Wednesday, 23 May 2012

Court Hearing Fees Are Struck Down as Unconstitutional

In a judgment released yesterday, the Honourable Mr. Justice McEwan declared unconstitutional the hearing fees charged by the B.C. Crown for use of courtrooms for hearings or trials.

In a tour de force 178-page judgment, which considered intervenor submissions from TLABC and CBA BC and took over two years to render, Justice McEwan reviewed the constitutional history of Canadian courts (starting from the Magna Carta), reviewed Charter and other access to justice considerations, and even likened access to the courts with public expectation of free health care.  Ultimately, he concluded with the following key lessons for the government:
(1) Access to the s. 96 courts is a fundamental premise of the constitutional arrangement of Canada which cannot be materially hindered by anyone (BCGEU), including either Parliament or the legislatures, just as public and political discourse may not be abrogated by law (Alberta Reference).
(2) The mandate of the province under s. 92(14) is to maintain, that is, to provide adequately for, the courts. It does not include the power to legislate in a manner that impairs the court’s ability to fulfill its proper role in a democracy. This responsibility is of precisely the same importance as the responsibility of governments to maintain the functions of legislatures and the executive branches of government. As a constitutional responsibility, the maintenance of the superior courts does not compete with the government’s discretionary expenditures.
(3) Hearing fees are a barrier to access imposed by one branch of government over another. For the reasons I have set out, this creates a constitutionally untenable appearance of hierarchy. The court cannot fulfill its democratic function as an independent and impartial arbiter between government and the individual, or between individuals, if the government limits those who may come before the court by means of financial or procedural deterrents. ...
(5) Fees charged by government for services rendered in individual cases, such as filing fees, do not constitute impermissible impediments to access, and as such fall within the legislative ambit of the province under s. 92(14) and its responsibility for the administration of justice. There is no alternative to that kind of assistance, and it is of direct individual benefit. Although the government is not bound to charge such fees on a strict cost recovery basis (see Eurig Estate (SCC), para. 80 herein), the fees charged, given the limited nature of such services, could not “reasonably” rise to a level that are not affordable by all but the truly poor or indigent. To the extent that, for those properly described as indigent, such fees constitute an impediment to access, the exemption is available.
(6) The question posed by this case was limited to the constitutionality of hearing fees. In this respect, the focus was narrower than the focus in Pleau which also addressed, among other things, jury fees. To the extent Pleau is applicable to the issue in this case, I have accepted that court’s conclusions, and the distinction it recognized between hearing fees and fees for services. I have rejected the AGBC’s position that there are no distinctions among fees and that government’s discretion is not limited as to the fees it may impose. ...

The actual effect of the judgment is somewhat unclear, since Justice McEwan only struck down the hearing fees under the old Rules:
[432] For the reasons I have given, I find that the hearing fees set out in paragraph 14 of Appendix C Schedule 1 (B.C. Regulation 10/96 as amended) (see para. 70 herein) are unconstitutional, and that neither Ms. Vilardell nor Mr. Dunham is liable to pay them.
How this applies to the current hearing fees under paragraphs 9 and 10 of Appendix C Schedule 1 (B.C. Reg. 119/2010) remains to be seen.

Monday, 21 May 2012

A Foreign Restraining Order Cannot Ground a CPL

In the globalized world of business litigation, it is not unusual to run into a multi-jurisdictional case.  For example, while the main proceedings may take place in in U.S., a defendant may reside or have assets in B.C.  A common issue in such proceedings is enforcement of foreign orders (not necessarily monetary judgments) against B.C. residents and/or their assets.  In Rissman v. Chen, 2012 BCSC 715, the court explained that one enforcement avenue not available in such cases is the use of a CPL against a B.C. property to enforce a foreign injunction against disposition of asset.

Friday, 18 May 2012

LPA Review of a Solicitor's Bill Trumps a Solicitor's Lien

Lawyers protect clients, but, sometimes, the two need to be protected from each other. 

Imagine a client unhappy about a lawyer's bill: the client decides to not pay and takes out an appointment under s. 70 of the Legal Profession Act to have the bill reviewed by a Registrar.  Until the review is completed or withdrawn, s. 70(12) prevents a lawyer from proceeding with a suit for the money owed.  Undoubtedly, this is inconvenient for the lawyer, but there is a solid rationale for this procedure: for example, addressing the inherent imbalance of power between clients and lawyers, and confirming to the public that, as officers of the court, we are held to a higher standard and also subject to the court's supervisory jurisdiction.

Imagine a slightly different situation: a client does not pay the bill but demands that his file be transferred to a new lawyer.  The former lawyer asserts a solicitor's lien and refuses to transfer the file until fees are paid.  The client may then apply to court under ss. 77 and 78 of the LPA for the release of the file and the court may order payment of fees or security.  Undoubtedly, this is inconvenient for the client, but there is a solid rationale for this procedure as well: for example, ensuring access to justice by protecting lawyers and encouraging them to take on files despite doubts about client's willingness to pay.

What happens, however, when these procedures for protecting lawyers and clients from each other overlap?  Does a lawyer's right to a solicitor's lien trump the client's right to have a bill reviewed and, in the process of the review, the right to obtain from the lawyer all documents necessary for that review?  As Master Taylor, sitting as Registrar, explained in Shapray Cramer LLP v. Mitschele, 2012 BCSC 702, "some meaningful space can be made for both objectives."

Rules 18-1(5), 23-6(4) and 23-6(5), give the Registrar broad powers to make orders to facilitate s. 70 reviews, including ordering a pre-hearing conference and production of documents.  These powers can partially impair an asserted solicitor's lien because it would be "contrary to the stated goals of the new Rules to require that parties who are applying [for a s. 70 review] to bring an application to Supreme Court pursuant to ss. 77 & 78 to retrieve documents necessary for the registrar to conduct a review."  Thus, in no uncertain language, Master Taylor concluded that principles of fairness and fundamental justice require disclosure of relevant documents and do not allow a lawyer to use a solicitor's lien to effectively frustrate the review process:
[59]         If the documents are relevant to the review hearing pursuant to s. 70 of the Act, then the clients cannot prepare their case without reference to the copies of the documents in question and the respondent is hindered in its attempt to recover the funds potentially owed. Nor should the clients be left at the mercy of the solicitors by being given documents which the solicitors ,  in their sole discretion ,  think are necessary for the clients’ needs to conduct the hearing. This concept, in my view, would be contrary to the principles of fairness and fundamental justice.
[60]         Consequently, allowing the clients to have access to the requested documents promotes the interests of both parties. It is only in the event that the solicitors provided the applicants with an unreasonable bill that those funds would not (and therefore should not) be recovered. If this is indeed the case then the pro forma step requiring clients to make an additional application in the Supreme Court is a hurdle in the way of clients who seek the documents necessary to challenge what they say is an unreasonable bill of costs.

Wednesday, 9 May 2012

Oppression Remedy Does Not Protect Directors' Access to Corporate Records

It is trite law that directors, as the persons wholly responsible for management of a corporation, are entitled to access all corporate records, including all financial and accounting records of a company.  Under the BCA, this right is enshrined in s. 196(3), which provides that:

(3) A company must make its accounting records available for inspection by any director during statutory business hours and must, on request, provide to the director a copy of any of those records.
What happens, however, when a director is denied access to these records, for example, by majority or de facto managing directors?  As the court explained in Brown v. Dee Lake Resort Ltd., 2012 BCSC 647, albeit without any substantive analysis, such denial does not provide a valid basis for an oppression claim under s. 227 because this remedy only protects shareholders', and not directors' rights:
... what the petitioners are really seeking is a declaration that the company’s acts have been oppressive or unfairly prejudicial to the petitioner/directors because the director/petitioners were not being given access to those data.

The fatal flaw in that submission is that these complaints have to do with rights, interests or positions that accrue to the petitioners in their capacities as directors. In short, the complaints have to do with directors’ rights, not shareholders’ rights. Therefore, whether the petitioners’ complaints about access to financial and reservations data are founded in fact or not, they cannot bottom a proceeding under s. 227.
Fortunately, directors are not without a recourse.  As mentioned in yesterday's post, also dealing with the oppression remedy, s. 228(2) should allow the court to issue an injunction to direct a company, shareholder, or director to comply with the Act, including compliance with s. 196:


Tuesday, 8 May 2012

Failure to Issue Proper Financial Statements and Hold AGMs is Shareholder Oppression


Section 227 of the Business Corporations Act is in many ways the equitable Swiss army knife of corporate law.  Operating on the basis of parties' reasonable expectations rather than pure legal rights, it allows the courts to apply what are essentially equitable principles to ensure that minority shareholders are not treated in a way that is "oppressive" or "unfairly prejudicial".  These are open-ended concepts and impugned conduct can take a myriad different forms, such as exclusion from management, removal as a director, or unfair dilution of holdings, to name just a few.  

In the context of small closely held companies, a particularly common complaint is the failure of the majority shareholder or directors to comply with corporate obligations such as preparing and issuing financial statements in compliance with (s. 199) and holding AGMs (s. 182).  In Red Line Enterprises Ltd. v. Six Mile Pub Ltd., 2012 BCSC 628, the court confirmed that this type of conduct is oppressive and may be remedied by a compliance order against the company and its directors.

Tuesday, 1 May 2012

Documents in Possession of Advisors May Not Be Producible

Often, documents are sought from a party that may be in possession of that party's professional advisors, e.g., lawyers, accountants, etc.  The basis for this request is R. 7-1(11) and (14), which provide for production of documents "that are or have been in the party's possession, power or control".  The application of these provisions was recently considered in The Owners, Strata Plan No. VIS3578 v. Canan Investment Group Ltd., 2012 BCSC 607, with what may be somewhat surprising results.

Because the defendant advised that documents sought by the plaintiff were no longer in its possession, the plaintiff sought an order to require the defendant "to make inquiries of various unspecified professionals such as accountants, solicitors and tax advisors who provided services to [defendant] at the relevant time concerning the enumerated documents, and to attempt to obtain the documents from these professionals."

Considering this request, the court accepted that "power or control" includes "all documents which, though not in the party's possession, he has a right to obtain from the person who has them": Lacker v. Lacker (1982), 42 B.C.L.R. 188 (S.C.).  Moreover, the court also accepted that it this principle has been applied to documents in possession of a lawyer because the agency relationship with the client: Jones, Gable & Company Limited v. Price (1977), 5 B.C.L.R. 103.  Nevertheless, the court dismissed the application on the basis that the plaintiff did not present any evidence regarding the nature of the retainers with these professionals; holding that "Depending on the nature of the retainer, there may or may not have been an agency relationship."