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The BLG Monthly Update is a digest of recent developments in the law whichNeil Guthrie, our National Director of Research, thinks you will find interestingor relevant – or both.

IN THIS MONTH’S EDITION

Administrative law• steadydietofappallingprisonfoodcouldbecruelandunusualpunishmentAdministrative law/securities• penaltiesimposedbysecuritiescommissionconstitutional;stiffinthisinstance,butstillnot penalinnatureCivil procedure• usefulsummaryofprinciplesapplicabletolettersrogatoryCivil procedure/employment law• usefulreviewoffactorsfordecidingwhetherapartycanpleadanoffertosettleConflict of laws• furtherproofthatthehousealwayswins?• jurisdiction–theSupremeCourtofCanadaspeaksConflict of laws/contracts• don’tforgetthechoiceoflawclause!Contracts• lawfulactscanbeeconomicduress,renderingacontractvoidable• unknownrepudiation–groundsforterminationbutnotdamagesContracts/derivatives• literalnotcontextualapproachprevailsininterpretationofISDAMasterAgreementContracts/partnerships/unjust enrichment• partnershipcanarisewithoutwrittenagreement,butnotherebecauseallwas‘subjecttocontract’Corporations• BCgovernmentintroduceslegislationallowingcommunitycontributioncompaniesEmployment law• itdoesn’tmatterwhatyouweredoingwheninjuredonthejobinordertobecompensatedforitEvidence• lawyer’strustaccountledgersnotnecessarilysubjecttosolicitor-clientprivilegeIntellectual property• ISPnotifiedofillegaldownloadingbutstillnotliable,saysHighCourtofAustralia• soundsnoweligiblefortrade-markprotectioninCanadaPrivacy• vicariousliabilityforspamtexts

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ADMINISTRATIVE LAW

Steady diet of appalling prison food could be cruel and unusual punishment

TerrencePrudeallegedthatstaffofthe

MilwaukeeCountyJailhadsubjectedhimtocruel

andunusualpunishmentbecausetheyfedhim

nothingbutnutriloaf,whichJudgePosnerofthe

7thCircuitdescribedas‘abad-tastingfoodgiven

toprisonersasaformofpunishment’,forperiods

ofseventotendaysatatime.Prudeallegedthat

thissteadydietcausedvomiting,stomachpains,

constipation,‘alarming’weightlossandpossibly

ananalfissure(‘whichisnofunatall’,inthe

wordsofthelearnedjudge).

Summaryjudgmentwasinitiallygrantedin

favourofthedefendants,butJudgePosner

thoughtthiswaswrong:theirresponsetothe

suitwas‘contumacious’inthattheyignored

theself-representedPrude’sdiscoverydemands

andthecourt’sordertocomplywiththem.

Thedefendants’evidenceonsummaryjudgment

wasa‘preposterous’hearsayassertionthat

nutriloaf‘hasbeendeterminedtobeanutritious

substanceforregularmeals’.ThefactthatPrude

hadsuedprisonstaffwhohadnotactuallybeen

indifferenttohishealthwasnotfataltohis

appeal;atleastsomeofthemwereawareofthe

direeffectsofnutriloafanddidnothingtohelp.

Thecourtbelowwascorrect,however,tostrike

Prude’sclaimthatitwascrueltoofferhima

sandwich(‘andnotofnutriloaf,either’)asabribe

tospyonotherprisoners;Prudehadrejectedthe

offer,butnotgettingthesandwichmadehimno

worseoffthanhewouldhavebeenotherwise.

Thedefendantswereorderedtoshowcausewhy

theyshouldnotbesanctionedfortheirfloutingof

thelowercourt’sorders;iftheyignoredthisorder,

‘theywillfindthemselvesindeeptrouble’.

Prude v Clarke (7thCir,27March2012)

ADMINISTRATIVE LAW/SECURITIES

Penalties imposed by securities commission found constitutional; stiff in this instance, but still not penal in nature

Rowan,presidentandCEOofWattCarmichael

Inc.(WCI)wasfoundbytheOntarioSecurities

CommissiontohavebreachedOntariosecurities

lawintradingin,andfailingtoreporttradesin,

Privacy/wills & estates:• heirscanassertrightofpublicityindeadperson’simage,saysCaliforniacourtTorts• thesultan,hisex-wife,herbadmintoncoachandthemissingdiamondsTrusts• breachoforaltrust• trustisresidentwherecentralmanagementandcontrolcarriedout,saysSCCUnjust enrichment• uncleanhandsprecludeclaimforcontributionstogrowop

3

sharesofBiovailCorp.EugeneMelnyk,thechair

ofBiovail,hadsetupanumberofoffshoretrusts

whichheldsharesofBiovailandwhich

maintainedaccountsatWCI.Rowanhadtrading

authorityovertheaccountsandwasalsoa

directorofBiovail.RowantradedmillionsofBiovail

sharesbutdidnotfileinsiderreports.TheOSC

concludedhehadnotengagedininsidertrading

buthadbreachedtheinsiderreporting

requirementsandhadengagedinconductthat

wasabusiveoftheintegrityofthecapitalmarkets.

Rowanwasorderedtopayanadministrative

monetarypenalty(AMP)of$520,000;hisfirm,

$420,000forfailingtosupervisehim.Rowanand

WCIwerealsoorderedtopaycostsof$140,000.

