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Vol. 34, No. 42
lawyersweekly.ca
MARCH 20 , 2015
B.C. appeal court refuses to halt
dementia patient’s spoon feeding
Court offers
rule clarity in
dismissal cases
Cristin Schmitz
OTTAWA
‘Principle of patient autonomy’ at issue, judges’ panel rules
Curbs, Page 2
Piper, Page 10
TAX LAW
LABOUR & EMPLOYMENT
BUSINESS & CAREERS
Defining
de facto
Last rights
of employees
‘Earn it before
your spend it’
You may not think you’re
a director, but CRA does
Options for employees
in a bankruptcy
Small firms need to watch
where the money goes
PAGE 11
PAGE 14
PAGE 20
Toronto’s Hugh Scher, co-counsel for the intervener Euthanasia Prevention Coalition and its B.C. affiliate in
a case involving spoon feeding a dementia patient, says the B.C. Court of Appeal has set out a bright line for
caregivers. Matthew Sherwood for The Lawyers weekly
the issue of whether a medical
intervention is appropriate at
that stage of life,” said Penny
Washington, of Vancouver’s
Bull, Housser & Tupper.
Washington, counsel for the
Developed for both Canadian and International business and corporate communities.
The result of a comprehensive, two-year review which engaged in a broad consultation process.
Professional administration is available from ADR Institute of Canada.
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Arbitration Rules
Now in effect!
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[email protected] • www.adrcanada.ca
PUBLICATIONS MAIL AGREEMENT NO. 40065517
priate at the late stage of the
disease.
In Margaret Anne Bentley’s
case, her family wanted her
care facility in Abbotsford, B.C.
The British Columbia Court of
Appeal has affirmed that a care
facility is required to continue
to offer food and fluids to a
woman in the final stage of Alzheimer’s disease, even though
her family says this contradicts
her previously expressed wishes.
Counsel said the March 3 ruling, in Bentley (Litigation
guardian of ) v. Maplewood Seniors Care Society [2015] B.C.J.
No. 367, is the first in Canada to
grapple with a novel issue that
that can arise when dementia
patients who can’t verbally communicate are also physically
unable to feed themselves: Are
caregivers obliged to offer such
patients
nourishment — by
holding a spoon or a glass to the
person’s lips — despite statements the patients may have
made years earlier that they do
not want to be fed or hydrated
in such circumstances?
U.S. jurisprudence on the
point is scant and there was no
reported case law in British Columbia or the rest of Canada,
counsel said.
“Mostly the cases are the other
way — that is, they’re around
To subscribe to The Lawyers Weekly,
visit www.lawyersweekly.ca/subscribe
respondent Fraser Health
Authority in Bentley, said the
cases are more often about families insisting on artificial tubefeeding despite the patient’s
care team saying it is inappro-
Employers generally must have
“legitimate business reasons” for
administratively
suspending
their non-unionized workers, and
should be “forthright” with
employees about those reasons,
the Supreme Court has ruled.
Justice Richard Wagner’s
March 6 ruling, in Potter v. New
Brunswick Legal Aid Services
[2015] S.C.J. No. 10, is the top
court’s first major decision in the
law of constructive dismissal
since the leading case of Farber v.
Royal Trust Co. [1997] 1 S.C.R.
846. The ruling provides guidance on the two-branch Farber
test for determining whether a
constructive dismissal has
occurred, an issue that tripped up
the New Brunswick courts below.
Justice Wagner gives specific
guidance on how to do the twostep analysis, under the first
branch of the Farber test, for
determining (1) whether an
administrative suspension constitutes a unilateral change that
amounts to a breach of contract
and if so, (2) whether the
unauthorized administrative suspension can reasonably be perceived as having substantially
changed the essential terms of
the contract.
Cristin Schmitz
2
• MARCH 20, 2015
THE LAWYERS WEEKLY
News
Contents
News
Court of Appeal will not stop
dementia patient’s feeding
1
Supreme Court offers clarity in
dismissal cases
1
Alberta impaired case explores
‘imminent peril’
3
Evidence not admissible, appeal
court rules
3
GPS tracking of mental health
patients banned
4
‘Sudden nature’ of change found
‘worrisome’ by court
5
Ontario provincial employees lose
in clash over anonymity
23
Focus
TAX LAW
You might not think you’re a
director, but the CRA might
11
Bad news for testamentary,
spousal trusts
12
The difference between secrets
and privacy
13
LABOUR & EMPLOYMENT
An employee’s options in
bankruptcy
14
With discrimination, you can lose
even if you win
15
Business & Careers
Keep it simple when starting your
own firm
20
Does Canada need a corporate
tax?
22
22
22
19
16
13
4
ANNOUNCEMENTS
CAREERS
CLASSIFIED ADS
DIGEST
LAWDITTIES
NAMES IN THE NEWS
Curbs: Scher sees potential limits
on laws restricting vulnerable care
Continued from page 1
to stop prompting the 83-yearold former nurse to eat or drink
by putting a spoon or a glass to
her lips. Bentley is in the final
stage of a 16-year battle with
Alzheimer’s. She has not spoken
since 2010 and doesn’t seem to
recognize anyone. She has limited movement. She sits
slumped over most of every day
with her eyes closed but, when
prompted, she does eat and
drink at times, and even seems
to show a preference for certain
foods, such as applesauce.
According to the judgment, her
caregivers’ approach is to
prompt her with a spoon or
glass and, if she keeps her
mouth closed, to try again. If
she refuses to open her mouth
after a couple of tries, they stop.
Her family believes she eats and
drinks reflexively, that she is
not consenting, and that the
caregivers’ holding of a spoon
or glass to her lips constitutes
battery.
However, the Court of Appeal
upheld the B.C. Supreme
Court’s 2014 decision, which
relied on expert medical evidence, that Bentley is capable
of consenting to eating and
drinking. The trial judge concluded that Bentley does consent and communicates her
consent by accepting nourishment when it is offered to her.
The case deals only with “natural” feeding by spoon or glass,
not with artificial feeding
through tubes, which is considered a medical intervention.
The Bentleys’ appeal focused
on issues of consent and onus of
proof.
Left unappealed were other
holdings and statements by the
trial judge. This included his
statement that providing oral
nutrition and hydration, by
prompting with a spoon or glass,
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is “personal” or “basic” care and,
as such, is not amenable to
advance directives under B.C.’s
Health Care (Consent) and Care
Facility (Admission) Act. This
contrasts with “health care,”
such as artificial tube-feeding,
that is subject to advance directives under the act.
The Court of Appeal dismissed
the Bentley family’s request for
a declaration that would bar
Maplewood House from giving
Bentley food and hydration.
The panel described the family
as “loving.
“I recognize the terribly difficult situation in which Mrs.
Bentley’s family find themselves
and I appreciate the disappointment they must feel in being
unable to comply with what they
believe to have been her wishes
and what they believe still to be
her wishes,” Justice Mary Newbury wrote for Justices Edward
Chiasson and P.D. Lowry.
“It is a grave thing, however,
to ask or instruct caregivers to
stand by and watch a patient
starve to death,” Justice Newbury said. “It should come as no
surprise that a court of law will
be assiduous in seeking to ascertain and give effect to the wishes
of the patient in the ‘here and
now,’ even in the face of prior
directives, whether clear or not.”
Justice Newbury said this
approach is consistent with “the
principle of patient autonomy”
reflected in the applicable provincial statutes and in many
court decisions, including the
Supreme Court of Canada’s
recent ruling that physicianassisted suicide is sometimes
permissible but must be based
on patients’ “clear consent.”
In Bentley, the B.C. courts
have set out a bright line for
professional caregivers, in the
view of Toronto’s Hugh Scher,
co-counsel with Geoffrey Cowper of Vancouver’s Fasken Mar-
I think the likely
outcome is more people
are going to choose the
option of doctor-assisted
suicide. They won’t
want to end up in Margo
Bentley’s situation,
which is a tragic
situation. It is certainly
contrary to what she
wanted for herself.
Kieran Bridge
Construction Law Group
tineau for the intervener Euthanasia Prevention Coalition and
its B.C. affiliate.
The court has clearly indicated, “and this is supported by
international policy around the
world,” that natural feeding by
spoon or glass is not typically
considered “medical treatment”
or “health care” — to which an
advance directive applies — and
as such is not something that
people can preclude that way,
Scher said.
Scher said he believes the
same result would likely obtain
in Ontario and the rest of Canada, notwithstanding that legislation varies from province to
province.
The Bentleys’ counsel, Kieran
Bridge of Vancouver’s Construction Law Group, said his clients
have not yet decided whether to
seek leave to appeal to the
Supreme Court.
Bentley has implications for
tens of thousands of people with
dementia, Bridge said.
“I think the likely outcome is
more people are going to choose
the option of doctor-assisted
suicide,” he predicted. “They
won’t want to end up in Margo
Bentley’s situation, which is a
tragic situation. It is certainly
contrary to what she wanted for
herself.”
Bridge said the decisions don’t
mean that British Columbians
can’t use advance directives to
prohibit being naturally fed
when they are in an advanced
stage of dementia. Rather, in his
view, the B.C. Supreme Court’s
decision stands for the proposition “that if that is your wish,
you must be very clear in saying,
‘If I get to certain physical stage,
don’t feed me through any
means. Don’t try to give me
spoon-feeding. Don’t try to
hydrate me.’”
Bentley told her family she
never wanted to live in the
“vegetative” state she saw some
of her patients endure. She also
signed two “living will” documents in the 1990s, whose
meaning the courts ultimately
found to be contradictory and
inconclusive with respect to her
wishes about being given food
and water if she suffered in
future from extreme mental or
physical disability.
Scher said it’s not clear that the
Constitution would permit federal and provincial governments
to make laws expressly permitting nursing homes, hospitals,
and other caregivers to withhold
spoon-feeding from dementia
patients who — although they
now open their mouths to eat
and drink — previously requested
that they not be given nutrition
in the late stage of the disease.
“The notion that someone
should be permitted to starve,
or to dehydrate, somebody to
death, I think, gives rise to serious concern about basic neglect, and about [the Charter’s ss.
7 and 15 guarantees of ] life,
liberty and security of the person, and equality in terms of
treatment, potentially,” Scher
said. “There may well be constitutional limitations on the ability of Parliament or the legislature to effectively permit
restrictions relative to this basic
and essential element of life.”
MARCH 20 , 2015 •
THE LAWYERS WEEKLY
3
News
Alberta impaired case explores ‘imminent peril’
Kim Arnott
Can imminent peril be “mostly
eliminated”? And how quickly after
peril ends does the defence of
necessity cease to exist?
An Alberta farmer has been
granted leave to appeal his conviction for impaired care and control
of a motor vehicle to the Alberta
Court of Appeal, based on the
impact of those questions on the
defence of necessity.
William Millar, a farmer in a
rural area about 100 kilometres
south of Edmonton, was charged
after police found him passed out
over the steering wheel of his truck,
with the engine running.
His 2013 conviction in Provincial
Court was upheld by summary
conviction appeal to the Court of
Queen’s Bench in 2014.
At trial, Millar testified that he
had worked in his fields all day,
then returned home and had five or
six beers before going to bed. In the
middle of the night, he awoke to
discover that his herd of Black
Angus cattle were loose and wandering toward a nearby highway.
Claiming the defence of necessity, Millar said he felt he had no
choice but to use his truck to
chase down the cows before they
put the lives of motorists at risk.
After locating some cows, herding them into a field and closing
the gate, he returned to his truck
and passed out.
Pearse
The trial judge found that Millar’s
initial actions satisfied the elements
of a necessity defence in that there
was immediate peril to the public,
he had no reasonable alternative to
his actions, and his travel on a lowuse rural road for a short distance
reflected a low degree of risk.
“The judge found that what he
was doing was necessary, that it
met the necessity defence until he
collapsed from exhaustion
behind the wheel,” said Alan
Pearse, an Alberta lawyer specializing in impaired offences who
acted as counsel for Millar
throughout the case.
After Millar’s return to his truck,
however, the trial judge questioned “whether the defence of
necessity continues to apply to
excuse Mr. Millar’s actions after
the imminent peril had been
wholly or mostly eliminated.”
In granting leave to appeal the
conviction, Court of Appeal Justice
Ronald Berger noted that Millar
had testified that he wasn’t certain
if he had all of the cows, but believed
he had most of them.
“It follows, having accepted that
the defence of necessity would exist
up to intercepting the cows, it is
arguable that to the extent that
there remained cows that had not
yet been intercepted ‘imminent
peril to the public’ remained a live
concern,” said Justice Berger.
He granted leave to appeal on the
questions of whether the trial judge
erred in law by finding that imminent peril ended when it was “mostly
eliminated,” and if he erred by misapplying the defence of necessity by
finding that the component of
imminent peril is spent immediately after it is extinguished.
“The issue in Millar is that the
(trial) judge doesn’t really make a
clear finding whether the appellant
is still facing the imminent peril at
the time when he is arrested for
care and control of the vehicle,” said
Lisa Silver, a Calgary lawyer and
sessional professor with the University of Calgary. “The error is that
it can’t be mostly eliminated. It’s
either there or it’s not there.”
She said Justice Berger’s decision
to grant leave is consistent with a
prior Alberta Court of Appeal decision in R. v. Sekhon [2007] A.J.
No. 864. In that case, the longevity
of the defence of necessity was
evaluated as it applied to a man
acquitted of drunk driving after
fleeing a wedding where he had
been threatened.
The appellate court ordered a
new trial because the original decision didn’t clearly address whether
the driver was still in danger when
arrested by police, said Silver.
While Millar may similarly earn
the right to a new trial when his
case is considered by the full panel,
she said the courts have typically
been quite consistent when evaluating the defence of necessity in
impaired cases.
“Once the peril is no longer
imminent, then the necessity
does not apply; the second part
of necessity can no longer be
made,” said Silver. “It’s the word
imminent that’s important, not
the word peril.”
The last few years have seen
the necessity defence used successfully in impaired driving
cases in Saskatchewan, Ontario
and Nova Scotia.
In R. v. Maxay [2013] S.J. No.
594, a Saskatchewan woman was
acquitted after she drove to escape
her sister’s enraged boyfriend who
had violently attacked her and was
chasing her in his vehicle.
A Nova Scotia man convinced
the court that his decision to
drive impaired was excused by
the necessity of getting an injured
friend to a hospital in R. v. Pleau
[2013] N.S.J. No. 630, and the
defence was also accepted in R.
v. Valauskas [2012] O.J. No.
6233 after the accused drove a
very short distance to get home
after being assaulted.
Silver said the defence is probably
being raised in the context of
impaired driving offences because
they are very difficult to defend.
“Thus, necessity, as a legal
excuse, which is applicable after
the elements of the offence have
been proven, becomes one of the
last types of defences available to
the accused when facing such a
charge,” she said.
Evidence was not admissible,
Ontario Court of Appeal rules
Sherrin, Page 23
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LAWYER M
A
2013-14
INE
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G
The Court of Appeal for Ontario
has ordered a new trial in a 2010
Ottawa aggravated assault case,
concluding that the trial judge
used inadmissible evidence to
help convict the accused.
“The evidence upon which
[Superior Court Justice Paul
Lalonde] relied as confirmation
consisted of an amalgam of
inadmissible opinion and of
evidence of the complainant’s
statements that was properly
admissible for one purpose, but
not for that purpose used by the
trial judge,” Appeal Court Justice David Watt wrote in R. v.
Mackenzie [2015] O.J. No. 575,
his Feb. 9 decision backed by
Justice Sarah Pepall and Justice
Grant Huscroft.
The fact the case could now
drag on for more than five years
does not reflect well on the
province’s justice system, said
Lee Stuesser, dean of the Bora
Laskin Faculty of Law at Lakehead University.
“If this is the state of the criminal justice system in Ontario,
shame on us all,” he told The
Lawyers Weekly.
The November 2011 trial
ended with the conviction of
50-year-old Ottawa resident
Luke Mackenzie on charges of
aggravated assault, unlawful
confinement, and uttering death
threats. The charges stemmed
from an August 2010 attack on
Brenda Ethier, 47, a friend of the
accused who lived nearby and a
single mother with two daughters, then aged 15 and 29.
The six-day trial featured testimony from Mackenzie, Ethier,
her two daughters, five police
officers, and a doctor who tended
to Ethier’s injuries, which
included a broken nose, a fractured rib, and multiple bruises.
Ethier testified that after
receiving minor surgery to
remove a cyst at Ottawa’s Montfort Hospital on Aug. 30, 2010,
she went to visit Mackenzie at
his apartment later that after-
CANA
D
I
John Schofield
4
• MARCH 20, 2015
THE LAWYERS WEEKLY
News
Awards
■ Stockwoods LLP civil litigation
lawyer Paul Le Vay has been
named the recipient of the 2015
Lincoln Alexander Award, part of
the Law Society of Upper
Canada’s annual awards that
include eight recipients of this
year’s Law Society Medal:
Fasken Martineau partner Craig
Carter, Adam Dodek (University
of Ottawa), Susan Eng (CARP
Advocacy), Faisal Joseph
(Lerners LLP), John Laskin
(Torys LLP), sole practitioner
Steward Lavigueur (Eganville,
Ont.), E. Patrick Shea (Gowlings
LLP) and Chantal Tie (Ontario
Human Rights Legal Support
Centre). Others to be honoured
May 27 in Toronto include Truth
and Reconciliation Commission
of Canada executive director
Kimberly Murray (Laura Legge
Award) and paralegal bencher
pioneer W. Paul Dray (William J.
Simpson Distinguished Paralegal
Award).
■ Julie Paquette, a partner in the
Ottawa office of Norton Rose
Fulbright with a practice
focusing on commercial real
estate and franchising, won the
Feb. 20-22 women’s Ultraman
Florida race with a combined
time of 29 hours 33 minutes for
the 10-kilometre swim, 145-km
and 275-km bike legs and the
concluding double marathon
run of 84.3 kilometres.
Programs
■ Dentons Canada has launched
an Internationally Trained Lawyer
(ITL) articling program in
Toronto, and announced it will
continue its ITL articling program
partnership with Imperial Oil Ltd.
for a second year. The firm’s ITL
program, accepting applications
until March 20, is geared to
new Canadians who are
trained and practised lawyers
in their home countries and
working to become licensed to
practise in Canada.
Publisher
Ann McDonagh
Editor In Chief
Rob Kelly
Senior Editor
Matthew Grace, LL.B.
Focus Editor
Richard Skinulis
Tracking of mental health patients banned
donalee Moulton
Nova Scotia has become the first
jurisdiction in the country to
legally ban the use of global positioning systems to track
patients on leave or absent without leave from a mental health
forensic hospital.
The decision to prohibit the use
of GPS tracking bracelets on forensic mental health patients came in
the wake of Andre Noel Denny’s
April 2012 charge of second-degree
murder in the death of well-known
gay rights activist Raymond Taavel. At the time, Denny was absent
without leave from the East Coast
Forensic Hospital, Canada’s only
combination hospital-correctional
facility, where patients arrive exclusively from the judicial system or
after being sent there for courtordered assessments.
Public outrage following Taavel’s death led the Capital District Health Authority to conduct
a review of its forensic hospital’s
processes and identify best practices in the field. The 18 ensuing
recommendations included the
development of a protocol for a
daily assessment of a patient’s
mental state before proceeding
with any leave. The review, however, did not endorse the use of
GPS monitoring in the absence
of further information.
The government prepared three
reports in response, including a
literature scan on the topic and
interviews with experts in the
United Kingdom and Australia — where GPS monitoring has
been mandated — by the Nova Scotia Health Research Foundation.
The third report, prepared by the
Health Law Institute at Dalhousie
University, analyzed potential legal
issues and whether a legislative
requirement to electronically monitor forensic patients would withstand a court challenge.
“We were very conscious of the
need to focus on public safety
and the need to rehabilitate
Gibson
individuals,” said Constance
MacIntosh, one of the three
researchers and director of the
Health Law Institute.
MacIntosh and her colleagues
looked at the legal landscape in
several areas including the Criminal Code, administrative law,
statutory human rights law, and
the Canadian Charter of Rights
and Freedoms. The latter was a
significant concern.
“The evidence didn’t show we
would withstand a Charter challenge, and there would likely be a
challenge,” said Ken Scott, director
of mental health services with the
province’s Department of Health
and Wellness.
The courts in Canada demand
“proportionality” when discretionary decisions engaging Charter values are in play. Legislative objectives must be balanced against
these values. On this issue, there
was an imbalance, noted Sheila
Wildeman, one of the report
researchers and an associate professor at Dalhousie’s Schulich
School of Law.
“The government needs to
demonstrably justify intruding on
people’s rights,” said Wildeman.
“There was no support or only the
most speculative support that electronic monitoring would enhance
public safety.”
The 124-page report examined
the use of electronic monitoring
under six sections of the Charter
including s. 15, which guarantees
equal protection under the law
without discrimination, including
mental disability. The researchers
concluded that a law or policy
requiring electronic monitoring
(EM) for forensic mental health
patients exercising community
access would probably be deemed
“discriminatory” by the courts.
“The application of EM to
some or all forensic mental
health patients would likely be
held to perpetuate prejudice and
exacerbate the stigma this population already experiences. A
blanket policy likely would be
held to be based on stereotyped
views,” they stated.
Given the relative newness of
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The government needs
to demonstrably justify
intruding on people’s
rights. There was no
support or only the
most speculative
support that electronic
monitoring would
enhance public safety.
Sheila Wildeman
Schulich School of Law,
Dalhousie University
Correspondents
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GPS technology, evidence was
lacking on the effectiveness of electronic monitoring for forensic
mental health patients as a means
of enhancing public safety.
“There is virtually no evidence
linking people being AWOL with
public safety concerns. Knowing
where someone is and protecting
the public are two different things,”
said Elaine Gibson, one of the
report researchers and an associate
professor at Dalhousie.
Seven public safety incidents
involving violence and forensic
mental health patients have
occurred in Nova Scotia the past
decade, and all but one of them
occurred when the person was
absent without leave.
In other jurisdictions, in particular Australia and Britain where
tracking bracelets are legally
required, the primary focus was on
reducing leave violations and not
on preventing members of the public from being harmed. “The studies are not parallel,” said Gibson.
In addition to not enhancing
public safety, the Health Law Institute’s report noted that ankle
bracelets on patients had negative
consequences including affecting
the progress of therapy and
restricting community integration.
The stigma of being electronically
monitored reinforces stereotypes
surrounding mental health and
further criminalizes an illness, the
researchers found.
Recent changes to the Criminal
Code address public safety concerns, including patients designated by a court as “high-risk
accused” being prohibited from
exercising indirectly supervised
and unescorted community access.
The designation may be made in
circumstances where a court is
satisfied there “is a substantial likelihood the accused will use violence that could endanger the life
or safety of another person.”
“That makes it harder for highrisk offenders to gain access to the
community,” said Scott.
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MARCH 20 , 2015 •
THE LAWYERS WEEKLY
5
News
‘Sudden nature’ of change by expert ‘worrisome’
Luis Millan
The Quebec Court of Appeal has
set aside a second degree murder
conviction and ordered a new
trial after finding that an expert
witness offered a completely different conclusion during crossexamination at a jury trial compared to the written report and
testimony she provided during
the preliminary inquiry.
In a clear message to expert witnesses, the appeal court held that
the forensic scientist, a professional expert witness with 14 years
of experience who is often called
upon by the Crown to testify,
should have at the very least disclosed her new conclusion to
Crown counsel or to the police
investigator who interviewed her
before trial.
“The sudden nature of her new
testimony is worrisome,” said the
three-judge Court of Appeal panel
in Gakmakge v. R. [2015] Q.J.
No. 1047.
Jacinthe Prévost is one of a
An expert has an obligation to tell the Crown if
his testimony will change the nature of his report
in order for the defence to be able to present a full
and complete defence.
Mia Manocchio
Criminal lawyer
handful of professionals in Quebec with an expertise in blood
splatters, DNA, and crime-scene
investigation, according to criminal lawyers.
Khalid Gakmakge was convicted
by a jury in the stabbing death of
his estranged wife, Lucia
Medeiros, in 2009, and was sentenced to life imprisonment with
no chance of parole before serving
14 years. The circumstances leading to the death of his wife are
relatively clear, said the appeal
court. Gakmakge admitted killing
his wife after stabbing her with a
large kitchen knife, but claimed
he did it in self-defence after she
first assaulted him with the same
knife as he lay in bed sleeping.
The Crown asserted that after he
murdered his wife, he inflicted
stab wounds on himself in an
attempt to commit suicide.
The core issue at trial was which
stabbing occurred first, and which
of the two spouses was the last to
be stabbed. During testimony at
the preliminary inquiry and in her
preparation to testify at trial with
a police investigator shortly prior
to trial, Prévost said she was
unable to answer the question,
who was the last to be stabbed.
“The sequence cannot be given
by simply looking at what’s on the
blade,” testified Prévost at the preliminary inquiry.
But at trial, Prévost had a change
of heart after she had “prepared
herself more” and considered “a
strong hunch.” During cross-
examination, she came to the conclusion that Gakmakge was
stabbed last because the majority
of the blood found on the knife
came from him, a conclusion she
never shared with either Crown
counsel or the police investigators.
“An expert has an obligation to tell
the Crown if his testimony will
change the nature of his report in
order for the defence to be able to
present a full and complete
defence,” said Mia Manocchio, a
Sherbrooke criminal lawyer.
Gakmakge argued before the
trial judge that if his counsel had
known what the expert witness
was going to say at trial about the
sequence of events, he would have
sought to obtain and introduce a
contrary opinion. Gakmakge
added that if he was not given that
opportunity, he would be deprived
of a full and complete defence.
But the trial judge dismissed his
objections in a succinct oral ruling, holding that Prévost’s testimony was not a “180 degree turn”
Set aside, Page 10
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10
• MARCH 20, 2015
THE LAWYERS WEEKLY
News
Piper: ‘Pro-employee’ take on constructive dismissal
Continued from page 1
“This is not new, but the Supreme
Court noted that the two steps are
often incorrectly combined, and
that the two-step analysis is in fact
correct,” says Jennifer Fantini of
Toronto’s Borden Ladner Gervais,
co-author of Quitting for Good
Reason: The Law of Constructive
Dismissal in Canada.
“An administrative suspension
must be explicitly authorized
under the contract or be reasonable and justified if it is to fall
short of amounting to constructive
dismissal,” Fantini said via e-mail.
The Supreme Court ruled 7-0
that lawyer David Potter was constructively dismissed as executive
director of the New Brunswick
Legal Aid Services Commission
when the commission’s board
indefinitely suspended him in
2010 with pay, but without telling
him why, or that it was an administrative suspension. The board
decided to suspend Potter when it
concluded that negotiations it had
initiated months earlier in the
hopes of buying out his seven-year
contract more than three years
early were not going to pan out the
way it wanted.
At the same time as the board
ordered the then-66-year-old
lawyer not to come into the workplace “until further direction”
and delegated his responsibilities
to someone else, it advised the
province’s Minister of Justice to
revoke his appointment for cause
(unbeknownst to Potter). Eight
weeks later Potter sued for constructive dismissal, at which
point the commission took the
position that he had effectively
resigned, and stopped his pay
and benefits. Potter maintained
he had not resigned.
The New Brunswick courts held
that his administrative suspension
with pay did not amount to a constructive dismissal because the
An administrative
suspension must be
explicitly authorized
under the contract
or be reasonable and
justified if it is to fall
short of amounting to
constructive dismissal.
Jennifer Fantini
Borden Ladner Gervais
commission had not done or said
anything that would lead an
objective observer, in Potter’s
shoes and with the knowledge he
had of the situation at the time, to
conclude that his duties had been
permanently removed. The trial
judge declined to consider the letter to the Minister of Justice recommending Potter’s termination
because Potter was not aware of it
at the time he launched his suit.
The Supreme Court reversed the
lower courts, ordering the defendant to pay the damages assessed at
trial — except without deducting
from those damages the pension
Potter began collecting after his
pay was cut off.
“In light of the indefinite duration of the suspension, of the
fact that the Commission failed
to act in good faith insofar as it
withheld valid business reasons
from Mr. Potter, and of the Commission’s concealed intention to
have Mr. Potter terminated, I
respectfully find that the trial
judge erred in concluding that
the suspension was authorized by
the contract of employment,” Justice Wagner wrote.
He went on to conclude that this
breach of the contract “amounted
to a substantial change to the
essential terms of the contract that
was imposed unilaterally by the
employer.”
Fantini told The Lawyers Weekly
the decision “suggests that an
administrative suspension cannot
be found to be justified in the
absence of a basic level of communication with the employee. It
also draws upon modern developments in employment law in terms
of the employer’s obligation to act
in good faith in relation to contractual dealings, by being honest,
reasonable, candid and forthright.”
Potter’s Supreme Court counsel, Pete Mockler of Fredericton,
N.B., agreed.
“People are entitled to know,
when they get up in the morning,
whether or not their job is still
there, and what their relationship
with their employer truly is,”
Mockler said. “This decision will
send a signal to employers that
they have got to be more forthright
in dealing with their employees.
And particularly if they’ve got a
hidden agenda, they better bring it
out, so it’s not hidden too much.”
Ben Piper, of Ottawa’s Sack,
Goldblatt, Mitchell, called Potter
“a very pro-employee statement of
constructive dismissal. It takes a
pretty expansive view.”
He added by e-mail, “the court
set out a clear test, concluding that
[The ruling is] a
very pro-employee
statement of
constructive dismissal.
It takes a pretty
expansive view.
Ben Piper
Sack, Goldblatt, Mitchell
in suspension cases, the employer
will have the burden to justify the
suspension, by showing (a) that
the suspension was authorized;
and (b) that a reasonable person
would consider that the employer
was acting in good faith to protect
a legitimate business interest and
that the employer’s act had a minimal impact on the employee. This
is a relatively stringent test that
favours clarity for employees.”
Counsel for the commission
could not be reached at press time.
Justice Wagner said it was
unnecessary to articulate “a rigid
framework” for determining
whether a particular administrative suspension is wrongful. The
approach to be taken, and the factors to be considered, will depend
on the nature and circumstances
of the suspension.
“The overriding question will be
whether the suspension was reasonable and justified,” he wrote.
Relevant factors include the duration of the suspension, whether it
is with pay, and good faith on the
employer’s part, including the
demonstration of legitimate business reasons.
“In my view, legitimate business
reasons constitute a requirement
for a finding that an administrative suspension based on an
implied authority to suspend is
not wrongful,” Justice Wagner
wrote. “Other than in the context
of a disciplinary suspension, an
employer does not, as a matter of
law, have an implied authority to
suspend an employee without
such reasons. Legitimate business reasons must always be
shown, although the nature or
the importance of those reasons
will vary with the circumstances
of the suspension.”
He held this basic requirement
was not met in Potter’s case.
First, he was given no reasons for
the suspension.
“It seems to me that, in most
circumstances, an administrative
suspension cannot be found to be
justified in the absence of a basic
level of communication with the
employee,” wrote Justice Wagner.
Moreover, the board’s ostensible purpose of suspending Potter to facilitate a buyout of his
contract was “undercut by the
actions the board took to have
Mr. Potter terminated.” Add to
that the fact that he was replaced
during his suspension, and that
the suspension period was
indefinite, Justice Wagner said
he was left with no doubt that the
suspension was not authorized by
the employment contract.
Set aside: Quebec Court of Appeal orders new murder trial
Continued from page 5
and that “an expert witness cannot be bound by the exact same
answers on a given subject time
after time.” He also noted that
the trial was well underway and
that 14 witnesses had already
been heard.
In his appeal, Gakmakge argued
that he should have been given
sufficient time to hire an expert, at
a minimum to assist him in crossexamining Prévost, and at best to
prepare a contrary opinion. He
also argued once again that he
was denied a full and complete
defence. The appeal court agreed.
What was at stake here was
much more than a mere issue of
the jury assessing the credibility of
Ms. Prévost’s previous testimony
at the preliminary inquiry and
comparing it to her different testimony at trial,” said the appeal
court. “This is a significant
change…As the appellant argues,
it was fundamental for the defence
to know what case it had to meet.”
The appeal court also said that
Gakmakge should have been
given sufficient time to hire an
expert, at a minimum to assist
him in cross-examining the
expert, and at best to prepare a
contrary opinion. That option
would have been available at a
trial by judge alone, which can be
adjourned for an extended period
of time. But given the impossibility of adjourning the jury trial for
the time that would have been
required, the “appellant’s subsidiary conclusion” to have the trial
judge order a mistrial should have
been granted.
The appeal court also castigated Prévost for changing her
mind on another subject that “fitted nicely” with what she had told
the jury about the sequence of
events. During cross-examination at the preliminary inquiry,
she testified that the source of the
blood came from both the appellant and his wife. At trial, however, she testified that the only
source of the stain was Medeiros,
even though there was evidence
of blood cells from Gakmakge.
On top of that, Prévost discussed
her new conclusions with a workplace colleague during a recess of
the trial when she was in the
midst of testifying.
“That was extremely harmful to
the defence, and the appeal court
was right to order a new trial
because the accused was deprived
of a full and complete defence,”
said Joëlle Roy, the former
president of the Quebec Association of Defence Lawyers
The ruling does not imply that
an expert cannot change their
opinion, said Véronique Robert, a
Montreal criminal lawyer. An
expert can make changes to their
report but risks losing credibility.
“The sciences are rarely exact,”
said Robert. “An expert might
learn new elements and bring
about nuances to his conclusions,
but if he changes his opinion he
risks losing his credibility.”
Ever since the notorious case of
Guy Turcotte, the former cardiologist who in 2011 was found not
criminally responsible for killing
his two children by reason of mental illness, expert witnesses have
been under intense scrutiny, noted
Manocchio. “They are being
watched and have to be very careful about what they say. This decision is a message to them.”
MARCH 20 , 2015 •
THE LAWYERS WEEKLY
Focus
TAX LAW
MattZ90 / iStockphoto.com
DEFINING DE FACTO
You might not think you’re a director, but the CRA has other ideas
Adrienne Woodyard
L
ouis XIV’s Finance Minister famously observed that “the art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.” The Canada Revenue
Agency, which has stepped up its audit and collection efforts noticeably in recent
years, doesn’t seem troubled by a bit of hissing.
This is a worrying trend for distressed corporations, whose directors may be held
personally liable for the corporation’s failure to remit various taxes, including GST/
HST and employee payroll deductions. While most sitting directors are aware of the
potential liability, many don’t know that it may persist long after they resign.
The majority of director tax assessments are challenged on the basis of either the
due diligence defence or the “two-year” rule. The latter provides that former directors cannot be assessed more than two years after they have resigned. The application of the two-year rule arises frequently in situations where all of the directors have
formally resigned and none has been replaced; in these situations the courts have
often been asked to consider whether another person has acted as a “deemed” or de
facto director.
In Ontario, ss. 115(4) of the Business Corporations Act provides that in the absence
of a director, any person who manages or supervises the management of the affairs
of a corporation will be deemed a director. Despite certain exceptions (including for
officers operating under the direction of a shareholder; for lawyers and accountants
providing professional services; and for trustees, receivers and secured creditors),
the CRA has often successfully relied on this rule to assess individuals who were
never formally appointed as directors.
The courts have also recognized that even after a resignation, an individual may
continue to act as a de facto director by performing functions that are typically
reserved for directors, such as giving instructions in the corporation’s name and
making financial and administrative decisions on the corporation’s behalf. De facto
directorship may also result where an individual holds herself out to third parties as
a director. Of courser such occurrences are fairly common in small, owner-managed
businesses, where there are seldom clear distinctions between the owner and the
corporate entity.
Bremner v. Canada [2009] F.C.J. No. 569 was such a case. In that instance, Bremner was both a de facto director and a deemed director under the OBCA after his
wife resigned. When the business finally shut down, Bremner claimed he was no
longer a director. The Minister issued an assessment against him exactly two years
and one month later.
The Tax Court of Canada observed that there is no fixed rule for determining when
a de facto director ceases to be a director, but the person’s “course of conduct” in
relation to the corporation must be examined. It found no evidence that Bremner
had informed any third parties that he was no longer a director and that he continued to act on the corporation’s behalf in winding up the business; most damaging
to his case was a letter he wrote to the CRA on the corporation’s behalf seven months
after he claimed to have ceased to be a director. The Federal Court of Appeal upheld
the Tax Court’s decision and confirmed that a de facto directorship must be held to
endure “at least as long” as a person manages or supervises the management of the
corporation’s affairs, “however minimal those actions may have been.”
Liability, Page 12
11
12 • MARCH 20, 2015
THE LAWYERS WEEKLY
Focus TAX LAW
Bad news for testamentary, spousal trusts
Major changes to the estate taxation rulebook are on the way
MaryAnne Loney
tarting next year, there will be
S
significant changes to the
manner in which trusts created
under a will are subject to income
tax. As there are no grandfathering provisions, these changes will also affect current wills,
trusts and estates.
Two substantial changes to
trust and estate taxation are:
n
The introduction of graduated
rate estates (GREs); and
n
The shift of the tax burden for
spousal/common-law partner
trusts, joint spousal/common-law
partner trusts, and alter-ego trusts
(for this article, “spousal trusts”).
Currently, any trust that arises
as a consequence of death (testamentary trust) is taxed at graduated rates indefinitely. This has
led to added potential tax savings
with each testamentary trust,
and has resulted in testamentary
trusts being used extensively in
estate planning.
However, starting Jan. 1 next
year, legislation introducing
GREs comes into effect. A GRE is
an estate that arises as a consequence of an individual’s death.
Only qualified disability trusts,
testamentary trusts where an
elected beneficiary qualifies for
the disability tax credit, and
GREs will be taxed at graduated
rates. All other trusts, including
other testamentary trusts, will be
taxed at the top marginal rate
(currently 39 per cent in Alberta).
Unlike testamentary trusts,
there may only be one GRE per
deceased, lasting for 36 months
after the deceased’s death.
adrian825 / iStockphoto.com
Other benefits which are currently available to testamentary
trusts, such as the ability to
carry back losses and transfer
donation receipts to a deceased’s
previous tax years, will only be
available to GREs. A GRE must
designate itself as a GRE in
order to take advantage of the
benefits available.
These changes will substantially limit the use of trusts in
general, and testamentary trusts
in particular, as a vehicle for
reducing taxes. That is likely the
government’s goal. However, the
limitation of graduated rates to
only GREs and qualified disability trusts means that some trusts
which, from a tax equity perspective, legitimately should have
access to graduated rates — for
example, trusts left for dependent minor children by deceased
parents — will also be taxed at the
top rate. Parents drafting their
wills will have to choose between
These changes will
substantially limit the
use of trusts in general,
and testamentary
trusts in particular, as
a vehicle for reducing
taxes. That is likely the
government’s goal.
MaryAnne Loney
McLennan Ross
either keeping the income out of
children’s hands or reducing the
tax burden of their estate by paying the income to children taxed
at lower marginal rates.
Spousal trusts have a deemed
disposition of their assets at the
death of the surviving spouse.
Currently, the trust bears the tax
burden for the income of that
deemed disposition.
However, with the new legislation, starting this Jan. 1, in the
year the surviving spouse dies, the
deceased must include all the taxable income, including the income
from the deemed disposition of
the spousal trust, in the deceased’s
final tax return. This occurs even
if the deceased’s estate will never
receive that income. As a result,
while the trust may realize the
income, the deceased’s estate will
bear the tax burden associated
with that income.
This potential mismatch
between the tax burden and the
income will be especially problematic if the beneficiaries of the
deceased’s estate and the remainder of the trust are not the same,
as is often the case when the
spousal trust was established for
the spouse in a second marriage.
It is far too easy to imagine two
sets of beneficiaries, connected
through the marriage of now
deceased individuals, fighting
over who is responsible for the
potentially substantial tax burden
of the spousal trust.
The spousal trust will be jointly
and severally liable for the additional tax payable by the deceased
as a result of the inclusion of the
spousal trust’s income. The government has also indicated that
the Canada Revenue Agency will
first look to the spousal trust for
the owed taxes. However, the
CRA may not be obligated to do
so and this does not change the
fact that the ultimate burden
rests with the deceased. It also
raises the possibility that, if the
CRA does collect the taxes from
the spousal trust, the spousal
trust may have a civil claim
against the deceased for those
same taxes.
The takeaway from these changes are:
n
Estate plans using testamentary trusts will not have the tax
advantages they previously had,
potentially leading to worse tax
outcomes than those of a plan
designed taking the new legislation into account.
n
For estate plans that include
spousal trusts, it would be substantially preferable to avoid the
potential tangle caused by this
shift in the tax burden from the
spousal trust to the deceased by
drafting wills/trust deeds to take
into account this new legislation.
n
Anyone with an estate plan
which creates a testamentary or
spousal trust should seriously
consider having their estate
plan reviewed.
MaryAnne Loney is a lawyer with
McLennan Ross in Edmonton. Her
practice includes tax planning for
estates and private corporations, and
tax dispute resolution.
Liability: Claims to be acting as a shareholder have been unsuccessful
Continued from page 11
Directors may be surprised to
know that the cessation of a corporation’s operations or the loss
of its control (for example, in the
course of a receivership) will not,
in and of itself, terminate a directorship. Former directors have
also been largely unsuccessful in
maintaining that actions taken
after their resignation were done
in their capacity as shareholder/
manager and not as director.
Even duties performed solely to
comply with statutory obligations, such as hiring accountants
to prepare financial statements
and tax returns, may be construed as the acts of a de facto or
deemed director.
Most director liability cases
arise in the wake of the collapse
of a business, a heightened time
of stress in which corporate record-keeping is less than scrupulous and events somewhat chaotic.
Two
recent
cases
demonstrate the anomalous
results that can obtain in such
circumstances. In Bekesinski v.
Canada [2014] T.C.J. No. 162, a
director claimed for the first
time, after being assessed, that he
had actually resigned four years
before. The judge found that he
had likely backdated his written
resignation, but because this was
not pleaded, the Crown was precluded from leading evidence to
show that the document was not
authentic, and the appeal was
allowed. The case is under appeal.
In Gariepy v. Canada [2014]
T.C.J. No. 193, the directors
were mere figureheads; their
husbands managed and operated the company, which was
formed after its predecessor col-
lapsed, leaving significant
unremitted taxes owing. The
husbands instructed their lawyers to prepare letters of resignation for their wives after the
expiry of the two-year director
liability period for the predecessor. The draft resignations were
unsigned, and, it appears, never
even delivered to the wives, but
the court nonetheless held that
the resignations were legally
effective, and allowed the
appeal. However, the court criticized the CRA for neglecting to
assess the husbands — one of
whom was bankrupt — as de
facto directors. The Crown has
not appealed, and the CRA is
now likely time-barred from
assessing the husbands.
As these cases show, when
closely-held corporations are
unable to meet their remittance
obligations, the post-resignation
conduct of former directors will
be subject to close scrutiny by the
CRA in the course of determining
which geese to pluck, and when.
Adrienne Woodyard is a tax litigator
with Davis LLP in Toronto.
MARCH 20 , 2015 •
THE LAWYERS WEEKLY
13
Focus TAX LAW
The difference between secrets and privacy
Global crackdown on tax evasion shines light on offshore bank accounts
If someone other than
you knows about your
secret accounts, you
should have no current
expectation that it will
remain secret for long.
Roy Berg
y father used to say the
M
only true secret is the one
“only you know, and that you
keep to yourself.” His admonition
was true then, true now, and prescient when applied to those who
thought they could maintain
secret financial accounts abroad.
This year’s release of certain
customers of HSBC who thought
Swiss banking law would forever
shield their identity should make
this clear. Further, domestic
whistleblower
awards
and
coordinated international efforts
demonstrate the worldwide
resolve to combat the drain on
public coffers brought about by
tax evasion.
The information was facilitated
by the International Consortium
of Investigative Journalists (ICIJ)
and resulted from an employee’s
leak of client information, account
balances, and client correspondence stolen and then leaked to
several governments and the ICIJ
itself. According to the ICIJ’s
website, the HSBC data includes:
n
1,859 clients from Canada, 48
per cent of whom have a Canadian passport or nationality;
n
3,176 bank accounts held with
HSBC; and
n
US$3.9 billion in maximum
account balances from 2006-2007.
Before we break out the pitchforks and torches, however, it’s
important to keep in mind that
not all owners of offshore accounts
are criminals. There may be perfectly justifiable reasons to maintain these accounts (residing in
the jurisdiction, for example) and
the accounts may be part of a
legitimate and legal structure to
minimize overall tax liability. In
other words, the raw data itself
does not tell the full story, and the
ICIJ report acknowledges this.
This is not the first substantial
leak of similar information. In
2007, ‘09, ‘13, and last year there
were similar leaks which were
met with predictable private and
public outcry. The first three of
those leaks resulted in nearly
2,000 account holders being
handed over to the Canada Revenue Agency. The 2014 leaks
showed that numerous Canadian
corporations, including Bombardier, had received secret, taxfavourable deals from Luxembourg, and at least one Canadian
pension fund, Public Sector
Investment Board, received a
Roy Berg
Moodys Gartner
PixHouse / iStockphoto.com
similar deal. True tax evaders
have been exposed by these leaks,
but so have public companies and
public retirement plans.
It’s not unusual for whistleblowers to receive compensation from
tax authorities for delivering
leaked information that results in
the recovery of tax. In fact, the
whistleblowers in 2007, 2009,
2013 and this year were reported
to have received several million
dollars from the affected countries. However, CBC reports that
Canada did not contribute to the
whistleblower awards for those
years. In 2013, Canada enacted its
own individual whistleblower
statute, and the CRA has since
published guidance on the administration of the new law. The U.S.
has had an individual whistleblower statute for several years,
and many recall the $104 million
award paid to Bradley Birkenfeld
for delivering information on tax
evasion at Swiss bank UBS.
The tax gap is typically defined
as the difference between the
amount of tax liability owed by
taxpayers that is not paid on
time. The U.S. estimates this figure to be $376 billion U.S. annually, based on an examination of
data from 2006, the last year for
which this information is available. Canada has declined to
undertake its own calculation of
the tax gap for various reasons,
including the difficulty of the calculation itself and the utility of
the resulting figure. Admittedly,
even the U.S. estimate of its tax
gap does not differentiate
between legal tax avoidance,
criminal tax evasion, and whether
tax evasion is attributable to
domestic or offshore structures.
All developed countries have
recognized that tax evasion and
aggressive tax avoidance constitute a threat to their fiscal coffers.
In an effort to close the tax gap,
there have been numerous individual and co-operative efforts.
The most recent examples
include the Foreign Account Tax
Compliance Act (FATCA), the
OECD’s Common Reporting
Standard (CRS), and the OECD’s
Base Erosion and Profit Shifting
(BEPS). Canada has shown its
willingness to close the tax gap by
participating in these efforts, as
well as committing $30 million
to finding tax evaders in the 2013
federal budget and introducing
the electronic funds transfer
initiative (EFTI). The new EFTI
law, which came into effect Jan. 1,
requires certain financial intermediaries, including banks, to
report directly to the CRA any
electronic fund transfers of
$10,000 or more.
There is a difference between
private information and secret
information. Privacy is the state
of being unobserved and out of
public view. Secrecy is the act of
keeping things hidden. Admittedly, privacy spills into secrecy
the more you contemplate the
subject. However, at some point
there is a difference: the Constitution protects privacy, but it
does not protect secrecy. The dividing line between the two is best
left to philosophers, academics,
and
numerous
other
experts — certainly not this
author. However, I submit that
bank secrecy falls mostly outside
of the realm of privacy. If someone other than you knows about
your secret accounts, you should
have no current expectation that
it will remain secret for long.
From a tax perspective, if your
“planning” has involved having
your assets remain secret, it
should be reconsidered.
Roy Berg is director, U.S. tax law, and
a barrister and solicitor at Moodys
Gartner Tax Law.
bombuscreative / iStockphoto.com
Pocket call to boss ends in theft charges
One of technology’s gifts to law enforcement is that not much is secret
anymore. That was the case when two Key West, Fla., men were heard
planning a robbery because one of them accidently “pocket-dialed” his
boss, reports cbsnews.com. David Ricky Fanuelsen made the accidental
call while he was talking to co-worker Dean Ellis Brown as they allegedly
discussed stealing $8,000 (all figures U.S.) worth of saws from their
employer, Concrete Solutions. The inadvertent speed-dial call, made to
company owner Stacey Valenzuela, went to voicemail, thus leaving a
perfectly incriminating description of the entire caper, including what was
to be stolen and how the loot would be sold to a drug dealer. Valenzuela
said he hadn’t realized the significance of the call until he went to the
work site and noticed that three saws were missing. “Talk about bumbling
idiots,” Valenzuela was quoted as saying. The two men each face a felony
grand theft charge and are being held on a $10,000 bond. — STAFF
14 • MARCH 20, 2015
Focus
THE LAWYERS WEEKLY
LABOUR & EMPLOYMENT
Last rights
Target’s closure underlines employee options in a bankruptcy
Alison McEwen
B
y now we have all heard about Target’s less than successful venture into the Canadian market. For
some, the closing of Target stores in Canada, so soon after their trumpeted opening, also means the
loss of their employment.
Target has filed for creditor protection, and is planning on closing all 133 of its stores in Canada. It has
announced the creation of a $70 million trust, allegedly to be used for severance for employees. Some
employees will be receiving pay in lieu of notice, while others will be required to work part or all of the
16-week notice period.
The question many employees have when faced with their employer’s bankruptcy is: what should they
do if their employer has not set aside a trust to cover termination and severance pay? Or, in the case of
Target employees, what if the trust turns out to be insufficient? It brings to light a larger question: what
are the options for employees should their employer go under?
Generally, when an employer goes bankrupt, employment contracts are considered to be terminated. However, this does not mean that the rights created by the employment relationship disappear. In fact, the Supreme Court of Canada found the
opposite in Rizzo & Rizzo Shoes Ltd. (Re) [1998] S.C.J. No.
2. Bankruptcy does not extinguish the employer’s obligation
to pay termination and severance pay under the applicable
employment standards legislation. Therefore, claims for statutory severance and other similar employer debts flowing from
the employment relationship give rise to unsecured claims.
The first thing an employee must determine is whether the
employer has filed for protection against bankruptcy, or if they
have in fact filed for bankruptcy itself.
Federal legislation, the Companies’ Creditors Arrangement Act
(CCAA), governs how a company deals with protection against
bankruptcy, and how debts are paid out. If an employee is unionized, he or she should be in contact with the union, as the union will
provide the necessary information. If the employee is not represented
by a union, the employee should contact the employer directly to
determine the status of the proceeding under the CCAA. Ask if a monitor has been appointed, and obtain the monitor’s contact information.
ale
The employee should also consider contacting the applicable Ministry of
xsl
/ iS
toc
Labour,
as the Ministry may be able to assist with the paperwork
kph
oto
required by the monitor. Under the CCAA, the employer will often retain
.co
m
control of its operations, and so the employee can continue to deal with the
employer directly, as well as with the monitor.
If the employer has gone bankrupt, the Bankruptcy and
Insolvency Act (BIA), a different piece of federal
legislation, dictates how monies owing are paid out
to creditors. Under the BIA, an employee who is
owed money becomes an unsecured creditor.
Once again, if unionized, the employee should
contact the union. If non-unionized, an employee
should obtain the name of the trustee or receiver
from the employer, and then contact them. The
employee should also consider contacting the appropriate Ministry of Labour, which will help the
employee determine what is owed and may assist
with the paperwork.
Employees may also want to check within
their home jurisdiction to see if there are any
other applicable statues (for example, in
Severance, Page 15
MARCH 20 , 2015 •
THE LAWYERS WEEKLY
15
Focus LABOUR & EMPLOYMENT
With discrimination, you can lose even if you win
Doug MacLeod
Nicole Simes
n employer is not explicitly
A
required to investigate a discrimination complaint under the
Ontario Human Rights Code, and
in 2013 the Ontario Divisional
Court concluded there is no
freestanding duty to investigate.
However, adjudicators appointed
under the code continue to state
that employers who fail to
adequately investigate complaints should pay employees
damages, whether or not discrimination took place.
Section 5 of the code provides
that employees should not face
harassment and discrimination on
the basis of 16 protected grounds.
As early as 2005, these protections
in the code were interpreted by the
Human Rights Tribunal of Ontario
to mean that employers in the
province have an obligation to take
a complaint of discrimination or
harassment seriously, respond
promptly, investigate and take
action where appropriate (see B.L.
v. Marineland of Canada
Inc. [2005] O.H.R.T.D. No. 30).
Since 2005, many tribunal decisions concluded that employers
have a duty to investigate com-
danielschweinert / iStockphoto.com
plaints about discrimination. Failure to do so could result in liability,
even if the behaviour was found not
to be discriminatory. For example,
in Nelson v. Lakehead University
[2008] O.H.R.T.D. No. 39, a professor interviewed for a tenuretrack position. He did not obtain
the position and complained to the
Dean of the University that his age
was a factor in that decision — contrary to the code. The Dean took
minimal steps following the complaint. The tribunal determined
that age was not a factor in the
decision not to hire the professor.
However, the tribunal held that the
Dean did not take reasonable steps
to investigate the complaint and
the University was liable under sections 5 and 9 of the code.
The duty to investigate and corresponding liability for failing to do
so in all situations was rejected by
the divisional court in Walton
Enterprises (c.o.b. Midas Auto Ser-
vices Experts) v. Lombardi [2013]
O.J. No. 3306. In this case, an
employee was terminated following a workplace fight. The employer
did not investigate whether the
fight was connected to workplace
harassment. The court held that
“liability for a discriminatory dismissal does not rest on a freestanding duty to investigate.”
The Walton case has been followed by some tribunal adjudicators. In Scaduto v. Insurance Search
Bureau [2014] O.H.R.T.D. No.
248, an employee complained following his termination that he had
been harassed at work on the basis
of sexual orientation and that the
decision to terminate his employment was discriminatory. At the
tribunal, he argued that the
employer had failed to investigate
these post-termination complaints.
The tribunal determined that the
harassment did not occur and that
the termination was not discrimin-
Severance: Employees are not secured creditors
Continued from page 14
British Columbia, the Business
Corporations Act may apply in
some circumstances, though if
there is a conflict the federal
legislation will prevail).
Another employee option is the
federal Wage Earner Protection
Program, which was developed to
protect employees when employers
are bankrupt or subject to receivership. In this program, employees
are entitled to a payment up to
$3,000 that is equal to four weeks
of insurable Employment Insurance earnings, less amounts prescribed by regulations, to cover
debts for unpaid wages, vacation
pay, termination pay, and severance
pay that the employee became
entitled to in the last six months
prior to bankruptcy or receivership.
Initially, WEPP did not cover termination pay or severance pay.
However, as of March 12, 2009,
and retroactive to Jan. 27, 2009, it
began to cover those entitlements.
In addition, starting on Dec. 15,
2011, WEPP entitlement was
expanded to cover employees who
lose their jobs when the employer
attempts to restructure under the
CCAA, or when a Division I proposal under the BIA ends in bankruptcy or receivership. The trustee
in bankruptcy or the courtappointed receiver should provide
the employee with the necessary
information, and the employee
should file a proof of claim with the
trustee as soon as possible, and
then apply for the payment through
Service Canada. Applications to
WEPP must be submitted to Service Canada within 56 days of the
date of bankruptcy or receivership.
Further, an application for WEPP
does not necessarily prevent an
employee from filing a claim under
the applicable employment standards legislation (for example, in
Ontario, an employee can apply to
WEPP, and also to the Ministry of
Labour to enforce the Employment
Standards Act, 2000. However, in
Alberta, Employment Standards
has no jurisdiction to act on behalf
of an employee where an employer
is in bankruptcy).
Despite these protections, and
the fact that the employee is
entitled to termination and/or
severance pay, it can prove difficult to collect the money. The
claims of employees may receive
preferential treatment over other
non-secured creditors, but government and secured creditors
still get to take their piece of the
pie first. Depending on the
employer’s financial situation,
there may be few or no assets
remaining to pay the outstanding
severance obligations.
Bankruptcies are never simple,
and this can be particularly true for
employees, who may not have all
the facts. But employees should
know that they do have rights when
their employer goes bankrupt, and
should consider which route will
best protect those rights and is
most likely to lead to a payout.
Alison McEwen is a lawyer in the
labour, employment and litigation
groups at Nelligan O’Brien Payne, a
full-service law firm in Ottawa.
She can be reached at alison.
[email protected].
atory. It then addressed the question of the duty to investigate. Following Walton, it held that “there is
no contravention of the Code simply because there was a failure to
investigate a complaint of discrimination where there is no finding of discrimination.”
Other tribunal adjudicators,
however, have ignored Walton and
awarded damages for the failure to
investigate a complaint of discrimination even where that discrimination did not exist. For
example, in Sears v. Honda of Canada Mfg. [2014] O.H.R.T.D. No.
44, the tribunal held that
“the Code imposes a duty on organizations to investigate a complaint
of discrimination, and that a failure
to investigate can attract liability,
even if the Tribunal ultimately dismisses the underlying allegations
of discrimination.”
In view of the conflicting case law,
employers need to know how to
address discrimination complaints
from the human resources and
legal perspectives.
Given the negative impact that
discrimination can have on
employee productivity, attendance, and morale, it makes sense
for employers to investigate all
discrimination complaints. Where
there is smoke, there is sometimes
fire, and fires are expensive to put
out. If it is only smoke, then the
cost to investigate can be minimal.
In this regard, an investigation
may involve nothing more than a
brief conversation with the alleged
discriminator.
Currently, an employer has a legal
obligation to maintain a discrimination-free workplace and a safe
workplace under the code and the
Occupational Health & Safety Act,
respectively. The courts can revisit
whether there is a derivative duty to
investigate discrimination complaints (which the divisional court
has rejected). Alternatively, if the
Ontario government believes that
this derivative right exists, it can
amend the code accordingly.
In the meantime, employers who
do not investigate discrimination
complaints do so at their peril. As
mentioned above, some adjudicators under the code have ignored
the Walton decision which means
an employer may be ordered to pay
damages under the code even if no
discrimination is found to exist.
Alternatively, if discrimination is
found to have taken place, then the
employer can be ordered to pay
discrimination damages and damages for failing to investigate.
Doug MacLeod and Nicole Simes of the
MacLeod Law Firm represent
employers and employees in all areas
of employment law, including human
rights complaints.
We Practise At the
CUTTING EDGE
You are a corporate counsel, a lawyer who does not practice
employment and labour law, or a member of a firm which
has been conflicted out or does not have an office in
Ontario. You have an important matter which requires
representation you will be confident with.
Kuretzky Vassos Henderson LLP is widely recognized as one
of Canada’s leading employment and labour law boutiques.
We practise at the cutting edge assisting a wide spectrum of
clients ranging from major corporate employers through to
individual plaintiffs. Our practice includes employment
contracts, wrongful dismissal, collective bargaining, labour
board applications, arbitrations, adjudications, employment
standards, health & safety, human rights and ADR. To
discuss what we can do for you or your client,
call Kuretzky Vassos Henderson LLP at (416) 865-0504.
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151 Yonge Street, Toronto, Ontario, M5C 2W7
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16
• MARCH 20, 2015
THE LAWYERS WEEKLY
Digest
Aboriginal Law
Communities and
governance
Duties of Crown - Fair dealing and
reconciliation - Consultation and
accommodation - Government funding
and services - Government oversight Appeals and judicial review
Appeal by the Crown from a
judicial review decision issued
in favour of the respondent
First Nation. The issues under
appeal related to the eligibility
criteria for income assistance
on First Nation reserves in
Atlantic Canada. The respondents challenged a decision by
the Minister of Aboriginal
Affairs undertaken to ensure
strict compliance with the provincial eligibility criteria in
accordance with pre-existing
obligations under agreements
with the Treasury Board, particularly a 1990 Memorandum
of Understanding (MOU). Previously, the respondents had
utilized criteria reasonably
comparable to the provincial
criteria. The judge found that a
change in policy from a reasonably comparable standard to
one of strict adherence to provincial criteria would adversely
affect First Nation applicants.
Although the change in policy
was consistent with a prior directive and the 1990 MOU, the
judge found that the decision
was unreasonable, as the Minister had failed to assess the
impact of the decision on First
Nation recipients of income
assistance. The judge found
that the respondents had not
been accorded procedural fairness and that meaningful consultation had not occurred. The
Crown appealed.
HELD: Appeal allowed. The
reviewing judge erred in concluding that respondents had to
be consulted prior to the Minister deciding that the eligibility
criteria for income assistance
on First Nation reserves were to
be identical to the applicable
provincial criteria. The wording
of the 1990 MOU was clear and
unambiguous regarding the
qualifying conditions Aboriginal Affairs was to apply for
income assistance to First
Nations. The use of reasonably
comparable wording in national
draft manuals was to ensure
Aboriginals were treated the
same way as non-Aboriginals in
respect of the provision of
income assistance, and gave no
indication of departure from
the direction given by the
Treasury Board in the 1990
MOU. The manuals did not evidence a change of policy, and
the Minister had no discretion
with respect to the application
of the prior directives and the
MOU. No duty of consultation
thus arose. To the extent that
the Minister gave notice, time
and training to the respondents
to adapt their income assistance to the provincial eligibility
criteria, the duty of procedural
fairness was met. The judgment
below was set aside and the
respondents’ application for
judicial review was dismissed.
Elsipogtog First Nation v. Canada
(Attorney General), [2015] F.C.J. No.
80, Federal Court of Appeal, Nadon,
Trudel and Boivin JJ.A., January 23,
2015. Digest No. 3442-001
Administrative
Law
Judicial review and
statutory appeal
When available - Bars - Alternate
remedy available
Appeal by Prasad from an order
striking his Notice of Application and dismissing it. The
Employment Insurance Commission imposed an $8,000
administrative penalty on the
appellant pursuant to s. 39(1)
(a) of the Employment Insurance Act on the basis he made
false and misleading representations by issuing fraudulent
records of employment. Rather
than pursuing his right to have
the Commission reconsider the
penalty, the appellant applied
for a declaration that the decision was capricious, wrong in
fact and law, was void for failure to provide adequate reasons, and resulted from officials
engaging in an abuse of process
and misfeasance in public
office. The appellant also
sought orders quashing the
decision and prohibiting the
Commission from collecting
the penalty pending disposition
of his application. The Commission moved to strike the
application on the basis it was
without merit and the appellant had failed to pursue remedies under the Act. The judge
dismissed the appellant’s application. Prasad appealed.
HELD:
Appeal dismissed.
Although it would have been
preferable for the chambers
judge to provide more fulsome
reasons, the reasons given were
sufficient to discern the basis
for the decision. It was wellestablished that any statutory
administrative process be
exhausted prior to an applica-
tion for judicial review. The
appellant’s failure to follow the
reconsideration and appeal
procedures in the Act provided
a complete justification for the
judge’s decision. The appellant
did not establish exceptional
circumstances justifying early
recourse to the courts. The record did not support the allegations of bias, misfeasance of
public office, or abuse of process, which were allegations
capable of being raised within
the administrative process. No
basis for appellate interference
was established.
Prasad v. Canada (Minister of
Employment and Social Development), [2015] F.C.J. No. 81, Federal
Court of Appeal, Ryer, Webb and
Boivin JJ.A., January 27, 2015. Digest
No. 3442-002
Alternative
Dispute
Resolution
Binding arbitration
Arbitrators and arbitration boards Jurisdiction - Practice and procedure Awards and remedial relief - Setting
aside - Orders - Enforcement of orders
Appeal by the Manitoba Teachers’ Society (MTS) from a ruling setting aside the ruling of a
second arbitator and reinstating the decision of the first
arbitrator charged with determining whether MTS was
entitled to offset disability
benefits payable to a member,
Loewen, under its Disability
Benefits Plan, against an award
she received in a tort action for
income loss. Loewen was a
teacher who was injured in a
1992 motor vehicle accident.
She received a monthly disability payment representing a percentage of her salary pursuant
to the plan. In 1999, Loewen
reached a global tort settlement
for $425,000. MTS ceased paying disability payments to
Loewen, taking the position it
was entitled to either subrogation or an offset with respect to
the settlement. The first arbitrator charged with determining whether MTS was entitled
to stop making disability payments concluded that neither
the common law doctrine of
subrogation, nor the offset provisions in the plan were applicable. He found the offset provisions of the plan ambiguous
and construed them against
MTS, finding it had failed to
discharge its onus to show the
provisions applied. MTS continued to withhold disability
payments from Loewen, therefore she applied, in 2009, for
an order enforcing the first
arbitrator’s award. The court
would not enforce the award
because it had not been finalized. The first arbitrator was no
longer available, therefore a
second
arbitrator
was
appointed. The second arbitrator did not consider himself
bound by the first arbitrator’s
decision. He found the parties’
dispute had been wrongly
decided and that there could be
an offset. He quantified it at
$135,000. Loewen successfully
appealed from the second arbitrator’s decision, and the court
reinstated the first arbitrator’s
decision.
HELD: Appeal dismissed. The
second arbitrator’s decision was
reviewable on the standard of
reasonableness. It was unreasonable to find the first arbitrator’s
decision was not a final one. The
second arbitrator should have
embarked on a consideration of
the context of the first arbitrator’s
decision, including the nature of
the administrative scheme, the
specific statutory and plan provisions at issue, the factual matrix
in which the decision was made
and the applicable legal principles. The parties clearly intended
that the first arbitrator’s decision
would be final on the issues he
was asked to determine, specifically, whether the offset provisions
or the doctrine of subrogation
applied. The court’s refusal to
enforce the first arbitrator’s
award did not mean it was not a
final decision on the issues it
addressed. The court did not
invite the parties to redo what the
first arbitrator had already done.
Loewen v. Manitoba Teachers’ Society, [2015] M.J. No. 21, Manitoba
Court of Appeal, F.M. Steel, M.M.
Monnin and C.J. Mainella JJ.A., January 30, 2015. Digest No. 3442-003
Civil Litigation
Civil evidence
Witnesses - Credibility - Opinion
evidence - Expert evidence - Criteria
for admissibility
Appeal by the plaintiff from
damages of $50,652 awarded to
him for personal injuries suffered when he was struck by a
motor vehicle driven by the
respondent. The only issue at
trial was the quantum of damages. The trial judge did not
accept the appellant’s view of
the gravity of the incident or
the injuries he claimed and
held that the appellant had
failed to mitigate his damages.
The appellant argued that the
trial judge’s view of his evidence
was heavily influenced by evidence in the form of consulting
reports from two psychiatrists
reporting to the appellant’s
family physician that were
improperly admitted as expert
reports. The two contested
documents were part of the
clinical file of the family physician. The appellant also argued
that the trial judge misapprehended aspects of his medical
files and evidence concerning
the appellant’s recollection of
the accident, matters relevant
to the assessment of his credibility. The appellant argued
that the psychiatrists’ reports
failed to set out the qualifications and educational experience of the doctors, the instructions provided to the doctors,
and the nature of the opinions
sought. Although the trial judge
recognized that that the documents did not comply with the
Rules, he held that there was
sufficient compliance because
the parties knew so well who
the experts were.
HELD: Appeal allowed. New
trial ordered. The judge wrongly
admitted the consulting reports
as expert evidence. Neither of
the
impugned
consulting
reports contained a commitment to the standards of the
Rules or evidenced the author’s
awareness that the documents
would be tendered as expert
reports. It was plain that the
two consulting reports were
simply in response to the family
physician’s referrals of the
appellant in the course of treatment. As such, they did not
meet the requirements of expert
opinion in any respect. Referral
by a family doctor to a physician with specialized knowledge did not equate to knowledge by the patient of the
specific information required in
the expert report. These documents were consequential in
the judge’s reasoning. The trial
judge overlooked and misapprehended evidence materially
bearing on the credibility
assessment as to the first
reporting by the appellant of
depression, vomiting and chest
pain. In the area of these three
symptoms and the appellant’s
lack of independent recollection of the accident, the judge’s
comments fatally undermined
his finding of the appellant’s
credibility and bore upon the
reliability of the expert reports.
It was not open to the judge,
given the appellant’s evidence
of the source of his version of
the accident, to discount the
appellant’s reports to doctors as
MARCH 20 , 2015 •
THE LAWYERS WEEKLY
17
Digest
exaggeration because of his
account of the accident unless
the judge concluded the appellant was not so informed, a
finding that the judge did not
make and an issue he did not
address. It was also not open to
attribute to the appellant a
“story” of the accident to which
he professed no independent
recollection.
Healey v. Chung, [2015] B.C.J. No.
158, British Columbia Court of
Appeal, M.E. Saunders, P.A. Kirkpatrick and D.M. Smith JJ.A., February
3, 2015. Digest No. 3442-004
Contracts
Misrepresentation
What constitutes - Negligent
misrepresentation - Good faith
Appeal by the defendant, the
Province of British Columbia,
from an order requiring it to
pay damages to the plaintiff,
Moulton Contracting. The
plaintiff was a logging contractor who was unable to
access its timber harvest areas
due to a blockade erected by
the respondents, the Fort Nelson First Nation, and members of the Behn family. After
the plaintiff and the Province
entered into the timber sale
licences, Behn told a Province
employee that he intended to
stop the logging. The Province
did not convey the threat to
the plaintiff for two months,
after logging had commenced.
The blockade was erected
shortly thereafter. The plaintiff was unable to complete its
logging under the licences and
litigation ensued. The trial
judge found that the parties’
agreement did not guarantee
the plaintiff access to the harvest areas, but nonetheless
included an implied term that
the Province was unaware of
any dissatisfaction with its
consultation with the First
Nation. The Province was
ordered to pay damages of
$1.75 million to the plaintiff,
representing the lost opportunity to enter into alternative
logging contracts. Liability
was based on a breach of the
implied contractual term, and
concurrent liability in negligent misrepresentation for
breach of an implied continuing representation. The plaintiff ’s claims against the Behns
and the First Nation were dismissed. The Province appealed.
HELD: Appeal allowed. The law
and evidence did not support
the trial judge’s conclusion that
it was an implied term of the
timber sale licences that the
Province was not aware of any
First Nation expressing dissatisfaction with the consulta-
tion undertaken by the Province, save as disclosed. Nor did
the law or evidence support liability for negligent misrepresentation based on an implied
continuing representation on
the same terms, or upon a standalone legal duty of care in that
respect. In addition, the exemption clause in the timber sale
licences shielded the Province
from liability in the circumstances. There was no ambiguity in the documents. The
exemption clauses were inconsistent with contractual intent
to imply a duty on the Province
to inform the plaintiff of information relevant to its ability to
exercise its rights under the
licences. The trial judge’s order
was set aside to the extent it
affected the Province. The
orders for costs payable by the
Province were set aside, with
the plaintiff rather than the
Province required to pay the
First Nation’s costs in accordance with the terms imposed by
the trial judge.
Moulton Contracting Ltd. v. British
Columbia, [2015] B.C.J. No. 331, British Columbia Court of Appeal, R.E.
Levine, E.C. Chiasson and S.D. Frankel JJ.A., February 26, 2015. Digest
No. 3442-005
Criminal Law
informations were not nullities
and that the trial judge was
obliged to allow the amendment of them by having them
re-sworn.
HELD: Appeal allowed. The
informations falsely sworn by
the informant were nullities
and could thus not be amended.
The trial judge found that the
informant knowingly did not
have reasonable and probable
grounds to permit the informations to be validly sworn. Once
this was demonstrated, the
informations were no longer
valid. There was no excuse for
not having the informations
validly sworn. It was just as serious as if the person administering the oath was not a justice of
the peace. The intent of Parliament in mandating that to institute a criminal proceeding an
informant must swear before a
justice of the peace that he or
she had personal knowledge or,
at a minimum, reasonable
grounds, that an offence had
been committed, was not a mere
technicality that could be cured
by amending the information.
The decision of the provincial
court judge was reinstated.
R. v. Awad, [2015] N.S.J. No. 34,
Nova Scotia Court of Appeal, D.R.
Beveridge, P. Bryson and J.E. Scanlan JJ.A., January 30, 2015. Digest
No. 3442-006
Procedure
Procedure
Information or indictment Requirement for laying information Reasonable and probable grounds for
belief - Validity
Trial judge’s duties - Charge or
directions - Defences - Evidence of
witnesses
Appeal by the accused from a
decision of a summary conviction appeal court judge setting
aside a decision of a provincial
Court judge quashing the informations sworn against the
appellants as being nullities. A
police officer had routinely
picked up informations prepared by other officers and had
appeared before a Justice of the
Peace swearing she had reasonable grounds to believe that the
persons named had committed
the charges enumerated in the
various informations. The officer had, in fact, no knowledge
whatsoever about the charges
against the individuals named
in the informations. The appellants were among the individuals named in such informations. The officer testified that
she had followed this process
hundreds of times from 2009 to
June 2012. Although the informations appeared to be regular
on their face, the trial judge
found that the appellants had
rebutted the presumption of
regularity and concluded that
the informations were nullities
that should be quashed. On
appeal by the Crown, the appeal
court judge found that the
Appeal by the accused, Campione, from convictions for two
counts of first degree murder.
The accused had a history of
mental illness and delusional
conduct. Her marital relationship was destructive. In 2006,
the accused killed her two
daughters, aged 19 months and
three years, by drowning them
in the family bathtub. She subsequently dressed the girls, surrounded them with stuffed animals and a doll, and wrapped
rosary beads in their interlocking hands. The accused filmed a
lengthy video in conjunction
with her actions with vindictive
comments directed toward her
former husband. Thereafter,
the accused unsuccessfully
attempted suicide. At trial, the
accused advanced a defence
that she was not criminally
responsible (NCR) for her conduct by reason of a mental disorder. The defence theory was
that the accused’s psychotic
delusions caused her to view
the killings as an altruistic act
to save the children from her
estranged husband and his
family. The Crown alleged the
killings were acts of vengeance
carried out in the midst of a bitter custody battle in which the
accused risked losing the children due to her husband’s
attempt to reveal the state of
her mental health to the court.
Expert evidence was adduced in
support of each side’s position.
The jury convicted the accused
of first degree murder. The
accused appealed on the basis
the trial judge erred in
instructing the jury.
HELD: Appeal dismissed. The
trial judge did not err in charging the jury on moral wrongfulness in the context of the
accused’s NCR defence. A passage included from the recent
Court of Appeal decision, Ross,
did not cause confusion or mislead the jurors into believing
the NCR test had an objective
component. Instead, the Ross
passage drew the jurors’ attention to the issue of capacity in a
clear and succinct fashion, and
summarized the standard
against which the jury was to
measure the accused’s conduct
in the context of the defence.
The jury was well aware that if
they accepted the defence position that the killings were an
altruistic act, driven by the
accused’s psychotic delusions,
they had to render a verdict of
NCR. The opinion of the Crown
expert did not mislead the jury
with respect to the applicable
law regarding the NCR defence.
The trial judge clearly directed
the jury that they were not to be
influenced by others’ statements
on the law. The trial judge did
not unfairly single out the
defence expert when cautioning
the jury, as the whole of the
charge would not leave the
impression that the caution was
solely confined to the evidence
of the defence’s expert.
R. v. Campione, [2015] O.J. No.
454, Ontario Court of Appeal, R.A.
Blair, S.E. Pepall and P.D. Lauwers
JJ.A., February 2, 2015. Digest No.
3442-007
plainant in the head using full
force. The complainant suffered a
broken jaw which required surgery and post-surgical treatment
prior to a full recovery. The
offender was convicted at trial.
He had no prior record. The
Crown sought a custodial sentence of 12 to 15 months. Defence
counsel sought a 90-day intermittent sentence plus 12 to 15
months of probation with community service. The sentencing
judge imposed a nine-month custodial sentence. The offender
appealed on the basis the sentence was excessive and demonstrably unfit. He sought to admit
fresh evidence of ill health based
on heart issues caused by a motor
vehicle accident.
HELD: Appeal dismissed. The
sentence judge erred in addressing the principle of restraint by
linking it with the nature of the
assault and by suggesting separation from society would
assist the offender’s rehabilitation. Notwithstanding the mistaken references to the law of
restraint and the rehabilitative
value of incarceration, the sentencing judge imposed a sentence that was not clearly excessive or unreasonable in the
circumstances. The fresh evidence would not affect the
result, as the damage to the
offender’s heart was mild to
moderate and no indication was
given as to how the sentence
would unduly affect him. Sentence: Nine months’ imprisonment -- Criminal Code, s. 268.
R. v. Keresztes, [2015] A.J. No. 109,
Alberta Court of Appeal, R.L. Berger,
P.A. Rowbotham and R.S. Brown
JJ.A., February 3, 2015. Digest No.
3442-008
Education Law
Schools
Sentencing
Criminal Code offences - Aggravated
assault - Particular sanctions Imprisonment - Sentencing
considerations - Rehabilitation - No
previous record - Health - Procedure Appeals - Fresh evidence
Appeal by the offender, Keresztes,
from a sentence imposed for
aggravated assault. A group of
individuals left a nightclub at
closing. The complainant mistook the offender for another
individual he had interacted with
earlier in the evening and struck
him in the head from behind. The
offender struck back in selfdefence. Following that initial
blow, the offender and a group of
men surrounded the complainant and assaulted him while he
lay on the ground. Police
approached the group and witnessed the offender kick the com-
Pupils or students - Student rights Privacy - Searches - Constitutional
issues - Canadian Charter of Rights
and Freedoms
Application by two high school
students, Gillies and Gorski, for
declaratory relief pursuant to
the Canadian Charter of Rights
and Freedoms. Prior to the senior prom hosted by the applicants’ school, the principal
announced that administration
of a mandatory breathalyzer
test would be a pre-condition of
entry to the event. The principal deposed that the measure
was a last resort to counteract a
culture of alcohol consumption
at the school’s dances and
proms. The applicants were
members of the student council
executive. They met with the
principal to voice their opposition to the policy. The principal maintained his position.
18
• MARCH 20, 2015
THE LAWYERS WEEKLY
Digest
The applicants applied for a
declaration that the policy
breached s. 8 of the Charter,
and was contrary to School
Board policies and procedures.
The parties agreed that the
application could not be adjudicated prior to the prom and
that the event would occur
without the mandatory testing.
Instead, students were observed
upon arrival and venue security
conducted pat-down searches.
No students were denied entry.
The principal indicated that a
mandatory breathalyzer would
serve as a precondition to entry
at future school dances and
proms. At issue was whether
the Charter applied to school
authorities at off-site school
events, and if so, whether a
mandator y
breathalyzer
impermissibly breached students’ s. 8 Charter rights.
prescribed by law, and was not
rationally connected to the
health, safety and discipline
objectives of the principal and
school authorities. The policy
did not involve minimal impairment of students’ privacy interest and, in light of the social
evidence regarding student
drinking, was a disproportionate reaction by school personnel. Declaratory relief was
granted accordingly.
HELD: Application allowed.
Although the matter was moot,
the principal’s indication that
the policy would be implemented in the future, and the
importance of the issues raised,
justified determination of the
merits. The Charter applied to
the Toronto District School
Board and the actions of the
principal. They derived their
powers from statute, carried
out a quintessentially government function, and acted in
furtherance of specific government policies to which the
Charter applied. An off-site
prom was a school-sanctioned
event at which the principal
acted in his professional capacity. The implementation of
the policy requiring a mandatory breathalyzer test as a condition to entry engaged s. 8 of
the Charter. To the extent that
voluntary consent to the test
could be implied, it was not sufficiently informed to amount to
a waiver of rights. Students
enjoyed a reasonable expectation of privacy in their breath
samples. Although such expectation was diminished in the
context of a school prom, the
absence of consent to the seizure justified protection of the
privacy interest. The principal
did not have reasonable
grounds to believe a school rule
was being violated to justify the
use of a mandatory breathalyzer
test in the manner proposed.
The principal’s suspicion of
pre-event drinking did not
meet the requisite threshold
under the Charter, or under
School Board policy. Administration of a mandatory breathalyzer test at an off-site school
event was a highly intrusive
search disproportionate to the
nature of the suspected violation of school rules. The proposed policy was unreasonable
and breached s. 8 of the Charter. The breach could not be
saved by s. 1 of the Charter, as
the proposed policy was not
Crown
Gillies (Litigation guardian of) v.
Toronto District School Board,
[2015] O.J. No. 833, Ontario
Superior Court of Justice, S.G. Himel
J., February 23, 2015. Digest No.
3442-009
Government Law
Contracts with Crown - Appeals and
judicial review
Application by the Crown for
judicial review of a decision by
the Canadian International
Trade Tribunal allowing the
complaint by the respondent,
Tritech Group Ltd. Public
Works issued a Request for
Standing Offer (RFSO) for the
supply of modular building
units for the Department of
Fisheries and Oceans. The
terms of the RFSO required,
among other things, fixed
pricing for the building units
throughout a standing offer
duration period of one year,
with two one-year options. The
RFSO included a provision that
allowed Public Works to extend
the time for acceptance of
offers. The respondent submitted a standing offer that specified the unit pricing, but also
included a provision that
materials pricing was valid for
90 days, after which it would be
indexed to published aluminum
indices. Public Works rejected
the offer as non-compliant on
the basis that the provision was
an impermissible modification
of the terms of the fixed pricing
condition of the RFSO. The
respondent filed a complaint
with the Tribunal, alleging that
the impugned provision applied
to any acceptance period extension request rather than the
fixed pricing condition. The
Tribunal found that Public
Works should not have rejected
the respondent’s standing offer
as non-compliant, as its interpretation of the impugned provision was unreasonable. The
Crown sought judicial review.
HELD: Application dismissed.
The Tribunal’s decision was
reviewable on a standard of
reasonableness. The Tribunal’s
decision was not based on
imposition of a duty upon Public Works to clarify the
impugned provision. Instead,
the Tribunal’s decision was that
Public Works was free to interpret bid language, but ran the
risk of an incorrect or unreasonable interpretation in the
absence of asking for clarification. The Tribunal’s interpretation of the impugned provision
was not unreasonable. Its reasons provided a sufficiently
transparent and intelligible
justification for its interpretation. The Tribunal’s decision to
uphold the respondent’s complaint was not unreasonable.
Tritech Group Ltd. v. Canada (Public
Works and Government Services),
[2015] F.C.J. No. 114, Federal Court
of Appeal, Dawson, Ryer and Webb
JJ.A., February 4, 2015. Digest No.
3442-010
Immigration Law
tionship existed between the
respondents and their grandmother at the relevant times.
The respondents maintained
regular contact with their birth
parents and continued to
receive guidance and financial
support. Similarly, the record
before the officer allowed her to
reasonably conclude that the
respondents failed to demonstrate that the adoptions were
not primarily for the purposes
of obtaining Canadian citizenship. The officer duly considered the safety of both
respondents in Jamaica. No
evidence was ignored and no
irrelevant factors were considered. The Federal Court
decisions were set aside and the
applications for judicial review
were pronounced dismissed.
Davis v. Canada (Minister of Citizenship and Immigration), [2015] F.C.J.
No. 115, Federal Court of Appeal,
Dawson, Stratas and Near JJ.A., February 6, 2015. Digest No. 3442-011
Naturalization or
citizenship
Right to citizenship - Children of
Canadian Citizens - Application for
grant of citizenship - Appeals and
judicial review
HELD: Appeals allowed. The
Federal Court failed to properly
apply the reasonableness standard. The citizenship officer
interviewed the respondents
and their grandmother. The
resulting findings of fact were
entitled to deference. Based on
the available record, the officer
could reasonably conclude that
no genuine parent-child rela-
Sanofi Pasteur Ltd. v. UPS SCS Inc.,
[2015] O.J. No. 577, Ontario Court of
Appeal, A. Hoy A.C.J.O., J.M. Simmons and M.H. Tulloch JJ.A., February 9, 2015. Digest No. 3442-012
Legal Profession
Barristers and solicitors
Insurance Law
Liability insurance
Appeals by the Minister of Citizenship and Immigration from
judicial review decisions setting
aside refusals of citizenship for
the respondents, Terika and
Lancia Davis. The respondents
were citizens of Jamaica. They
arrived in Canada in 2008 to
visit their grandmother for six
weeks. They sought to remain
in Canada permanently and
their grandmother adopted
them in April 2009. At the time
of adoption, Terika was 17 years
of age and Lancia was 19. In
June 2009, the respondents
applied for citizenship. In 2013,
the applications were refused.
The officer was not satisfied
that a genuine parent and child
relationship existed between
the respondents and their
grandmother, as their relationship with their birth parents
remained unchanged. The officer was not satisfied that the
adoptive relationship was not
entered into primarily for the
purpose of acquiring citizenship. The respondents each
sought judicial review. The
Federal Court found that the
refusal
decisions
were
unreasonable and set them
aside. The Minister appealed to
the Federal Court of Appeal.
As no facts were at issue, summary judgment was available. The
judge properly interpreted the
parties’ contract in finding that
Sanofi assumed all risk of damage
to the medications, except for up
to $100,000 caused solely by the
negligence of UPS. It was commercially reasonable to imply
Sanofi and UPS intended to
extend the benefit of their insurance covenant to the third party
manufacturers and installers. To
hold otherwise would unfairly
subject the third parties, mostly
small companies, to significant
liabilities for acts over which they
had little or no control.
Business and commercial insurance
Appeal by Sanofi from the summary dismissal of its action
against UPS and others arising
from the total loss of medications stored at a UPS warehouse. Sanofi stored its products with UPS pursuant to a
contract providing that they
needed to be maintained at a
certain temperature. The parties’ contract obliged Sanofi to
maintain insurance coverage
for the total value of its products, and limited UPS’s liability
to a total of $100,000 per year
for property damage due to its
negligence. Over a weekend,
the cooling equipment at the
UPS warehouse malfunctioned,
and alarms intended to alert
UPS to temperature fluctuations failed to activate. All of
Sanofi’s products were rendered
unsaleable. UPS paid Sanofi the
$100,000 it considered owing
under the contract. Sanofi sued
UPS and others, including the
manufacturer of the cooling
equipment and the installer of
the alarm system, for the full
value of the lost medications.
The claim was summarily dismissed on UPS’s application.
The judge concluded that the
insurance covenant in the parties’ contract signified Sanofi’s
assumption of risk of the very
damage for which it sued, and
was therefore a complete
answer to Sanofi’s action.
HELD: Appeal dismissed. A factual determination of the cause of
the loss forming the basis of
Sanofi’s action was not necessary
to interpret the parties’ contract.
Liability - Relationship with client Constitutional issues - Canadian
Charter of Rights and Freedoms
Appeal by the Attorney General of
Canada from a judgment of the
British Columbia Court of Appeal
affirming a judgment concluding
that some provisions of Canada’s
anti-money laundering and antiterrorist financing legislation violated s. 7 of the Canadian Charter
of Rights and Freedoms (Charter).
The Proceeds of Crime (Money
Laundering) and Terrorist Financing Act (Act) and Proceeds of
Crime (Money Laundering) and
Terrorist Financing Regulations
(Regulations) imposed duties on
financial intermediaries, including
lawyers and accountants, who
were required to collect information in order to verify the identity
of those on whose behalf they paid
or received money, to keep records
of the transactions, and to establish internal programs to ensure
compliance. The legislation also
subjected financial intermediaries,
including lawyers, to searches and
seizures of the material that they
were required to collect, record
and retain. The Federation of Law
Societies of Canada argued that
the scheme made lawyers unwilling state agents. The application
judge held that the challenged provisions were contrary to s. 7 of the
Charter. The Court of Appeal
unanimously held that the obligations imposed on lawyers by the
provisions breached s. 7 of the
Charter and that they were not
saved by s. 1.
HELD: Appeal allowed in part.
The search powers in sections 62,
63 and 63.1 of the Act authorized
sweeping searches of law offices,
and there was a significant risk
that at least some privileged
material would be found among
the documents that were the sub-
MARCH 20 , 2015 •
THE LAWYERS WEEKLY
19
Digest
ject of the search powers in the
Act. Although s. 64 set up a procedure to protect against disclosure of privileged material in the
course of a search, it required the
lawyer to seal, identify and retain
the document and to claim privilege in court. There was no
requirement for notice to the
client, who was the holder of the
privilege. These defects constituted a very significant limitation
of the right to be free of unreasonable searches and seizures guaranteed by s. 8 of the Charter. The
justification failed the minimal
impairment test. There were
other less drastic means of pursuing the same identified objectives. Moreover, the provisions
infringed s. 7 of the Charter. The
lawyer’s duty of commitment to
the client’s cause was a principle
of fundamental justice, as it constituted a legal principle, there
was significant societal consensus that it was fundamental to
the way in which the legal system
ought to fairly operate and it was
sufficiently precise so as to yield a
manageable standard against
which to measure deprivations of
life, liberty or security of the person. As such, the state could not
impose duties on lawyers that
undermined their duty of commitment to their clients’ causes.
Under the Act and the Regulations, lawyers were required to
gather and retain considerably
more information than the profession thought was needed for
ethical and effective client representation and they were liable
to imprisonment if they did not
comply with these requirements.
This, coupled with the inadequate protection of solicitorclient privilege, undermined the
lawyers’ ability to comply with
their duty of commitment to the
client’s cause. The provisions,
taken as a whole, limited the liberty of lawyers in a manner that
was not in accordance with the
principle of fundamental justice.
The Attorney General failed to
demonstrate that these limitations of Charter rights were
demonstrably justified in a free
and democratic society, and they
were therefore not saved by s. 1
of the Charter. Section 64 of the
Act was of no force or effect and
ss. 62, 63 and 63.1 were read
down so that they did not apply
to documents in the possession
of legal counsel or in law office
premises. Sections 33.3, 33.4,
33.5, and 59.4 of Regulations
were of no force and effect, and
s. 11.1 of the Regulations was
read down so that it did not
apply to documents in the possession of legal counsel or in law
office premises.
Canada (Attorney General) v. Federation of Law Societies of Canada,
[2015] S.C.J. No. 7, Supreme Court
of Canada, McLachlin C.J. and LeBel,
Abella, Cromwell, Moldaver, Karakatsanis and Wagner JJ., February 13,
2015. Digest No. 3442-013
Real Property
Law
Registration of
documents
Land Registry system - Registry Acts Registration of deeds - Instruments
that may be registered - Court orders
and judgments - Effect of registration
Appeal by MacIsaac from an order
directing the registration of two
judgments against a property. MacIsaac was a lawyer who represented
the vendors and purchasers in the
sale of the property. He did not
check the judgment roll prior to
conveying the property to the purchasers, and therefore was unaware
of two judgments against the vendors recorded against the property.
The vendors subsequently disappeared with the purchasers’
money, having failed to make good
on the two judgments against
them, which remained on the judgment roll. The court held that the
purchasers obtained their interest
in the property subject to the judgments recorded against the vendors prior to closing, but after the
agreement of purchase and sale
was executed. It ordered that the
parcel register be amended to add
the two judgments.
HELD: Appeal dismissed. The
signing of the agreement of purchase and sale by the vendors did
not relieve them of their interest in
the property such that the judgments could not subsequently
attach to the property. MacIsaac
failed in his duty to conduct a
proper search of the judgment roll
and to bring the judgments into the
parcel register. The court was correct to direct the amendment of the
parcel register to include the two
judgments.
Royal Bank of Canada v. Marmura,
[2015] N.S.J. No. 44, Nova Scotia
Court of Appeal, P. Bryson, M.J.
Hamilton and J.E. Scanlan JJ.A., February 5, 2015. Digest No. 3442-014
Tort Law
tionship. The plaintiff was
arrested and charged with harassing the defendant, unlawfully loitering near the defendant’s residence, and mischief. Despite
being released on terms that he
could not contact the defendant,
the plaintiff contacted her on several occasions, leading to further
arrests and charges. The plaintiff
was found guilty of six counts of
breach of recognizance by contact
with the defendant. He was
acquitted of the other charges.
The plaintiff claimed the defendant’s false statements to the police
led to his arrest and charges. He
sought damages for loss of reputation, loss of career opportunities, legal costs incurred in
defence of the criminal action and
general damages. The judge
granted the defendant’s motion
for summary judgment to dismiss
the claim. The motion judge
found that it was plain and
obvious the plaintiff had no reasonable cause of action. The judge
found that while the defendant’s
report initiated the police investigation which resulted in criminal
proceedings, and the plaintiff was
successful at the criminal proceeding, the defendant did not act
maliciously. He concluded that
the defendant had reasonable and
probable grounds to fear the
plaintiff and to suspect that he
was responsible for breaking the
basement window because at the
relevant time he was obsessed,
fanatic and irrational.
HELD: Appeal dismissed. The
plaintiff had not demonstrated
any palpable or overriding
error. The judge’s conclusion
that the plaintiff had reasonable and probable cause to suggest to police that the plaintiff
was a possible suspect was justified. Although the judge
applied the old test, which
asked whether there was a
genuine issue for trial, whereas
Rule 7.3 permitted summary
judgment where there was “no
merit to the claim,” under either
test, the plaintiff could not succeed. It followed that if there
was no genuine issue for trial,
the claim had no merit.
Abuse of legal procedure
or process
Transportation
Law
PROCEEDINGS
Constitutional issues - Federal v.
provincial jurisdiction - Canadian
Charter of Rights and Freedoms
Application by four motorists
challenging the constitutionality
of Alberta’s administrative
licence suspension regime. The
amendments at issue provided
for the immediate suspension of
a driver’s licence upon being
charged with an alcohol-related
driving offence. Prior to the
amendments, the legislation provided for a 24-hour suspension
with a 21-day grace period before
a longer suspension took effect.
Under the amended s. 88.1 of the
Act, a suspension was no longer
for a stipulated duration, as the
suspension ended at the earlier
point of resolution of the charge
or a successful appeal by the
driver from the suspension.
Under the amended s. 39.2 of the
Act, the appeal process remained
fundamentally the same as under
the old Act and outlined the relevant evidentiary record on
appeal. The amendments provided for suspensions of between
three and 30 days for driving
with a blood-alcohol concentration of between 50 and 80 milligrams per 100 millilitres of
blood. Finally, the amended s.
172.1(1) of the Act compelled
seizure of the vehicle for three or
seven days, whereas seizure was
optional and for a shorter period
under the previous provisions.
The applicants submitted that
the amendments were criminal
law in substance, and therefore
ultra vires the jurisdiction of
Alberta. In the alternative, the
applicants submitted that the
impugned provisions were
inconsistent with ss. 7, 8 and
11(d) of the Charter.
HELD: Application dismissed. The
Province of Alberta had jurisdiction to enact the impugned amendments pursuant to its authority to
enact laws in relation to local
works, property and civil rights,
and matters of a local nature. The
purpose and effect of s. 88.1 of the
Traffic Safety Act was to reduce the
risk posed by drinking and driving.
The provincial highway traffic
safety dimensions of the law were
pronouncedly more important
than the federal criminal law
dimension and did not conflict
with the Criminal Code. None of
the challenged provisions were
inconsistent with the Charter. An
alcohol-related administrative
licence suspension did not deprive
any person of the right to life, liberty and the security of the person.
There was no constitutional right
to drive or hold a driver’s licence.
No liberty aspect of s. 7 was
engaged, as the duration of the suspension did not deprive a licensee
of his or her free will when deciding
whether to plead guilty or not guilty
to the charges that triggered the
suspension. To the extent a s. 7
right was engaged, the Province’s
response to the substantial harm
posed by drinking and driving
complied with the substantive and
procedural elements of the principles of fundamental justice. The
amendments did not occasion a
breach of s. 8 of the Charter, as the
authority for a breath sample
demand came from s. 254 of the
Criminal Code rather than the
Traffic Safety Act. The presumption of innocence was not engaged,
as a suspension pursuant to s. 88.1
did not give rise to charges or an
offence. To the extent that drinking
and driving charges resulted, they
were pursuant to the Criminal
Code and an individual charged
thereunder was entitled to the constitutional protection of s. 11(d) of
the Charter.
Sahaluk v. Alberta (Transportation
Safety Board), [2015] A.J. No. 231,
Alberta Court of Queen’s Bench, T.W.
Wakeling J., February 27, 2015.
Digest No. 3443-016
Classifieds
Malicious prosecution - Establishing
elements - Malice - Relation to want of
reasonable and probable cause
Appeal by the plaintiff from the
summary dismissal of his claim of
malicious prosecution against his
former girlfriend. The parties
were in a tumultuous relationship
for five years. In 2010, after the
defendant’s home alarm was activated and a basement window
was broken, she called the police
and identified the plaintiff as a
possible suspect. The plaintiff had
made several telephone calls and
text messages to the defendant
following the ending of their rela-
Stout v. Track, [2015] A.J. No. 127,
Alberta Court of Appeal, P.A.
Rowbotham, T.W. Wakeling JJ.A.
and D.A. Sulyma J. (ad hoc), February 5, 2015. Digest No. 3442-015
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20
• MARCH 20, 2015
THE LAWYERS WEEKLY
Business & Careers
‘Earn it before you spend it’
Instead of a splashy office, keep it simple and professional when starting out
M
any lawyers in recent years have decided to take
on the challenge of launching their own practice.
They might be new graduates entering the profession who are unable to find jobs or veteran lawyers who
just want to go it on their own.
While the experience can be liberating, allowing lawyers to create their own brand, it can also be very expensive, as there are computers and furniture to buy, an
office to rent, software to acquire, a website to build and
marketing to be done.
Paul Busch, who operates a boutique accounting practice
in Mississauga, Ont., that serves small to medium-sized
businesses, including law firms, says there’s a whole laundry list of expenses that lawyers face when starting their
own practice.
In addition to the anticipated expenses, he says, other
start-up items that must be covered include a telephone
system, business cards and letterhead, law society dues,
insurance, perhaps the cost of incorporating the firm,
hiring a receptionist to answer calls, as well as money
for an accountant to set up the firm’s books, an account
with the Canada Revenue Agency, and a system of collecting the HST.
When starting a practice, he says, the first thing a lawyer
should do is put together a business cash-flow projection
for 24 months, as it will help them stay on track.
“You’re putting a benchmark out in front of yourself and
saying, ‘That’s the hurdle I’ve got to jump so I’d better get
my butt in gear.’ It tells you if you’re falling short.”
Busch suggests lawyers have enough cash reserves on
hand, or at least a number of clients in the pipeline, so they
have some type of fee generation at start-up.
He looked at a couple of small law firms that he does
accounting work for and found that it costs them about
$40,000 a year in office costs and $80,000 to
$90,000 per year in overhead expenses for each
lawyer. That does not include salaries.
If a lawyer is strapped for cash, Busch recommends renting office space from an existing firm,
saving the practitioner money on library costs
and paying a receptionist.
He also suggests lawyers think long and hard
before purchasing expensive office furniture.
“I was in practice five years before I went
out and spent $20,000 on really nice oak furniture. I’m a
believer in, ‘Earn it before you spend it.’ I tell my clients all
the time when they’re starting up, ‘You’re not IBM, so let’s
wait a while before you go spending all this money.’”
Janice Wright, of Wright Temelini in Toronto, says many
of the issues around costs, budgets and marketing will be
determined by the type of firm a lawyer is starting.
“In many respects, that’s the most important thing to get
right and then a lot of the other questions and therefore
answers will follow on from that.”
Wright is familiar with the financial challenges of
starting a practice. She launched Wright Temelini, a litigation boutique, with her partner Greg Temelini just
over a year ago.
She says setting up the practice was a great learning
experience for the two and what they learned is to set priorities, have a plan, and be cautious when spending.
“You know the old saying, ‘Plan for the worst and hope
for the best.’ That’s what we did.”
When Wright and her partner started out, they set up
a budget — and stuck to it. They set aside more money
for technology because the firm handles complex legal
issues like securities and corporate commercial litigation, international trade law and cross-border litigation, so it was critical to have the latest tech tools to
keep files organized.
“We considered that critical, so our budget in that area
was probably quite a bit higher than other small firms but
it was absolutely critical for us.”
The partners didn’t go over the top on furnishings
because they wanted the office to be comfortable for clients but not too extravagant.
“We took the time to furnish it in a way we think is professional but we didn’t go out of our way to have it
extremely elaborate because neither of us, quite frankly,
had a sense that that’s what we want.”
Says Temelini: “It really depends on who you’re trying to
attract. For us, having marble flooring wasn’t high on our
priority list.”
Peter Aprile, taxation and litigation lawyer and principal of Counter Tax Lawyers in Toronto, says financial
costs can add up when a lawyer decides to hang out
their shingle, so it’s wise for them to be cautious.
“I always have and would encourage people to be
very willing to take risks but be conservative in
Cash, Page 21
Vectoraart / iSto
ckphoto.com
Grant Cameron
MARCH 20 , 2015 •
THE LAWYERS WEEKLY
21
Business & Careers
Cash: Keep eye on finances
Continued from page 20
terms of costs and things of that nature.
Having a cash reserve, as well as a good
relationship with the bank, and a healthy
line of credit are other things that I would
recommend for a lawyer starting their
own practice.”
Aprile believes a healthy financial foundation is essential to launching a successful practice because that allows a lawyer to
focus on bringing in new business and clients instead of worrying about finances.
“Starting a practice is hard enough and
I wouldn’t want to be in a position
where I’m worried about making rent
right off the bat.”
At the end of the day, he says, reputation is the most valuable asset a lawyer
has and it’s a recipe for disaster if decisions are made based on finances as
opposed to servicing clients.
When starting out, says Aprile, lawyers
should consider whether a purchase they
make will have benefits down the road.
“People tend to focus on things like
fancy office furniture, but that is where
people would be wise not to take on
those expenses, at least not in the short
term. I think you need to be projecting
the right image, but I don’t think it
needs to be over the top.”
Aprile has carried that frugal philosophy to his daily dealings with clients.
Instead of going for lunch or a round of
golf, he prefers to visit clients at their
offices or partake in “modest” activities
and develop a deeper understanding of
their needs.
“Making personal connections with
people and having a cup of coffee with them
and taking the time to go and meet with
them at their offices is just as valuable.”
BENCHER ELECTIONS
BENCHER ELECTIONS
Re-Elect Barbara Murchie
A bencher committed to:
¾ A competent, honourable, diverse profession with
higher entry standards
¾ Proportional, fair and effective regulation
¾ Increased access to justice through support for soles
and smalls and increased legal aid
¾ Support for local libraries
A bencher with a track-record for:
¾ Taking her duties as a bencher and LawPro director
seriously
¾ Sitting as an adjudicator on panels hearing discipline matters
¾ Supporting the advancement of women and working on competence
initiatives
Re-Elect Barbara Murchie
For Sensible and Effective Regulation
For more, go to: electmurchie.wordpress.com
RELEVANT INVOLVED FRESH THINKING PERSPECTIVE COMMITMENT RELEVANT INVOLVED FRESH THINKING PERSPECTIVE COMMITMENT RELEVANT INVOLVE
RELEVANT INVOLVED FRESH THINKING PERSPECTIVE COMMITMENT RELEVANT INVOLVED FRESH THINKING P
RELEVANT INVOLVED FRESH THINKING PERSPECTIVE COMMITMENT RELEVANT IN
RELEVANT INVOLVED FRESH THINKING PERSPECTIVE COMMITMENT RELEVANT INVOLVED FRESH THINKING PERSPECTIVE COMMITMENT
RELEVANT INVOLVED FRESH THINKING PERSPECTIVE COMMITMENT RELEVANT INVOLVED FRESH THINKING PERSPECTIVE COMMITME
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Running for Bencher
Outside
Toronto
Ray Mikkola
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Jack Braithwaite
Jerry B. Udell
Janet E. Minor
Toronto
Barbara Murchie
Paul M. Cooper
Paul DioGuardi
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Doug Downey
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Ross F. Earnshaw
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Rondinelli
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Durcan
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the WILL
to carry on.
Will McDowell for Bencher
To find out where Will
stands, visit willmcdowell.ca
Colin Lachance
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Heather Zordel
22
• MARCH 20, 2015
THE LAWYERS WEEKLY
Business & Careers
Does Canada need a corporate tax?
Vern Krishna
Tax Views
T
he subject of corporate taxation has
troubled tax policy gurus for more
than half a century in Canada.
The Carter Commission recognized the
problems associated with taxing corporations as far back as 1966, when it said:
“Equity and neutrality would best be achieved
under a tax system in which there were no
taxes on organizations as such, and all individuals and families holding interests in
organizations were taxed on the accrued net
gains from such interests on the same basis
as all other net gains.”
Since corporations cannot deduct dividends paid to their shareholders, corporate
income is potentially subject to economic
“double taxation,” first at the corporate level
and then again in the individual shareholder’s hands.
Ultimately, only individuals pay tax. Artificial entities do not really “pay” tax — they are
merely legal conduits for individuals who
bear the real economic burden of taxation.
Thus, the first question we must answer is
whether we should have a separate corporate tax at all. What if we adopted Carter’s
notion that simply attributed income on an
annual basis to the corporation’s individual
shareholders, regardless of whether the corporation actually paid out its income as
dividends? Under this scheme, the corporation would merely be a conduit for its shareholders in much the same way as a partnership is for its partners, or a trust is for its
beneficiaries. By adjusting the tax rate on
dividends, we could raise the same amount
of revenues as we do under the dual regime
of corporate and shareholder taxation.
Although appealing in theory, the concept
of notionally flowing through corporate
income to individual shareholders creates
practical problems. Notional flow-through
of corporate income that would be taxed in
the hands of individuals could create liquidity problems for some taxpayers if the corporation did not actually pay out cash dividends. Shareholders might be compelled to
sell portions of their shareholdings to raise
the necessary funds to pay their tax liabilities. This could have a significant effect on
private corporations.
There would also be difficulties with corporate control if individual shareholders had
to sell a portion of their private corporation
shareholdings in order to raise cash for their
tax bills. Corporate control could change
from the liquidation of shares, and familyowned businesses in particular would be
vulnerable. Private corporations might
encounter difficulties in finding a suitable
market for their shares, which would need to
be valued annually if they were to be sold.
Also, non-residents would escape the
income tax under Part I of the Income Tax
Act and pay only the substantially lower
withholding tax (generally five to 15 per
cent) on dividends under Part XIII as modified by Canada’s bilateral tax treaties.
The Carter Commission recognized these
difficulties: “Although we can see no grounds
in principle for taxing corporations and
other organizations, we have reluctantly
reached the conclusion that there are good
and sufficient reasons for continuing to collect a tax from them. The main reason is the
practical difficulty of taxing accrued share
gains as required under the ideal approach
we have just described. Another reason is
the loss in economic benefit to Canada that
would result if non-residents holding shares
in Canadian corporations were not taxed by
Canada on their share of corporate income
at approximately the rates that now prevail.”
The rationale for the structure of our cor-
If we are to have a separate
corporate tax, what is the
ideal tax rate?
Vern Krishna
TaxChambers LLP
porate tax model becomes clearer if we
accept the proposition that corporate income
should not flow through and be taxed annually in the hands of individual shareholders.
In the absence of a flow-through of income to
shareholders, corporate income must bear its
own tax annually if we are to prevent tax
deferral. If corporate income is not taxed at
its full rate, there would be incentive to
accumulate income in the corporation in
order to defer any tax that would otherwise
be payable if it were paid out to shareholders.
Thus, the prevention of tax deferral is an
important reason for levying an annual tax
on corporate income. As it is, however, within
specified limits, we do allow Canadian-controlled private corporations to defer taxes on
their active business income by taxing them
at a corporate rate that is lower than top marginal rates applicable to individuals.
If we are to have a separate corporate tax,
what is the ideal tax rate? The problem now
assumes additional dimensions.
The corporate tax rate determines the
extent to which one can defer tax by using the
corporate form to conduct business. A corporate tax rate lower than individual rates
invites deferral. Assume, for example, that
the corporate tax rate is 25 per cent and that
the top marginal rate for individuals is 50 per
cent. If an individual can shift $200,000
income into his or her corporation and invest
the tax savings ($50,000) at eight per cent
per year, the tax saved will be worth $233,000
ANNOUNCEMENT
in 20 years. Thus, each dollar of tax savings
accumulates to 4.7 times its value in 20 years.
If the taxpayer could do this annually for 20
years, the tax savings for each year would
accumulate to $2.521 million. If the individual sold his or her shares in the 20th year, the
value of the tax savings would transform into
a taxable capital gain of $1.2605 million. If
the capital gains tax rate is 23 per cent, the
taxpayer, in addition to the tax deferral
advantage, saves 27 per cent of $2.521 million, or $680,670. Thus, the taxpayer benefits both from tax deferral and from shifting
his or her income to the corporation.
To be sure, we could eliminate tax deferral
by making the corporate tax rate equal to the
highest marginal rate for individuals. If we
did this, the tax system would be substantially neutral at the top end, and businesses
could make their decisions on the basis of
non-tax criteria. There would be no taxdeferral advantage to earning income
through a corporation. A corporate rate
equal to the top individual tax rate (approximately 50 per cent) would also remove business and economic incentives from those
who presently obtain special low rates of
taxation — for example, small businesses.
Thus, any gain in tax neutrality between different types of taxpayers would carry with it
the cost of lost tax incentives for certain sectors of the economy. This would have significant economic and political implications.
Several factors determine the corporate
tax rate, but the desirability of having competitive international tax rates is increasingly important in an era of capital mobility.
Canadian corporations must compete internationally, and the tax rates of our principal
trading partners have a significant influence
on the structure and location of Canadian
corporations.
Prof. Vern Krishna, CM, QC, of the University of
Ottawa Law School and Of Counsel,
TaxChambers LLP (Toronto). Vern.Krishna@
TaxChambers.ca. www.vernkrishna.com
CAREERS
WILLS, ESTATES AND TRUST LAWYER
Kronis, Rotsztain,
Margles, Cappel LLP
(Maternity Leave Contract)
Barristers and Solicitors
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This is an excellent opportunity for an individual seeking to gain experience practicing with a
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MARCH 20 , 2015 •
THE LAWYERS WEEKLY
23
News
Sherrin: Repetition does not bolster credibility
Continued from page 3
noon. She left to prepare dinner
for her teenage daughter, Angel
Laplante, who lived with her,
but returned to Mackenzie’s
apartment at about 10 or 11
that evening, and eventually
fell asleep on his makeshift cot.
When she woke up and told
him she wanted to go home, she
testified, an argument ensued
and Mackenzie “went ballistic,”
punching her in the head, choking her, and preventing her
from leaving. She said she eventually escaped and returned to
her apartment, naked and without her belongings. According
to police testimony, when they
arrived at the apartment in
response to a 911 call from her
older daughter, Ethier was
initially reluctant to speak to
them because Mackenzie had
made death threats, telling
them instead she had fallen and
hit a doorknob. However, she
later gave them a statement.
Mackenzie argued on appeal
that the convictions were flawed
because the trial judge relied on
inadmissible evidence from one
of the police officers to confirm
that the complainant’s testimony
met the Crown’s standard of
proof. Counsel for the appellant
also claimed that the judge relied
too much on the testimony of
various witnesses about what the
complainant said to them about
the cause of her injuries shortly
after her return home from the
The trial judge gave too
much credence to the
police officer’s opinion.
It’s a good reminder to
just get the facts.
Lee Stuesser
Lakehead University law
appellant’s apartment.
In his written decision in R. v.
Mackenzie [2011] O.J. No.
5216, Justice Lalonde specifically stated that the evidence of
lead investigator Joshua Pulfer
“is to be given a lot of weight.”
Pulfer told the court that Ethier’s demeanour when he saw
her within an hour of her return
home was “consistent with
someone who was physically
assaulted, confined and threatened with death.” He added
that marks on Ethier’s thighs
could not have been made by
her, that the marks on her neck
were consistent with someone
who had been choked, and that
he was certain fear had caused
her initial lack of co-operation
with the police.
The Appeal Court concluded
the trial judge was correct in
trying to confirm the complainant’s testimony, and said much
of Pulfer’s evidence was admissible as narrative. But the police
officer was not a medical or
forensic evidence expert, it
added, and was not qualified to
draw conclusions about Ethier’s
demeanour or the marks on her
neck or thighs. The decision
also notes that his testimony
went beyond the “compendious
statement of facts” exception
for lay evidence.
“The trial judge gave too much
credence to the police officer’s
opinion,” said Stuesser. “It’s a good
reminder to just get the facts.”
Stuesser said the decision has
some parallels with R. v. Graat
[1982] S.C.J. No. 102, the
Supreme Court’s leading decision on lay opinion which
The basic theory is that
saying the same thing
on multiple occasions
does not make the
statement any more
credible. The trial judge
is not allowed to rely on
consistency to confirm
the credibility of the
complainant.
Christopher Sherrin
Western University law
“reminded us that just because
they’re police officers, let’s not
give their opinion increased
weight,” he noted.
The Appeal Court also said
the trial judge relied on the
daughters’ testimony, admitted
as part of the “res gestae” —a
collection of exceptions to the
hearsay rule. In fact, the decision notes, they were prior consistent statements, which are
considered a form of hearsay
and
therefore
considered
unreliable, irrelevant, and lacking probative value. “The basic
theory is that saying the same
thing on multiple occasions
does not make the statement
any more credible,” said Christopher Sherrin, a law professor
at Western University in London. Ont. who specializes in
criminal law and procedure,
evidence, and the Charter. “The
trial judge is not allowed to rely
on consistency to confirm the
credibility of the complainant.”
Sherrin said it’s understandable why Crown counsel wanted
to introduce the evidence.
“It’s an example of evidence
that seems helpful on the surface,” he said. “But you have to
take the extra step and make
sure the person who is giving
that evidence is qualified to give
it. If you scratch below the surface, you realize there are real
problems with its reliability.”
The case also points to the
challenges of keeping track of
the admissibility of evidence,
added Sherrin. A piece of evidence may be admissible for
one purpose, he said, and not
admissible for another.
Ontario provincial employees lose in clash over anonymity
Christopher Guly
Ontario’s Court of Appeal has held
that provincial government
employee names cited via a request
for access to personal records under
the Freedom of Information and
Protection of Privacy Act (FIPPA)
cannot be withheld unless a specific
threshold is met.
In Ontario (Minister of Community and Social Services) v. John
Doe [2015] O.J. No. 727, Associate
Chief Justice Alexandra Hoy and
Justices Katherine van Rensburg
and David Brown upheld a lower
court ruling that public servant
names must be identified if the
disclosure — as
outlined
in
FIPPA — would not “reasonably be
expected to endanger the life or
physical safety” or “seriously
threaten the safety or health” of
government employees.
The appellants, including the
Ministry of Community and Social
Services and the Ontario Public
Service
Employees
Union
(OPSEU), challenged a divisional
court decision dismissing their
Korte
application for an order setting
aside another order made by an
Information and Privacy Commissioner (IPC) of Ontario adjudicator. That order required the ministry to disclose records, including
the full names of some Family
Responsibility Office (FRO)
employees, to an individual who
had requested personal information from the office responsible for
enforcing court orders involving
child and spousal support arising
from family law proceedings.
The requester alleged the FRO
had mismanaged his file and
sought to discover the cause by
obtaining documents, including
correspondence and internal
records, some of which contained FRO employee names.
IPC adjudicator Steve Faughnan
concluded the ministry was not
entitled to rely on the FIPPA
provisions to redact the names,
a ruling the divisional court
found to be reasonable. (Faughnan also found that the FRO
employees’ job function didn’t
require anonymity, as is the case
with police officers often working undercover or in plainclothes assignment).
The appellants argued that a
2000 grievance health-and-safety
settlement addressing employee
full-name disclosure gave FRO
employees the option of publicly
revealing only their first name and
employee identification number.
The appellants also contended that
the IPC only considered whether
the requester himself could reasonably be expected to pose a risk to
FRO employees (not whether he
could also disseminate their names)
and that FIPPA section 47.1, which
addresses disclosure of information
to an individual, should be considered as “disclosure to the world,”
resulting in a generalized risk to
employees as a result.
However, the appeal court noted
that between 2002 and 2006, FRO
employees received only 24 documented threats out of an estimated
2.988 million phone calls.
There was no evidence that the
employees, whose names were
going to be disclosed, had been
threatened, or that the requester
posed any threat to employees, or
that he would circulate their names
after obtaining his records.
IPC counsel Lawren Murray, who
argued the appeal, said the risk of
harm resulting from disclosure
must extend “well beyond the mere
possibility,” as the Supreme Court
of Canada affirmed in two rulings.
In Ontario (Community Safety
and Correctional Services) v.
Ontario (Information and Privacy
Commissioner) [2014] S.C.J. No.
31, the Supreme Court of Canada
referred to a finding in its earlier
ruling in Merck Frosst Canada Ltd.
v. Canada (Health) [2012] S.C.J.
No. 3, and held that the “could reasonably be expected to” standard in
FIPPA provides “a middle ground
between that which is probable and
that which is merely possible.”
Catherine Korte, a partner with
McCague Borlack in Toronto who
practises privacy law, said the test
to determine disclosure, as
advanced in Merck, is a “reasonable
expectation of probable harm,” and
that the appellants in John Doe
failed to meet that burden.
“The possibility of harm can’t be
based on feared, fanciful, imaginary or contrived harm,” she said.
Murray said John Doe is consistent with FIPPA s. 2.3 in which
personal information doesn’t
include the name and title of
someone in a business, professional or official capacity, and
that civil servants “can’t remain
anonymous absent evidence of a
health or safety threat that goes
well beyond a mere possibility.”
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