BLG Logo
Banner

​​​​

 

 

Fairness Opinions – Is there a new InterOil Standard?Fairness Opinions – Is there a new InterOil Standard?302BLG Blog PostMichael A. Marionmmarion@blg.com | Michael A. Marion | 693A30232E777C626C6763616E6164615C6D616D i:0#.w|blgcanada\mam​The Supreme Court of Yukon recently issued a final order approving the plan of arrangement whereby ExxonMobil Corporation would acquire all of the outstanding shares of InterOil Corporation. This was the second attempt by InterOil to obtain court approval in connection with the arrangement with ExxonMobil, its first attempt having been denied by the Yukon Court of Appeal, which found that the arrangement as originally proposed had not been shown to be fair and reasonable.In gaining final approval of the Court for its proposed plan of arrangement, InterOil took a number of steps not commonly used before now. Whether these steps, and the court decision that approved them, will be followed in future plans of arrangement remains to be seen[Read more​...]​<p style="text-align:justify;">​The Supreme Court of Yukon recently issued a final order approving the plan of arrangement whereby ExxonMobil Corporation would acquire all of the outstanding shares of InterOil Corporation. This was the second attempt by InterOil to obtain court approval in connection with the arrangement with ExxonMobil, its first attempt having been denied by the Yukon Court of Appeal, which found that the arrangement as originally proposed had not been shown to be fair and reasonable.</p><p style="text-align:justify;">In gaining final approval of the Court for its proposed plan of arrangement, InterOil took a number of steps not commonly used before now. Whether these steps, and the court decision that approved them, will be followed in future plans of arrangement remains to be seen</p><p style="text-align:justify;">[<a href="/energy/Pages/Post.aspx?PID=302" target="_blank"><em>Read more​</em></a>...]​</p>The Supreme Court of Yukon recently issued a final order approving the plan of arrangement whereby ExxonMobil Corporation would acquire all of the outstanding shares of InterOil Corporation. This was the second attempt by InterOil to obtain court approval in connection with the arrangement with ExxonMobil, its first attempt having been denied by the Yukon Court of Appeal, which found that the arrangement as originally proposed had not been shown to be fair and reasonable.In gaining final approval of the Court for its proposed plan of arrangement, InterOil took a number of steps not commonly used before now. Whether these steps, and the court decision that approved them, will be followed in future plans of arrangement remains to be seen.>> Read the full publication by BLG lawyers ​Paul Mingay and Melissa Smith​ <p style="text-align:justify;">The Supreme Court of Yukon recently issued a final order approving the plan of arrangement whereby ExxonMobil Corporation would acquire all of the outstanding shares of InterOil Corporation. This was the second attempt by InterOil to obtain court approval in connection with the arrangement with ExxonMobil, its first attempt having been denied by the Yukon Court of Appeal, which found that the arrangement as originally proposed had not been shown to be fair and reasonable.</p><p style="text-align:justify;">In gaining final approval of the Court for its proposed plan of arrangement, InterOil took a number of steps not commonly used before now. Whether these steps, and the court decision that approved them, will be followed in future plans of arrangement remains to be seen.</p><p style="text-align:justify;"><strong>>> </strong><a href="http://blg.com/en/News-And-Publications/Publication_4880" target="_blank"><strong>Read the full publication</strong></a> by BLG lawyers ​<a href="http://blg.com/en/Our-People/Mingay-Paul" target="_blank">Paul Mingay</a> and <a href="http://blg.com/en/Our-People/Smith-Melissa" target="_blank">Melissa Smith​</a> </p>3/27/2017 4:00:00 AM2017-03-27T04:00:00ZTrue1float;#3.00000000000000float;#2017.00000000000string;#Marchfloat;#201703.000000000GP0|#98850b8e-4cdc-41cf-9cf7-f309880c7c29;L0|#098850b8e-4cdc-41cf-9cf7-f309880c7c29|BLG Energy News and Events;GTSet|#939fe804-8a2a-4cfa-af8f-5756b32ac3caBLG Energy News and Events
Federal Budget 2017 – A Focus on Innovation and Tax Fairness for the Middle ClassFederal Budget 2017 – A Focus on Innovation and Tax Fairness for the Middle Class301BLG Blog PostMichael A. Marionmmarion@blg.com | Michael A. Marion | 693A30232E777C626C6763616E6164615C6D616D i:0#.w|blgcanada\mam​​The Trudeau Liberal Government tabled its second Federal Budget on March 22, 2017. Compared to last year’s budget, which included major increases to program spending and tax expenditures, Budget 2017 had little new money for program spending or bold tax initiatives. Government policy options were constrained by a combination of a sluggish economy, deficits from previous spending commitments, and potential tax changes from the Trump administration in the United States.The tax measures focus on the key themes of enhancing the integrity of the tax system and improving its efficiency and effectiveness.Click on the link below to read BLG’s analysis of the Federal Budget and learn more about the proposed tax measures.[Read more...]<p style="text-align:justify;">​​The Trudeau Liberal Government tabled its second Federal Budget on March 22, 2017. Compared to last year’s budget, which included major increases to program spending and tax expenditures, Budget 2017 had little new money for program spending or bold tax initiatives. Government policy options were constrained by a combination of a sluggish economy, deficits from previous spending commitments, and potential tax changes from the Trump administration in the United States.</p><p style="text-align:justify;">The tax measures focus on the key themes of enhancing the integrity of the tax system and improving its efficiency and effectiveness.</p><p style="text-align:justify;">Click on the link below to read BLG’s analysis of the Federal Budget and learn more about the proposed tax measures.</p><p style="text-align:justify;">[<a href="/energy/Pages/Post.aspx?PID=301" target="_blank"><em>Read more</em></a>...]</p>The BLG Tax Group released a bulletin on the 2017 Federal Budget. The Trudeau Liberal Government tabled its second Federal Budget on March 22, 2017. Compared to last year’s budget, which included major increases to program spending and tax expenditures, Budget 2017 had little new money for program spending or bold tax initiatives. Government policy options were constrained by a combination of a sluggish economy, deficits from previous spending commitments, and potential tax changes from the Trump administration in the United States.The tax measures focus on the key themes of enhancing the integrity of the tax system and improving its efficiency and effectiveness.Click on the link below to read BLG’s analysis of the Federal Budget and learn more about the proposed tax measures.>> Read the full bulletin <p style="text-align:justify;"><em>The </em><a href="http://blg.com/en/expertise/tax"><em>BLG Tax Group</em></a><em> released a bulletin on the 2017 Federal Budget. </em></p><p style="text-align:justify;">The Trudeau Liberal Government tabled its second Federal Budget on March 22, 2017. Compared to last year’s budget, which included major increases to program spending and tax expenditures, Budget 2017 had little new money for program spending or bold tax initiatives. Government policy options were constrained by a combination of a sluggish economy, deficits from previous spending commitments, and potential tax changes from the Trump administration in the United States.</p><p style="text-align:justify;">The tax measures focus on the key themes of enhancing the integrity of the tax system and improving its efficiency and effectiveness.</p><p style="text-align:justify;">Click on the link below to read BLG’s analysis of the Federal Budget and learn more about the proposed tax measures.</p><p style="text-align:justify;"><strong>>> </strong><a href="http://blg.com/en/News-And-Publications/Federal-Budget-2017" target="_blank"><strong>Read the full bulletin</strong></a><strong> </strong></p>3/23/2017 4:00:00 AM2017-03-23T04:00:00ZTrue1float;#3.00000000000000float;#2017.00000000000string;#Marchfloat;#201703.000000000GP0|#98850b8e-4cdc-41cf-9cf7-f309880c7c29;L0|#098850b8e-4cdc-41cf-9cf7-f309880c7c29|BLG Energy News and Events;GTSet|#939fe804-8a2a-4cfa-af8f-5756b32ac3ca;GP0|#f61f75ba-8b4a-47e4-ac93-81a58bdb7860;L0|#0f61f75ba-8b4a-47e4-ac93-81a58bdb7860|Public PolicyBLG Energy News and Events;Public Policy
BLG Launches M&A Building BlocksBLG Launches M&A Building Blocks291BLG Blog PostFrank S. Callaghanfcallaghan@blg.com | Frank S. Callaghan | 693A30232E777C626C6763616E6164615C6663616C6C616768 i:0#.w|blgcanada\fcallagh​​​​Borden Ladner Gervais LLP is pleased to announce the launch of an insightful new resource that discusses the key facets of negotiating and completing an M&A deal, M&A Building Blocks​.This resource will feature a series of articles that provide an in-depth look into different aspects of M&A transactions from start to finish, such as confidentiality agreements, negotiating deal protections and advising special committees. While the emphasis is on deals involving public companies, BLG’s M&A Building Blocks is also applicable to private M&A.The first instalment in the series, Introduction to the Deal, outlines key threshold issues and process points that must be considered in an M&A transaction, such as due diligence, approvals, financing, structure and timetables. While every deal is unique, these process points and issues will typically be of importance to both purchasers and sellers. ​[Read more...]<p style="text-align:justify;">​​​​Borden Ladner Gervais LLP is pleased to announce the launch of an insightful new resource that discusses the key facets of negotiating and completing an M&A deal, <a href="http://blg.com/en/News-And-Publications/Mergers-and-Acquisitions-Building-Blocks" target="_blank">M&A Building Blocks​</a>.</p><p style="text-align:justify;">This resource will feature a series of articles that provide an in-depth look into different aspects of M&A transactions from start to finish, such as confidentiality agreements, negotiating deal protections and advising special committees. While the emphasis is on deals involving public companies, BLG’s M&A Building Blocks is also applicable to private M&A.</p><p style="text-align:justify;">The first instalment in the series, Introduction to the Deal, outlines key threshold issues and process points that must be considered in an M&A transaction, such as due diligence, approvals, financing, structure and timetables. While every deal is unique, these process points and issues will typically be of importance to both purchasers and sellers. </p><p style="text-align:justify;">​[<a href="/energy/Pages/Post.aspx?PID=291" target="_blank"><em>Read more</em></a>...]</p>​Borden Ladner Gervais LLP is pleased to announce the launch of an insightful new resource that discusses the key facets of negotiating and completing an M&A deal, M&A Building Blocks.This resource will feature a series of articles that provide an in-depth look into different aspects of M&A transactions from start to finish, such as confidentiality agreements, negotiating deal protections and advising special committees. While the emphasis is on deals involving public companies, BLG’s M&A Building Blocks is also applicable to private M&A.The first instalment in the series, Introduction to the Deal, outlines key threshold issues and process points that must be considered in an M&A transaction, such as due diligence, approvals, financing, structure and timetables. While every deal is unique, these process points and issues will typically be of importance to both purchasers and sellers. >> Download M&A Building BlocksFor further information about BLG’s Mergers and Acquisitions team, visit blg.com/ma<p style="text-align:justify;">​Borden Ladner Gervais LLP is pleased to announce the launch of an insightful new resource that discusses the key facets of negotiating and completing an M&A deal, <a href="http://blg.com/en/News-And-Publications/Mergers-and-Acquisitions-Building-Blocks" target="_blank">M&A Building Blocks</a>.</p><p style="text-align:justify;">This resource will feature a series of articles that provide an in-depth look into different aspects of M&A transactions from start to finish, such as confidentiality agreements, negotiating deal protections and advising special committees. While the emphasis is on deals involving public companies, BLG’s M&A Building Blocks is also applicable to private M&A.</p><p style="text-align:justify;">The first instalment in the series, Introduction to the Deal, outlines key threshold issues and process points that must be considered in an M&A transaction, such as due diligence, approvals, financing, structure and timetables. While every deal is unique, these process points and issues will typically be of importance to both purchasers and sellers. </p><p style="text-align:justify;"><strong>>> </strong><a href="http://blg.com/en/News-And-Publications/Mergers-and-Acquisitions-Building-Blocks" target="_blank"><strong>Download M&A Building Blocks</strong></a></p><p style="text-align:justify;">For further information about BLG’s Mergers and Acquisitions team, visit blg.com/ma<br></p>3/21/2017 4:00:00 AM2017-03-21T04:00:00ZTrue1float;#3.00000000000000float;#2017.00000000000string;#Marchfloat;#201703.000000000GP0|#9328c8bb-8a9a-4b9a-b019-f81ca750e829;L0|#09328c8bb-8a9a-4b9a-b019-f81ca750e829|Mergers & Acquisitions;GTSet|#939fe804-8a2a-4cfa-af8f-5756b32ac3caMergers & Acquisitions
Alberta Budget 2017Alberta Budget 2017298BLG Blog PostBeth Reimer-Heck, Q.C.;Colin Poon;Jason Wangbreimerheck@blg.com | Beth Reimer-Heck, Q.C. | 693A30232E777C626C6763616E6164615C627265696D65726865636B i:0#.w|blgcanada\breimerheck;cpoon@blg.com | Colin Poon | 693A30232E777C626C6763616E6164615C63706F6F6E i:0#.w|blgcanada\cpoon;jawang@blg.com | Jason Wang | 693A30232E777C626C6763616E6164615C6A6177616E67 i:0#.w|blgcanada\jawang​On March 16, 2017, the Alberta Government released Budget 2017 titled "Working to Make Life Better" ("Budget 2017"), which includes the government's fiscal and capital plans and the outlook for the province's economy. This is the NDP's third budget which follows last year's "The Alberta Jobs Plan" released on April 1, 2016 (click here for BLG's analysis of Budget 2016). Finance Minister, Joe Ceci, stated that there are signs "green shoots" are emerging from the downturn in Alberta's economy, including increased drilling rig activity, exports, and employment in the province. The province has seen two consecutive years of recessions as a result of the low price of oil. The Alberta Government structured Budget 2017 around three key themesSupporting practical changes to make life more affordable for Albertans;Creating good jobs and building a diversified economy; andProtecting and improving the services and supports that make a difference in the lives of Albertans. [Read more...] <p style="text-align:justify;">​On March 16, 2017, the Alberta Government released Budget 2017 titled "Working to Make Life Better" ("Budget 2017"), which includes the government's fiscal and capital plans and the outlook for the province's economy. This is the NDP's third budget which follows last year's "The Alberta Jobs Plan" released on April 1, 2016 (<a href="/energy/Pages/Post.aspx?PID=193"><span lang="EN-CA" style="text-decoration:underline;">click here</span></a> for BLG's analysis of Budget 2016). Finance Minister, Joe Ceci, stated that there are signs "green shoots" are emerging from the downturn in Alberta's economy, including increased drilling rig activity, exports, and employment in the province. The province has seen two consecutive years of recessions as a result of the low price of oil. The Alberta Government structured Budget 2017 around three key themes:</p><ol style="text-align:justify;"><li>Supporting practical changes to make life more affordable for Albertans;</li><li>Creating good jobs and building a diversified economy; and</li><li>Protecting and improving the services and supports that make a difference in the lives of Albertans. </li></ol><p><em>[<a href="/energy/Lists/Blog%20Posts/DispForm.aspx?ID=298&Source=http%3A%2F%2Fblog%2Dadmin%2Eblgcanada%2Ecom%2Fenergy%2FLists%2FBlog%2520Posts%2FAllItems%2Easpx&ContentTypeId=0x0100F409F32683034CD19A87A77036E55D2900EEE41252A8F2434EA8BD5455C21553A8">Read more...