TheirappealwasdismissedbytheDivisional

Court;theCommission’sreasonswerecareful,

thoroughandcorrectinlaw.RowanandWCI

appealedagain,arguingtheCommission’s

abilitytoimposeAMPsofupto$1millionper

infractionviolateds11(d)oftheCharter becausethemagnitudeofpotentialAMPsmadethem

penalratherthanadministrativeinnature,

triggeringCharterprotection.TheOntarioCourtofAppealrejectedthiscontention:thelevelof

possibleAMPswas‘entirelyinkeeping’withthe

Commission’sregulatorymandate,andnecessary

toserveasanadequatedeterrenttomisconduct.

RowanalsoarguedthattheCommissionmay

imposeanAMPonlywheretherehasbeenan

actualbreachoftheSecurities Act, notforconductthathasmerelybeenfoundtobecontrary

tothepublicinterest.This,too,wasrejected:

actingcontrarytothepublicinterestwas

‘inextricablylinked’tohisactualbreachofthe

insiderreportingobligations.AMPsforWCI’s

failuretosupervisewerealsoupheld.

Rowan v OSC,2012ONCA208

[Linkavailablehere].

CIVIL PROCEDURE

Useful summary of principles on letters rogatory

ThesummaryisfoundinMcFadden Lyon Rouse LLC v Lookkin,2012ONSC2243,whereJSO’NeillJwasaskedtoenforce

lettersofrequest(lettersrogatory)issued

byacourtinAlabamafortheexamination

oftwopartiesinOntarioforthepurposes

ofanactioninAlabama.

Thefactsofthecasedon’tmuchmatter,

butthejudgedoesprovideaniceoutlineof

thegeneralprinciplesfortheenforcementof

lettersrogatory,withcitations:(a)obtaining

theevidencemusthavebeendulyauthorised

bytheforeigncourt,(b)thewitnesswhose

evidenceissoughtmustbewithinthejurisdiction

oftheenforcingcourt,(c)theevidencesought

mustbeinrelationtoaproceedinginthe

foreigncourtand(d)theforeigncourtmust

beoneofcompetentjurisdiction.TheOntario

courtwillconsiderwhether(i)theevidenceis

relevant,(ii)theevidenceisnecessaryfor

discoveryortrialintheforeignjurisdiction,

(iii)theevidenceisotherwiseunobtainable,

(iv)thedocumentssoughtareidentifiedwith

reasonablespecificity,(v)enforcementwould

becontrarytopublicpolicyinCanadaand

(vi)enforcementwouldbeundulyburdensome.

Thereisapredispositiontoaccommodatethe

requestsofforeigncourts.

[Linkavailablehere].

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CIVIL PROCEDURE /EMPLOYMENT LAW

Useful review of factors for deciding whether a party can plead an offer to settle

MoneyExpressPOSSolutionsInc.madeanoffer

tosettleinitsterminationlettertoRaheelJiwan,

whichJiwanthenreferredtoinhispleadingsina

wrongfuldismissalsuit.Theemployermovedto

havereferencestotheletterexpunged,onthe

groundstheywereprotectedbysettlement

privilege:Jiwan v Money Express POS Solutions Inc,2012ONSC909.

MasterShortoftheOntarioSuperiorCourtgives

ausefulreviewofthecaselawandthefactors

thatwillbeconsideredincasesofthiskind:

(1)wasthecommunicationfromthedefendant?

(yes,inthiscase);(2)wastheplaintiff

contemplatinglitigation?(yes,eventhough

theoffertosettlewasinthesameletterasthe

termination;neithercame‘outoftheblue’from

theemployee’sperspective);(3)wasthe

defendantofferingarealcompromise?(yes);

(4)wasthecommunication‘withoutprejudice’?

(yes,itsaidsospecifically);and(5)wasthe

genuinepurposeofthecommunicationa

settlement?(again,yes).Theparagraphinthe

pleadingswasthereforestruck.

[Linkavailablehere].

CONFLICT OF LAWS

Further proof that the house always wins?

Or,thatwhathappensinVegasdoesn’t

necessarilystayinVegas:Wynn Las Vegas LLC v Teng,2012ONSC1927.TennyTengwenttoLasVegastogamble,havingobtaineda

$300,000lineofcreditfromtheWynncasino

(and,itappears,fromCaesar’sPalaceandthe

Bellagioaswell).TengdrewontheWynnlineof

creditandleftVegasowingadebtof$290,000

(hehadpaid$10,000onarrivalasfrontmoney).

Thetwochequeshehadprovidedassecurity

weredishonoured.Thecasinowas,not

surprisingly,incontactwithTengabouthis

indebtednessandwasnotsatisfiedbyhistales

offinancialdifficultyandpromisestorepay.

ThecasinosuedinOntario,seekingsummary

judgmentfortheoutstandingprincipaland

interest.TengarguedfirstofallthatNevadawas

themoreappropriateforum,giventhelocation

ofwitnessesandthefactthedebtarosethere.

Healsodeniedhavingappliedforthelineof

creditandclaimedevenifhehadsignedthe

application,hewaswasundertheinfluenceof

allthefreedrinksthatthecasinohadpliedhim

withandcouldn’trememberathing.Teng

contendedtheseweregenuineissuesfortrial.

Yeah,right!Thefactthatthecasinocouldhave

suedinNevadawasnotdispositive;thecredit

applicationprovideditcouldpursueremedies

thereorelsewhere;andOntariowas,furthermore,

whereTengresided,wherehisassetswereand

wherethechequesbounced.Tengalsoattorned

tothejurisdictionoftheOntariocourtbyfilinga

defence.Astothe‘genuine’issuesrequiringtrial,

theywerebeliedbyacleartrailofe-mailswhich

establishedthatTenghadsentthecredit

applicationbyfaxfromhome,andthatany

claimnottobeabletoremembersigningthe

documentationaroseafterWynnsuedhim.

