singleissuer, having an aggregate acquisiAon cost ofnotless thanCanadian$150,000,paidin cashatthe Ame of the trade, provided that thepurchaser was not created or used solely topurchaseorholdsecuriAesonthatbasis.

RuiM.FernandesFo l l ow R u i M . F e r nande s on Tw i9e r@RuiMFernandes and onLinkedin. See alsohisblogathmp://transportlaw.blogspot.ca

Endnotes(*1)This arAcleis part4of17parts dedicatedtoa reviewofdoingbusiness inCanada.SubsequentarAcles will include Canadian ImmigraAon,Employment Laws, Directors and Officers,InternaAonal Trade,CompeAAon, Sale ofGoods,Intellectual Property, Privacy, Real Property,Environmental Laws, TaxaAon, Insolvency,LiAgaAonandADR.Endnotes(*2)DebtcapitalmarketsinCanada:regulatoryoverview,ThomsonReutersPracAcalLaw,May2017.




3.CockpitVoiceRecorderProposedRegulaXon

NotallaircraioperaAnginCanadacurrentlyhavea cockpit voice recorder (“CVR”) on board thatmeet certain high-end uniform standards, i.e.being able to retain 2 hours of recordedinformaAon and that have a recorderindependent power supply (“RIPS”), (i.e. a 10-m i n u t e b a c k u p p ow e r s u p p l y ) . T h eTransportaAon Safety Board of Canada (“TSB”)stated in2013 that a lackofrecordedvoice andotherauralinformaAoncanhinderaircraisafetyinvesAgaAons and delay or prevent theidenAficaAon of aircrai or operaAonal safetydeficiencies.

Certain proposed amendments (*1) wouldrequire aCVRandRIPSforanexpandednumberof aircrai except, forexample, turbine-poweredaeroplaneswitha maximumcerAficatedtake-offweight less than 27,000 kg that weremanufacturedbeforeJanuary 1, 1987, andnon-transporthelicopters.

RuiM.Fernandes

Fo l l ow R u i M . F e r nande s o n Tw i9e r@RuiMFernandes and on Linkedin. See alsohisblogathmp://transportlaw.blogspot.ca

Endnotes(*1)CanadaGaze9ePartI,Vol.151,No.51




4. FreightBrokerageEmploymentContractsandNon-SolicitaXonClauses:ACaseStudy

The recently published decision in TitaniumLogisMcsInc.v.B.S.D.LinehaulInc.,(*1)illustratescertainkeyprinciples appliedby thecourtsintheenforcement of non-solicitaAon clauses inemploymentcontracts.Thisdecisionarisesintheloadbrokeragecontext.

Titanium LogisAcs Inc. (“Titanium”) and B.S.DLinehaul LogisAcsInc. (“B.S.D.”) competein theloadbrokerageindustry.Titaniumbroughta clamagainst B.S.D. and twoof itsformer employees,AndrewShim(“Shim”)andDavidDal Bello(“DalBello”)toenforce certainconfidenAalityandnon-solicitaAon terms in contracts they had signedwith Titanium in connecAon their prioremployment with that company. Titanium alsoasserted that Shim and Dal Bello were keyemployees who had breached fiduciary duAesowed to Titanium when they lei Titanium toworkforB.S.D.

Titaniumhadcarriedonbusiness asa loadbrokerfor its customers since 2002. Shim startedworkingas anaccount execuAvefor TitaniuminJuly 2013.Dal Bellowas hiredby TitaniumasanaccountexecuAveinJune2015.

As accountexecuAves atTitanium,ShimandDalBello were responsible for developing andmaintaining customer accounts. This includedproviding quotes for shipping services tocustomers and prospecAve customers, sourcingperforming carriers and coordinaAng freightcarriage logisAcs. Titanium asserted that in thecourse oftheseacAviAesthatShimandDalBellowere privy tosensiAveandproprietarycustomerlistandpricinginformaAon.

Shim and Dal Bello had signed an employmentagreement with Titanium that contained aconfidenAality and non-solicitaAon clauseprovidingthattheywould:

…well andfaithfully service[Titanium]anduse his … best efforts to promote theinterestthereof,andshallnot,duringhis…

employment and for a period of 12months following terminaXon of his …employment for any reason…disclose theprivate affairs of [Titanium], or any tradesecret, confidenXal or proprietaryinformaXon of [Titanium] to any personother than the President, and shall notsolicit any of the customers of thecompany,whetherformerorcurrentattheAmeofterminaAonor intheprevious twoyears, or otherwise directly or indirectlyamempt in any way to obtain from thosecustomersor formercustomersbusinesstothe detriment of [Titanium] for anycompeXXve endeavour, whether [Shim]parAcipates is [sic] such endeavors as anemployee a partner, a shareholder, anagent,a consultantorotherwise.[emphasisadded]

Inits courtacAon,TitaniumcomplainedthataiertheyresignedfromittoworkforB.S.D.thatShimandDal Bellothen improperly used confidenAalTitanium informaAon for B.S.D. to competeagainstit.

Titanium applied to theOntario Superior CourtforaninjuncAonrestrainingB.S.D., ShimandDalBello from soliciAng new business with 93companies that Titanium asserted to beestablished customers. On September 14, 2017theOntario Superior Court of JusAcegranted atemporary injuncAon “protecAng” Titanium inrespect of these customers. Titaniumsought anextensionofthis injuncAverelief,alsoseekinganorderthatthedefendants notbeallowedtodealwithyetafurther Titaniumcustomer,namely KPBuilding Products Inc. (“KP”). Titanium hadprovidedbrokeringservices forKPsinceMarchof2015. In 2016, Titanium billed KP just over $1millionandwas ontracktobill a similaramountin2017.ShimhadbeentheaccountexecuAveforKPwhile hewasat Titanium.Aier Shim resignedfrom Titanium, KP informed Titanium that itwould no longer be using Titanium for freight-forwardingservices.

Dal Bellodidnotobjecttothis applicaAon.B.S.D.and Shim did, however, “pushback”, opposing


this “injuncAon extension” applicaAon. Theywantedtoservice the93 companiesinquesAonaswellasKP.

Titanium filed evidence that while at Titanium,Shimwasresponsiblefor 43 customer accountsand had coord inated the log isAcs forapproximately 1207 loads through over 800lanes. Shim did not deny these facts. Theevidence also indicated that Dal Bello wasresponsible for 45 customer accounts,coordinaAng approximately 425 loads through350 freightlanes. Titaniumassertedthat that asaccount execuAves, they gained access toconfidenAal informaAon criAcal to its marketcompeAAveness.

Titanium filed in evidence a “Rate and LoadConfirmaAon” form issued by B.S.D. for a KPshipment, which Titanium had received byaccidentonAugust4,2017. This wasdatedaierShimandDalBellohadleiTitaniumtoworkforB.S.D. confirmedthat B.S.D.was usingthe samefreight lanesthat Titaniumhad beenpreviouslyservicing for KP and that B.S.D. had exactlymatched Titanium’s pricing. Titanium alsoproducedShim’s emaildatedAugust1,2017-theday aier Shim resigned – sent to anotherTitaniumcustomerstaAng:

… If you have any shipments this weekpleasedonothesitatetoreachouttomeorour team and we can provide rates andavailability.”

Shimcounteredthathe hadobtaineda publiclyavailable contact list of approximately 2000companies in Ontario that used freight-forwardingservicesandthathehadsentouttheabove“emailblast” tothosecompanies. Hedidnot dispute that someof Titanium’s customersmayhavebeenrecipients,butstatedthathewasnot aware of the idenAty of all of Titanium’scurrentor formercustomers.Hedeniedthattheaboveemail was anamempttosolicitTitanium’scustomers.

As farasKPwasconcerned,Shimdidnotdisputethat B.S.D. was providing freight-forwarding

services for it, but he submimed that Titaniumhad lost KP’s business as it did not have thecorrect typeof truck tomove KP’s productandKPhadbecome“verydispleased”withTitanium.TheCourthowever foundthere tobe insufficientevidencetosupportShim’s asserAons thatKPnolongerusedTitaniumowingtoserviceissues.

Titaniumalsoallegedthatoneof its employees,Brian Rupnarain, was approached by Shim inJanuary 2017 to “start up our own truckingbrokerageand for all of us to leave Titanium”.Shimdenieddoingthis.ShimalsodeniedthathehadanyconfidenAal informaAonofTitaniumanddenied taking any customer lists, documents orother informaAon from Titanium. His evidencewasthat therates and prices usedby Titaniumwere not tradesecretsandwerewell known intheindustry.

Shim raised various defences to Titanium’scomplaints that he used its confidenAalinformaAontoimproperlysolicitcustomers:

i) The language in the above non-solicitaAonagreementwas notenforceableasitwastoobroadandambiguous;

ii) Shimwas not a key employee anddidnotoweafiduciarydutytoTitanium;

iii) B.S.D. was not in compeAAon withTitanium;and

iv)ShimhadnorecollecAonofever seeingthe subject employment agreement, letaloneeversigningit,althoughheconceded“certain iniAals on the agreement lookedsimilartohissignature”.

