This week, the federal government announced a settlement of a claim under the North American Free Trade Agreement, Can T.S. 1994 No. 2 (“NAFTA”) by AbitibiBowater Inc. (“Abitibi”) against Canada as a result of the dispute between the company and Newfoundland. In 2008, the Newfoundland government hastily expropriated nearly all of Abitibi’s Newfoundland assets after the company announced the closure of the Grand Fall’s pulp and paper mill, a key contributor to the region’s economy. The federal government has agreed to reimburse Abitibi for the expropriation in the amount of $130 million, much less than the $500 million sought.

Also, Newfoundland announced that it would seek leave to appeal from the SCC of a related decision by the Quebec Superior Court (AbitibiBowater Inc. (Arrangement relatif à), 2010 QCCS 1261), affirmed by the Quebec Court of Appeal (Newfoundland v. AbitibiBowater Inc., 2010 QCCA 965), that Newfoundland’s environmental protection orders compelling Abitibi to clean up certain expropriated sites were claims subject to bankruptcy protection claims procedures. (TheCourt.ca reviewed the Quebec decisions here.)

This article will focus on the NAFTA claim and outcome.

Background and Facts

Abitibi was a failing company as a result of the worldwide drop in demand for newsprint resulting from the proliferation of internet based news sources. A US incorporated pulp and paper manufacturer, it operated throughout the province of Newfoundland for over a century. In 2008, the company announced that its last operating mill, located in Grand Falls-Windsor, would close in 2009. This marked the end of its active operations in the province.

However, Abitibi still retained numerous property rights, assets, and undertakings within Newfoundland amounting to well over $300 million. This included interests in hydroelectric facilities, surface rights, and paper mills, many purchased either from the province or third parties for proper consideration.

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It may be time for the National Parole Board to take its Policy Manual off the bookshelf.  This month, the Federal Court ordered the Board to reconsider Robert Latimer’s request for more lenient parole conditions in Latimer v. Canada (AG), 2010 FC 806.  Latimer, the infamous mercy killer who euthanized his severely disabled daughter, was denied relaxed parole by the Board.  The case at hand involves his application to the Federal Court for judicial review of the Board’s decision.  The Federal Court was concerned about the construction and use of one contentious book, the National Parole Board’s Policy Manual.

Following his conviction for the second-degree murder of his daughter, Tracy, in 2001, Latimer was sentenced to life imprisonment.  Although eligible for full parole after 10 years of the sentence, he first applied for day parole in February 2008.  Conditions imposed upon him at the time included living in a halfway house.  In September 2008, Latimer’s day parole was extended to allow him to move to Victoria, BC and live in his apartment two nights a week, and spend the remaining five in a halfway house (a “two and five”).  After a lengthy period of day parole, Latimer applied for relaxed conditions, asking for a “five and two,” where he would be permitted to spend five nights per week in his Victoria apartment.  The Board denied this request in August 2009, citing a lack of “exceptional circumstances” required by Chapter 4.1 of the Policy Manual.

The Structure of the Parole System

For the benefit of all readers who may not be familiar with the Canadian parole system, I provide a brief explanation.

The federal government, through legislation (the Corrections and Conditional Release Act, S.C. 1992, c. 20 - “CCRA”), has created the framework under which a government agency, the National Parole Board, makes decisions.  The Board is an independent administrative tribunal and is responsible for making determinations with respect to parole.  This authority is granted to the Board in s. 107 of the CCRA.

Section 102 of the CCRA establishes rules for granting parole decisions.  Two criteria are identified as necessary.  Parole may be granted if the Board believes that:

1. The offender will not present a risk to society; and
2. The release of the offender will protect society by facilitating reintegration of the offender back into society.

However, s. 151 of the CCRA gives the Board the authority to develop additional parole guidelines, which were written and are now contained in the contentious Policy Manual.  Chapter 4.1 of the Policy Manual forms the basis of Latimer’s appeal to the Federal Court, as it was this section which was used to justify the denial of his extended parole application.

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On August 16, 2010, the British Columbia Court of Appeal released its decision in Baiden v. Vancouver (City), 2010 BCCA 375, regarding the costs and disbursements awarded following Todd Baiden’s successful action for damages against the police, the City of Vancouver and others for battery. Baiden was asleep in his locked place of employment when the police arrived to investigate reports of suspicious activity. The police inflicted serious injuries upon him that required emergency surgery and hospitalization after they mistook him for a person “up to no good.” Of particular interest is the issue regarding the trial judge’s decision to allow disbursements for the police defendants for steps taken on their behalf alone, which were primarily related to their examinations for discovery. Although the employer was ultimately held to be vicariously liable for the police’s actions, the police defendants incurred costs for personal representation. Five out of the six police defendants requested that they receive costs and disbursements.

Baiden argued that it would be unjust for him to be required to pay for the police’s costs and disbursements because parts of the discoveries of each officer were read in at trial as part of his case. Although the Police Act, R.S.B.C. 1996, c. 367 limited the possibility of claiming against each officer personally, he argued that it was reasonable and necessary to include them as defendants so that counsel could examine them for discovery.

Neilson J., writing on behalf of the unanimous Court of Appeal, held that the trial judge did not err in exercising his discretion to award limited costs and disbursements to five of the six police defendants. Baiden knew that he did not have evidence to fulfill the requirements under s. 21 of the Police Act in order to have an action against an individual police officer. Section 21 states

21  (1) In this section, “police officer” means a person holding an appointment as a constable under this Act.
(2) No action for damages lies against a police officer or any other person appointed under this Act for anything said or done or omitted to be said or done by him or her in the performance or intended performance of his or her duty or in the exercise of his or her power or for any alleged neglect or default in the performance or intended performance of his or her duty or exercise of his or her power.
(3) Subsection (2) does not provide a defence if
(a) the police officer or other person appointed under this Act has, in relation to the conduct that is the subject matter of action, been guilty of dishonesty, gross negligence or malicious or wilful misconduct, or
(b) the cause of action is libel or slander. Read the rest of this entry »

In recent weeks, the Federal Court of Appeal has sent two cases back to the Tax Court of Canada for rehearing. In GlaxoSmithKline Inc. v. The Queen, 2010 FCA 201 (discussed here), the Court of Appeal found that Rip C.J. erred by misunderstanding the application s. 69(2) of the Federal Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) (“ITA”).

In this latest case, Heron Bay Investments Ltd. v. Her Majesty the Queen, 2010 FCA 203, the Federal Court of Appeal (reasons for judgment by Sharlow J.A.) ruled that the actions of Hogan J. in Heron Bay Investments Ltd. v. The Queen, 2009 TCC 337 gave rise to a reasonable apprehension of bias and breached “the rules of procedural fairness.” The case was sent back to the Tax Court for retrial by another judge.

Background and Facts

The Heron Bay Corporation is a member of the Conservancy Group of corporations, which includes Rosehue Downs Developments Inc., Burlmarie Developments Inc., Shellfran Investments Ltd., Marlo Developments Inc., and Viewmark Homes Ltd. The Rosehue and Burlmarie corporations entered into an agreement to purchase property from Runnymede Development Corporation Ltd., an arm’s length corporation. Marlo, along with Shelfran and Viewmark, entered into an agreement to purchase the property from Rosehue and Burlmarie. Viewmark borrowed from Heron Bay for the purchase.

For the 1995 tax year, Heron Bay deducted the amount of the loan to Viewmark. According to Heron Bay, the loan was doubtful because the value of the property interest bought by Viewmark was less than the purchase price, thus there was a reasonable doubt that it would be repaid.

For tax purposes, a doubtful loan is one that stands the chance of not being reimbursed in full. The deducted amount must be included as income in the following year. But, if  the loan is still doubtful at the end of the year a new deduction is allowed. This can be repeated until the debt is recovered or is no longer doubtful. At that point the deduction is included as income. (If the loan becomes bad or uncollectible it can be deducted per s. 20(1)(p)(ii) of the ITA).

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Conrad Black has another court victory under his belt after the ruling in Black v. Breeden, 2010 ONCA 547, where the Ontario Court of Appeal ruled his libel suits against former Hollinger board members can proceed in Ontario.  The defendants argued libel actions brought against them by Black had no connection to Ontario and should be tried in the United States.

The Libel Actions

The well-known businessman, Conrad Black, former Chairman of Hollinger International, launched six libel actions against directors and advisors of the company between February 2004 and March 2005.  It should be no surprise to readers that the publications forming the basis of the libel actions accused Black of improperly taking large sums of money from the company and violating securities law.  The libel suits allege the named defendants damaged and conspired to damage Black’s reputation internationally.  For the purposes of this case, the actions were restricted to Ontario publications and damages Black suffered in Ontario.

Statements were made on the Hollinger International website, which disclosed information relating to investigations conducted against Black and his criminal charges.  Specifically, the Internet-based releases accused Black of stealing hundreds of millions of dollars from the company, and stated that Black was determined to “line [his] pockets at the expense of Hollinger almost every day, in almost every way.”  The releases were available in Canada, and contact information was provided to Canadian media outlets.

After Black launched the action, the defendants motioned for a stay of proceedings, arguing that the Ontario Superior Court of Justice did not either have the jurisdiction to hear the case, or that Ontario was not the most convenient forum (the forum non conveniens test).  The motions judge disagreed, dismissing the motion on the basis of Muscutt v. Courcelles (2002), 60 O.R. (3d) 20 (C.A.), which established the test for assumed jurisdiction.  However, Muscutt was recently modified in Van Breda v. Village Resorts Limited (2010), 98 O.R. (3d) 721 (C.A.), leave to appeal to S.C.C. granted, [2010] S.C.C.A. No. 174, which required the Ontario court to re-apply a new test.

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On August 11, the Ontario Court of Appeal (OCA) released its unanimous decision in R. v. Largie, 2010 ONCA 548. The case discusses Gavra and Karl Largie’s appeal of their convictions for second degree murder and manslaughter, respectively. Of the several grounds of appeal argued by these seemingly desperate appellants, the one regarding the constitutionality of s. 184.2 of the Criminal Code warrants the most interest. Subsection (1) of s. 184.2 permits the police to intercept private communications as long as the following two requirements are fulfilled: (i) the originator of the communications or the intended recipient of the communications has consented to the interception; and (ii) a judge authorizes the interception. This practice is referred to as “participant surveillance”. The two Largies argued that s. 184.2 is unconstitutional because investigative necessity is not a requirement for judicial authorization. In the alternative, the Largies argued also that the evidence obtained from the interceptions should have been excluded because the judge who authorized the interception rubber stamped the application as opposed to acting as an “independent arbiter”.

You Better R-E-S-P-E-C-T or Else

The facts of the case reflect the contemporary self-obsession with respect and maintaining one’s territory in gang culture. The two Largies were accused of participating in the murder of Mohamoud Ahmed. They were part of a group of men from the Malvern area of Scarborough, Ontario, that went in search of a person from a rival group that had apparently disrespected them on their territory. Ahmed was suspected of being that person, and was hit over the head with a metal pipe and shot to death. Later, it was revealed that Ahmed had not perpetrated the act of disrespect that apparently justified his death.

It  was unclear what role the Largies played in the murder until the police came across an informant who learned about the details of the murder from the accused. According to the informant, Gavra told him that he shot the man, while Karl froze. Pursuant to s. 184.2, the police applied to a judge to intercept private communications between the informant and the Largies. In support of their application, the police provided the judge with the consent of the informant, CPIC records, a statement of the informant, and a robbery complaint made by Ahmed. Read the rest of this entry »

In simple terms, when related corporations trade property, services or intangibles across international borders, the outlay is referred to as the transfer price. Pursuant to s. 69(2) of the Federal Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) (“ITA”), the transfer price must be “reasonable in the circumstances” that would exist if the non-resident person and the taxpayer had been dealing at arm’s length. In other words, to combat transactions structured for tax avoidance purposes, the Minister must accept that the price is of the amount that would have been paid if the taxpayer and non-resident person (eg. foreign corporation) were unconnected. Corporations and their subsidiaries are obviously connected, and thus are presumed to deal at non-arm’s length for tax purposes. (TheCourt.ca previously discussed transfer price in GE Capital v. The Queen 2009 TCC 563, found here.)

In the case of GlaxoSmithKline Inc. v. The Queen, 2008 TCC 324 [Glaxo I], the “reasonable in the circumstances” standard was applied to payments for a pharmaceutical product purchased by Glaxo Canada (“Glaxo”) from a non-arm’s length non-resident person, Adechsa SA (“Adechsa”), both members of the Glaxo Group of companies (“Glaxo Group”). The Minister and Tax Court of Canada agreed that the reasonable amount was the fair-market value of the pharmaceutical product.

However, according to the Federal Court of Appeal decision in Glaxosmithkline Inc. v. Canada, 2010 FCA 201 [Glaxo II], (reasons for judgement by Nadon J.A.) the failure of the Tax Court of Canada to “consider all relevant circumstances which an arm’s length purchaser would have had to consider…”, including a related licensing and purchasing agreement, was a legal error. Essentially, determining the price that is “reasonable in the circumstances” is a contextual process and not merely an exercise in determining the fair market value.

Legal Framework

Section 69(2) of the ITA states:

69. (2) Where a taxpayer has paid or agreed to pay to a non-resident person with whom the taxpayer was not dealing at arm’s length as price, rental, royalty or other payment for or for the use or reproduction of any property, or as consideration for the carriage of goods or passengers or for other services, an amount greater than the amount (in this subsection referred to as “the reasonable amount”) that would have been reasonable in the circumstances if the non-resident person and the taxpayer had been dealing at arm’s length, the reasonable amount shall, for the purpose of computing the taxpayer’s income under this Part, be deemed to have been the amount that was paid or is payable therefor.

Pursuant to this section, a payment to a non-arm’s length non-resident person has to be an amount not greater than what would be “reasonable in the circumstances” if the payment was made to an arm’s length person.

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The blogosphere is buzzing after last week’s announcement that a California judge had struck down the contentious Proposition 8, stating that the constitutional amendment violated the 14th Amendment of the Constitution of the United States.  The decision is a major step forward for proponents of same-sex marriage.  Likely to end up at the U.S. Supreme Court, Proposition 8 reignites the debate regarding the delicate balance between democracy and individual rights.

A Brief History of Proposition 8

Before launching into a legal analysis, a quick outline of the proceedings leading up to the decision may be helpful.

Proposition 8 was included on the ballot during the November 2008 state elections and allowed voters to decide whether a constitutional amendment should be implemented stating that “only marriage between a man and a woman is valid or recognized in California.”  Despite many pre-election legal challenges, Proposition 8 made it onto the 2008 ballot and passed with a simple majority of 52.24%.

Several lawsuits were soon launched in both the State Supreme Court and the Federal District Court.  The case in question, Perry v. Schwarzenegger (No C 09-2292) in the U.S. District Court, was launched by two same-sex couples.   On August 4, 2010 Vaughn R. Walker C.J. of the U.S. District Court overturned the proposition, temporarily staying the case to allow suspension of his ruling pending appeal.

The Legal Framework

In part, the lawsuit contended that restricting the definition of marriage to a union between a man and a woman violated both the due process and equal protection clauses of the 14th Amendment of the US Constitution.  Most of the relevant case law is concerned with due process and thus is the focus of my analysis.  

The due process clause (Section 1) of the 14th Amendment states, “…nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.”  In a nutshell, the due process clause ensures all citizens receive an equal, fair and clear application of the law.  Additionally, substantive due process considers the reasons why a law is enforced.  If an unreasonable law is passed, substantive due process may render it unconstitutional. 

In his analysis, Walker C.J. deemed marriage to be a fundamental right available to all and found Proposition 8 to be a violation of substantive due process.  By referencing multiple precedential cases, he set out a strong case for ruling Proposition 8 unconstitutional.

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Most employees commence legal action against an employer after formal termination; however, Ms. Jennifer Lewis is part of the small minority who choose to sue before the employment contract has been formally repudiated.  In Lewis v. Terrace Tourism Society 2010 BCCA 346, the British Columbia Court of Appeal grappled with the issue of dismissing employees on leave and the associated legal consequences.  The majority determined Lewis was constructively dismissed when her company voted to shut down, despite being on leave. In comparison, the  dissent written by Frankel J.A. makes a strong case for why employees on leave should be treated differently.

How It All Began

In 2004, Jennifer Lewis began her position as Executive Director of the Terrace Tourism Society. She went on maternity leave at the end of 2006.  A contracted employee was hired to replace her as interim Executive Director during her leave.  Shortly after, the Society found itself in financial trouble as a result of a municipal decision to cut funding. Immediately, the interim Executive Director was laid off and Lewis’ signing authority on bank accounts was removed.  On February 19, 2007 the Society passed a dissolution resolution where they decided the Executive Director position would be removed.

The Society, at this time, recognized it would owe Lewis severance pay as her position would eventually be eliminated (as a result of the company’s closing).  On March 7, 2007 the Society contacted Lewis asking for more information on whether severance had been discussed in her contract. Severance had not been discussed. Twelve days later, Lewis commenced an action against the Society in Small Claims Court for wrongful dismissal.  As a result of the lawsuit, the Society informed Lewis her employment was terminated for just cause.  In July 2007, Lewis sued the employer in the BC Supreme Court for wrongful dismissal and/or constructive dismissal.

The trial judge dismissed Lewis’ lawsuit, finding that she had not been constructively dismissed and that the filing of a Small Claims lawsuit formed the requisite just cause to terminate her employment.  Additionally, the court found that the Society had intended to offer severance to Lewis but could not do this as Lewis had taken a “pre-emptive strike” against the employer by launching the Small Claims case.

Two issues arose on appeal: first, whether the company’s effective shutdown constituted constructive dismissal and second, whether commencing litigation constituted just cause for Lewis’ dismissal.  I focus on the first ground of appeal.

The Court of Appeal Finds Lewis Was Constructively Dismissed

Constructive dismissal occurs when an employer changes a fundamental term or condition of an employment contract without providing reasonable notice of the alteration to the employee.  It is considered repudiation of the contract by the employer, regardless of whether or not the intention existed to continue the employment relationship (Farber v. Royal Trust Co., [1997] 1 S.C.R. 846).  In the case at hand, the issue concerned when and if Lewis could have considered herself constructively dismissed before the company offered appropriate severance (as there was never any question whether the position would be terminated, it only was a matter of when).

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Last week, the SCC dismissed the appeal of Robert Pickton in R. v. Pickton, 2010 SCC 32 [Pickton II], upholding the majority decision of the British Columbia Court of Appeal in R. v. Pickton, 2009 BCCA 299 [Pickton I]. The SCC affirmed that impugned jury instructions did not negatively impact the fairness of the trial, or constitute a miscarriage of justice.

At trial, Pickton was convicted of six counts of second degree murder stemming from the disappearance of a number of women from Vancouver’s notorious downtown eastside. Throughout the hearing, the Crown was consistent in its claims that Pickton alone shot and killed the six women. Pickton’s defence avowed the possibility of the involvement of others and asserted that the Crown failed to prove Pickton was the sole perpetrator. The goal of the defence, as usual, was to simply raise a reasonable doubt that Pickton murdered the woman.

The Impugned Jury Instructions

Counsel for Pickton requested that the trial judge instruct the jury according to the Crown’s theory (that Pickton was the sole perpetrator and shot the six women) and again in relation to the defence theory that others were involved. On agreement of both parties, the following instruction was given to the jury by the trial judge:

If you find that Mr. Pickton shot [name of victim], you should find that the Crown has proven [element 3, the identity of the killer]. On the other hand, if you have a reasonable doubt about whether or not he shot her, you must return a verdict of not guilty on the charge of murdering her…

During the trial the jury posed the following question to the judge in relation to the above instruction:

When considering Element 3 [the identity of the killer] on one or more of the counts, are we able to say “Yes”, if we infer that the accused acted indirectly?

In response, the judge instructed the jury of the following:

If you find that Mr. Pickton shot [name of victim] or was otherwise an active participant in her killing, you should find that the Crown has proven this element. On the other hand, if you have a reasonable doubt about whether or not he was an active participant in her killing, you must return a verdict of not guilty on the charge of murdering her…[Emphasis added]

The defence claimed that the insertion of the phrase “or was otherwise an active participant in her killing” suggested that the accused may have aided or abetted the crimes, and as a result the trial judge should have instructed the jury on the law of aiding or abetting.

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