Wynnobtainedjudgmentforthefullamountof

thedebtpluspre-judgmentinterestattherate

of18%asstipulatedinthecreditagreement,

post-judgmentinterestof18%andcostsona

partialindemnityscale.

[Linkavailablehere].

5

Jurisdiction: the SCC has spoken

IncaseyoumisseditinApril,theSupreme

CourtofCanadahandeddownitsjudgmentsin

fourcasesabouttheassumptionofjurisdiction

byacourtinproceedingswithamultijuris-

dictionalcharacter.Hardtosummarisebriefly,

butheregoes.

InthecombinedappealsinClub Resorts Ltd v Van Breda and Club Resorts Ltd v Charron, 2012SCC17,whichinvolvedcatastrophicinjuries

(inoneinstancefatal)sustainedbyCanadianson

holidayinCuba,theSCCaffirmedthedecisions

below.LeBelJ,forthecourt,largelyendorsedthe

approachthathadbeentakenbySharpeJA

intheOntarioCourtofAppealinrefiningand

reformulatingthecommon-lawtestfor

assumptionofjurisdiction.A‘realandsubstantial

connection’betweenthedisputeandthe

jurisdictionisrequired,andtheSCCagreedwith

JusticeSharpethatjurisdictionmaybepresumed

onthebasisofcertainfactors,eachofwhichmay

berebuttedbyshowingthatthepresumed

connectionisinfactaweakone.TheSCCdid,

however,narrowtherangeofpresumptive

categoriestothese:(a)thedefendantisresident

ordomiciledinthejurisdiction,(b)thedefendant

carriesonbusinessinthejurisdiction(although

suggestingthatactualnotmerelyvirtualpresence

shouldberequired),(c)thetortwascommittedin

thejurisdictionand(d)acontractconnectedwith

thedisputewasmadeinthejurisdiction.Thislist

isnotclosed,however,andmaybeaugmentedas

thecaselawdevelopsbyanalogousrelationships

totheforum.TheSCCagreedwithJusticeSharpe

thattheanalysisforjurisdictionisdistinctfrom

thatforforum non conveniens (FNC),whichdecideswhetherthereisanotherforumwhich

wouldbeabetteronetohearthedisputefor

reasonsofpracticalityandfairness.Onlyonce

jurisdictionisestablisheddoesFNCcomeinto

play,butifitisn’traisedbythedefendantthe

litigationproceeds.IfFNCisraised,theonusison

thedefendanttoshowwhyanotherforumisa

moreconvenientone,andthereisnoexhaustive

listoffactorstobeconsidered;eachcasewill

raiseitsownissues.

[Linkavailablehere]

InBreeden v Black,2012SCC19,whicharosefromallegedlydefamatoryremarksmadeoverthe

internetbyUSrepresentativesofaUScompany

aboutLordBlack,thecourtruledthatthetortof

defamationoccursuponpublicationtoathird

party;inthecaseoftheonlinestatementsat

issue,thiswaswhentheywereread,downloaded

andrepublishedinOntariobythreenewspapers.

Everyrepetitionorrepublicationisanew

publication,andtheoriginalauthormaybeliable

whererepublicationwaseitherauthorisedbyhim

orherorwhererepublicationisthenaturaland

probableresultoftheoriginalpublication.There

wereFNCfactorsinfavourofbothIllinoisand

Ontario,butthebalancetippedinfavourofthe

latter.LordBlack’sactioninOntarioagainstthe

threenewspaperswouldotherwiseproceedhad

thepartiesnotalreadysettled(havingagreedto

letthejurisdictionissuegouptotheSCC).

[Linkavailablehere].

Editions Ecosociété Inc v Banro Corp,2012SCC18,isthecivil-lawbook-endtoBreeden v Black. Banro,anOntario-basedminingcompany,

suedQuebec-basedpublisherEditionsEcosociété

inOntario,onthebasisthatabookithad

published,whichallegedhumanrightsviolations

bythecompanyintheDemocraticRepublicof

Congo,wasavailabletoOntarioreadersonthe

company’swebsiteandin93hardcopies(in

French)inOntariobookstores.Theplacewhere

thetortoccurredwas(asinBreeden)wherethe

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allegedlydefamatorywordswerepublishedtoa

thirdparty,althoughtheSCCmusedthatthe

traditionallex loci delicti rulemightgivewayin

defamationcasestothelawoftheplacewhere

themostsubstantialharmtoreputationoccurred.

Undereitheranalysis,theOntariocourthad

jurisdictiontoheartheclaimandtheFNCfactors.

Netresult?Tooearlytotell,butBarryGlaspellof

theTorontoofficeofBLGsuggeststhatCanadian

courtsaremuchmoreamenabletoassuming

jurisdictionovermultijurisdictionaldisputesthan

theircounterpartsinEnglandortheUStobegin

with;theserecentdecisionsmaynarrow(slightly)

theopportunityforacourttoassumejurisdiction

butmaymakeaFNCtransfertoanother

jurisdiction(slightly)moredifficult.Alsolots

ofunansweredquestions.

[Linkavailablehere].

CONFLICT OF LAWS/CONTRACTS

Don’t forget the choice-of-law clause!

Thisisexactlywhatthepartiesforgottodoin

Presstek Europe Ltd v Multi-Digital De Impresion SL(QBD,13March2012)–althoughoneofthem

claimeditthoughttheagreementincorporateda

choice-of-lawprovisionfromarelatedcontract.

PresstekandMulti-Digitalhadenteredintoa

non-exclusivedistributionagreementwhich

statedthatEnglishlawgovernedalldisputes

exceptanythatinvolvedinjunctiverelief,andthat

theLondonInternationalCourtofArbitrationwas

tohavejurisdiction.Thepartiesthenenteredinto

acontractforthesaleofthreemachinesby

Multi-DigitaltoPresstek;therewasno

choice-of-laworjurisdictionclause.Presstek

(aUKcompany)claimedthatMulti-Digital(a

Spanishcompany)hadfailedtoperformthesales

contractandthatEnglishlawgoverned.Multi-

Digitalsuccessfullychallengedthejurisdictionof

theEnglishcourts:evenif(andthatappearsto

havebeenabigif)thesalescontractdidimplicitly

incorporatethedistributionagreement’schoice-

of-lawandjurisdictionprovisions,itwasclear

thatthepartieshadnotintendedthoseprovisions

toapplytoalldisputes.Mostdisputesweretobe

arbitratedinLondonunderEnglishlaw,butnotall

disputes,andnothinginvolvinginjunctiverelief.

Theactualdisputebetweenthepartiesinvolved

aninjunction,soitfellintothegapareatowhich

EnglishlawdidnotapplyandtheEnglishcourts

didnothavejurisdiction.Bettertohavedealtwith

choiceoflawandjurisdictionsquarelyinthe

salescontract.

CONTRACTS

Lawful acts can amount to economic duress, rendering a contract voidable

Thelawfulconductwashardbargaining

(generallyOKinacommercialsetting)butit

amountedtoeconomicduressinProgress Bulk Carriers Ltd v Tube City IMS LLC, [2012]EWHC

273(Comm).TubeCitycharteredashipowned

byProgress,makingitclearthattheidentityof

thevesselwasimportanttobothitandthe

receiverofthegoodsthatweretobeshippedon

it.Progressthenconcludedacharterfortheship

withanotherparty,inbreachofitsagreement

withTubeCity.Progressconcededthisandsaidit

wouldfindanothership,initiallyagreeingto

compensateTubeCityforanydamages.TubeCity

reliedontheseassurancesanddidnotlookfor

anothervesselitself.Presumablysensingthat

TubeCitywasinajam,Progressthenchanged

7

itstuneandmadea‘takeitorleaveit’offer

whichwouldhaverequiredTubeCitytorelease

allclaimsagainsttheship-owner.

Thedisputewenttoarbitration,whereitwas

foundthatTubeCity’sagreement(underprotest)

towaiveitsclaimshadbeenprocuredby

economicduress.Butwasthatcorrect,giventhat

Progress’shadmerelyrepudiateditscontractand

notdoneanythingillegal?CookeJconsideredthe

leadingcasesoneconomicduress,concluding

that‘lawfulactduress’can–inexceptional

circumstances,andnottypicallyinacommercial

setting–amounttothe‘illegitimatemeans’

sufficienttorenderthecontractvoidable.

Progresshadnotonlyrepudiateditscontract

withTubeCitybuthadreliedonthatbreachto

takeadvantageofthesituationithadcreated.

Thearbitratorsgotitright.

[Linkavailablehere].

Unknown repudiation: grounds for termination but not damages

Anovelpoint,apparently,inLeofelis SA v Lonsdale Sports Ltd, [2012]EWHC485(Ch),

wheretheplaintiffmadeasecondkickatthe

caninclaimingdamagesforrepudiationof

contract.Leofeliswastheexclusivelicensee

incertainEuropeancountriesofLonsdale,

amanufacturerofsportsandleisuregear.In2007,

LeofelisallegedthatLonsdalehadrepudiatedthe

Leofelislicence,butwasunsuccessful.Inthe

courseofthatlawsuit,theevidenceputforward

byLonsdaleindicatedthatthecompanyhad,

infact,grantedalicencetoaLatviancompany

withrespecttosomeoftheterritoriesunderthe

Leofelislicence.HadLeofelisknownthisin2007,

therewouldhavebeengroundstosaythat

Lonsdalehadrepudiatedthecontractandought

tomakeupforLeofelis’slostprofits.

ButcouldLeofelissayitwasjustifiedin

terminatingthecontractin2007inrelianceon

arepudiatorybreachofwhichitwasunaware

atthetime?Yesandno,saidRothJofthe

EnglishChanceryDivision.TheLatvianside

dealwouldhavebeenenoughtojustifynotice

ofterminationbyLeofelis,butbecauseLeofelis

hadnotacknowledgedthatparticularbreachit

didnothavearighttocompensationforlosses

sufferedasaresultofitsdecisiontoterminate

thecontract.

[Linkavailablehere].

CONTRACTS/DERIVATIVES

Literal not contextual approach prevails in interpretation of ISDA Master Agreement

Not,perhaps,whatonemighthaveexpectedin

thewakeoftherecentdecisionoftheUK

SupremeCourtinRainy Sky SA v Kookmin Bank, [2011]UKSC50,whichoptedforthecontextual

approach,asinformedbybusinesscommon

sense.But,onthefactsofLomas v JFB Firth Rixson Inc, [2012]EWCACiv419,theliteral

approachseemstomakesense.

Butfirst,alittleDerivatives101.Underan

interestrateswap,onepartypaysafloating

rateofinterestonanotionalsumoveraspecified

period;theotherpartypaysafixedrateonthe

samesumoverthesameperiod.Attheendof

eachperiodonepartywillbe‘inthemoney’and

theother‘outofthemoney’:thelatterpaysthe

differenceinvaluetotheother.