Titanium’srequesttoExtendtheInjuncMon

Having review the facts of the case the Courtaddressedthefollowing:

1. What is the applicable test to obtain aninjuncAon?

2.DidTitaniumMeetthis Testonthe Facts ofthisCase?


1.WhatistheTesttoObtainanInjuncMon?

In RJR-MacDonald Inc. v. Canada (A9orneyGeneral) (*2), theCourt establisheda threeparttest for a court to grant an interlocutoryjudgment:

i)Theparty requesAng theinjuncAonmustshow that there is a serious issue to betried, andthat it hasan apparently strongcase;ii) Irreparable harm would be suffered bythe applicant if the injuncAon is notgranted;andiii)TakingintoconsideraAontheinterestoftheparAesandthefactsofthecase,thebalanceofconveniencemustfavourgranAngtheinjuncAon.

As further arAculatedinthe caseofAltusGroupLimited.v.Yeoman(“Altus”)(*3)onanapplicaAonfor an injuncAon, the court must undertake apreliminaryanalysis toassess thestrengthoftheplainAff’s case and of the defences which areoffered in order to determine if an injuncAonshouldbe granted.Thetestis whetherthereis apresumpAvely strong case – in legal terms, a“prima facie case”. The Court took this intoconsideraAon,bearinginmindthatTitaniumwasseeking to enforce the non-solicitaAonagreement which might have the effect ofrestricAng B.S.D.’s operaAonsand Shim’s abilitytoearnalivelihood.Thesecondandthirdpartsofthetest,beingthatof“irreparableharm”and“balance of convenience”, would then beconsidered in the event that this first test wassaAsfied.

2.ShouldTitaniumObtainanInjuncMonontheFactsofthisCase?

i)Was Therea “Serious Issue”tobeTriedanddidTitaniumhaveanapparentstrongcase?

In its analysis, the Court first took intoconsideraAon Shim’s asserAon that the non-solicitaAonclausewas not enforceableas itwastoo broadly worded. The Court noted thedecision in Mason v. Chem-Trend Limited

Partnership (“Mason”) (*4) which reviewed thegoverningprinciples whenconsideringwhetherarestricAvecovenantinanemploymentcontractisoverlybroad(orunreasonable)soas tothereforebeunenforceable:

-Tobeenforceable,thecovenantmust be"reasonablebetween theparAes andwithreferencetothepublicinterest";

-Thebalance is betweenthepublicinterestin maintaining open compeAAon anddiscouragingrestraintontradeontheonehand, andon theotherhand, the right ofanemployer to theprotecAonof its tradesecrets,confidenAal informaAonandtradeconnecAons;

-Thevalidity,or otherwise,ofa restricAvecovenant canbe determinedonlyuponanoverall assessment of the clause, theagreementwithinwhichit is foundandallofthesurroundingcircumstances;

- In that context, the three factors to beconsideredare(1)did the employerhaveaproprietary interest enAtled toprotecAon;(2) are the temporal or spaAal limits toobroad;and(3)isthe covenantoverlybroadin the acAvity it proscribes because itprohibits compeAAongenerallyandnotjustsolicitaAonoftheemployer'scustomers?

The Court then considered the case of BensonKearley & Associates Insurance Brokers Ltd. v.Jeffrey Valerio, (“Benson”)(*5)whichconsideredcertaingeneral principlesapplicabletorestricAvecovenants:

… non-solicitaAon clauses, suitablyrestrained in temporal and spaAal terms(are)morelikely torepresentareasonablebalanceofthe compeAnginterests thanisanon-compeAAon clause. An appropriatelylimited non-solicitaAon clause offersprotecAonforanemployerwithoutundulycompromisingaperson's ability toworkinhis or her chosenfield. Anon-compeAAon


clause, on theother hand, is enforceableonlyinexcepAonalcircumstances….

InBenson,theCourtfoundthata non-solicitaAonclause was unreasonableas it was of unlimitedduraAon.Onthatbasis,it foundthe plainAffhadnot met the strong “prima facie test”. In thepresent case, the Court noted that the non-solicitaAonclausehadonly a12monthduraAonduring which Ame Shim could not solicitTitanium’scustomers.Onthatbasis,the Titaniumcontract term was not considered to beunreasonable.

TheCourtalsonotedthat,intheBensoncase,thetrial judge was also concerned as the non-solicitaAonclausedealt withallof theplainAff’sclients andnot just those whom the defendantknew or those to whom it had access. Theconcernwasthatthe defendantwouldthereforehavenoway of knowingwhether any parAcularpotenAal client was a current client of theplainAff.

The same issue was raised in theMason case,cited above, where the non-solicitaAon clausestated that theformer employeecouldnotdealwith any customer of the company during theperiod in which he was an employee. In theMason case, the former employee had workedfor theemployer for 17 years andthecompanyhad worldwide operaAons. The restricAon wasnotlimitedjusttothecustomers thatthe formeremployeehaddealtwith,butall customers.TheCourtofAppealinMason foundthat theformeremployee did not know and would not haveaccess toa listofall ofthe company’s customersand that the restricAon was overly broad andunworkable and, therefore, unreasonable andunenforceable.

The non-solicitaAon clause in the Titaniumagreement includedaprovision that Shim couldnotsolicitanyofTitanium’s currentcustomers orthose that existed in the prior two years.Titaniumhoweversoughttorestrictaccess tothe93 customers (and KP), being a finite lisAng ofcompanies. Accordingly Titanium assertedthat

the restricAon was not overly broad and was,therefore,enforceable.

Inthe circumstances,the CourtwassaAsfiedthatTitaniumhadestablished a“serious issuetobetried” anda strongpresumpAonthat therehadbeena breachofthe non-solicitaAonagreement.Accordingly TitaniumestablishedthefirstcriteriaofobtainingtheextensiontotheinjuncAon.

WasShimA“KeyEmployee”?

In the course of its analysis on the test for aninjuncAon, theCourt also consideredTitanium’sconcerns that Shim owed it fiduciary duAes.CiAng the Benson case, the Court noted allemployees have certain basic duAes to theiremployer. In that case the judge had ruled asfollows:

All employeeshavecertainbasic duAes totheir employers of loyalty and confidenceduringthecourseof their employment. Intheabsenceofa validrestricAve covenant,however, ordinary or “mere” employeesare free to compete with their formeremployers once their employment isterminatedsubjecttothe caveatthathe orshemay not make use of the employer’sconfidenAal informaAon, suchascustomerlists or tradesecrets.Ahigherdutyappliesto a former employee who may becharacterized as “top management”,“seniormanagement”ora“keyemployee”on the basis of the funcAons and duAesperformed. Such a “key employee” mayhaveapost-employmentfiduciarydutythatprecludes him or her from soliciAng aformeremployer’sclientsorcustomers.

A determinaAonof whether or not Shimwas akeyemployeewas nottobebasedonhis jobAtle.An important factor would be whether thebeneficiary,Titanium,was“unusuallyvulnerable”tothefiduciary.

Taking the above and all of the circumstancesinto account, the Court was not saAsfied thatShimwasa keyemployeeatTitanium.Hewas not


amanager or a director of Titanium. Hewas acommissioned salespersonwho hadworked forTitaniumfor four years.Hewas not a long-termemployee.Therewasnoevidencefiledastohowmanyother commissionedsalesemployees wereemployed by Titanium, or what revenue wasgeneratedbyShimforTitanium. AccordinglytheCourtlackedanycontexttogaugeShim’srelaAveimportanceinterms offuncAontotheTitaniumoperaAonas a whole. Accordingly Titaniumdidnot prevail under this asserAon; however, asnoted above, it met the iniAal test for aninjuncAonbyvirtue ofthenon-solicitaAonclausewordingintheemploymentcontract.

ii)WouldTitaniumsufferirreparableharmiftheinjuncMonwerenotgranted?

Titaniumpresentedevidence that it lost the KPbusiness following Shim’s resignaAon and thecreaAon of B.S.D. Titanium pointed to the factthatKPhadgeneratedover$1millioninrevenueforTitaniumin2016.Titaniumalsocomplainedoftheriskofits losingmarketshare,aswell as a losstoits reputaAonasa resultofallegaAonthatKPhadleionaccountofserviceissues.

In the RJR-Macdonald Inc. v. Canada (A9orneyGeneral) casecitedabove, theCourt gavesomedefiniAon to what may qualify as “irreparableharm”:

"Irreparable" refers to the nature of theharmsufferedratherthanits magnitude.Itis harmwhicheither cannot bequanAfiedin monetary terms or which cannot becured, usually because one party cannotcollect damages from theother. Examplesof theformer include instanceswhereoneparty will be put out of business by thecourt's decision,whereonepartywill sufferpermanent market loss or irrevocabledamage to its business reputaAonorwhere a permanent loss of naturalresources will be the result when achallengedacAvityisnotenjoined.The factthat one party may be impecunious (i.e.unabletopaya judgment topaymonetary

damages ) does not automaAca l l ydeterminethe applicaAonin favour of theotherpartywhowill notulAmatelybeableto collect damages, although it may be arelevantconsideraAon.(*6)

TheAltus decision cited above also consideredtheissueof irreparableharm, withthejudge inthatcasenoAngasfollows:

Evidence ofirreparable harmmustbeclearand not speculaAve. [The plainAff] hasprovided no real evidence other than itsbald statement that it will either losemarket share, or be put out of business.Lost sales and market share can becompensated in damages, and cangenerallybecalculatedonthe basis ofsaleshistories, and sales projecAons. Althoughperhaps difficult, [those] damages can becalculated.Ifthe nature ofthe damagecanbe calculated in money, then no mamerhow hard it may be to the quanAfydamages,the courtshoulddeclinetograntaninjuncAon.