</a></em>] </p>On March 16, 2017, the Alberta Government released Budget 2017 titled “Working to Make Life Better” (“Budget 2017”), which includes the government’s fiscal and capital plans and the outlook for the province’s economy. This is the NDP’s third budget which follows last year’s “The Alberta Jobs Plan” released on April 1, 2016 (click here for BLG’s analysis of Budget 2016). Finance Minister, Joe Ceci, stated that there are signs “green shoots” are emerging from the downturn in Alberta’s economy, including increased drilling rig activity, exports, and employment in the province. The province has seen two consecutive years of recessions as a result of the low price of oil. The Alberta Government structured Budget 2017 around three key themesSupporting practical changes to make life more affordable for Albertans;Creating good jobs and building a diversified economy; andProtecting and improving the services and supports that make a difference in the lives of Albertans. Highlights of Budget 2017The 2017-18 fiscal year projects expenses of $54.9 billion, revenues of $45 billion, and a deficit of $10.3 billion, representing half a billion less than the budget deficit in Budget 2016. The deficit is anticipated to increase by $9.7 billion for 2018-2019 and $7.2 billion for 2019-2020. Highlights of Budget 2017 includeRemoving school fees ($54 million on a school year basis) including fees for instructional supplies or materials;Extending the tuition freeze in post-secondary institutions for a third year and increasing base operating grant for post-secondary institutions by 2%;Continuing the government infrastructure investments from Budget 2016 into programs and projects in the amounts of $4.5 billion for health infrastructure (including a new hospital in Edmonton and a long term care facility in Calgary), $2.6 billion for schools (including 5 new schools in Calgary, and 4 new schools in Edmonton), $3.1 billion for road and bridges (including twinning Highway 15 near Edmonton and a new interchange in Calgary), and $7.6 billion in municipal infrastructure support;Projecting increases in the operating budget of 2.2% in 2017-2018, and 2.7% in 2018-2019 and 2019-2020 and increases in total expenses ($54.9 billion in 2017-2018, $56.7 billion in 2018-2019 and $58 billion in 2019-2020); No changes in personal or corporate tax announced;Forecasting the economy to grow by 2.6% in 2017;Predicting the oil price will continue to increase over the next three years and that oil revenues will continue to be a major source of funding for the Alberta Government. Notable Energy and Economic Assumptions Budget 2017 expects that the global oil market will slowly come back into balance and that oil will average US$55/bbl in 2017-18, $59, in 2018-19, and $68 in 2019-20. For every dollar by which the price of a barrel of oil drops represents roughly $130 million loss in revenue for the Government of Alberta. Due to this volatility, the Budget 2017 includes a risk adjustment factor of $500 million in 2017-2018. This risk adjustment is included in the calculation of the deficit. Alberta’s economy is expected to expand by a modest 2.6% in 2017. Growth will be primarily driven by a surge in production and exports as oil sands output expands and manufacturing exports increase. The recovery in the Alberta economy is expected to be moderate due to the lingering effects of low oil prices on investment and consumer spending. Real GDP is not expected to return to pre-recession levels until 2019. The Alberta Government projects a decline in oil sands and non-residential investment before a gradual improvement occurs. The Issue of Alberta’s DeficitFinance Minister, Joe Ceci, confirmed that this year’s deficit will be $10.3 billion, while Alberta’s total debt is projected to increase to $45 billion in the coming year, as the NDP government continues to borrow heavily to finance operations and to build infrastructure. There was no clear indication by the Alberta Government as to when the deficit would cease. Budget 2017 lacks specific details about how the NDP government plans to return the province to a balanced budget or to start paying off the increasing debt. The $45 billion debt amounts to a nominal GDP ratio of 13.8 per cent with debt servicing costs of $1.4 billion. The debt is forecast to hit $71.1 billion by 2019-20, with a debt-to-GDP ratio of 19.5 per cent. Debt servicing costs by then are estimated at $2.3 billion. Taxes The Alberta Government has no plans to raise taxes or to cut services this year. However, Budget 2017 provides the first detailed look at how the Alberta Government intends to spend the carbon levy, which came into effect on January 1, 2017. The government estimates the carbon tax will bring in $1.04 billion in 2017-18, which will increase to $1.4 billion a year by 2019-20. Budget 2017 has a chapter devoted to how the Alberta Government plans to spend $5.4 billion in carbon revenue over three years. The Alberta Government intends to spend the revenue in the following areas small business tax reduction ($565 million); household rebates (approximately $1.5 billion); energy efficiency programs ($151 million); coal phaseout agreements ($291 million); capital for green infrastructure (approximately $1.3 billion) and other infrastructure identified as bioenergy, renewable energy, innovation and technology, and coal community transition ($998 million). Click here for BLG’s recent assessments of the Alberta Carbon Levy. <p style="text-align:justify;">On March 16, 2017, the Alberta Government released Budget 2017 titled “Working to Make Life Better” (“Budget 2017”), which includes the government’s fiscal and capital plans and the outlook for the province’s economy. This is the NDP’s third budget which follows last year’s “The Alberta Jobs Plan” released on April 1, 2016 (<a href="/energy/Pages/Post.aspx?PID=193">click here</a> for BLG’s analysis of Budget 2016). Finance Minister, Joe Ceci, stated that there are signs “green shoots” are emerging from the downturn in Alberta’s economy, including increased drilling rig activity, exports, and employment in the province. The province has seen two consecutive years of recessions as a result of the low price of oil. The Alberta Government structured Budget 2017 around three key themes:</p><ol style="text-align:justify;"><li>Supporting practical changes to make life more affordable for Albertans;</li><li>Creating good jobs and building a diversified economy; and</li><li>Protecting and improving the services and supports that make a difference in the lives of Albertans. </li></ol><h3>Highlights of Budget 2017</h3><p style="text-align:justify;">The 2017-18 fiscal year projects expenses of $54.9 billion, revenues of $45 billion, and a deficit of $10.3 billion, representing half a billion less than the budget deficit in Budget 2016. The deficit is anticipated to increase by $9.7 billion for 2018-2019 and $7.2 billion for 2019-2020.</p><p style="text-align:justify;"> Highlights of Budget 2017 include:</p><ul style="text-align:justify;"><li>Removing school fees ($54 million on a school year basis) including fees for instructional supplies or materials;</li><li>Extending the tuition freeze in post-secondary institutions for a third year and increasing base operating grant for post-secondary institutions by 2%;</li><li>Continuing the government infrastructure investments from Budget 2016 into programs and projects in the amounts of $4.5 billion for health infrastructure (including a new hospital in Edmonton and a long term care facility in Calgary), $2.6 billion for schools (including 5 new schools in Calgary, and 4 new schools in Edmonton), $3.1 billion for road and bridges (including twinning Highway 15 near Edmonton and a new interchange in Calgary), and $7.6 billion in municipal infrastructure support;</li><li>Projecting increases in the operating budget of 2.2% in 2017-2018, and 2.7% in 2018-2019 and 2019-2020 and increases in total expenses ($54.9 billion in 2017-2018, $56.7 billion in 2018-2019 and $58 billion in 2019-2020); </li><li>No changes in personal or corporate tax announced;</li><li>Forecasting the economy to grow by 2.6% in 2017;</li><li>Predicting the oil price will continue to increase over the next three years and that oil revenues will continue to be a major source of funding for the Alberta Government. </li></ul><h3>Notable Energy and Economic Assumptions</h3><p>Budget 2017 expects that the global oil market will slowly come back into balance and that oil will average US$55/bbl in 2017-18, $59, in 2018-19, and $68 in 2019-20. For every dollar by which the price of a barrel of oil drops represents roughly $130 million loss in revenue for the Government of Alberta. Due to this volatility, the Budget 2017 includes a risk adjustment factor of $500 million in 2017-2018. This risk adjustment is included in the calculation of the deficit. </p><p style="text-align:justify;">Alberta’s economy is expected to expand by a modest 2.6% in 2017. Growth will be primarily driven by a surge in production and exports as oil sands output expands and manufacturing exports increase. The recovery in the Alberta economy is expected to be moderate due to the lingering effects of low oil prices on investment and consumer spending. Real GDP is not expected to return to pre-recession levels until 2019. The Alberta Government projects a decline in oil sands and non-residential investment before a gradual improvement occurs. </p><h3> The Issue of Alberta’s Deficit</h3><p style="text-align:justify;">Finance Minister, Joe Ceci, confirmed that this year’s deficit will be $10.3 billion, while Alberta’s total debt is projected to increase to $45 billion in the coming year, as the NDP government continues to borrow heavily to finance operations and to build infrastructure. There was no clear indication by the Alberta Government as to when the deficit would cease. Budget 2017 lacks specific details about how the NDP government plans to return the province to a balanced budget or to start paying off the increasing debt. The $45 billion debt amounts to a nominal GDP ratio of 13.8 per cent with debt servicing costs of $1.4 billion. The debt is forecast to hit $71.1 billion by 2019-20, with a debt-to-GDP ratio of 19.5 per cent. Debt servicing costs by then are estimated at $2.3 billion.</p><h3> Taxes </h3><p style="text-align:justify;">The Alberta Government has no plans to raise taxes or to cut services this year. However, Budget 2017 provides the first detailed look at how the Alberta Government intends to spend the carbon levy, which came into effect on January 1, 2017. The government estimates the carbon tax will bring in $1.04 billion in 2017-18, which will increase to $1.4 billion a year by 2019-20. Budget 2017 has a chapter devoted to how the Alberta Government plans to spend $5.4 billion in carbon revenue over three years. The Alberta Government intends to spend the revenue in the following areas: small business tax reduction ($565 million); household rebates (approximately $1.5 billion); energy efficiency programs ($151 million); coal phaseout agreements ($291 million); capital for green infrastructure (approximately $1.3 billion) and other infrastructure identified as bioenergy, renewable energy, innovation and technology, and coal community transition ($998 million).</p><p style="text-align:justify;"> <a href="/energy/Pages/Search.aspx?k=carbon%20levy">Click here</a> for BLG’s recent assessments of the Alberta Carbon Levy.</p><div style="text-align:justify;">  </div>3/17/2017 4:00:00 AM2017-03-17T04:00:00ZTrue1float;#3.00000000000000float;#2017.00000000000string;#Marchfloat;#201703.000000000GP0|#8c26ad5a-20b9-4634-924a-6dd03588ea9a;L0|#08c26ad5a-20b9-4634-924a-6dd03588ea9a|BLG News;GTSet|#939fe804-8a2a-4cfa-af8f-5756b32ac3ca;GP0|#23e50663-be85-467e-acf9-7150e42ed669;L0|#023e50663-be85-467e-acf9-7150e42ed669|Energy;GP0|#f61f75ba-8b4a-47e4-ac93-81a58bdb7860;L0|#0f61f75ba-8b4a-47e4-ac93-81a58bdb7860|Public Policy;GP0|#60a6f187-f0e0-4c65-a06c-b97febf6542e;L0|#060a6f187-f0e0-4c65-a06c-b97febf6542e|Oil & GasBLG News;Energy;Public Policy;Oil & Gas
Canadian Companies and the Effects of Foreign Operations – Out of Sight, Front of Mind Canadian Companies and the Effects of Foreign Operations – Out of Sight, Front of Mind 297BLG Blog PostMiles Pittman;Rick Williamsmpittman@blg.com | Miles Pittman | 693A30232E777C626C6763616E6164615C6D706974746D616E i:0#.w|blgcanada\mpittman;rwilliams@blg.com | Rick Williams | 693A30232E777C626C6763616E6164615C726C77 i:0#.w|blgcanada\rlw​As the domestic Canadian economy continues to mature, companies with a healthy appetite for risk can find themselves looking outside Canada to generate significant returns. Investments in foreign jurisdictions come with a myriad of challenges – uncertain legal structures and slow and cumbersome regulatory processes are just two of many, but the risk profile of these foreign adventures can be high for Canadian companies. One issue Canadian companies often overlook in assessing the risk of an international venture is the effect Canadian domestic courts can have on the venture’s success, notwithstanding the fact that the venture has little actual connection to Canada. Foreign litigants are increasingly using the Canadian court system to attempt to recover damages from Canadian parents or affiliates in cases where the claim arose from foreign operations entirely conducted by a foreign affiliate or subsidiary of the Canadian parent. A claim for negligence against the parent can give rise to damages under Canadian law, where such a claim might not be successful in the host country against the foreign affiliate actually undertaking the venture. Further, enforcement of foreign-obtained judgments against Canadian companies is relatively easy, in that Canadian courts are generally deferential to foreign courts’ findings. Therefore, if a Canadian entity finds itself on the wrong end of a foreign judgment, it is relatively easy to enforce that judgment against the Canadian entity’s assets in Canada. All this is to say that Canadian companies should include what Canadian courts might do when they are deciding whether to undertake foreign operations, and how to structure those operations. There are two very recent high profile examples where lawsuits were brought in Canada against Canadian-domiciled companies but the matters actually being litigated had marginal connections to Canada. Because of of valuable Canadian-based assets, or because of the Canadian law of negligence, however, the plaintiffs asked Canadian courts to provide a remedy, as opposed to the court where the operations took place. [Read more…]​<p style="text-align:justify;">​As the domestic Canadian economy continues to mature, companies with a healthy appetite for risk can find themselves looking outside Canada to generate significant returns. Investments in foreign jurisdictions come with a myriad of challenges – uncertain legal structures and slow and cumbersome regulatory processes are just two of many, but the risk profile of these foreign adventures can be high for Canadian companies. </p><p style="text-align:justify;">One issue Canadian companies often overlook in assessing the risk of an international venture is the effect Canadian domestic courts can have on the venture’s success, notwithstanding the fact that the venture has little actual connection to Canada. Foreign litigants are increasingly using the Canadian court system to attempt to recover damages from Canadian parents or affiliates in cases where the claim arose from foreign operations entirely conducted by a foreign affiliate or subsidiary of the Canadian parent. A claim for negligence against the parent can give rise to damages under Canadian law, where such a claim might not be successful in the host country against the foreign affiliate actually undertaking the venture. Further, enforcement of foreign-obtained judgments against Canadian companies is relatively easy, in that Canadian courts are generally deferential to foreign courts’ findings. Therefore, if a Canadian entity finds itself on the wrong end of a foreign judgment, it is relatively easy to enforce that judgment against the Canadian entity’s assets in Canada. All this is to say that Canadian companies should include what Canadian courts might do when they are deciding whether to undertake foreign operations, and how to structure those operations. </p><p style="text-align:justify;">There are two very recent high profile examples where lawsuits were brought in Canada against Canadian-domiciled companies but the matters actually being litigated had marginal connections to Canada. Because of of valuable Canadian-based assets, or because of the Canadian law of negligence, however, the plaintiffs asked Canadian courts to provide a remedy, as opposed to the court where the operations took place.  </p><p style="text-align:justify;">[<a href="/energy/Pages/Post.aspx?PID=297" target="_blank"><em>Read more</em></a>…]​</p>As the domestic Canadian economy continues to mature, companies with a healthy appetite for risk can find themselves looking outside Canada to generate significant returns. Investments in foreign jurisdictions come with a myriad of challenges – uncertain legal structures and slow and cumbersome regulatory processes are just two of many, but the risk profile of these foreign adventures can be high for Canadian companies. One issue Canadian companies often overlook in assessing the risk of an international venture is the effect Canadian domestic courts can have on the venture’s success, notwithstanding the fact that the venture has little actual connection to Canada. Foreign litigants are increasingly using the Canadian court system to attempt to recover damages from Canadian parents or affiliates in cases where the claim arose from foreign operations entirely conducted by a foreign affiliate or subsidiary of the Canadian parent. A claim for negligence against the parent can give rise to damages under Canadian law, where such a claim might not be successful in the host country against the foreign affiliate actually undertaking the venture. Further, enforcement of foreign-obtained judgments against Canadian companies is relatively easy, in that Canadian courts are generally deferential to foreign courts’ findings. Therefore, if a Canadian entity finds itself on the wrong end of a foreign judgment, it is relatively easy to enforce that judgment against the Canadian entity’s assets in Canada. All this is to say that Canadian companies should include what Canadian courts might do when they are deciding whether to undertake foreign operations, and how to structure those operations. There are two very recent high profile examples where lawsuits were brought in Canada against Canadian-domiciled companies but the matters actually being litigated had marginal connections to Canada. Because of of valuable Canadian-based assets, or because of the Canadian law of negligence, however, the plaintiffs asked Canadian courts to provide a remedy, as opposed to the court where the operations took place.These cases highlight several key points if the court system in the foreign jurisdiction is shown to be corrupt or dishonest, a Canadian court may be chosen as the court to decide the lawsuit, irrespective of limited connection to Canada;foreign litigants may argue that they are protected by Canadian negligence law for actions taking place in a foreign jurisdiction; statements about corporate social responsibility made by a Canadian parent might serve as an avenue for establishing a claim against the Canadian parent in a Canadian court; it is vitally important to construct and maintain a separate structure for international affiliates, to avoid a scenario where the corporate veil can be pierced; and foreign litigants are often sympathetic (i.e. villagers who have been subject of environmental damage and poisoning, or protesters who have been shot by security personnel); therefore Canadian courts may wish to find a remedy for them out of a sense of doing what’s right.A Word on ProcessForeign actions brought in Canada invariably start with a fight about jurisdiction, and a determination of the most appropriate court to hear the action. The Canadian test is “forum conveniens” – a Canadian court would be asked if the foreign court (likely where the operation is located, or where the damages occurred) is the most appropriate forum to decide the action, or whether there are reasons why a Canadian court should take jurisdiction and decide the case. If the foreign court is the most appropriate forum, the question then arises about enforcement of a judgment issued by the foreign court. It is relatively easy to enforce a foreign-obtained judgment against a Canadian