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WhenLehmanBrothersbecameinsolventin2008,

itwasinthemoneyinrelationtoanumberof

swaps.Itsadministratorsnaturallywantedto

collectbutfacedanobstacleintheInternational

SwapsandDerivativesAssociation(ISDA)Master

Agreement,thestandard-formcontractwhich

governedthetransactions.TheISDAMaster

Agreementprovidesthatpaymentisconditional

ontherebeing‘noEventofDefaultorPotential

EventofDefault’(definedtoincludeinsolvency)

that‘hasoccurredandiscontinuing’.Onitsface,

notgoodfortheadministrators’case.They

arguedthattheconditionprecedentoughttobe

readinthelightoffouralternativeimpliedterms,

underwhichtheconditionwouldnolongerbe

operative(a)aftertheexpiryofsuchtimeas

wouldberequiredtoallowthenon-defaulting

partytoelectanearlyterminationdate,(b)after

areasonabletime,(c)ontheexpiryormaturityof

allrelevanttransactionsor(d)ontheexpiryofall

transactionsbetweenthepartiesgovernedbythe

ISDAMaster.Thesealternativesmadesome

commercialsense:whyshouldtheout-of-the-

moneypartygetoffscot-free?

Well,saidtheEnglishCourtofAppeal,because

that’swhattheISDAMasterAgreementprovided

inclearterms(thatbitabout‘andiscontinuing’

stronglysuggestingthatanimpliedexpiration

dateoftheconditionoughtnottobereadin).

Thecourtsaiditwouldreadintermsonly

‘ifitisnecessarytodosoorifitwouldbe

obvioustoanydisinterestedthirdpartythatthe

contractmusthavethemeaningwhichthe

impliedtermswouldgiveit’.Nothere.

[Linkavailablehere].

CONTRACTS/PARTNERSHIPS/UNJUST ENRICHMENT

Partnership can arise without written agreement, but not here because all was ‘subject to contract’

Ausefullittlereminderaboutthenatureof

partnershipsandcontractualnegotiationsin

Valencia v Llupar,[2012]EWCACiv396.

Valenciaownedtworestaurants.Llupar,afriend

ofValencia’sdaughter,wantedtobecome

involvedinValencia’sbusiness.Heallegedthat

Valenciahadrepresentedthattherestaurants

wereflourishingandthathecouldbecomeher

businesspartnerandrentouttheapartment

aboveoneofthelocations.Lluparmade

paymentstoValenciatotalling₤80,000althoughonexactlywhatbasiswasunclear.Profitsfrom

therestaurantsturnedouttobeconsiderably

lessthanLluparclaimedhehadbeenledto

believe,andtheflatwasn’treadyforoccupation.

Hesued,claimingthatalettersenttohimby

Valenciaconstitutedapartnershipagreement.

Itwasheaded‘partnershipagreement–subject

tocontract’.

ThetrialjudgeacceptedthatValenciahadmade

misrepresentationsbutheldthatbecausethe

partnershipagreementwasneversigned,

thepartiesshouldsimplyberestoredtotheir

originalposition,eitheronthebasisofthe

misrepresentationsoratotalfailureofcontractual

consideration.Correctresult,butwrongonthe

law,saidtheEnglishCourtofAppeal.Partnership

can,ofcourse,ariseatwillwithouttheneedfora

writtenagreement,butitwasclearfromthe

actualletterthatanyrelationofpartnershipwas

tocomeintoexistenceonlywhenanagreement

wasconcluded–the‘subjecttocontract’bit.

Moneystransferredinanticipationofaformal

contractthatnevermaterialisearetobe

9

refunded.Therewasnoneedtoconsiderwhether

Valenciahadmisrepresentedthestateofthe

businesstoLlupar;thiswasasimplecaseof

unjustenrichment.

[Linkavailablehere].

CORPORATIONS

BC government introduces legislation allowing community contribution companies

FollowingtheleadofanumberofUSstateswhich

permittheformationofbenefitcorporations,

BritishColumbia’sBill23(Finance Statutes Amendment Act 2012)would,ifenacted,seeanewcorporatehybridintheprovince,with

featuresofbothabusinesscorporationanda

not-for-profit.

Thenewcommunitycontributioncompany(orC3)

wouldberequiredtodevoteaportionofitsprofit

toacommunitypurposespecifiedintheC3’s

articles,havelimitsonitsabilitytodistribute

profitstoshareholders(includingondissolution)

andberequiredtomakepublicdisclosureofits

contributiontothecommunity.

[Linkavailablehere].

EMPLOYMENT LAW

It doesn’t matter what you were doing when injured on the job in order to be compensated for it

PVYW(anonymisedbythecourtforreasons

whichwillbecomeapparent)wasemployed

intheHRdepartmentofanAustralian

governmentagency,whichrequiredherto

traveltoacountrytowninNewSouthWales

toconductbudgetreviewsandprovidetraining.

Whilethere,shehookedupwithamalefriend

andtookhimbacktohermotelroom,where

theyhadsex.Duringtheirencounter,aglass

lightfittingabovethebedwas(somehow)

pulledfromitsmount.Thelightfittingfell

onPVYWandcausedherinjuries.Sheclaimed

compensationundertheSafety Rehabilitation and Compensation Act 1988 foraninjurysustainedinthecourseofheremployment.

Theemploymenttribunalrejectedtheclaim:

atthetimeoftheinjuryshewasnotengagedin

acts‘associatedwithheremployment’or‘atthe

directionorrequestofheremployer’,norwas

theinjury‘sufficientlyconnected’withherjob.

NicholasJoftheAustralianFederalCourt

reversed:PVYWwasinthemotelonlybecause

herjobrequiredit,andaninterludeinanoverall

periodorepisodeofworkwasstillpartofbeing

onthejob.Injuriessustainedinthatkindof

interludearestillinthecourseofemployment,

unlesstheyinvolvegrossmisconduct(whichher

trystwasnot)orself-inflictedinjury(whichthis

didn’tseemtobe,intentionallyanyway).

Shewouldhavebeeneligibleforcompensation

ifshehadbeenbathingordressinginhermotel

room;indeed,‘iftheapplicanthadbeeninjured

whileplayingagameofcardsinhermotelroom

shewouldbeentitledtocompensationeven

thoughitcouldnotbesaidthatheremployer

inducedorencouragedhertoengageinsuchan

activity’.PVYW’sparticularrecreationalactivity

whileonaworktripwasalsocoveredbythe

compensationscheme:PVYW v Comcare (No 2), [2012]FCA395.

[Linkavailablehere].

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EVIDENCE

Lawyer’s trust account ledgers not necessarily subject to solicitor-client privilege

Solicitor-clientprivilegeshieldslegaladvicegiven

totheclientfromdisclosure,butitdoesn’textend

toallfactscontainedinthelawyer’sfile.Arethe

thecontentsofalawyer’strustaccountsmore

likelegaladviceoraretheyjustfacts?

Justfactsinthiscase,saidtwooutofthree

membersoftheBCCourtofAppealhearing

Donell v GJB Enterprises Inc., 2012BCCA135.Theclient,GJBEnterprises,wasapyramid

schemeinCaliforniawithnolegitimatebusiness.

Berke,itsprincipal,foundhiswaytoBritish

Columbia,whereheretainedtheFarrisVaughn

firm(FV).GJB’sCaliforniareceiverappliedtothe

BCcourttoobtainrecordsinFV’spossession

whichrelatedtoGJB’sillegalconduct,whichthe

receivercontendedwouldidentifythesourceof

paymentstoBerke’spersonalbankaccountinBC.

Thechambersjudgeconcludedthatthefirm’s

recordswereprotected,thecrime-fraudexception

notcomingintoplaybecausetherewasno

evidencethatFV’scommunicationswithBerke

involvedparticipationinorcounsellingofany

criminalactivity.Onappeal,thereceivernarrowed

therequesttothefirm’strustaccountledgers.

ChiassonJA(NeilsonJAconcurring)notedthat

whilesolicitor-clientprivilegeisnowasubstantive

rightinCanada,withconstitutionalprotection,the

olddistinctionbetweenfactsandcommunications

forthepurposesofobtaininglegaladviceisstill

relevant.Alawyer’sbillwillbeprivilegedbecause

itarisesoutofthelawyer-clientrelationshipand

‘whattranspireswithinit’,buttrustaccount

ledgersarenotpresumptivelyprivileged.Where

theledgersreflectthesolicitor-clientrelationship,

privilegewillattach;wheretheydonot,itwon’t.

Someoftheledgerentriesfellintotheformer

category,buttheonesthereceiverwantedtosee

merelytracedpaymentsinandoutandshouldbe

produced.SmithJAdissented:thefactofthe

paymentsdidnotariseindependentlyofthe

solicitor-clientrelationship,withtheresultthat

privilegeshouldattach.

[Linkavailablehere].

INTELLECTUAL PROPERTY

ISP notified of illegal downloading but still not liable, says High Court of Australia

iiNetisAustralia’sthird-largestinternetservice

provider(ISP)andtheevidenceinthis

infringementcasesuggestedthatmorethan

halfofitssubscribers’usageconsistedofillegal

downloadingofcontentusingBitTorrentpeer-to-

peertechnology.AFACT,acoalitionofcopyright-

holders,usedacomputerprogrammetogather

evidenceofinfringementandsenttheresultsto

iiNetonnumerousoccasions.Theissuewas

whetheriiNet,havingbeennotifiedofspecific

infringements,wasitselfliableforhaving

authorisedinfringement: Roadshow Films Pty Ltd v iiNet Ltd,[2012]HCA16.

Intheend,no.WhileiiNetcouldhavesimply

terminatedindividualsubscriptionstoitsservice,

itwouldhaveneededtoconductaninvestigation

ofitsowntodeterminewhowasdownloading,

whichapplicablelegislationdidnotrequireit

todo.Itcouldnothaveterminatedcontracts

solelyonthebasisoftheAFACTnotices,which

didnotprovideenoughinformationtogoon.

Inactivitycouldnotgiverisetoaninference

ofauthorisation–orindeedtooneofindifference

ontheISP’spart,giventhatitwouldhavebeen

11

imprudenttoactonthebasisoftheAFACT

noticesalone,whichmighthavedeprived

accesstonon-infringingservices.

[Linkavailablehere].

Sounds now eligible for trade-mark protection in Canada

Metro-Goldwyn-MayerLionCorp.appliedfora

trade-marktoprotectthedistinctivelion’sroar

usedbyitintheopeningcreditsatthemovies.

Thetrade-marksregistrarsaidno;soundsaren’t

eligiblefortrade-markprotection.Thiswas

reversedbyabrieforderofaprothonotaryofthe

FederalCourt:Metro-Goldwyn-Mayer Lion Corp v AG Canada, docketT-1650-10(1March2012).

Inresponse,theCanadianIntellectualProperty

Officehasannouncedthatitwillnowaccept

applicationsforsoundmarks.

[Linkavailablehere].

PRIVACY

Vicarious liability for spam texts

Spamisirritating,whetheritcomesbye-mailor

textmessage,eventhoughit’sactuallypretty

easyjusttodeleteit.Agroupofcustomersof

HeartlandAutomotiveServices,afranchisee

whichoperatedJiffyLube(JL)servicestations,

foundthespamtextstheyreceivedsufficiently

annoyingthattheyinitiatedclassproceedings:

In re Jiffy Lube International Inc Text Spam Litigation (SDCal,9March2012).Themessages

atissue,whichoffereddiscountsonJLservices,

wereactuallysentbyTextMarks,acompany

whichhadallegedlybeenhiredbyHeartlandto

storephonenumbersandsendoutmasstexts.

Theplaintiffsclaimedthisviolatedfederallaw

againsttheuseofautomateddiallingtechnology.

Indecliningtodismisstheirclaims,theCalifornia

districtcourtthoughttherewasnoreasonin

principlewhyHeartlandcouldn’tbevicariously

liableforrobocalling,eventhoughthiswasnot

expresslyprovidedforinthelegislation.Heartland

alsoarguedthatitscustomershadconsentedto

receivingtextmessagesbyprovidingtheirphone

numberswhenmakingpayment,andwhilethe

courtdidn’truleonewayoranotheronthepoint

itsuggestedthatconsentprobablyrequiredan

expressstatementbythecustomerthat

promotionaltextswouldbeOK.

PRIVACY/WILLS & ESTATES

Heirs can assert right of publicity in dead person’s image, says California court

ThedeadpersoninquestionisAlbertEinstein,

whoseimagewaslicensedfromGettyImages

byGeneralMotorsforanadinasingleedition

ofPeoplemagazine.TheHebrewUniversityof

JerusalemclaimedthisinfringedEinstein’s

statutoryandcommon-lawrightsofpublicity,

whichtheuniversityhadinheritedunderthe

termsofEinstein’swill.ThewillleftEinstein’s

‘literarypropertyandrights,ofanyandevery

kindornaturewhatsoever’totheuniversity.

GMcontendedthatthiscouldnotextendto

arightofpublicityinEinstein’simage;

theuniversitycounteredthatitwasimplied,

andthatEinsteinhad,duringhislifetime,

licensedtheuseofhisimageforcommercial

purposes(e.g.arefrigeratorad),althoughit

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wasunclearwhetherhehadeverreceived

compensation.

MatzJoftheCaliforniadistrictcourtdidn’t

thinkitwasnecessaryfortheplaintifftoshow

thatEinsteinhadexploitedhisimagefor

moneyduringhislifetime(someauthorityto

thecontrary);whatmatteredwasEinstein’s

‘probableintent’indesiringtocontrolhisimage,

hadheknownhecoulddothisevenafterdeath.

Thejudgeobservedthatthereare‘sound,even

compellingreasons’toallowheirsofthefamous

deadtopreventuseoftheperson’simagefor

purposesinconsistentwiththename,image,

reputationandidentityheorshehadestablished

whileliving.GM’smotionforsummaryjudgment

wasthereforedenied,althoughitdidmanageto

havetheuniversity’sunfaircompetitionandfalse

endorsementclaimsdismissed,becauseitwas

obviousthatGMwasnotsuggestingEinstein’s

actualendorsementofitsproduct:The Hebrew University of Jerusalem v General Motors LLC (CDCal,17March2012).

TORTS

The sultan, his ex-wife, her badminton coach and the missing diamonds

TheratioofAziz v Lim, [2012]EWHC915,is–

asmuchasanythingelse–thatit’shardtofind

goodhelpthesedays.MariamAzizistheex-wife

oftheSultanofBrunei,oneoftherichestmenin

theworld.Asaresultofherdivorcesettlement,

MsAzizbecame‘anextremelywealthywoman

inherownright’andamongthetrinketsshe

receivedonpartingwayswithHisMajestywere

adiamondbraceletworthUS$5.545million,

a12.71-caratpear-shapedbluediamond

(US$12.7million)anda27.1-caratsquareyellow

diamond(amere$1million).Azizclaimedthat

FatimahLim,herbadmintoncoach,bodyguard

andpersonalassistant,hadpurloinedthejewels,

sellingthebraceletandcontrivingwithajeweller

toreplacethetwolargediamondswithreplicas.

LindblomJfoundMsLim’sexplanations(there

wereseveral,andtheyconflicted)completely

unbelievable.Thestorythatthediamondswere

soldtopayoffgamblingdebtsinLim’snamebut

actuallythoseofAziz(whowasallegedlyhardup)

wassimplynotcredible;dittoLim’sretractionof

anearlierconfessiontotheRoyalBruneiPolice

thatshehadstolenthejewels,whichsheclaimed

hadbeenforcedfromherunderduress.

Thecasedoesn’ttellusanythingaboutthetort

ofconversionwedidn’talreadyknow,butitdoes

shinesomelightonthelivesofthe1%ofthe1%.

[Linkavailablehere].

TRUSTS

Breach of oral trust

It’sneverahappydaywhenafatherhasto

suehisdaughter,buttherewillbetimeswhen

itappearstobenecessary:Berkowitz v Berkowitz, 2012USDistLEXIS31487(DMass,9March2012).

SamuelBerkowitzgrantedageneralpowerof

attorneytohisdaughterBonnie,tellingherto

‘takecare’ofhermother(Samuel’sex-wife)and

brotherBrianintheeventofhisdeath.Samuel

laterconveyedaseriesofpiecesofrealestateto

Bonnie,allegingheagaininstructedherorallyto

usetheincomefromthemto‘takecare’ofher

motherandtoshareanyremainingvaluewith

13

Brian.Bonniesoldthepropertiesfor$1.7million.