TakingtheforegoingintoconsideraAonthe Courtfoundthat Titaniumhadnot producedsufficientevidencethat itwouldsuffer irreparable harmifthe injuncAon extensionthat it sought was notgranted.Titaniumwasinfactable toquanAfytheloss associated with KP. Presumably, if othercustomerswere alsolost, the issue of damagescould be quanAfied as Titanium would haveinformaAonregardingany lost revenue, as itdidwith KP. Accordingly, Titanium would be ablecontinuewith its claimthat the defendants shouldpay monetary damages for their conduct. FurtherTitanium’s claim for loss of market share anddamage to its reputaAon was found to be toospeculaAve. In simple terms, the Court foundthat the evidence before it only tended tosupportaclaimformonetarydamages.

Accordingly,onthe basis ofthis secondinjuncAverelief test, Titanium failed to secure theinjuncAonitwaslookingfor.

iii)Didthe“BalanceofConvenience”favourTitaniuminobtaininganinjuncMon?


Given the Court’s determinaAon that a case ofirreparableharmhadnotbeenestablished,itwasnot obliged to consider the balance ofconvenience test; however, in the interest ofbeing thorough, the Courtdidaddress the issue,finding that the “balance of convenience” didfavour Titanium. WhileShimhadfiledevidencethat an injuncAon would prevent B.S.D. fromoperaAng, depriving him of the opportunity tomakealiving,theCourtrecalledShim’s evidencethat he had obtained the “publicly availablecontactlistof2000companies”inOntariowhichused freight-forwarding services. Finding thatthere would then be 1,907 potenAal othercustomers for B.S.D. to solicit, the Courtdetermined that, were it to enforce the non-solicitaAon agreement, it would not prevent

B.S.D.fromoperaAonorShimfromworkinginhisfield.

Conclusion

Giventhefindingregardinga lackofevidenceofirreparableharm,Titaniumhadnotmetall oftherequirements required to obtain the injuncAonextensionandaccordinglyitsrequestwasdenied.

GordonHearn

Endnotes(*1)2017ONSC7526(CanLII)(*2)[1994]1SCR311(*3)2012ONSC4406(CanLII)(*4)2011ONCA344(CanLII)atpara.16(*5)2016ONSC4290(CanLII)atpara.39(*6)atpara.64.


5. LukácsAdvocaXngforObesePassengers–SupremeCourtDividedonStandingBeforetheCTA

In February 2017, we reported on the thenpending liAgaAon to be heard by the SupremeCourt of Canada (*1 )withrespect to aFederalCourt of Appeal decision, which overturned adecisionof theCanadianTransportaAon Agency(“CTA”) (*2) dismissing a complaint brought byserial aviaAon liAgant, Dr. Gabor Lukács(“Lukács”)(*3).

Lukács hadbroughtacomplaintbeforetheCTAinwhichhe disputedthepracAces ofDeltaAirLines(“Delta”)inhandlingobesepassengers.Delta hadwrimen toan affected passenger and explainedthat it recommended that obese passengerspurchase twoseats andotherwisetheir pracAcewastomovethepassenger to alternaAveseatswheretherewasnoneighbouringpassengerortomovethepassenger toa laterflight if the flightwasoverbooked.

Lukács broughthis complaint about the pracAcepursuant to s. S. 67.2 (1) of the CanadaTransportaAon Act (the “Act”) (*4). Lukácsalleged that Delta’s stated pracAce was (i)discriminatory,(ii)inbreachofs.111(2)oftheAirTransportaMon RegulaMons which exclude anairlinefromapplyingtermsandcondiAons ofaircarriage that give any undue or unreasonablepreference or advantage to or in favour of anyperson (*5), and (iii) contrary topreviouscasesd e c i d e d b y t h e C TA c o n c e r n i n g t h eaccommodaAonofdisabledpersons.

The complaint was dismissed on a preliminarybasis raisedby theCTAofits iniAaAveconcerningwhether Lukács had the requisite standing toprosecutethecomplaint. TheCTA decisionheldthatLukács didnothaveprivateintereststandingsincehewaspersonally unaffectedby thepolicyas he stood at six feet tall and weighed 175pounds.

The CTA further held that Lukács did not havepublic interest standing tobring thecomplaint.The CTA denied that public interest standing

could be established absent a challenge to theconsAtuAonalityoflegislaAonorofadministraAveacAons.

Lukács successfullyappealedtotheFederal Courtof Appeal whichfound that thedecisionof theAgencywas unreasonable. Per deMonAgny J.A.,the standing test applied by the CTA wasunreasonable given that S. 67.2 (1) of the Actconfers upon theCTA thejurisdicAontoruleonan allegaAon of discriminatory terms orcondiAons whenever a complaint is brought by“anyperson”.

The Federal Court of Appeal directed that themamerbe returnedtothe CTA for consideraAonofwhethertoinquire intoandhearthecomplaintotherwisethanonthebasisofstanding.

Delta successfully obtained leave from theSupreme Court of Canada to bring an appeal,which was heard on October 4, 2017, with adecisionreleasedonJanuary 19,2018(*6). TheCourtwas splitona 6-3basis.The majorityofthecourt, led by the outgoing Chief JusAceMcLachlanallowedtheappeal inpartonlyontheissue of whether the Federal Court of Appealerred in denying the CTA the opportunity toreconsider the issue of standing in light of theCourt’s comments.ThedissenAngjudges,whosereasonswereexpressedby AbellaJ.,wouldhaveallowed theappeal inwholeand reinstatedthedecisionofthe CTAthatLukács failedtoestablishhis standing as an expression of the discreAonaffordedto the CTA tocontrol its processes bytheAct by enforcing“gatekeepingandscreeningmechanisms”toobviatean“adhocapproach”tostanding.

Neverat issuewas thestandardofreview,whichwasagreedbytheparAes tobe reasonablenessinaccordancewiththecaselawapplicablewhenanadministraAve body interprets its enablinglegislaAon and is called upon to exercisediscreAonthereunder(*7).

The majority found that the CTA decision fellshort of being reasonable on twogrounds. Thefirst reasonfor this was that the CTArecognized


that there wasapossibility tobringacomplaintbefore the CTA pursuant to public intereststanding,butthenproceededtosetoutatestforsuchstandingwhichcouldneverbe met,therebyfemering thediscreAon afforded to the CTA bytheAct.

TheCTAindicatedthattoestablishpublicintereststanding before it on a complaint, eitherlegislaAonoradministraAveacAonwouldhavetobe impugned on consAtuAonal grounds. Giventhat thecomplaintmechanismof s. 67.2 of theActrelatessolely tocomplaints abouttheterms,condiAons and pracAces of air carriers, acomplaint brought would never be challenginglegislaAonoradministraAveacAon.PertheChiefJusAce,“TheimposiAonofatest that canneverbemet could not bewhat Parliament intendedwhen it conferred a broad discreAon on thisadministraAve body to decide whether to hearcomplaints”.

Furthermore, the majority expressed concernthat the standingtest appliedby theCTAwouldexclude public interest groups from everprosecuAnga complaint, whichwouldthus haveto be brought by a directly affected passenger.TheChiefJusAcehighlightedthat successful andimportant advocacy groups, suchas theCouncilof Canadians withDisabiliAes,wouldnever havestandingtobringa complaintpursuanttothetestsetoutby theCTA.(*8)TheCTA’stest,the Courtfound,wasinconsistentwithandunreasonableinlight ofthe broadremedial powers conferredontheCTAbythe Acttointerveneuponacomplaintby any person concerning discriminatory termsandcondiAons.

TheCTAdecisioncouldnot be remediedby thecourt by way of supplementary reasons giventhat, pursuant to the decision of the SupremeCourt,the reasons consistedofthearAculaAonofa testfor standingwhichcouldnotbe reconciledwith the statutory scheme. The courts cannotprovidetheirownreasons as analternaAvewayto support outcomes reached by the CTA.Deference is to be owed to the CTA and,therefore,its roleofdeterminingwhentohearacomplaintcouldnotbeusurpedby theSupreme

Courtonthebasisthatit,the CTA,hadappliedanunreasonabletestinthiscase.

TheChief JusAce andthemajority did howeveragree withthedissenAngcohortthattheFederalCourtofAppeal wenttoofar indirecAngthatthemamer should be reconsidered by the CTAwithoutreferencetothe issue ofstanding.Therewasnobasis todenytheCTAtheopportunitytoreconsider the standing issue given thelegislature’s intentthatdeferencebeaffordedtothe CTA’s determinaAon of its own complaintsprocess.

MarkGlynn

Endnotes

(*1) Delta Air Lines Inc. v. Gábor Lukács, 2017CanLII8567 (*2) Lukácsv. Canada (TransportaMon Agency),2016FCA220(*3) Decision No. 425-C-A-2014 (November 25,2015) Complaint by Gábor Lukács against DeltaAir Lines, Inc. carrying on business as Delta AirLines,DeltaandDeltaShu9le(*4)CanadaTransportaMonAct,SC1996,c10(*5)AirTransportaMonRegulaMons(SOR/88-58)(*6)DeltaAirLinesInc.v.Lukács2018SCC2(*7)Dunsmuirv.NewBrunswick2008SCC9(*8) This would have been parAcularlyproblemaAc given the success of theCouncil inbringingcomplaints underotherprovisions oftheAct such as one against VIA Rail where afavourabledecisionofthe CTAwasreinstatedbytheSupremeCourt in2007,CouncilofCanadianswithDisabiliMesv.VIARailCanadaInc.,2007SCC15,[2007]1S.C.R.650


6. TheImportanceofHavingaWell-DraledShareholderAgreement

Are youoneof twoor more shareholdersof abusiness? Have you thought about what yourrightsareif:

(i) youdecidethat youwant to sellyour sharesbutcannotfindabuyer;(ii) the other shareholder decides to sell theirshares tosomeone youdonotparAcularlywanttodobusinesswith;(iii)anothershareholderbecomes ill andis unabletoparAcipateinthebusiness;(iv)youwantyour shares tobetreatedacertainwayuponyourdeath;(v)you’veloaneda large amountofmoneytothecorporaAontoget it startedandnow the othershareholders wish to issue dividends tothemselvesbeforeyourloanispaid;(vi) theother shareholders receive a great offerfor their sharesfromapotenAal buyer andyouwouldliketoparAcipate;(vii)there areanevennumber shareholders andyoucannotagreeonakeyissue;or(viii)youarea minorityshareholderandthe othershareholders want to make a crucial businessdecisionthatyoudonotagreewith?

Ashareholderagreementcanprovidetheanswerto each of these quesAons. It sets out eachshareholder’s rights,privileges andobligaAonsinconnecAon with the business and is a cost-effecAve way of providing a roadmap of howcertain issues will be dealt with, should theyarise. By forcing shareholders to think aheadabout the issues that may affect them in thefuture,a shareholderagreementprovides clarity,certainty and flexibility, and is able to assistshareholders to avoid costly liAgaAon in thefuture.

We s t rong l y recommend tha t p r i va tecorporaAonswithtwoormoreshareholders havea shareholderagreementinplace.Herearesomeof themainways a shareholder agreement canhelp:

DecisionMaking

Generally, business decisions that requireshareholder consent can be made with theapproval of the majority of shareholders. Incertainlimitedcases,a “special majority” (2/3ofvotes) isneededtomakefundamental decisions.In cases where one or more shareholders holdthe majority of voAng rights, the minorityshareholders canbeleiwithlimletonodecision-makingpower.

Ashareholderagreementcanavoidthis situaAonand provide some equalizaAon among theshareholders by se�ng out certainkey businessdec is ions that wi l l require unanimousshareholder approvalbeforetakingeffect.Whatdecisionswill beconsidered“key”will dependonthe business in quesAon but could includeanythingfromsellingallorsubstanAallyallofthecorporaAon’s assets, to taking out abank loan,dissolving the corporaAon, paying dividends,changing execuAve employees’ salaries,purchasing assets over and above a certainmonetarythresholdandevenmoredecisions.

FundingtheBusiness

A shareholder agreement can set out how thecorporaAonmayaccess funds.InparAcular,itcanestablishwhenthe shareholders shouldprovideaddiAonal capital,whethertheprovisionoffundswill be mandatory, the requisite amount thateachshareholdermust contribute, penalAesforfailing todo so, and repayment methods if thefunds will beadvancedasshareholder loans.Forexample, a shareholder agreement could statethatnodividends shouldbedeclaredorpaidunAlcertain shareholder loans have been repaid infull.

Where a corporaAon decides to borrow fundsfroma bankorother thirdparty,theshareholderagreement can set out whether personalguarantees must be provided and how liabilitywillbesharedamongtheshareholders.


AnM-DiluMon

A shareholder agreement can also addresssituaAons wherethe corporaAonintends toissueaddiAonal shares in the capital of thecorporaAon. A “pre-empAve right” clausewouldallowthe exisAng shareholders tofirstsubscribefor addiAonal shares based on their pro-rataownership levels, thereby allowing them toprotect their ownership percentage on futureshareissuances.

ExitStrategies/RestricMonsonShareTransfers

Various circumstances might arise where ashareholder no longer wishes to be part of thebusiness. A shareholder agreement can set outthe circumstances under which a deparAngshareholder may transfer their shares. Mostshareholderagreements will prohibita transferofshares thatare notinaccordancewiththetermssetout intheagreement unlessall shareholdersapprove.Typical provisions includea variaAonofthefollowing:

(i)rightoffirstrefusal:a sellingshareholdermustfirst offer their shares for sale to the othershareholders. If the other shareholders do notwish to purchase the shares, then the sellingshareholder may offer them for sale to a thirdparty. Similarly, if aselling shareholder receivedan offer from a third party, the othershareholders must first have the opAon topurchasethosesharesatthesameprice;

(ii) drag along right: if a majority shareholderwishestosell all oftheir shares toa thirdparty,this clause forces theminorityshareholdertosellalloftheirsharesaswell;

(iii) tag along or piggy back right: where amajority shareholderhas receivedanoffer toselltheir shares, a minority shareholder has theopAon to also sell their shares to the samepurchaser;and

(iv)shot-gunclause:a shareholdermakes anoffertothe remainingshareholders tobuytheirshares

at acertainprice; thoseremaining shareholdersmust either accept the offer or buy theshareholder’s shares at the specified price. ThealternaAve to this scenario could also apply –where the triggering shareholder offers to selltheir shares and theothers must accept or selltheirown.

Theshareholdersmayalsowantcertaintransferstobeallowedundertheagreement,forexample:toatrustorholdingcorporaAoncontrolledbytheshareholder.

Insolvency,Illness,DeathorIncapacitaMon

If a shareholder dies, becomes severely ill,disabled, insolvent or unable/unwilling tocontribute to the business due to some othercause,this canleave a lotofuncertaintyas tothefutureof thebusinessandwhat will happentothat shareholder’s shares. A well-draiedshareholderagreement cansetoutwhether theshares aretobeboughtbythecorporaAonortheremaining shareholders, or transferred toanother beneficiary (perhaps named in theshareholder’s will). The agreement can also setout the method for determining the value ofthose shares and exactly when such disposalmeasuresaretotakeeffect.

Forexample,anagreementmightprovidethatifa shareholder is unable to parAcipate in themanagement of business for 45 days or more,thenthistriggersa requirementfortheremainingshareholders to purchase his/her shares at apredetermined price. The agreement can alsorequire the shareholders to have key maninsuranceinplaceonthelife oftheshareholderstoprovide capital tothecorporaAonorremainingshareholdersshouldatriggeringeventoccur.

From an estate planning perspecAve, it isimportant that the provisionsof theshareholderagreementandtheshareholder’swill arealignedtoavoidany uncertainty thatmightariseif theywere tocontradicteachother.AddiAonally,theremay be tax consequences associatedwith eachmethodofdisposal whichshouldbe consideredbytheshareholder.


DisputeResoluMonandOtherClauses

Ifshareholders prefertoavoidliAgaAngamamerin a courtroom, they can ensure that theshareholder agreement provides for alternaAvemethods ofdisputeresoluAon,suchasmediaAonor arbitraAon. This can be parAcularly usefulwherethere areanevennumberofshareholdersand a Ae-breaker vote may be needed onparAcularissues.

Anagreement canalso includenon-compeAAonclauses thatwouldapplywhena shareholder nolonger holds shares in the CorporaAon. AnaddiAonal clause could include the method tocalculatethecurrentvalueofthebusiness.

WhyYouShouldActNow

Thesooner that shareholders thinkabout theseissues and put an agreement inplace, the lessheadache, cost, andpossibility of liAgaAonthatthey will face in the future. A shareholderagreement provides clarity and certainty to therelaAonship between business owners. With ashareholder agreement set up, the business isable to runmore smoothly because its ownersknow that they havea proper conAngency planthatdealswiththeirkeyconcerns.

JaclyneReive

Twi9er:@jaclyne_reiveBlog:h9ps://jaclynereive.wordpress.com


https://jaclynereive.wordpress.com

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DISCLAIMER & TERMS This newsletter is published to keep our clients and friends informed of new and important legal developments. It is intended for information purposes only and does not constitute legal advice. You should not act or fail to act on anything based on any of the material contained herein without first consulting with a lawyer. The reading, sending or receiving of information from or via the newsletter does not create a lawyer-client relationship. Unless otherwise noted, all content on this newsletter (the "Content") including images, illustrations, designs, icons, photographs, and written and other materials are copyrights, trade-marks and/or other intellectual properties owned, controlled or licensed by Fernandes Hearn LLP. The Content may not be otherwise used, reproduced, broadcast, published,or retransmitted without the prior written permission of Fernandes Hearn LLP.

Editor: Rui Fernandes, Articles Copyright Fernandes Hearn LLP, 2018

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