Thursday, 16 May 2013

Contractual Unconscionability - You Get What You Pay For

Service contracts often include liability exclusion clauses which limit liability for breach of contract and for negligence in performing the contracted service to the amount actually paid under the contract.  Naturally, if the contract is not properly performed and the recipient of the service suffers damages, they may attempt to convince a court that the exclusion clause is either not applicable to the particular negligence or breach, or should not be enforced because it is unconscionable or contrary to public policy.  

In considering whether a contractual term is unconscionable, courts look at two factors:
(a) inequality in the position of the parties arising from the ignorance, need or distress of the weaker, which left him in the power of the stronger; and
(b) proof of substantial unfairness in the bargain.
(see for example Loychuk v. Cougar Mountain Adventures Ltd., 2012 BCCA 122 at paras. 29-31 and McNeill v.Vandenberg, 2010 BCCA 583 at para. 15)

As shown by the recent decision in Gordon v. Krieg, 2013 BCSC 842, in considering whether a particular bargain is unfair, courts apply a common sense approach whereby they consider the service that was provided, how much was paid for the service, and the potential damages that could result from an improper performance.  In this particular decision, the court concluded that it was not an unfair bargain to limit damages arising from a visual only, three-hour home inspection - which damages could be in tens, if not hundreds of thousands of dollars - to the $400 paid for the inspection.

Thursday, 9 May 2013

Interpretation of a Precedent is a Question of Law

Under section 31 of the Arbitration Act, an appeal from an arbitrator's decision (other than in family matters) can only be taken on a pure question of law with leave of the court.  Issues of fact or mixed fact and law are not appealable.  The distinction between different types of issues was explained by the SCC in Canada(Director of Investigation and Research) v. Southam Inc.:
35 ... Briefly stated, questions of law are questions about what the correct legal test is; questions of fact are questions about what actually took place between the parties; and questions of mixed law and fact are questions about whether the facts satisfy the legal tests.
Despite the definition, determining whether a particular issue is a pure question of law is often a difficult task and counsel, as well as the courts, have often struggled trying to categorize particular issues.  Adding to the case law dealing with categorization of issues is the recent decision in Teal Cedar Products Ltd. v. British Columbia (Ministry of Forests), 2013 BCSC 788, where the court held that a proper interpretation of a legal precedent, such as a decision of the Court of Appeal, is a question of law for which leave to appeal may be granted:
[43] It is my conclusion that the application does raise a question of law, namely, the proper interpretation of the decision of the Court of Appeal in MacMillan Bloedel. The Arbitrator decided that MacMillan Bloedel stands for two propositions that are relevant to Teal’s claim to a gross-up award:
  1. In the absence of evidence that tax will be payable on the award, and where there is positive evidence of tax losses available to be applied by the awardee, there is no entitlement to a gross-up; and
  2. The use of existing tax loss credits to offset the income effect of the award does not constitute improperly requiring an awardee to use or expend an asset unrelated to the award.
[44] He applied those principles to the facts at hand and concluded that Teal did not require a tax gross-up.

[45] Accordingly, I find the petition raises a question of law and, if other relevant considerations are satisfied, leave should be granted.

Thursday, 2 May 2013

Freeing Up Masters' Chambers (Yes, We Are Back)!

After an all too long hiatus spent, among other things, studying for and writing patent agent exams, we are back and will strive for weekly posts!

Quietly announced on April 30, 2013, was a much-awaited change to the Masters' Chambers that should, hopefully, reduce wait times and increase the likelihood of actually being heard. 

Long overdue, effective May 27, 2013, ordinary (non-urgent) foreclosure matters will only be heard in Masters’ chambers on Mondays and Thursdays, and there will be an additional Master on those days assigned to the foreclosure list.  This should effectively add 60-90 minutes of daily capacity to Masters' Chambers, which were previously spent on uncontested foreclosure applications.


Tuesday, 30 October 2012

BCCA Approves Shareholder Camouflage

Under the B.C. Business Corporations Act, and under other Canadian corporate statutes, every company must maintain a "central securities register" where it records the registered owners of the company's issued and outstanding shares.