company and this has led some litigants to attempt to enforce judgments against Canadian assets, even where the Canadian company or Canadian assets had nothing to do with the claim itself.Forum Conveniens and Corporate Social Responsibility – BC Court of Appeal Lifts the Stay in Garcia v Tahoe Resources Inc. ​​The latest decision attempting to hold Canadian parent companies liable for the actions of foreign subsidiaries was released at the end of January by the BC Court of Appeal. Readers of the blog will be familiar with the case of Garcia v Tahoe Resources Inc. (2017 BCCA 39) (we have previously written about Garcia v Tahoe Resources Inc. in Dodging the Corporate Veil - Recent Attempts to Hold Companies Liable for the Actions of their Foreign Subsidiaries​ and Court Refuses to Hear Corporate-Veil Case​), filed in June 2014. The case concerns a claim for damages brought by Guatemalan plaintiffs against a Canadian parent company, Tahoe Resources Inc. (Tahoe), over the actions of mine security personnel at the Escobal mine in Guatemala. The mine is owned by two subsidiaries of Tahoe, and the Tahoe subsdiaries hired a private security contractor that shot Guatemalan protesters during a protest at the mine, killing one and injuring six others. The case has been tied up in jurisdictional arguments since it was commenced. The chambers judge had at first instance held that Guatemala was the more appropriate jurisdiction to hear the case, as both a criminal proceeding and also a potential civil suit in Guatemala were in process; accordingly, he stayed the Canadian court action. The chambers judge also found that the plaintiffs could obtain a fair trial in Guatemala. DecisionThe BC Court of Appeal overturned the stay and allowed the action to proceed against Tahoe in Canada, finding that there was a serious risk of unfair process in Guatemala. It held that the chambers judge had improperly framed the threshold question as whether Guatemalan courts were “capable” of providing justice; instead the Court held that the correct test is whether the evidence discloses a real risk of an unfair trial process in the foreign court. With respect to the criminal proceedings in Guatemala, the Court of Appeal admitted new evidence showing that the Guatemalan criminal proceeding had been stayed as a result of the accused security personnel fleeing the country; this fact was critical in the Court’s decision to lift the stay. The Court considered several factors with respect to the Guatemalan civil action the limitation period and discovery procedures for civil suits in Guatemala; the inherent difficulty in joining a Canadian entity to a Guatemalan civil action; and the expiry of the limitation period to bring a civil action in Guatemala. Tahoe argued that the failure to file suit in time was a failure of the plaintiffs to honour the governing law and their failure should not be visited on Tahoe, but the Court viewed this as one more reason why Guatemala was not the appropriate forum and that the Canadian action should proceed. The risk of unfairness inherent in the Guatemalan justice system was also a deciding factor. Evidence of corruption in the Guatemalan justice system particularly with regard to criminal proceedings against “illegal security forces and clandestine security structures” was brought into evidence at the Court of Appeal. Also, the Court put more emphasis on the events of the shooting and the social conflict involving mining activity in Guatemala than did the chambers judge, who had treated the events as a personal injury case without considering the social context. Analysis – Corporate Social Responsibility and the Corporate VeilCanadian companies with foreign operations will be watching the proceedings in Tahoe with interest, now that the jurisdictional arguments have been resolved, because of the innovative claims that the Guatemalan plaintiffs have brought. Every corporate lawyer worth his or her salt has advised clients to ensure that operations in foreign jurisdictions are conducted by a subsidiary which has nothing connecting it to Canada, except potentially for board members and share ownership. In doing so, a “corporate veil,” insulating the parent from liability for the actions of its subsidiaries, is established. This corporate veil would be pierced only in limited situations and this case does not seem at first blush to be one where the corporate veil is likely to be pierced. The plaintiffs’ claims in Tahoe are novel because they focus on the Canadian parent’s public statements regarding its commitment to corporate social responsibility, thus avoiding the corporate veil issue altogether. The plaintiffs argue that Tahoe is directly liable in tort (specifically negligence, battery and conversion) as a result of (i) its public statements of oversight and maintenance of standards at the Escobal mine; and (ii) its adoption of various international standards, such as the 2006 IFC standards on social and environmental performance and the Voluntary Principles on Security and Human Rights. The plaintiffs claim that the contractors’ actions were in direct conflict with both Tahoe's public statements and the international standards it had ascribed to, and as Tahoe had acknowledged that it retained ultimate control over and had responsibility for operations in Guatemala, particularly security practices, it was responsible to the plaintiffs. Whether the operations were actually conducted by Tahoe or its Guatemalan subsidiary becomes irrelevant. While there are challenges with this approach, including remoteness and reliance, the fact that the action is proceeding on the merits gives significant leverage to the Guatemalan plaintiffs to negotiate a settlement. The Court did not dismiss the action out of hand and a Canadian trial result where the plaintiffs were successful could have a material effect on Tahoe. In other words, watch this space. ​Enforcement of Foreign Judgments against Unrelated Subsidiaries the Latest Chapter in the Saga of the Ecuadoran VillagersThe latest chapter in Yaiguaj​e v. Chevron Corporation (2017 ONSC 135) (discussed in Supreme Court of Canada confirms generous and liberal approach to the recognition and enforcement of foreign judgments​)​ was released on January 20, 2017. The case arises from environmental claims made by Ecuadoran townspeople against Texaco (now Chevron). Chevron conducted crude oil drilling and production in the Ecuadoran jungle between 1967 and 1992, and the plaintiffs sued Chevron in 1993 as a result of ongoing health problems and environmental damages they claimed arose from the operations. After an eighteen-year odyssey through the US and Ecuadoran court system, in 2011 the Ecuadoran plaintiffs were awarded $9 billion in damages against Chevron. 1The problem for the plaintiffs was collection of the Ecuadoran judgment. Chevron had left Ecuador in 1993, and there were no assets in Ecuador to be seized. Further complicating matters, there was evidence that the Ecuadoran judgment had been obtained by fraud and deceit. The strategy plaintiffs’ counsel subsequently employed was to seek to enforce the judgment in foreign jurisdictions where Chevron did have assets – including Canada. Part of the reason the plaintiffs chose Canada is its relatively low threshold for enforcement of foreign judgments. In Beals v. Saldanha ([2003] 3 S.C.R. 416), the Supreme Court of Canada expanded the Morguard2 test for enforcement of inter-provincial judgments to include enforcement of judgments from foreign jurisdictions. In short, the test is that the subject-matter of the action must have a “real and substantial connection” to the jurisdiction where the action was brought; once that is shown, there are limited defences to the enforcement of the action. Generally speaking, in order for a judgment not to be enforced, it must be shown that the judgment was obtained fraudulently, that the judgment offends natural justice, or that the judgment is against public policy. Barring unique circumstances, no other defences are permitted.The main hurdle for enforcing the judgment against Chevron in Canada, however, was not a conflict of laws issue; instead, it is a basic corporate law issue—corporate separateness. Chevron’s assets in Canada were owned by Chevron Canada Limited and Chevron Canada Financial Limited (together, Chevron Canada), who were not party to the Ecuadoran action and had no connection to Ecuador. Further, the shares of each were not owned by a party to the Ecuadoran action either; they were owned by a different Chevron subsidiary. Therefore, the shares of Chevron Canada and their respective assets would normally be immune from seizure to satisfy the judgment, unless the Chevron Canada “corporate veil was pierced” – that is, the Court found that Chevron Canada liable for the obligations of other entities in the Chevron conglomerate. Once the plaintiffs brought their action to enforce the judgment in the Ontario Court, Chevron Canada sought summary judgment against the plaintiffs that Chevron Canada was not subject to the Ecuadoran judgment and therefore the enforcement action could never succeed; the plaintiffs by countermotion sought to have Chevron’s entire defence struck out as being non-compliant with Beals v. Saldanha. It therefore rested with the plaintiffs to show how their action to enforce the Ecuadoran judgment could ever succeed under Ontario and Canadian law. The plaintiffs’ first argument arose pursuant to Section 18 of the Execution Act (Ontario), which permits the sheriff to “seize and sell any equitable or other right, property, interest or equity of redemption in or in respect of any goods, chattels, or personal property.” Their argument stated that this language was broad enough to permit Chevron’s interest in a subsidiary many levels down on the organizational chart to be seized. Hainey J. rejected this argument out of hand, finding that the Execution Act was a procedural statute only, and that Chevron Corporation, the party to the Ecuadoran lawsuit, did not have any interest, beneficial or otherwise, in the shares or assets of Chevron Canada and hence the statute was inapplicable. Chevron Corporation might be the ultimate corporate owner of Chevron Canada, but the law does not recognize ultimate ownership as being actual ownership – each entity stands on its own as a distinct entity. Second, and most importantly for Canadian corporate lawyers, Hainey J. did not find facts giving rise to a situation where piercing Chevron Canada’s corporate veil was appropriate. In order for the corporate veil to be pierced, the plaintiffs were required to meet the two steps in the widely accepted Transamerica test3 that Chevron Canada was “completely controlled and dominated” by Chevron Corporation; and second that the corporate structure was being used as a shield for improper or fraudulent conduct. Hainey J. found instead that “Chevron and Chevron Canada are separate legal entities with separate rights and obligations,” and that Chevron Corporation and Chevron Canada had a typical parent/subsidiary relationship. Therefore neither part of the test was met. The plaintiffs offered several additional innovative arguments in order to persuade the Court to pierce the corporate veil. First, while they admitted that the Chevron structure was not fraudulent or as a result of wrongdoing, they argued that it was just and equitable to pierce the corporate veil where the result would be “too flagrantly opposed to justice."4 Second, they argued that Chevron Canada’s structure fell into one of two exceptions to the corporate veil jurisprudence (a) that Chevron Canada was part of a group enterprise (i.e. the Chevron conglomerate) and therefore Chevron Corporation was liable for the debts of Chevron Canada5; and (b), they argued that the principle of corporate separateness does not apply to a subsidiary that may be liable to pay the debt of its parent6. Each of these arguments was strongly rejected by the Court. It held that the “just and equitable” line of cases arising from Kosmopoulos did not give rise to an independent “just and equitable” exception to the principle of corporate separateness. It also distinguished the group enterprise and inter-corporate debt cases described above on the facts, finding that those cases arose under unique circumstances and were thus of limited utility. Hainey J. therefore granted Chevron Canada’s motion for summary judgment, as he found that the plaintiffs’ case for enforcing the judgment against Chevron Canada could not succeed on the facts. The plaintiffs had a modicum of success on their counter-application to strike Chevron’s defences, in that the Court found that two of Chevron’s defences were not compliant with the Beals v. Saldanha tests set out above. However, the meat of Chevron’s defences, that the Ecuadoran court was corrupt and biased, passed the test and could therefore be brought by Chevron. AnalysisThe Chevron case is a dispassionate application of Canadian corporate law and conflict of laws rules to a charged fact situation, while the Tahoe case is less clear-cut. Both sets of plaintiffs paint sympathetic pictures villagers poisoned by oil and gas operations and protesters shot by private security guards are media-friendly storylines, as are large corporations with unlimited resources. On the essential facts of each case, however, neither Chevron Canada nor Tahoe is the corporate actor causing the damage; the Canadian entities are affiliates only.However, each of the Canadian entities has valuable assets and is subject to a Canadian court system that may in the right circumstances award damages and enforce judgments irrespective of the weak connection to Canada. This is the cautionary tale for Canadian companies doing business in foreign countries – it is essential to control those things you can and minimize the effect of liabilities beyond your control by ensuring the separateness of entities in a corporate structure. Canada is a relatively easy jurisdiction in which to maintain a lawsuit and enforce a judgment, but Chevron’s strict adherence to its corporate structure ensured that any attempt to enforce a judgment against Chevron Canada would have a high likelihood of being dismissed. If the structure were impugned and Chevron Canada’s assets were available for seizure, Chevron’s ability to resist the judgment on its merits would be very limited. It is vital therefore for Canadian companies and their directors to avoid becoming involved in the operations of their foreign subsidiaries. If the Canadian entity was on the wrong end of a foreign judgment, the Canadian entity’s assets would likely be available for seizure with the support of Canadian courts. The Tahoe case should also be troubling for Canadian companies having foreign operations, particularly now that the action can proceed on its merits. Canadian companies, particularly public companies, are under constant pressure to adopt corporate responsibility standards, though those standards are not technically required by law. Agencies ranking corporate governance, for example, consider corporate social responsibility as a metric in assessing the entity’s governance practices. Adoption of these standards has been viewed in the past as a relatively risk-free way of improving the company’s social perception in the wider community. In light of the Tahoe decision, however, companies might be well advised to stay silent on matters of corporate responsibility, notwithstanding the fact that it may make the company appear to be a good citizen. The internet has a compendious memory, and all those well-meaning statements to the press could come back to haunt management if a tragedy occurs. We also note that the taking of steps to avoid reasonably foreseeable harm is a defence to a claim for negligence. Therefore, corporations with foreign subsidiaries should ensure that reasonable steps are taken to implement and maintain corporate responsibility standards, if for no other reason than doing so helps establish a defence against later claims of negligence. Both the Ecuadoran plaintiffs and the Guatemalan plaintiffs decided that Canada to be a useful forum to try to recover damages. The Ecuadorans haven’t yet been successful; we’ll see if the Guatemalans are. ​1 For a non-legal history of the case, see Patrick Radden Keefe, “Reversal of Fortune” The New Yorker, January 9, 2012, accessed at http//www.newyorker.com/magazine/2012/01/09/reversal-of-fortune-patrick-radden-keefe2 From Morguard Investments Ltd. v. De Savoye [1990] 3 S.C.R. 10773 Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. (1996) 28 O.R. (3d) 423 (Gen. Div.); aff’d 1997 CarswellOnt 3496 (C.A.)4 This language is from Kosmopoulos v. Constitution Insurance Co. [1987] 1 S.C.R. 2 5 Teti and ITET Corp. v. Mueller Water Products 2015 ONSC 44346 Christian Brothers of Ireland in Canada (Re) (2000), 47 O.R. (3d) 674 (C.A.) <p style="text-align:justify;">As the domestic Canadian economy continues to mature, companies with a healthy appetite for risk can find themselves looking outside Canada to generate significant returns. Investments in foreign jurisdictions come with a myriad of challenges – uncertain legal structures and slow and cumbersome regulatory processes are just two of many, but the risk profile of these foreign adventures can be high for Canadian companies. </p><p style="text-align:justify;">One issue Canadian companies often overlook in assessing the risk of an international venture is the effect Canadian domestic courts can have on the venture’s success, notwithstanding the fact that the venture has little actual connection to Canada. Foreign litigants are increasingly using the Canadian court system to attempt to recover damages from Canadian parents or affiliates in cases where the claim arose from foreign operations entirely conducted by a foreign affiliate or subsidiary of the Canadian parent. A claim for negligence against the parent can give rise to damages under Canadian law, where such a claim might not be successful in the host country against the foreign affiliate actually undertaking the venture. Further, enforcement of foreign-obtained judgments against Canadian companies is relatively easy, in that Canadian courts are generally deferential to foreign courts’ findings.  Therefore, if a Canadian entity finds itself on the wrong end of a foreign judgment, it is relatively easy to enforce that judgment against the Canadian entity’s assets in Canada. All this is to say that Canadian companies should include what Canadian courts might do when they are deciding whether to undertake foreign operations, and how to structure those operations. </p><p style="text-align:justify;">There are two very recent high profile examples where lawsuits were brought in Canada against Canadian-domiciled companies but the matters actually being litigated had marginal connections to Canada. Because of of valuable Canadian-based assets, or because of the Canadian law of negligence, however, the plaintiffs asked Canadian courts to provide a remedy, as opposed to the court where the operations took place.</p><p style="text-align:justify;">These cases highlight several key points: </p><ul style="text-align:justify;"><li>if the court system in the foreign jurisdiction is shown to be corrupt or dishonest, a Canadian court may be chosen as the court to decide the lawsuit, irrespective of limited connection to Canada;<br></li><li>foreign litigants may argue that they are protected by Canadian negligence law for actions taking place in a foreign jurisdiction;  <br></li><li>statements about corporate social responsibility made by a Canadian parent might serve as an avenue for establishing a claim against the Canadian parent in a Canadian court; <br></li><li>it is vitally important to construct and maintain a separate structure for international affiliates, to avoid a scenario where the corporate veil can be pierced; and <br></li><li>foreign litigants are often sympathetic (i.e. villagers who have been subject of environmental damage and poisoning, or protesters who have been shot by security personnel); therefore Canadian courts may wish to find a remedy for them out of a sense of doing what’s right.<br></li></ul><h3>A Word on Process</h3><p style="text-align:justify;">Foreign actions brought in Canada invariably start with a fight about jurisdiction, and a determination of the most appropriate court to hear the action.  The Canadian test is “<em>forum conveniens</em>” – a Canadian court would be asked if the foreign court (likely where the operation is located, or where the damages occurred) is the most appropriate forum to decide the action, or whether there are reasons why a Canadian court should take jurisdiction and decide the case. </p><p style="text-align:justify;">If the foreign court is the most appropriate forum, the question then arises about enforcement of a judgment issued by the foreign court. It is relatively easy to enforce a foreign-obtained judgment against  a Canadian company and this has led some litigants to attempt to enforce judgments against Canadian assets, even where the Canadian company or Canadian assets had nothing to do with the claim itself.</p><h3><em>Forum Conveniens</em> and Corporate Social Responsibility – BC Court of Appeal Lifts the Stay in <em>Garcia v Tahoe Resources Inc</em>. ​​</h3><p style="text-align:justify;">The latest decision attempting to hold Canadian parent companies liable for the actions of foreign subsidiaries was released at the end of January by the BC Court of Appeal.  Readers of the blog will be familiar with the case of <em>Garcia v Tahoe Resources Inc.</em> (2017 BCCA 39) (we have previously written about <em>Garcia v Tahoe Resources Inc.</em> in <a href="/energy/Pages/Post.aspx?PID=41" target="_blank"><em>Dodging the Corporate Veil - Recent Attempts to Hold Companies Liable for the Actions of their Foreign Subsidiaries</em></a>​ and <a href="/energy/Pages/Post.aspx?PID=150" target="_blank"><em>Court Refuses to Hear Corporate-Veil Case</em>​)</a>, filed in June 2014. The case concerns a claim for damages brought by Guatemalan plaintiffs against a Canadian parent company, Tahoe Resources Inc. (Tahoe), over the actions of mine security personnel at the Escobal mine in Guatemala. The mine is owned by two subsidiaries of Tahoe, and the Tahoe subsdiaries hired a private security contractor that shot Guatemalan protesters during a protest at the mine, killing one and injuring six others. </p><p style="text-align:justify;">The case has been tied up in jurisdictional arguments since it was commenced. The chambers judge had at first instance held that Guatemala was the more appropriate jurisdiction to hear the case, as both a criminal proceeding and also a potential civil suit in Guatemala were in process; accordingly, he stayed the Canadian court action. The chambers judge also found that the plaintiffs could obtain a fair trial in Guatemala. </p><h3>Decision</h3><p style="text-align:justify;">The BC Court of Appeal overturned the stay and allowed the action to proceed against Tahoe in Canada, finding that there was a serious risk of unfair process in Guatemala. It held that the chambers judge had improperly framed the threshold question as whether Guatemalan courts were “capable” of providing justice; instead the Court held that the correct test is whether the evidence discloses <span style="text-decoration:underline;">a real risk of an unfair trial process in the foreign court</span>. </p><p style="text-align:justify;">With respect to the criminal proceedings in Guatemala, the Court of Appeal admitted new evidence showing that the Guatemalan criminal proceeding had been stayed as a result of the accused security personnel fleeing the country; this fact was critical in the Court’s decision to lift the stay. </p><p style="text-align:justify;">The Court considered several factors with respect to the Guatemalan civil action: the limitation period and discovery procedures for civil suits in Guatemala; the inherent difficulty in joining a Canadian entity to a Guatemalan civil action; and the expiry of the limitation period to bring a civil action in Guatemala. Tahoe argued that the failure to file suit in time was a failure of the plaintiffs to honour the governing law and their failure should not be visited on Tahoe, but the Court viewed this as one more reason why Guatemala was not the appropriate forum and that the Canadian action should proceed.  </p><p style="text-align:justify;">The risk of unfairness inherent in the Guatemalan justice system was also a deciding factor. Evidence of corruption in the Guatemalan justice system particularly with regard to criminal proceedings against “illegal security forces and clandestine security structures” was brought into evidence at the Court of Appeal. Also, the Court put more emphasis on the events of the shooting and the social conflict involving mining activity in Guatemala than did the chambers judge, who had treated the events as a personal injury case without considering the social context. </p><h3>Analysis – Corporate Social Responsibility and the Corporate Veil</h3><p style="text-align:justify;">Canadian companies with foreign operations will be watching the proceedings in <em>Tahoe</em> with interest, now that the jurisdictional arguments have been resolved, because of the innovative claims that the Guatemalan plaintiffs have brought.  Every corporate lawyer worth his or her salt has advised clients to ensure that operations in foreign jurisdictions are conducted by a subsidiary which has nothing connecting it to Canada, except potentially for board members and share ownership. In doing so, a “corporate veil,” insulating the parent from liability for the actions of its subsidiaries, is established.  This corporate veil would be pierced only in limited situations and this case does not seem at first blush to be one where the corporate veil is likely to be pierced. </p><p style="text-align:justify;">The plaintiffs’ claims in <em>Tahoe</em> are novel because they focus on the Canadian parent’s public statements regarding its commitment to corporate social responsibility, thus avoiding the corporate veil issue altogether. The plaintiffs argue that Tahoe is directly liable in tort (specifically negligence, battery and conversion) as a result of (i) its public statements of oversight and maintenance of standards at the Escobal mine; and (ii) its adoption of various international standards, such as the 2006 IFC standards on social and environmental performance and the Voluntary Principles on Security and Human Rights. The plaintiffs claim that the contractors’ actions were in direct conflict with both Tahoe's public statements and the international standards it had ascribed to, and as Tahoe had acknowledged that it retained ultimate control over and had responsibility for operations in Guatemala, particularly security practices, it was responsible to the plaintiffs. Whether the operations were actually conducted by Tahoe or its Guatemalan subsidiary becomes irrelevant. </p><p style="text-align:justify;">While there are challenges with this approach, including remoteness and reliance, the fact that the action is proceeding on the merits gives significant leverage to the Guatemalan plaintiffs to negotiate a settlement. The Court did not dismiss the action out of hand and a Canadian trial result where the plaintiffs were successful could have a material effect on Tahoe.  In other words, watch this space. </p><h3>​Enforcement of Foreign Judgments against Unrelated Subsidiaries: the Latest Chapter in the Saga of the Ecuadoran Villagers</h3><p style="text-align:justify;">The latest chapter in <em>Yaiguaj​e v. Chevron Corporation</em> (2017 ONSC 135) (discussed in <a href="/energy/Pages/Post.aspx?PID=126"><em>Supreme Court of Canada confirms generous and liberal approach to the recognition and enforcement of foreign judgments</em></a>​)​ was released on January 20, 2017. The case arises from environmental claims made by Ecuadoran townspeople against Texaco (now Chevron). Chevron conducted crude oil drilling and production in the Ecuadoran jungle between 1967 and 1992, and the plaintiffs sued Chevron in 1993 as a result of ongoing health problems and environmental damages they claimed arose from the operations.  After an eighteen-year odyssey through the US and Ecuadoran court system, in 2011 the Ecuadoran plaintiffs were awarded $9 billion in damages against Chevron. <sup>1</sup></p><p style="text-align:justify;">The problem for the plaintiffs was collection of the Ecuadoran judgment.  Chevron had left Ecuador in 1993, and there were no assets in Ecuador to be seized.  Further complicating matters, there was evidence that the Ecuadoran judgment had been obtained by fraud and deceit. The strategy plaintiffs’ counsel subsequently employed was to seek to enforce the judgment in foreign jurisdictions where Chevron did have assets – including Canada. </p><p style="text-align:justify;">Part of the reason the plaintiffs chose Canada is its relatively low threshold for enforcement of foreign judgments. In <em>Beals v. Saldanha</em> ([2003] 3 S.C.R. 416), the Supreme Court of Canada expanded the <em>Morguard</em><sup>2</sup>  test for enforcement of inter-provincial judgments to include enforcement of judgments from foreign jurisdictions. In short, the test is that the subject-matter of the action must have a “real and substantial connection” to the jurisdiction where the action was brought; once that is shown, there are limited defences to the enforcement of the action.  Generally speaking, in order for a judgment not to be enforced, it must be shown that the judgment was obtained fraudulently, that the judgment offends natural justice, or that the judgment is against public policy. Barring unique circumstances, no other defences are permitted.</p><p style="text-align:justify;">The main hurdle for enforcing the judgment against Chevron in Canada, however, was not a conflict of laws issue; instead, it is a basic corporate law issue—corporate separateness. Chevron’s assets in Canada were owned by Chevron Canada Limited and Chevron Canada Financial Limited (together, Chevron Canada), who were not party to the Ecuadoran action and had no connection to Ecuador. Further, the shares of each were not owned by a party to the Ecuadoran action either; they were owned by a different Chevron subsidiary.  Therefore, the shares of Chevron Canada and their respective assets would normally be immune from seizure to satisfy the judgment, unless the Chevron Canada “corporate veil was pierced” – that is, the Court found that Chevron Canada liable for the obligations of other entities in the Chevron conglomerate. </p><p style="text-align:justify;">Once the plaintiffs brought their action to enforce the judgment in the Ontario Court, Chevron Canada sought summary judgment against the plaintiffs that Chevron Canada was not subject to the Ecuadoran judgment and therefore the enforcement action could never succeed; the plaintiffs by countermotion sought to have Chevron’s entire defence struck out as being non-compliant with <em>Beals v. Saldanha</em>. It therefore rested with the plaintiffs to show how their action to enforce the Ecuadoran judgment could ever succeed under Ontario and Canadian law. </p><p style="text-align:justify;">The plaintiffs’ first argument arose pursuant to Section 18 of the <em>Execution Act</em> (Ontario), which permits the sheriff to “seize and sell any equitable or other right, property, interest or equity of redemption in or in respect of any goods, chattels, or personal property.” Their argument stated that this language was broad enough to permit Chevron’s interest in a subsidiary many levels down on the organizational chart to be seized.  </p><p style="text-align:justify;">Hainey J. rejected this argument out of hand, finding that the <em>Execution Act</em> was a procedural statute only, and that Chevron Corporation, the party to the Ecuadoran lawsuit, did not have any interest, beneficial or otherwise, in the shares or assets of Chevron Canada and hence the statute was inapplicable.  Chevron Corporation might be the ultimate corporate owner of Chevron Canada, but the law does not recognize ultimate ownership as being actual ownership – each entity stands on its own as a distinct entity. </p><p style="text-align:justify;">Second, and most importantly for Canadian corporate lawyers, Hainey J. did not find facts giving rise to a situation where piercing Chevron Canada’s corporate veil was appropriate.  In order for the corporate veil to be pierced, the plaintiffs were required to meet the two steps in the widely accepted <em>Transamerica</em> test<sup>3</sup>: that Chevron Canada was “completely controlled and dominated” by Chevron Corporation; and second that the corporate structure was being used as a shield for improper or fraudulent conduct. Hainey J. found instead that “Chevron and Chevron Canada are separate legal entities with separate rights and obligations,” and that Chevron Corporation and Chevron Canada had a typical parent/subsidiary relationship. Therefore neither part of the test was met.  </p><p style="text-align:justify;">The plaintiffs offered several additional innovative arguments in order to persuade the Court to pierce the corporate veil.  First, while they admitted that the Chevron structure was not fraudulent or as a result of wrongdoing, they argued that it was just and equitable to pierce the corporate veil where the result would be “too flagrantly opposed to justice."<sup>4</sup> Second, they argued that Chevron Canada’s structure fell into one of two exceptions to the corporate veil jurisprudence: (a) that Chevron Canada was part of a group enterprise (i.e. the Chevron conglomerate) and therefore Chevron Corporation was liable for the debts of Chevron Canada<sup>5</sup>; and (b), they argued that the principle of corporate separateness does not apply to a subsidiary that may be liable to pay the debt of its parent<sup>6</sup>. </p><p style="text-align:justify;">Each of these arguments was strongly rejected by the Court. It held that the “just and equitable” line of cases arising from <em>Kosmopoulos </em>did not give rise to an independent “just and equitable” exception to the principle of corporate separateness. It also distinguished the group enterprise and inter-corporate debt cases described above on the facts, finding that those cases arose under unique circumstances and were thus of limited utility. Hainey J. therefore granted Chevron Canada’s motion for summary judgment, as he found that the plaintiffs’ case for enforcing the judgment against Chevron Canada could not succeed on the facts. </p><p style="text-align:justify;">The plaintiffs had a modicum of success on their counter-application to strike Chevron’s defences, in that the Court found that two of Chevron’s defences were not compliant with the <em>Beals v. Saldanha</em> tests set out above. However, the meat of Chevron’s defences, that the Ecuadoran court was corrupt and biased, passed the test and could therefore be brought by Chevron.  </p><h4>Analysis</h4><p style="text-align:justify;">The <em>Chevron</em> case is a dispassionate application of Canadian corporate law and conflict of laws rules to a charged fact situation, while the <em>Tahoe</em> case is less clear-cut.  Both sets of plaintiffs paint sympathetic pictures: villagers poisoned by oil and gas operations and protesters shot by private security guards are media-friendly storylines, as are large corporations with unlimited resources. On the essential facts of each case, however, neither Chevron Canada nor Tahoe is the corporate actor causing the damage; the Canadian entities are affiliates only.</p><p style="text-align:justify;">However, each of the Canadian entities has valuable assets and is subject to a Canadian court system that may in the right circumstances award damages and enforce judgments irrespective of the weak connection to Canada. This is the cautionary tale for Canadian companies doing business in foreign countries – it is essential to control those things you can and minimize the effect of liabilities beyond your control by ensuring the separateness of entities in a corporate structure. Canada is a relatively easy jurisdiction in which to maintain a lawsuit and enforce a judgment, but Chevron’s strict adherence to its corporate structure ensured that any attempt to enforce a judgment against Chevron Canada would have a high likelihood of being dismissed.  If the structure were impugned and Chevron Canada’s assets were available for seizure, Chevron’s ability to resist the judgment on its merits would be very limited.  It is vital therefore for Canadian companies and their directors to avoid becoming involved in the operations of their foreign subsidiaries. If the Canadian entity was on the wrong end of a foreign judgment, the Canadian entity’s assets would likely be available for seizure with the support of Canadian courts.  </p><p style="text-align:justify;">The <em>Tahoe</em> case should also be troubling for Canadian companies having foreign operations, particularly now that the action can proceed on its merits. Canadian companies, particularly public companies, are under constant pressure to adopt corporate responsibility standards, though those standards are not technically required by law. Agencies ranking corporate governance, for example, consider corporate social responsibility as a metric in assessing the entity’s governance practices. Adoption of these standards has been viewed in the past as a relatively risk-free way of improving the company’s social perception in the wider community. </p><p style="text-align:justify;">In light of the <em>Tahoe</em> decision, however, companies might be well advised to stay silent on matters of corporate responsibility, notwithstanding the fact that it may make the company appear to be a good citizen.  The internet has a compendious memory, and all those well-meaning statements to the press could come back to haunt management if a tragedy occurs.  We also note that the taking of steps to avoid reasonably foreseeable harm is a defence to a claim for negligence. Therefore, corporations with foreign subsidiaries should ensure that reasonable steps are taken to implement and maintain corporate responsibility standards, if for no other reason than doing so helps establish a defence against later claims of negligence. </p><p style="text-align:justify;">B<strong></strong>oth the Ecuadoran plaintiffs and the Guatemalan plaintiffs decided that Canada to be a useful forum to try to recover damages. The Ecuadorans haven’t yet been successful; we’ll see if the Guatemalans are. </p><hr /><p style="text-align:justify;"><span style="font-size:0.6em;"><sup>​1</sup><em> </em>For a non-legal history of the case, see Patrick Radden Keefe, “Reversal of Fortune” The New Yorker, January 9, 2012, accessed at http://www.newyorker.com/magazine/2012/01/09/reversal-of-fortune-patrick-radden-keefe<br></span><span style="font-size:0.6em;"><sup>2<i> </i></sup>From <em>Morguard Investments Ltd. v. De Savoye</em> [1990] 3 S.C.R. 1077<br></span><span style="font-size:0.6em;"><sup>3 </sup><em>Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co.</em> (1996) 28 O.R. (3d) 423 (Gen. Div.); aff’d 1997 CarswellOnt 3496 (C.A.)<br></span><span style="font-size:0.6em;"><sup>4</sup> <span style="font-size:7.8px;">This language is from Kosmopoulos v. Constitution Insurance Co. [1987] 1 S.C.R. 2 </span><br></span><span style="font-size:0.6em;"><sup>5 </sup>Teti and ITET Corp. v. Mueller Water Products 2015 ONSC 4434<br></span><span style="font-size:0.6em;"><sup>6<i> </i></sup><em>Christian Brothers of Ireland in Canada (Re)</em> (2000), 47 O.R. (3d) 674 (C.A.) </span></p>3/15/2017 4:00:00 AM2017-03-15T04:00:00ZTrue1float;#3.00000000000000float;#2017.00000000000string;#Marchfloat;#201703.000000000GP0|#3e7a8132-33f1-45f1-82ca-865d4e5b5f77;L0|#03e7a8132-33f1-45f1-82ca-865d4e5b5f77|International;GTSet|#939fe804-8a2a-4cfa-af8f-5756b32ac3ca;GP0|#6ed29997-7c09-433d-9f4f-e4bb2ce1b29b;L0|#06ed29997-7c09-433d-9f4f-e4bb2ce1b29b|Litigation;GP0|#60a6f187-f0e0-4c65-a06c-b97febf6542e;L0|#060a6f187-f0e0-4c65-a06c-b97febf6542e|Oil & GasInternational;Litigation;Oil & Gas
Alberta Court of Appeal Allows Crown to Advance Appeal on Workplace Safety Issues of Significant Public Importance to the Oil and Gas IndustryAlberta Court of Appeal Allows Crown to Advance Appeal on Workplace Safety Issues of Significant Public Importance to the Oil and Gas Industry296BLG Blog PostAndrew Pozzobonapozzobon@blg.com | Andrew Pozzobon | 693A30232E777C626C6763616E6164615C61706F7A7A6F626F6E i:0#.w|blgcanada\apozzobon​​​On February 8, 2017, the Alberta Court of Appeal released its leave to appeal decision in R v Precision Diversified Oilfield Services Corp, 2017 ABCA 47. Precision had been convicted at trial under Alberta’s Occupational Health and Safety legislation for failing to ensure the safety of its workers. The Court of Queen’s Bench set aside those convictions and ordered a new trial (which BLG previously wrote about in Queen’s Bench Sets Aside Convictions Under OHS Legislation and Orders a New Trial). The Crown appealed that decision and the Court of Appeal agreed that it would allow the Crown to advance its appeal since workplace safety was of significant public importance in the context of the oil and gas industry.[Read more…]​​<p style="text-align:justify;">​​​On February 8, 2017, the Alberta Court of Appeal released its leave to appeal decision in <a href="http://www.canlii.org/en/ab/abca/doc/2017/2017abca47/2017abca47.pdf" target="_blank"><em>R v Precision Diversified Oilfield Services Corp</em></a>, 2017 ABCA 47. Precision had been convicted at trial under Alberta’s Occupational Health and Safety legislation for failing to ensure the safety of its workers. The Court of Queen’s Bench set aside those convictions and ordered a new trial (which BLG previously wrote about in <a href="/energy/Pages/Post.aspx?PID=265" target="_blank"><em>Queen’s Bench Sets Aside Convictions Under OHS Legislation and Orders a New Trial</em></a>). The Crown appealed that decision and the Court of Appeal agreed that it would allow the Crown to advance its appeal since workplace safety was of significant public importance in the context of the oil and gas industry.</p><p style="text-align:justify;">[<a href="/energy/Pages/Post.aspx?PID=296" target="_blank"><em>Read more</em></a>…]​​</p>On February 8, 2017, the Alberta Court of Appeal released its leave to appeal decision in R v Precision Diversified Oilfield Services Corp, 2017 ABCA 47. Precision had been convicted at trial under Alberta’s Occupational Health and Safety legislation for failing to ensure the safety of its workers. The Court of Queen’s Bench set aside those convictions and ordered a new trial (which BLG previously wrote about in Queen’s Bench Sets Aside Convictions Under OHS Legislation and Orders a New Trial). The Crown appealed that decision and the Court of Appeal agreed that it would allow the Crown to advance its appeal since workplace safety was of significant public importance in the context of the oil and gas industry. BackgroundPrecision was involved in drilling a well for Novus Energy appr​oximately 30 kilometres from Grande Prairie, Alberta. On December 12, 2010, the rig’s crew was “tripping out” or removing pipe from a well hole. A Precision worker (Worker) was severely injured during the tripping out procedure, and died the following day.As a result of the accident, Precision was charged with two offences (i) failing to ensure the health and safety of the Worker insofar as it was reasonably practicable to do so as required by s. 2(1) of the Occupational Health and Safety Act (OHS Act); and (ii) failing to take measures to eliminate workplace hazards as required by s. 9 of the Occupational Health and Safety Code 2009.At trial, there was no evidence from anyone about how the Worker was injured as no one witnessed any contact between the drilling equipment and the Worker. It was evident that some part of the drilling equipment struck the Worker when torque from the drillstring was released but there was no evidence of which part of the assembly had struck the Worker.Despite the lack of evidence about how the Worker was injured, the Provincial Court trial judge (Trial Judge) convicted Precision of both offences, and imposed a total fine of $400,000. The Trial Judge determined that Precision had failed to take all reasonable steps to avoid the accident as it had not installed an interlock device, an engineered solution that had been put in place by Precision’s competitor.On appeal, Madam Justice Veit of the Court of Queen’s Bench (Appeal Judge) set aside the convictions and ordered a new trial against Precision (Appeal Decision). The Appeal Judge held that the Trial Judge had erred by finding that the Crown proved the offence merely by proving that the accident occurred. The Appeal Judge also found that Precision​ met all industry standards and regulations and the Trial Judge failed to assess due diligence with reference to industry standards. In addition, the Appeal Judge found that there was only one other small drilling company that had implemented the engineered device referred to by the Trial Judge, and there was no evidence that the device or any other technical solutions had made an impact on industry standards. Leave DecisionThe Crown applied under Section 19(1) of the Provincial Offences Procedure Act, RSA 2000 c p-34, for leave to appeal the Appeal Decision. The Crown sought leave to appeal two questions Did the Appeal Judge err in law by requiring the Crown, as part of the actus reus of the offence, to negate due diligence or prove negligence?Did the Appeal Judge err in law in her interpretation and application of the due diligence test?On the first question, the Crown argued that the Appeal Judge required the Crown to prove negligence or to negate due diligence. The Court of Appeal noted that based on existing law in Alberta, in order to prove a prima facie breach under Section 2(1) of the OHS Act, the Crown needed only to prove the fact the worker was employed, the worker’s engagement in the employer’s work, and his injury or death. As such, the Court of Appeal concluded that the Crown’s position on this question had arguable merit. The second question related to the standard of proof required by Precision at the due diligence stage. The Crown argued that the Appeal Judge made a legal error by strictly comparing Precision’s practices to generally accepted standard practices in the industry, rather than taking a broader view of steps that Precision reasonably should have taken. The Crown argued that legislated and industry standards may set a minimum level of care, but they were not determinative of due diligence. The Court of Appeal held that the Appeal Judge's decision arguably used a due diligence test that required the Crown to disprove compliance with industry standards and did not apply the proper foreseeability test or broader due diligence test. The Court of Appeal noted that the question of law engaged in this case had not been broadly settled yet. The Court of Appeal concluded that the Crown’s position had arguable merit since the decision of the Appeal Judge used a test of due diligence that imposed an obligation on the Crown to disprove compliance with industry standard and specific government regulation. The Alberta Court of Appeal agreed that the appeal could proceed on those two issues. It held that the two questions were of sufficient importance to justify a further appeal, since workplace safety was of significant public importance in the context of the oil and gas industry, and generally, in Alberta. Implications The Alberta Court of Appeal decision will have significant implications on employers in the oil and gas industry as it should provide further clarification on the due diligence standard and it should finally determine whether an employer can rely on following industry standards in a closely regulated industry to prove due diligence. BLG will continue to monitor the appeal and provide a further update once the Court of Appeal releases its decision on the merits.<p style="text-align:justify;">On February 8, 2017, the Alberta Court of Appeal released its leave to appeal decision in <a href="http://www.canlii.org/en/ab/abca/doc/2017/2017abca47/2017abca47.pdf" target="_blank"><em>R v Precision Diversified Oilfield Services Corp</em></a>, 2017 ABCA 47. Precision had been convicted at trial under Alberta’s Occupational Health and Safety legislation for failing to ensure the safety of its workers. The Court of Queen’s Bench set aside those convictions and ordered a new trial (which BLG previously wrote about in <a href="/energy/Pages/Post.aspx?PID=265" target="_blank"><em>Queen’s Bench Sets Aside Convictions Under OHS Legislation and Orders a New Trial</em></a>). The Crown appealed that decision and the Court of Appeal agreed that it would allow the Crown to advance its appeal since workplace safety was of significant public importance in the context of the oil and gas industry. </p><h4>Background</h4><p style="text-align:justify;">Precision was involved in drilling a well for Novus Energy appr​oximately 30 kilometres from Grande Prairie, Alberta. On December 12, 2010, the rig’s crew was “tripping out” or removing pipe from a well hole. A Precision worker (Worker) was severely injured during the tripping out procedure, and died the following day.</p><p style="text-align:justify;">As a result of the accident, Precision was charged with two offences: (i) failing to ensure the health and safety of the Worker insofar as it was reasonably practicable to do so as required by s. 2(1) of the <em>Occupational Health and Safety Act</em> (OHS Act); and (ii) failing to take measures to eliminate workplace hazards as required by s. 9 of the <em>Occupational Health and Safety Code 2009</em>.</p><p style="text-align:justify;">At trial, there was no evidence from anyone about how the Worker was injured as no one witnessed any contact between the drilling equipment and the Worker. It was evident that some part of the drilling equipment struck the Worker when torque from the drillstring was released but there was no evidence of which part of the assembly had struck the Worker.</p><p style="text-align:justify;">Despite the lack of evidence about how the Worker was injured, the Provincial Court trial judge (Trial Judge) convicted Precision of both offences, and imposed a total fine of $400,000. The Trial Judge determined that Precision had failed to take all reasonable steps to avoid the accident as it had not installed an interlock device, an engineered solution that had been put in place by Precision’s competitor.</p><p style="text-align:justify;">On appeal, Madam Justice Veit of the Court of Queen’s Bench (Appeal Judge) set aside the convictions and ordered a new trial against Precision (Appeal Decision). The Appeal Judge held that the Trial Judge had erred by finding that the Crown proved the offence merely by proving that the accident occurred. The Appeal Judge also found that Precision​ met all industry standards and regulations and the Trial Judge failed to assess due diligence with reference to industry standards. In addition, the Appeal Judge found that there was only one other small drilling company that had implemented the engineered device referred to by the Trial Judge, and there was no evidence that the device or any other technical solutions had made an impact on industry standards. </p><h4>Leave Decision</h4><p style="text-align:justify;">The Crown applied under Section 19(1) of the <em>Provincial Offences Procedure Act</em>, RSA 2000 c p-34, for leave to appeal the Appeal Decision. The Crown sought leave to appeal two questions: </p><ol style="text-align:justify;"><li>Did the Appeal Judge err in law by requiring the Crown, as part of the <em>actus reus</em> of the offence, to negate due diligence or prove negligence?<br></li><li>Did the Appeal Judge err in law in her interpretation and application of the due diligence test?<br></li></ol><p style="text-align:justify;">On the first question, the Crown argued that the Appeal Judge required the Crown to prove negligence or to negate due diligence. The Court of Appeal noted that based on existing law in Alberta, in order to prove a <em>prima facie</em> breach under Section 2(1) of the OHS Act, the Crown needed only to prove the fact the worker was employed, the worker’s engagement in the employer’s work, and his injury or death. As such, the Court of Appeal concluded that the Crown’s position on this question had arguable merit. </p><p style="text-align:justify;">The second question related to the standard of proof required by Precision at the due diligence stage. The Crown argued that the Appeal Judge made a legal error by strictly comparing Precision’s practices to generally accepted standard practices in the industry, rather than taking a broader view of steps that Precision reasonably should have taken. The Crown argued that legislated and industry standards may set a minimum level of care, but they were not determinative of due diligence. The Court of Appeal held that the Appeal Judge's decision arguably used a due diligence test that required the Crown to disprove compliance with industry standards and did not apply the proper foreseeability test or broader due diligence test. The Court of Appeal noted that the question of law engaged in this case had not been broadly settled yet. The Court of Appeal concluded that the Crown’s position had arguable merit since the decision of the Appeal Judge used a test of due diligence that imposed an obligation on the Crown to disprove compliance with industry standard and specific government regulation. </p><p style="text-align:justify;">The Alberta Court of Appeal agreed that the appeal could proceed on those two issues. It held that the two questions were of sufficient importance to justify a further appeal, since workplace safety was of significant public importance in the context of the oil and gas industry, and generally, in Alberta. </p><h4>Implications </h4><p style="text-align:justify;">The Alberta Court of Appeal decision will have significant implications on employers in the oil and gas industry as it should provide further clarification on the due diligence standard and it should finally determine whether an employer can rely on following industry standards in a closely regulated industry to prove due diligence. BLG will continue to monitor the appeal and provide a further update once the Court of Appeal releases its decision on the merits.</p>3/9/2017 5:00:00 AM2017-03-09T05:00:00ZTrue1float;#3.00000000000000float;#2017.00000000000string;#Marchfloat;#201703.000000000GP0|#1eb0aeef-3188-486c-8353-ba825b2cedc8;L0|#01eb0aeef-3188-486c-8353-ba825b2cedc8|Occupational Health & Safety;GTSet|#939fe804-8a2a-4cfa-af8f-5756b32ac3ca;GP0|#60a6f187-f0e0-4c65-a06c-b97febf6542e;L0|#060a6f187-f0e0-4c65-a06c-b97febf6542e|Oil & Gas;GP0|#a8d93e98-a569-4c7f-ac81-5c92b85685cd;L0|#0a8d93e98-a569-4c7f-ac81-5c92b85685cd|Appeals;GP0|#6ed29997-7c09-433d-9f4f-e4bb2ce1b29b;L0|#06ed29997-7c09-433d-9f4f-e4bb2ce1b29b|Litigation;GP0|#79f5b025-e6dd-4c66-873b-67e8780cf972;L0|#079f5b025-e6dd-4c66-873b-67e8780cf972|RegulatoryOccupational Health & Safety;Oil & Gas;Appeals;Litigation;Regulatory
The Resource: February 2017 DigestThe Resource: February 2017 Digest295BLG Blog PostMichael A. Marionmmarion@blg.com | Michael A. Marion | 693A30232E777C626C6763616E6164615C6D616D i:0#.w|blgcanada\mam​​​​The February 2017 summary put together by the editors of The Resource BLG Energy Law Blog is now available on the BLG website. Some of the post topics include Interesting topics in litigationAlberta Court of Appeal Protects Confidentiality of Alberta Energy Regulator’s ADR Process and Clarifies What Evidence can be Relied on When Seeking Permission to AppealBoxing-in Bhasin Alberta Court of Appeal Confirms No Common Law Duty To Reasonably Exercise Discretionary Contractual Powers [Read more...] <p style="text-align:justify;">​​​​The February 2017 summary put together by the editors of The Resource: BLG Energy Law Blog is now available on the BLG website. Some of the post topics include:</p><p><strong>Interesting topics in litigation</strong></p><ul><li><a href="/energy/Pages/Post.aspx?PID=294" target="_blank">Alberta Court of Appeal Protects Confidentiality of Alberta Energy Regulator’s ADR Process and Clarifies What Evidence can be Relied on When Seeking Permission to Appeal</a><br></li><li><a href="/energy/Pages/Post.aspx?PID=290" target="_blank">Boxing-in Bhasin: Alberta Court of Appeal Confirms No Common Law Duty To Reasonably Exercise Discretionary Contractual Powers</a><br></li></ul><p>[<a href="/energy/Pages/Post.aspx?PID=295" target="_blank"><em>Read more</em></a>...]</p><p></p>​The February 2017 summary put together by the editors of The Resource BLG Energy Law Blog is now available on the BLG website. Some of the post topics includeInteresting topics in litigationAlberta Court of Appeal Protects Confidentiality of Alberta Energy Regulator’s ADR Process and Clarifies What Evidence can be Relied on When Seeking Permission to AppealBoxing-in Bhasin Alberta Court of Appeal Confirms No Common Law Duty To Reasonably Exercise Discretionary Contractual Powers>> FIND MORE LITIGATION POSTSLabour & employment updatesPotential Changes to NAFTA could have Significant Impacts on Obtaining Canadian Work PermitsNewfoundland Court Determines an Employer was not Justified in Terminating the Employment of an Offshore Worker found to be in Possession of Marijuana>> FIND MORE LABOUR & EMPLOYMENT POSTSOur perspective on recent decisionsAlberta Utilities Commission Rules on the Scope of Evidence required by First Nations and Métis on Notice of Constitutional Question and the AUC’s Jurisdiction to assess Crown ConsultationAlberta Court of Queen’s Bench Confirms the Scope of Procedural Fairness and Evidence to Trigger Alberta Crown’s Duty to Consult in Resource Development Applications>> FIND MORE RECENT DECISION POSTSThe full digest is available on BLG.com. To review this information offline, download our print-friendly pdf​.<p style="text-align:justify;">​The February 2017 summary put together by the editors of The Resource: BLG Energy Law Blog is now available on the BLG website. Some of the post topics include:</p><h3>Interesting topics in litigation</h3><ul style="text-align:justify;"><li><a href="/energy/Pages/Post.aspx?PID=294" target="_blank">Alberta Court of Appeal Protects Confidentiality of Alberta Energy Regulator’s ADR Process and Clarifies What Evidence can be Relied on When Seeking Permission to Appeal</a><br></li><li><a href="/energy/Pages/Post.aspx?PID=290" target="_blank">Boxing-in Bhasin: Alberta Court of Appeal Confirms No Common Law Duty To Reasonably Exercise Discretionary Contractual Powers</a><br></li></ul><p style="text-align:justify;"><strong>>> FIND MORE </strong><a href="/energy/Pages/Category.aspx?Category=Litigation&" target="_blank"><strong>LITIGATION POSTS</strong></a></p><h3>Labour & employment updates</h3><ul style="text-align:justify;"><li><a href="/energy/Pages/Post.aspx?PID=281" target="_blank">Potential Changes to NAFTA could have Significant Impacts on Obtaining Canadian Work Permits</a><br></li><li><a href="/energy/Pages/Post.aspx?PID=282" target="_blank">Newfoundland Court Determines an Employer was not Justified in Terminating the Employment of an Offshore Worker found to be in Possession of Marijuana</a><br></li></ul><p style="text-align:justify;">>> FIND MORE LABOUR & EMPLOYMENT POSTS</p><h3>Our perspective on recent decisions</h3><ul style="text-align:justify;"><li><a href="/energy/Pages/Post.aspx?PID=289" target="_blank">Alberta Utilities Commission Rules on the Scope of Evidence required by First Nations and Métis on Notice of Constitutional Question and the AUC’s Jurisdiction to assess Crown Consultation</a><br></li><li><a href="/energy/Pages/Post.aspx?PID=288" target="_blank">Alberta Court of Queen’s Bench Confirms the Scope of Procedural Fairness and Evidence to Trigger Alberta Crown’s Duty to Consult in Resource Development Applications</a><br></li></ul><p style="text-align:justify;"><strong>>> FIND MORE </strong><a href="/energy" target="_blank"><strong>RECENT DECISION POSTS</strong></a></p><p style="text-align:justify;">The full digest is available on BLG.com. To review this information offline, download our <a href="http://blg.com/en/News-And-Publications/Documents/Publication_4861.pdf" target="_blank">print-friendly pdf​</a>.</p>3/8/2017 5:00:00 AM2017-03-08T05:00:00ZTrue1float;#3.00000000000000float;#2017.00000000000string;#Marchfloat;#201703.000000000GP0|#98850b8e-4cdc-41cf-9cf7-f309880c7c29;L0|#098850b8e-4cdc-41cf-9cf7-f309880c7c29|BLG Energy News and Events;GTSet|#939fe804-8a2a-4cfa-af8f-5756b32ac3caBLG Energy News and Events
Good Tactics or Bad Faith: The Divisive Issue of Sandbagging in M&AGood Tactics or Bad Faith: The Divisive Issue of Sandbagging in M&A292BLG Blog PostMichael A. Marionmmarion@blg.com | Michael A. Marion | 693A30232E777C626C6763616E6164615C6D616D i:0#.w|blgcanada\mam​​​There are few issues in a private M&A transaction as potentially divisive as the treatment of “sandbagging” in the purchase agreement. “Sandbagging” occurs when the buyer has knowledge of a breach by the seller of a representation, warranty or covenant, closes the transaction despite such knowledge and then seeks indemnification from the seller post-closing for losses caused by the breach. The concept of “sandbagging” goes beyond M&A tactics and strategy and can become a debate between buyer and seller about fundamental concepts of honesty, fairness and good faith. This bulletin will explain what sandbagging is, provide examples of “pro” and “anti” sandbagging provisions, discuss how prevalent these provisions are in the Canadian M&A market and explore how Canadian courts have dealt with the issue.​[Read more...]<p style="text-align:justify;">​​​There are few issues in a private M&A transaction as potentially divisive as the treatment of “sandbagging” in the purchase agreement. “Sandbagging” occurs when the buyer has knowledge of a breach by the seller of a representation, warranty or covenant, closes the transaction despite such knowledge and then seeks indemnification from the seller post-closing for losses caused by the breach. The concept of “sandbagging” goes beyond M&A tactics and strategy and can become a debate between buyer and seller about fundamental concepts of honesty, fairness and good faith. This bulletin will explain what sandbagging is, provide examples of “pro” and “anti” sandbagging provisions, discuss how prevalent these provisions are in the Canadian M&A market and explore how Canadian courts have dealt with the issue.​</p><p style="text-align:justify;">[<a href="/energy/Pages/Post.aspx?PID=292" target="_blank"><em>Read more</em></a><em>.</em>..]</p>​​There are few issues in a private M&A transaction as potentially divisive as the treatment of “sandbagging” in the purchase agreement. “Sandbagging” occurs when the buyer has knowledge of a breach by the seller of a representation, warranty or covenant, closes the transaction despite such knowledge and then seeks indemnification from the seller post-closing for losses caused by the breach. The concept of “sandbagging” goes beyond M&A ta​​ctics and strategy and can become a debate between buyer and seller about fundamental concepts of honesty, fairness and good faith. This bulletin will explain what sandbagging is, provide examples of “pr​o” and “anti” sandbagging provisions, discuss how prevalent these provisions are in the Canadian M&A market and explore how Canadian courts have dealt with the issue.​​>> Read the full publication by BLG lawyers Paul A.D. Mingay, Andrew M. Bunston and Colin G. Cameron-Vendrig​<p style="text-align:justify;">​​There are few issues in a private M&A transaction as potentially divisive as the treatment of “sandbagging” in the purchase agreement. “Sandbagging” occurs when the buyer has knowledge of a breach by the seller of a representation, warranty or covenant, closes the transaction despite such knowledge and then seeks indemnification from the seller post-closing for losses caused by the breach. The concept of “sandbagging” goes beyond M&A ta​​ctics and strategy and can become a debate between buyer and seller about fundamental concepts of honesty, fairness and good faith. This bulletin will explain what sandbagging is, provide examples of “pr​o” and “anti” sandbagging provisions, discuss how prevalent these provisions are in the Canadian M&A market and explore how Canadian courts have dealt with the issue.​​</p><p style="text-align:justify;">>> <a href="http://blg.com/en/News-And-Publications/Publication_4799" target="_blank"><strong>Read the full publication</strong></a> by BLG lawyers <a href="http://blg.com/en/Our-People/Mingay-Paul" target="_blank">Paul A.D. Mingay</a>, <a href="http://blg.com/en/Our-People/Bunston-Andrew" target="_blank">Andrew M. Bunston</a> and <a href="http://blg.com/en/Our-People/CameronVendrig-Colin" target="_blank">Colin G. Cameron-Vendrig​</a></p>3/7/2017 5:00:00 AM2017-03-07T05:00:00ZTrue1float;#3.00000000000000float;#2017.00000000000string;#Marchfloat;#201703.000000000GP0|#9328c8bb-8a9a-4b9a-b019-f81ca750e829;L0|#09328c8bb-8a9a-4b9a-b019-f81ca750e829|Mergers & Acquisitions;GTSet|#939fe804-8a2a-4cfa-af8f-5756b32ac3caMergers & Acquisitions
Alberta Court of Appeal Protects Confidentiality of Alberta Energy Regulator’s ADR Process and Clarifies What Evidence can be Relied on When Seeking Permission to Appeal Alberta Court of Appeal Protects Confidentiality of Alberta Energy Regulator’s ADR Process and Clarifies What Evidence can be Relied on When Seeking Permission to Appeal 294BLG Blog PostMichael A. Marion;Sandi Shannonmmarion@blg.com | Michael A. Marion | 693A30232E777C626C6763616E6164615C6D616D i:0#.w|blgcanada\mam;sshannon@blg.com | Sandi Shannon | 693A30232E777C626C6763616E6164615C737368616E6E6F6E i:0#.w|blgcanada\sshannon​The Alberta Court of Appeal's decision in Bokenfohr v Pembina Pipeline Corporation, 2016 ABCA 382 provides an important reflection on admissibility of evidence in the permission stage of an appeal in the oil and gas context. The decision was a result of an application by the respondent, Pembina Pipeline Corporation to strike from the record a number of affidavits filed in support of an application to appeal from a decision of the Alberta Energy Regulator (AER) to approve a pipeline. In considering the precise wording of section 45(7) of the Responsible Energy Development Act, SA 2012, c. R-17.3 (Act), the Court of Appeal held that evidence, including evidence that was not before the Regulator at the time of the decision, may be admissible at the permission stage of the appeal process so long as it is relevant to the determination. However, the admissibility of such evidence at the permission stage of the appeal process should not be interpreted as admissibility of the same evidence in the appeal itself. [Read more...]<p style="text-align:justify;">​The Alberta Court of Appeal's decision in <a href="http://www.canlii.org/en/ab/abca/doc/2016/2016abca382/2016abca382.html?searchUrlHash=AAAAAQAoQm9rZW5mb2hyIHYgUGVtYmluYSBQaXBlbGluZSBDb3Jwb3JhdGlvbgAAAAAB&resultIndex=1" target="_blank"><em>Bokenfohr v Pembina Pipeline Corporation</em></a>, 2016 ABCA 382 provides an important reflection on admissibility of evidence in the permission stage of an appeal in the oil and gas context. The decision was a result of an application by the respondent, Pembina Pipeline Corporation to strike from the record a number of affidavits filed in support of an application to appeal from a decision of the Alberta Energy Regulator (AER) to approve a pipeline. In considering the precise wording of section 45(7) of the <em>Responsible Energy Development Act</em>, SA 2012, c. R-17.3 (Act), the Court of Appeal held that evidence, including evidence that was not before the Regulator at the time of the decision, may be admissible at the permission stage of the appeal process so long as it is relevant to the determination. However, the admissibility of such evidence at the permission stage of the appeal process should not be interpreted as admissibility of the same evidence in the appeal itself. </p><p>[<a href="/energy/Pages/Post.aspx?PID=294"><em>Read more</em></a>...]</p>​The Alberta Court of Appeal's decision in Bokenfohr v Pembina Pipeline Corporation, 2016 ABCA 382 provides an important reflection on admissibility of evidence in the permission stage of an appeal in the oil and gas context. The decision was a result of an application by the respondent, Pembina Pipeline Corporation to strike from the record a number of affidavits filed in support of an application to appeal from a decision of the Alberta Energy Regulator (AER) to approve a pipeline. In considering the precise wording of section 45(7) of the Responsible Energy Development Act, SA 2012, c. R-17.3 (Act), the Court of Appeal held that evidence, including evidence that was not before the Regulator at the time of the decision, may be admissible at the permission stage of the appeal process so long as it is relevant to the determination. However, the admissibility of such evidence at the permission stage of the appeal process should not be interpreted as admissibility of the same evidence in the appeal itself. BackgroundThere is no appeal of a decision of the AER as of right. Appeals to the Court of Appeal are contemplated by s. 45(1) of the Act and are limited to "a question of jurisdiction or on a question of law". The application to appeal in this decision was brought by a number of landowners who had opposed Pembina's application to build a pipeline from Fox Creek to Namao Junction. The AER, who approved the application, held a 13 day hearing, involving 41 witnesses and substantial documentary evidence. In seeking leave to appeal, a number of landowners filed affidavits in support of that application. The respondent, Pembina, argued that section 45(7) prevented the admission of certain information included in the landowners affidavits. Pursuant to section 45(7) of the Act, on hearing of an appeal, no evidence may be admitted other than the evidence that was submitted to the Regulator on the making of the decision being appealed. The evidence in the challenged affidavits was characterized as follows(a) information that is duplicitous because it is already on the record;(b) information that postdates the hearing, and accordingly could not have been known by the Regulator when it made the decision;(c) information about the confidential alternative dispute resolution process used by the Regulator;(d) information about decisions made by the Regulator and the Surface Rights Board after the decision presently being challenged, for which there are other avenues of relief; and(e) information which is irrelevant to the application for permission to appeal.(para 4)Section 45(7)The Court of Appeal drew a distinction between the "application for permission to appeal" and the appeal itself, noting that the issues in each would be different. If an appeal is granted, the issue will be whether there is an "error in law or jurisdiction". An application for permission to appeal, on the other hand, is based on different considerations such as(a) Is the issue of general importance?(b) Is the point raised of significance to the decision itself?(c) Does the appeal have arguable merit?(d) What standard of review is likely to be applied?(e) Will the appeal unduly hinder the progress of the proceedings? (para 5).The Court of Appeal held that, based on the precise wording of section 45(7), it did not apply to the permission stage of the appeal process, rather, its application was limited to the evidence considered in the appeal itself. Accordingly, the Court of Appeal held that evidence can be introduced on an application for permission to appeal, so long as it is relevant. However, because evidence is permitted or introduced in the application for permission to appeal stage does not by extension make such evidence part of the appeal record. A separate application made under Rule 14.45 will still be required to overcome the prohibition of section 45(7) of the Act to have the evidence introduced in the appeal itself. Arguments as to relevance and admissibility, according to the Court of Appeal, will be deferred to the duty judge who hears the application for permission to appeal, with two exceptions (1) affidavits which reproduce information already on the record; and (2) affidavits that refer to the Alternative Dispute Resolution process authorized by section 46 of the Act. With respect to the first exception, Pembina argued that the only way to bring evidence from the Regulator's record into the appeal is under section 45(4) of the Act. Section 45(4) of the Act provides that the Court of Appeal may, on application or motion or on its own, if satisfied that a transcript or other materials are necessary for the purpose of determining the application for permission to appeal, direct the Regulator to provide the same within a specific timeframe. Accordingly, Pembina argued, that the landowners were not entitled to attach to their affidavits any documents that formed part of the hearing before the Regulator. The Court of Appeal reminded parties that they are expected to identify and bring forward evidence that is relevant to the application and held that affidavits containing relevant evidence that was before the Regulator at the hearing are unobjectionable. Process of Alternative Dispute Resolution With respect to information contained in the affidavits which related to the ADR procedure used by the Regulator, the Court of Appeal noted that it specifically provides that the process be considered confidential and privileged Alberta Energy Regulator Rules of Practice, rule 7.7 and Manual 004 Alternative Dispute Resolution Program and Guidelines for Energy Industry Disputes. Although the landowners signed acknowledgements of that, they argued that the Regulator had blurred the line between consultation and mediation, and between its decision making and ADR process, and that accordingly, there was a point where privilege was compromised. The Court of Appeal agreed that the references in the affidavits to the ADR process related to the actual hearing, however, they went on to confirm that any evidence about the ADR process is confidential (and in the circumstances, irrelevant). The Court of Appeal, in upholding the confidential nature of the ADR process, ordered that the whole of any affidavit that refers to that process be struck from record. ImplicationsThe Court of Appeal's confirmation of the sanctity of the privileged and confidential nature of the ADR process under AER Rule 7.7 and Manual 004 will put many at ease. However, perhaps of more import is the Court of Appeals commentary with respect to the admissibility of evidence. Going forward, it would appear that the Court of Appeal will accept evidence that was not before the Regulator at the permission stage of the appeal process so long as the evidence is considered relevant, however, the same will not be permissible at the appeal itself absent an application pursuant to rule 14.45. Therefore, while additional evidence may be adduced to meet the "permission to appeal" test, for example to show why the issue is of general importance, it cannot be used to bolster evidence for the appeal or to fill gaps in the evidence at the appeal hearing. <p style="text-align:justify;">​The Alberta Court of Appeal's decision in <a href="http://www.canlii.org/en/ab/abca/doc/2016/2016abca382/2016abca382.html?searchUrlHash=AAAAAQAoQm9rZW5mb2hyIHYgUGVtYmluYSBQaXBlbGluZSBDb3Jwb3JhdGlvbgAAAAAB&resultIndex=1" target="_blank"><em>Bokenfohr v Pembina Pipeline Corporation</em></a>, 2016 ABCA 382 provides an important reflection on admissibility of evidence in the permission stage of an appeal in the oil and gas context. The decision was a result of an application by the respondent, Pembina Pipeline Corporation to strike from the record a number of affidavits filed in support of an application to appeal from a decision of the Alberta Energy Regulator (AER) to approve a pipeline. In considering the precise wording of section 45(7) of the <em>Responsible Energy Development Act</em>, SA 2012, c. R-17.3 (Act), the Court of Appeal held that evidence, including evidence that was not before the Regulator at the time of the decision, may be admissible at the permission stage of the appeal process so long as it is relevant to the determination. However, the admissibility of such evidence at the permission stage of the appeal process should not be interpreted as admissibility of the same evidence in the appeal itself. </p><p style="text-align:justify;"><em>Background</em></p><p style="text-align:justify;">There is no appeal of a decision of the AER as of right. Appeals to the Court of Appeal are contemplated by s. 45(1) of the Act and are limited to "a question of jurisdiction or on a question of law". The application to appeal in this decision was brought by a number of landowners who had opposed Pembina's application to build a pipeline from Fox Creek to Namao Junction. The AER, who approved the application, held a 13 day hearing, involving 41 witnesses and substantial documentary evidence. In seeking leave to appeal, a number of landowners filed affidavits in support of that application. </p><p style="text-align:justify;">The respondent, Pembina, argued that section 45(7) prevented the admission of certain information included in the landowners affidavits.  Pursuant to section 45(7) of the Act, on hearing of an appeal, no evidence may be admitted other than the evidence that was submitted to the Regulator on the making of the decision being appealed. The evidence in the challenged affidavits was characterized as follows:</p><p style="text-align:justify;">(a) information that is duplicitous because it is already on the record;</p><p style="text-align:justify;">(b) information that postdates the hearing, and accordingly could not have been known by the Regulator when it made the decision;</p><p style="text-align:justify;">(c) information about the confidential alternative dispute resolution process used by the Regulator;</p><p style="text-align:justify;">(d) information about decisions made by the Regulator and the Surface Rights Board after the decision presently being challenged, for which there are other avenues of relief; and</p><p style="text-align:justify;">(e) information which is irrelevant to the application for permission to appeal.(para 4)</p><p style="text-align:justify;"><em>Section 45(7)</em></p><p style="text-align:justify;">The Court of Appeal drew a distinction between the "application for permission to appeal" and the appeal itself, noting that the issues in each would be different.  If an appeal is granted, the issue will be whether there is an "error in law or jurisdiction". An application for permission to appeal, on the other hand, is based on different considerations such as:</p><p style="text-align:justify;">(a) Is the issue of general importance?</p><p style="text-align:justify;">(b) Is the point raised of significance to the decision itself?</p><p style="text-align:justify;">(c) Does the appeal have arguable merit?</p><p style="text-align:justify;">(d) What standard of review is likely to be applied?</p><p style="text-align:justify;">(e) Will the appeal unduly hinder the progress of the proceedings? (para 5).</p><p style="text-align:justify;">The Court of Appeal held that, based on the precise wording of section 45(7), it did not apply to the  permission stage of the appeal process, rather, its application was limited to the evidence considered in the appeal itself. Accordingly, the Court of Appeal held that evidence can be introduced on an application for permission to appeal, so long as it is relevant. However, because evidence is permitted or introduced in the application for permission to appeal stage does not by extension make such evidence part of the appeal record. A separate application made under Rule 14.45 will still be required to overcome the prohibition of section 45(7) of the Act to have the evidence introduced in the appeal itself. </p><p style="text-align:justify;">Arguments as to relevance and admissibility, according to the Court of Appeal, will be deferred to the duty judge who hears the application for permission to appeal, with two exceptions: (1) affidavits which reproduce information already on the record; and (2) affidavits that refer to the Alternative Dispute Resolution process authorized by section 46 of the Act. </p><p style="text-align:justify;">With respect to the first exception, Pembina argued that the only way to bring evidence from the Regulator's record into the appeal is under section 45(4) of the Act. Section 45(4) of the Act provides that the Court of Appeal may, on application or motion or on its own, if satisfied that a transcript or other materials are necessary for the purpose of determining the application for permission to appeal, direct the Regulator to provide the same within a specific timeframe. Accordingly, Pembina argued, that the landowners were not entitled to attach to their affidavits any documents that formed part of the hearing before the Regulator. The Court of Appeal reminded parties that they are expected to identify and bring forward evidence that is relevant to the application and held that affidavits containing relevant evidence that was before the Regulator at the hearing are unobjectionable. </p><p style="text-align:justify;"><em>Process of Alternative Dispute Resolution </em></p><p style="text-align:justify;">With respect to information contained in the affidavits which related to the ADR procedure used by the Regulator, the Court of Appeal noted that it specifically provides that the process be considered confidential and privileged: <em>Alberta Energy Regulator Rules of Practice, rule 7.7 and Manual 004: Alternative Dispute Resolution Program and Guidelines for Energy Industry Disputes</em>. Although the landowners signed acknowledgements of that, they argued that the Regulator had blurred the line between consultation and mediation, and between its decision making and ADR process, and that accordingly, there was a point where privilege was compromised. The Court of Appeal agreed that the references in the affidavits to the ADR process related to the actual hearing, however, they went on to confirm that any evidence about the ADR process is confidential (and in the circumstances, irrelevant). The Court of Appeal, in upholding the confidential nature of the ADR process, ordered that the whole of any affidavit that refers to that process be struck from record. </p><p style="text-align:justify;"><em>Implications</em></p><p style="text-align:justify;">The Court of Appeal's confirmation of the sanctity of the privileged and confidential nature of the ADR process under AER Rule 7.7 and Manual 004 will put many at ease.  However, perhaps of more import is the Court of Appeals commentary with respect to the admissibility of evidence.  Going forward, it would appear that the Court of Appeal will accept evidence that was not before the Regulator at the permission stage of the appeal process so long as the evidence is considered relevant, however, the same will not be permissible at the appeal itself absent an application pursuant to rule 14.45. Therefore, while additional evidence may be adduced to meet the "permission to appeal" test, for example to show why the issue is of general importance, it cannot be used to bolster evidence for the appeal or to fill gaps in the evidence at the appeal hearing.  </p>3/3/2017 5:00:00 AM2017-03-03T05:00:00ZTrue1float;#3.00000000000000float;#2017.00000000000string;#Marchfloat;#201703.000000000GP0|#6ed29997-7c09-433d-9f4f-e4bb2ce1b29b;L0|#06ed29997-7c09-433d-9f4f-e4bb2ce1b29b|Litigation;GTSet|#939fe804-8a2a-4cfa-af8f-5756b32ac3ca;GP0|#79f5b025-e6dd-4c66-873b-67e8780cf972;L0|#079f5b025-e6dd-4c66-873b-67e8780cf972|Regulatory;GP0|#23e50663-be85-467e-acf9-7150e42ed669;L0|#023e50663-be85-467e-acf9-7150e42ed669|Energy;GP0|#7ea7e480-c8e7-48db-baae-396516e81926;L0|#07ea7e480-c8e7-48db-baae-396516e81926|Pipelines;GP0|#a8d93e98-a569-4c7f-ac81-5c92b85685cd;L0|#0a8d93e98-a569-4c7f-ac81-5c92b85685cd|AppealsLitigation;Regulatory;Energy;Pipelines;Appeals
Boxing-in Bhasin: Alberta Court of Appeal Confirms No Common Law Duty To Reasonably Exercise Discretionary Contractual Powers Boxing-in Bhasin: Alberta Court of Appeal Confirms No Common Law Duty To Reasonably Exercise Discretionary Contractual Powers 290BLG Blog PostMichael A. Marion;Leanne Desbaratsmmarion@blg.com | Michael A. Marion | 693A30232E777C626C6763616E6164615C6D616D i:0#.w|blgcanada\mam;ldesbarats@blg.com | Leanne Desbarats | 693A30232E777C626C6763616E6164615C6C646573626172617473 i:0#.w|blgcanada\ldesbarats​​In 2014, the Supreme Court of Canada issued a landmark decision in Bhasin v Hrynew, 2014 SCC 71 (Bhasin), recognizing a duty to act honestly in the performance of contractual obligations and in the exercise of contractual rights. The decision sets out the somewhat amorphous concepts that a) there is an organizing principle of good faith that impacts all contracts which is “highly context-specific” and which underpins existing legal doctrines that requires parties to have appropriate regard for the other contracting party’s legitimate contractual interests; and b) that parties have a common law duty to act honestly in the performance of contractual obligations, and cannot lie or otherwise knowingly mislead each other about matters directly linked to the performance of the contract. The subsequent cases dealing with the application of these principles have attempted to interpret and clarify Bhasin, but the parameters of the principles continue to evolve. The Alberta Court of Appeal recently issued its decision in Styles v Alberta Investment Management Corporation, 2017 ABCA 1 (Styles), in which the Court stressed the limited scope of Bhasin and rejected the proposition that there was a duty to reasonably exercise discretion under a contract. The case is significant in outlining what the principles in Bhasin cannot, and should not do, potentially narrowing the avenue for parties to pursue claims. [Read more...]<p style="text-align:justify;">​​In 2014, the Supreme Court of Canada issued a landmark decision in <em>Bhasin v Hrynew</em>, 2014 SCC 71 (<em>Bhasin</em>), recognizing a duty to act honestly in the performance of contractual obligations and in the exercise of contractual rights.  The decision sets out the somewhat amorphous concepts that: a) there is an organizing principle of good faith that impacts all contracts which is “highly context-specific” and which underpins existing legal doctrines that requires parties to have appropriate regard for the other contracting party’s legitimate contractual interests; and b) that parties have a common law duty to act honestly in the performance of contractual obligations, and cannot lie or otherwise knowingly mislead each other about matters directly linked to the performance of the contract.  The subsequent cases dealing with the application of these principles have attempted to interpret and clarify <em>Bhasin</em>, but the parameters of the principles continue to evolve. The Alberta Court of Appeal recently issued its decision in <em>Styles v Alberta Investment Management Corporation</em>, 2017 ABCA 1 (<em>Styles</em>), in which the Court stressed the limited scope of Bhasin and rejected the proposition that there was a duty to reasonably exercise discretion under a contract. The case is significant in outlining what the principles in <em>Bhasin</em> cannot, and should not do, potentially narrowing the avenue for parties to pursue claims. </p><p style="text-align:justify;">[<a href="/energy/Pages/Post.aspx?PID=290" target="_blank"><em>Read more</em></a>...]</p>​​​Introduction In 2014, the Supreme Court of Canada issued a landmark decision in Bhasin v Hrynew, 2014 SCC 71 (Bhasin), recognizing a duty to act honestly in the performance of contractual obligations and in the exercise of contractual rights. The decision sets out the somewhat amorphous concepts that a) there is an organizing principle of good faith that impacts all contracts which is “highly context-specific” and which underpins existing legal doctrines that requires parties to have appropriate regard for the other contracting party’s legitimate contractual interests; and b) that parties have a common law duty to act honestly in the performance of contractual obligations, and cannot lie or otherwise knowingly mislead each other about matters directly linked to the performance of the contract. The subsequent cases dealing with the application of these principles have attempted to interpret and clarify Bhasin, but the parameters of the principles continue to evolve. The Alberta Court of Appeal recently issued its decision in Styles v Alberta Investment Management Corporation, 2017 ABCA 1 (Styles), in which the Court stressed the limited scope of Bhasin and rejected the proposition that there was a duty to reasonably exercise discretion under a contract. The case is significant in outlining what the principles in Bhasin cannot, and should not do, potentially narrowing the avenue for parties to pursue claims. Background In Styles, the plaintiff was terminated from his employment with Alberta Investment Management Corporation (AIMC). His employment was governed by an employment contract which provided that he could receive bonuses through a Long Term Incentive Plan (the Plan). The Plan provided that an employee could receive a bonus after four years of employment and expressly provided that a participant had to be “actively employed” in order to receive the bonus. The plaintiff was terminated by AIMC without cause after three years of employment and accordingly was not “actively employed” on the vesting date stipulated in the Plan. AIMC did not pay the plaintiff any bonus when he was terminated. The plaintiff commenced this action seeking damages in the amount of the unpaid bonus, alleging that AIMC had not acted in good faith when it decided not to pay the bonus. Trial Decision The trial judge assessed whether AIMC performed its obligations under the employment agreement and the Plan in accordance with principles in Bhasin, in particular focusing on whether AIMC breached its duty of honesty in contractual performance when it terminated Styles without paying him the bonus. The trial judge determined that AIMC had breached this obligation, finding that the duty of honesty in contractual performance also includes, or should be expanded to include, the recognition of a “common law duty which requires that discretionary powers under a contract must be exercised fairly and reasonably and not in a manner that is ‘capricious’ or ‘arbitrary’” (para 63). The trial judge held that AIMC exercised two elements of discretion vis a vis Styles with respect to the bonus payment and termination 1) it exercised its discretion in choosing not to provide a bonus to Styles, as the language of the Plan provided that such a bonus “may be forfeited” if the participant was not actively employed on the vesting date; and 2) it exercised its discretion when it decided to terminate Styles without cause. The trial judge held that AIMC was not reasonable or fair in its exercise of these two elements of discretion and ordered AIMC to pay the plaintiff the amount of his bonus. The Court held that “although the Defendant employer had the right to terminate without cause under the contract, its decision to exercise that right and the corresponding refusal to pay the Plaintiff any of his earned LTIP grants amounts to an unfair and unreasonable exercise of the employer’s discretionary powers under the terms of the contract” (para 119). Court of Appeal Decision As a preliminary issue, the Court determined that the applicable standard of review for the appeal was correctness. While the general rule set out by the Supreme Court of Canada in Sattva Capital Corp v Creston Moly Corp., 2014 SCC 53 provides that the interpretation of a contract is a mixed question of law and fact, the Court relied on the exception to this standard for standard form contracts recently outlined by the Supreme Court of Canada in Ledcor Construction Ltd. v Northbridge Indemnity Insurance Co., 2016 SCC 37. In the Ledcor decision, the Supreme Court held that the standard of review for standard form contracts is correctness because such cases have “precedential value” and “[s]uch contracts cannot have one interpretation in one situation, and another in the next” (paras 26 and 46-48). The first substantive issue the Court considered was whether there was in fact discretion exercised by the AIMC with respect to the issue of the bonus payment and the termination. The Court rejected the trial judge’s finding that the language that the bonus “may be forfeited” introduced an element of discretion, finding that the language was not in fact permissive based on an analysis of the contract as a whole and the specific provision in question. The Court further held that the decision to terminate without cause was not properly characterized as a “discretion” of an employer, as termination without cause is not a breach of contract and an employer can terminate the contract of employment on reasonable notice without any explanation. Upon determining that there was no discretion exercised by AIMC, the Court did not have to consider the wider issue of whether there is a common law duty of reasonable exercise of discretionary contractual powers. However, the Court provided a detailed analysis of the issue in obiter comments in order to clarify the current state of the law. The Court of Appeal emphasized that Bhasin actually considered tw​o related arguments by the appellant. First, whether there is a general duty of good faith in contract and, second, whether there is a duty of honest performance in contractual obligations. The Court recognized that the first proposition, that there is an organizing principle of good faith, underlies a number of specific situations where the law already recognizes an obligation of good faith (and is not a stand-alone concept). The Court stressed that applying this involves a balancing exercise as parties are entitled to perform their contracts in accordance with their express terms but that at some point that performance cannot be such that it undermines the legitimate contractual interests of the other party. The balancing exercise becomes particularly important as there is danger in construing the “legitimate contractual interests” of the parties in a way that is contrary to the plain wording of the contract or in a way that imports subjective considerations into the analysis. The Court of Appeal held that the second proposition, the duty to act honestly, is “a very narrow concept” that simply means that “parties must not lie or otherwise knowingly mislead each other about matters directly linked to the performance of the contract” (para 47). This concept does not create any duty of loyalty, duty of disclosure or require the foregoing of contractual advantages.The Court of Appeal then went on to consider the trial judge’s analysis, noting that the trial judge purported to build on the second proposition in Bhasin in holding that a capricious or arbitrary exercise of power could amount to dishonesty or bad faith within the Bhasin principle. The Court of Appeal rejected this analysis, explaining that Bhasin in no way supports this analysis, stating at para 49 … Bhasin does not establish any general principle of “reasonable exercise of discretion” in contractual performance. This radical extension of the law is unsupported by authority, and contrary to the principles of the law of contract.The Court of Appeal stressed the very limited scope of the principles in Bhasin, finding that in this instance, they could not be relied on to re-write the clear words of the Plan which expressly set out that an employee would not be entitled to a bonus until after four years of employment. The Court went to great lengths to stress the limited scope of the principles in Bhasin stating that the principles only relate to the performance of a contract and have no application to an interpretation of the terms of that contract. The principles in Bhasin cannot rewrite the terms of a contract and cannot be employed to “award damages to contracting parties that the court regards as being “fair,” even though they are clearly unearned under the contract” (para 54). The Court emphasized that the principles in Bhasin “do not enable either party to insist on covenants and provisos that are not set out in writing in the agreement, nor do they allow the parties to ignore the plain wording of the agreement” (para 64) and do “not allow the insertion of provisions inconsistent with the actual terms of the contract” (para 64). With respect to the exercise of discretion under a contract the Court stressed that where parties have negotiated discretion into a contract “that is a method of risk allocation between the parties to the contract” (para 60), further providing at para 59 ​… discretion may be exercised “unreasonably”, “subjectively”, “idiosyncratically” or “selfishly” without it following that the discretion has been exercised arbitrarily or dishonestly.The Court stated that the Plan clearly provided that a participant must be actively employed on the vesting date and that no application of the principles in Bhasin (or any extension of them) could be relied upon to insist on an interpretation of the Plan that ignored the plain language of that agreement. Implications This decision provides an important clarification and limitation on the application of the principles outlined in Bhasin. The Court emphasized that Bhasin created two concepts that are distinct and that each is very limited in application. On the organizing principle of good faith, the Court in Bhasin expressly acknowledged that there would be opportunities to extend the principle beyond the scope of the decision in Bhasin, however, such extensions are to be limited and the Court of Appeal stressed the comment in Bhasin that the principle cannot be used to “veer into a form of ad hoc moralism or ‘palm tree’ justice” (para 53). On the duty to act honestly, the Court emphasized the limited application of the duty, clearly providing that the duty is only to act honestly and the standard is not to perform reasonably or in any way contrary to the terms of the contract or against a party’s own self interest. In sum, the decision emphatically limits the scope of the principles in Bhasin, clearly setting out that the principles in Bhasin are not an invitation to create ambiguous and amorphous obligations. Litigants will have to be mindful of these limitations and the “boxing-in” of the principles in Bhasin in pursuing claims.​<p style="text-align:justify;">​<span>​​Introduction </span></p><p style="text-align:justify;"><span></span><span>In 2014, the Supreme Court of Canada issued a landmark decision in </span><em>Bhasin v Hrynew</em><span>, 2014 SCC 71 (</span><em>Bhasin</em><span>), recognizing a duty to act honestly in the performance of contractual obligations and in the exercise of contractual rights.  The decision sets out the somewhat amorphous concepts that: a) there is an organizing principle of good faith that impacts all contracts which is “highly context-specific” and which underpins existing legal doctrines that requires parties to have appropriate regard for the other contracting party’s legitimate contractual interests; and b) that parties have a common law duty to act honestly in the performance of contractual obligations, and cannot lie or otherwise knowingly mislead each other about matters directly linked to the performance of the contract.  The subsequent cases dealing with the application of these principles have attempted to interpret and clarify </span><em>Bhasin</em><span>, but the parameters of the principles continue to evolve. The Alberta Court of Appeal recently issued its decision in </span><em>Styles v Alberta Investment Management Corporation</em><span>, 2017 ABCA 1 (</span><em>Styles</em><span>), in which the Court stressed the limited scope of Bhasin and rejected the proposition that there was a duty to reasonably exercise discretion under a contract. The case is significant in outlining what the principles in </span><em>Bhasin</em><span> cannot, and should not do, potentially narrowing the avenue for parties to pursue claims. </span></p><h3>Background </h3><p style="text-align:justify;">In <em>Styles</em>, the plaintiff was terminated from his employment with Alberta Investment Management Corporation (AIMC). His employment was governed by an employment contract which provided that he could receive bonuses through a Long Term Incentive Plan (the Plan). The Plan provided that an employee could receive a bonus after four years of employment and expressly provided that a participant had to be “actively employed” in order to receive the bonus. The plaintiff was terminated by AIMC without cause after three years of employment and accordingly was not “actively employed” on the vesting date stipulated in the Plan. AIMC did not pay the plaintiff any bonus when he was terminated. The plaintiff commenced this action seeking damages in the amount of the unpaid bonus, alleging that AIMC had not acted in good faith when it decided not to pay the bonus. </p><h3>Trial Decision </h3><p style="text-align:justify;">The trial judge assessed whether AIMC performed its obligations under the employment agreement and the Plan in accordance with principles in <em>Bhasin</em>, in particular focusing on whether AIMC breached its duty of honesty in contractual performance when it terminated Styles without paying him the bonus.  </p><p style="text-align:justify;">The trial judge determined that AIMC had breached this obligation, finding that the duty of honesty in contractual performance also includes, or should be expanded to include, the recognition of a “common law duty which requires that discretionary powers under a contract must be exercised fairly and reasonably and not in a manner that is ‘capricious’ or ‘arbitrary’” (para 63). </p><p style="text-align:justify;">The trial judge held that AIMC exercised two elements of discretion vis a vis Styles with respect to the bonus payment and termination: 1) it exercised its discretion in choosing not to provide a bonus to Styles, as the language of the Plan provided that such a bonus “<span style="text-decoration:underline;">may</span> be forfeited” if the participant was not actively employed on the vesting date; and 2) it exercised its discretion when it decided to terminate Styles without cause. </p><p style="text-align:justify;">The trial judge held that AIMC was not reasonable or fair in its exercise of these two elements of discretion and ordered AIMC to pay the plaintiff the amount of his bonus. The Court held that “although the Defendant employer had the right to terminate without cause under the contract, its decision to exercise that right and the corresponding refusal to pay the Plaintiff any of his earned LTIP grants amounts to an unfair and unreasonable exercise of the employer’s discretionary powers under the terms of the contract” (para 119). </p><h3>Court of Appeal Decision </h3><p style="text-align:justify;">As a preliminary issue, the Court determined that the applicable standard of review for the appeal was correctness. While the general rule set out by the Supreme Court of Canada in <em>Sattva Capital Corp v Creston Moly Corp.</em>, 2014 SCC 53 provides that the interpretation of a contract is a mixed question of law and fact, the Court relied on the exception to this standard for standard form contracts recently outlined by the Supreme Court of Canada in <em>Ledcor Construction Ltd. v Northbridge Indemnity Insurance Co.</em>, 2016 SCC 37. In the <em>Ledcor </em>decision, the Supreme Court held that the standard of review for standard form contracts is correctness because such cases have “precedential value” and “[s]uch contracts cannot have one interpretation in one situation, and another in the next” (paras 26 and 46-48). </p><p style="text-align:justify;">The first substantive issue the Court considered was whether there was in fact discretion exercised by the AIMC with respect to the issue of the bonus payment and the termination. The Court rejected the trial judge’s finding that the language that the bonus “<span style="text-decoration:underline;">may</span> be forfeited” introduced an element of discretion, finding that the language was not in fact permissive based on an analysis of the contract as a whole and the specific provision in question. The Court further held that the decision to terminate without cause was not properly characterized as a “discretion” of an employer, as termination without cause is not a breach of contract and an employer can terminate the contract of employment on reasonable notice without any explanation. </p><p style="text-align:justify;">Upon determining that there was no discretion exercised by AIMC, the Court did not have to consider the wider issue of whether there is a common law duty of reasonable exercise of discretionary contractual powers. However, the Court provided a detailed analysis of the issue in <em>obiter</em> comments in order to clarify the current state of the law.    </p><p style="text-align:justify;">The Court of Appeal emphasized that <em>Bhasin</em> actually considered tw​o related arguments by the appellant. First, whether there is a general duty of good faith in contract and, second, whether there is a duty of honest performance in contractual obligations. </p><p style="text-align:justify;">The Court recognized that the first proposition, that there is an organizing principle of good faith, underlies a number of specific situations where the law already recognizes an obligation of good faith (and is not a stand-alone concept). The Court stressed that applying this involves a balancing exercise as parties are entitled to perform their contracts in accordance with their express terms but that at some point that performance cannot be such that it undermines the legitimate contractual interests of the other party. The balancing exercise becomes particularly important as there is danger in construing the “legitimate contractual interests” of the parties in a way that is contrary to the plain wording of the contract or in a way that imports subjective considerations into the analysis.  </p><p style="text-align:justify;">The Court of Appeal held that the second proposition, the duty to act honestly, is “a very narrow concept” that simply means that “parties must not lie or otherwise knowingly mislead each other about matters directly linked to the performance of the contract” (para 47). This concept does not create any duty of loyalty, duty of disclosure or require the foregoing of contractual advantages.</p><p style="text-align:justify;">The Court of Appeal then went on to consider the trial judge’s analysis, noting that the trial judge purported to build on the second proposition in <em>Bhasin</em> in holding that a capricious or arbitrary exercise of power could amount to dishonesty or bad faith within the <em>Bhasin</em> principle. </p><p style="text-align:justify;">The Court of Appeal rejected this analysis, explaining that <em>Bhasin</em> in no way supports this analysis, stating at para 49: </p><blockquote style="margin:0px 0px 0px 40px;padding:0px;border:currentcolor;"><p style="text-align:justify;">… Bhasin does not establish any general principle of “reasonable exercise of discretion” in contractual performance. <strong>This radical extension of the law is unsupported by authority, and contrary to the principles of the law of contract</strong>.</p></blockquote><p style="text-align:justify;">The Court of Appeal stressed the very limited scope of the principles in <em>Bhasin</em>, finding that in this instance, they could not be relied on to re-write the clear words of the Plan which expressly set out that an employee would not be entitled to a bonus until after four years of employment. </p><p style="text-align:justify;">The Court went to great lengths to stress the limited scope of the principles in <em>Bhasin</em> stating that the principles only relate to the performance of a contract and have no application to an interpretation of the terms of that contract. The principles in <em>Bhasin</em> cannot rewrite the terms of a contract and cannot be employed to “award damages to contracting parties that the court regards as being “fair,” even though they are clearly unearned under the contract” (para 54). The Court emphasized that the principles in <em>Bhasin</em> “do not enable either party to insist on covenants and provisos that are not set out in writing in the agreement, nor do they allow the parties to ignore the plain wording of the agreement” (para 64) and do “not allow the insertion of provisions inconsistent with the actual terms of the contract” (para 64). </p><p style="text-align:justify;">With respect to the exercise of discretion under a contract the Court stressed that where parties have negotiated discretion into a contract “that is a method of risk allocation between the parties to the contract” (para 60), further providing at para 59: </p><blockquote style="margin:0px 0px 0px 40px;padding:0px;border:currentcolor;"><p style="text-align:justify;">​… discretion may be exercised “unreasonably”, “subjectively”, “idiosyncratically” or “selfishly” without it following that the discretion has been exercised arbitrarily or dishonestly.</p></blockquote><p style="text-align:justify;">The Court stated that the Plan clearly provided that a participant must be actively employed on the vesting date and that no application of the principles in <em>Bhasin</em> (or any extension of them) could be relied upon to insist on an interpretation of the Plan that ignored the plain language of that agreement.  </p><h3>Implications </h3><p style="text-align:justify;">This decision provides an important clarification and limitation on the application of the principles outlined in <em>Bhasin</em>. The Court emphasized that <em>Bhasin</em> created two concepts that are distinct and that each is very limited in application.  On the organizing principle of good faith, the Court in <em>Bhasin</em> expressly acknowledged that there would be opportunities to extend the principle beyond the scope of the decision in <em>Bhasin</em>, however, such extensions are to be limited and the Court of Appeal stressed the comment in <em>Bhasin</em> that the principle cannot be used to “veer into a form of <em>ad hoc</em> moralism or ‘palm tree’ justice” (para 53). On the duty to act honestly, the Court emphasized the limited application of the duty, clearly providing that the duty is only to act honestly and the standard is not to perform reasonably or in any way contrary to the terms of the contract or against a party’s own self interest. In sum, the decision emphatically limits the scope of the principles in <em>Bhasin</em>, clearly setting out that the principles in Bhasin are not an invitation to create ambiguous and amorphous obligations. Litigants will have to be mindful of these limitations and the “boxing-in” of the principles in <em>Bhasin</em> in pursuing claims.​</p>3/1/2017 5:00:00 AM2017-03-01T05:00:00ZTrue1float;#3.00000000000000float;#2017.00000000000string;#Marchfloat;#201703.000000000GP0|#a8d93e98-a569-4c7f-ac81-5c92b85685cd;L0|#0a8d93e98-a569-4c7f-ac81-5c92b85685cd|Appeals;GTSet|#939fe804-8a2a-4cfa-af8f-5756b32ac3ca;GP0|#6ed29997-7c09-433d-9f4f-e4bb2ce1b29b;L0|#06ed29997-7c09-433d-9f4f-e4bb2ce1b29b|LitigationAppeals;Litigation