By2002,SamuelsuspectedthatBonniehad

forgedhissignatureonshareandfundstransfers,

butassumedshewasneverthelessactingin

furtheranceofhisgeneralinstructions.In2008

Samuelaskedforanaccountingoftheoraltrust.

‘Whattrust?’wasessentiallythereply:Bonnie

tookthepositionthatherfather’swordswere

insufficienttocreateatrustandthat,anyway,

becausethepropertyatstakewasland,the

statuteoffraudswasengagedandany

declarationoftrustwouldneedtobein

writing.Bonniemovedtohaveherfather’s

claimdismissedasnotdisclosingaplausible

causeofaction.

TheMassachusettsdistrictcourtconcluded

Samuel’scomplaintcertainlydisclosedacauseof

action.Aslongasyouhavethethreecertainties

ofintention,subject-matterandobjects,therewill

beavalidtrust;thereisnorequirementinequity

forthesettlementtotakeanyparticularform.

Samuelthereforehadaplausiblecasethathe

hadcreatedatrustinfavourofBonnie’smother

forlife,witharemaindertoBonnieandBrian.

Bonnie’slimitationdefencefailed:theclockbegan

totickfromherrepudiationofthetrustin2008

andherfather’sactualknowledgeofthat

repudiation,notfromthedateSamuelbecame

awareofherapparentlydodgydealingsin2002.

Bonnie’sstatuteoffraudsargumentwasbest

leftfortrial.

Trust is resident where central management and control carried out, says SCC

InFundy Settlement v Canada,2012SCC14,thatmeantwherethemainbeneficiaries–not

thetrustee–resided.Twotrustsweresettled

inStVincentandadministeredbyStMichael

TrustCorp.,whichwasresidentinBarbados.

Thetrusteearguedthatitsresidenceshould

govern,withtheresultthatthetrustswere

entitledtoarefundof$152millioninwithholding

taxoncapitalgainsbyvirtueoftheCanada-

Barbadostaxtreaty,whichhasanexemption

forCanadiancapitalgainsrealisedby

Barbadianresidents.

TheSupremeCourtofCanada,noting‘adearth

ofjudicialauthorityontheresidencyofatrust’,

appliedthetestusedtodeterminetheresidence

ofacorporation:wherethecentralmanagement

andcontrolofthecorporation’sbusinessis

carriedout.Thecourtrejectedtheargumentthat

thistestwasinapplicablegiventhatatrustisnot

alegalperson.Trueasamatterofthelawof

trusts,butnotundertheIncome Tax Act,whichdeemsatrusttobeaperson.WhileStMichael

carriedout‘limited’administrativefunctionson

thebeneficiaries’behalf,itwasreallytheywho

hadthecentralmanagementandcontrolof

thetrusts–andtheyresidedinCanada.

Ondifferentfacts,thetrustee’sresidency

mightgovern,butnothere.Sonorefundof

the$152million.(Andunclearwhatthe

answerwouldbeoutsidethetaxcontext.)

[Linkavailablehere].

UNJUST ENRICHMENT

Unclean hands preclude claim for contributions to grow-op

LonnieCraiggsandJoannLynnOwensshackedup

together,livingin‘amarriage-likerelationship’in

ahouseownedbyOwens.Inthebasementwasa

marijuanagrow-op,butafterthecouplesplitup

eachpartyclaimedtheotherwasthedirecting

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mindoftheventure.Craiggsclaimedthathehad

investedlabourandmoneyintheproperty,

andhelpedpayoffthemortgage,unjustly

enrichingOwens.Headmittedthatheshared

intheprofitsfromthebasement,butmaintained

thathisfinancialcontributionstotheproperty

werefromlegitimatesources.Owens

counterclaimed,allegingthatCraiggsforcedher

intohelpingwiththepotbusinessandthathe

shouldpaydamagestothepropertyflowingfrom

apolicedrugbust(whichresultedina15-month

prisonsentenceforCraiggs).

BruceJoftheBCSCfoundthatbothparties’

testimonywasdifficulttoacceptinfull,butwas

preparedtosaythatCraiggshadmadeouta

claiminunjustenrichment:Craiggs v Owens, 2012BCSC29.Recoverywasprecluded,however,

byhisuncleanhands–hiscontributionstothe

property(likedivertinghydrofromthemunicipal

wiresandhaulingbagsoffertiliserfromthelocal

gardencentre)weredirectlylinkedtotheillegal

activitybelowstairs.Evenifsomeofthefinancial

contributionscamefromlegitimatesources,they

wereusedtofundanillegaloperation.Although

shewasthesuccessfulpartyinthelitigation,

Owenswasnotawardedcostsonaccountof

herownwillingparticipationinthegrow-op.

Perfectlycorrect,butcouldpeople(including

judges)pleasestopsaying‘unjustenrichmentis

anequitableremedy’(atpara34)?Itisn’t.

[Linkavailablehere].

AUTHOR

Neil Guthrie

Partner,NationalDirectorofResearch

Toronto

416.367.6052

nguthrie@blg.com

ng

15

BORDEN LADNER GERVAIS LLP

National Managing Partner

Sean Weir Toronto 416.367.6040 sweir@blg.com

Regional Managing Partners

David Whelan Calgary 403.232.9555 dwhelan@blg.com

John Murphy Montréal 514.954.3155 jmurphy@blg.com

Marc Jolicoeur Ottawa 613.787.3515 mjolicoeur@blg.com

Frank Callaghan Toronto 416.367.6014 fcallaghan@blg.com

Don Bird Vancouver 604.640.4175 dbird@blg.com

b

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