For private companies, the persons listed in the securities register are generally the actual shareholders or persons who hold shares in trust for the beneficial shareholders.  For publicly traded companies, however, most of the issued shares are usually registered in the name of Canada’s national securities depository, CDS Clearing and Depository Services Inc. ("CDS").  CDS holds shares on behalf of intermediaries, such as brokerage firms and investment funds, who in turn hold and/or control shares on behalf of their investors or sometimes other intermediaries.

From a practical standpoint, CDS functions as an outsourced central securities register, recording share ownership and clearing and facilitating share trading and transfers pur, but not holding or controlling the shares on its own behalf.  As explained in TELUS Corporation v. Mason Capital Management LLC, 2012 BCCA 403, however, from the corporate law standpoint, CDS a bona fide registered shareholder with the appurtenant rights, including the right to call a general meeting.

Tuesday, 2 October 2012

Claims for "Knowing Assistance in Breach of Trust" or "Knowing Receipt of Trust Property" Are Sufficient to Establish Jurisdiction

After a brief hiatus, spent traveling and litigating, we are back!

The Court Jurisdiction and Proceedings Transfer Act is an complete code of jurisdiction simpliciter (now called "territorial competence") and forum non convenience rules applicable in B.C.  Generally, a B.C. court has territorial competence over a party in a proceeding if that party is ordinarily resident in B.C. or if there is a real and substantial connection between B.C. and the facts on which a proceeding is based.  In particular, section 10 sets out a list of situations where real and substantial connection is presumed, including in actions for breach of trust where the trust has a proprietary or administrative connection to B.C.:

10  ... a real and substantial connection between British Columbia and those facts is presumed to exist if the proceeding

(d) is brought against a trustee in relation to the carrying out of a trust in any of the following circumstances:

(i)  the trust assets include property in British Columbia that is immovable or movable property and the relief claimed is only as to that property;
(ii)  that trustee is ordinarily resident in British Columbia;
(iii)  the administration of the trust is principally carried on in British Columbia;
(iv)  by the express terms of a trust document, the trust is governed by the law of British Columbia,

Although s. 10(d) appears to only apply to actions “against a trustee”, in Right Business Limited v. Affluent Public Limited, 2012 BCCA 375, the Court of Appeal agreed that this presumption extends to actions against non-trustees for knowing assistance in breach of trust or knowing receipt of trust property.  The Court provided two grounds for this conclusion:

1)      the statement of Groberman J.A. in Olney v. Rainville, 2009 BCCA 380 at para. 27, Groberman J.A, that the words of s. 10 “real and substantial connection” should be construed broadly and not in an overly technical manner, which would bring claims “for knowing assistance or knowing receipt” under the trust claims in s. 10(d); and

2)      the principle that “a non-trustee [who] who knowingly assists in a breach of trust or knowingly receives trust property or benefit by reason of breach of trust …  may be construed as a constructive trustee and could be held jointly or severally liable to the wronged beneficiary as if he were the trustee who participated in the breach of trust”, as expressed in Bikur Cholim Jewish Volunteer Services v. Langston 2009 ONCA 196 and Halsbury’s Laws of Canada – Trusts (Hoffstein), “Administration of Trusts – Breach of Trust” (Online, LexisNexis Canada Inc.: 2011) at HTR160).

Foreign breach of trust conspirators beware!

Wednesday, 1 August 2012

Production of Redacted Records - Evidentiary Threshold

Whether or not to redact a document or a record is a question that often vexes counsel producing documents as Rule 7-1 is silent on this issue.  On the receiving side, counsel are often forced to decide whether to oppose redaction in the absence of information about what exactly has been redacted and relying solely on the description provided by the producing counsel.  While some judicial guidance had been provided in the past, it was mostly in the context of the Old Rules and, therefore, is of questionable applicability to the new Rules espousing proportionality and two-stage production.  Fortunately, a comprehensive decision of the recently appointed Master Muir in Hadani v. Hadani, 2012 BCSC 1142, which skillfully argued by my colleague Jennifer Loeb on behalf of the plaintiff, provides some useful guidance. 

At issue in Hadani was redaction of medical records to remove portions that concerned injuries and medical conditions not in issue in this proceeding and the disclosure of which would cause embarrassment to the plaintiff.  The Master dismissed the defendant's application for production of unredacted records, finding that the defendant had failed to adduce any evidence that would demonstrate that the redacted portions were actually reasonably connected to any issues in the the proceeding.  In particular, the Master held as follows: