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Securities Regulators Rack Up $1.1 billion in Unpaid FinesSecurities Regulators Rack Up $1.1 billion in Unpaid Fines308BLG Blog PostMaureen Dohertymdoherty@blg.com | Maureen Doherty | 693A30232E777C626C6763616E6164615C6D646F6865727479 i:0#.w|blgcanada\mdoherty The Globe and Mail conducted an investigation and published an article which revealed that securities regulators across Canada have over $1.1 billion in uncollected fines. This is despite the fact that each year Canadian regulators levy approximately $100 million in fines and penalties. The investigation uncovered that the British Columbia Securities Commission has the highest amount of unpaid fines (likely due to the fact that it levies the highest fines overall), followed by the Ontario Securities Commission and Alberta Securities Comission. <p>The Globe and Mail conducted an investigation and published an article which revealed that securities regulators across Canada have over $1.1 billion in uncollected fines. This is despite the fact that each year Canadian regulators levy approximately $100 million in fines and penalties. The investigation uncovered that the British Columbia Securities Commission has the highest amount of unpaid fines (likely due to the fact that it levies the highest fines overall), followed by the Ontario Securities Commission and Alberta Securities Comission. </p> ​Recently, the Globe and Mail conducted an investigation and published an article which revealed that securities regulators across Canada have over $1.1 billion in uncollected fines. This is despite the fact that each year Canadian regulators levy approximately $100 million in fines and penalties. The investigation uncovered that the British Columbia Securities Commission has the highest amount of unpaid fines (likely due to the fact that it levies the highest fines overall), followed by the Ontario Securities Commission and Alberta Securities Comission. The article notes that often the more egregious the offender, the less likely a fine will be paid, particularly if the offender is banned from the industry. It notes an example of a Mutual Fund Dealers Association ("MFDA") decision which commented "the imposition of a permanent prohibition may well make it less likely that a fine will ever be paid". Interestingly, the article does not comment on the ability of some regulators (Alberta, Quebec and Prince Edward Island) to collect fines through their court systems. These powers have been granted recently and may well impact the ability of those regulators to collect unpaid fines. Click here to read my article on this topic http//blog.blg.com/theexchange/Pages/Post.aspx?PID=204. <p>​Recently, the Globe and Mail conducted an investigation and published an article which revealed that securities regulators across Canada have over $1.1 billion in uncollected fines. This is despite the fact that each year Canadian regulators levy approximately $100 million in fines and penalties.  The investigation uncovered that the British Columbia Securities Commission has the highest amount of unpaid fines (likely due to the fact that it levies the highest fines overall), followed by the Ontario Securities Commission and Alberta Securities Comission. The article notes that often the more egregious the offender, the less likely a fine will be paid, particularly if the offender is banned from the industry. It notes an example of a Mutual Fund Dealers Association ("MFDA") decision which commented: "the imposition of a permanent prohibition may well make it less likely that a fine will ever be paid".  </p><p>Interestingly, the article does not comment on the ability of some regulators (Alberta, Quebec and Prince Edward Island) to collect fines through their court systems. These powers have been granted recently and may well impact the ability of those regulators to collect unpaid fines.  Click here to read my article on this topic: <a href="/theexchange/Pages/Post.aspx?PID=204">http://blog.blg.com/theexchange/Pages/Post.aspx?PID=204</a>.<br></p>1/5/2018 5:00:00 AM2018-01-05T05:00:00ZTrue1float;#1.00000000000000float;#2018.00000000000string;#Januaryfloat;#201801.000000000GP0|#75eda1bb-5890-4b6b-aad7-b703245ec2e8;L0|#075eda1bb-5890-4b6b-aad7-b703245ec2e8|Securities: Litigation Regulatory and Compliance;GTSet|#efd3ce69-ee46-4bca-b6af-3daf96f6b0eb;GP0|#11984f46-19e7-4b16-acce-db2c31f12bae;L0|#011984f46-19e7-4b16-acce-db2c31f12bae|Fraud and White Collar CrimeSecurities: Litigation Regulatory and Compliance;Fraud and White Collar Crime
An Entrepreneurial Expectation of Risk: Yip v. HSBC HoldingsAn Entrepreneurial Expectation of Risk: Yip v. HSBC Holdings306BLG Blog PostBevan Brooksbankbbrooksbank@blg.com | Bevan Brooksbank | 693A30232E777C626C6763616E6164615C6262726F6F6B7362616E6B i:0#.w|blgcanada\bbrooksbank ​A plaintiff in proposed class action is ordered to pay costs of $1 million to the defendants after losing a motion that Ontario has jursidiction over the proposed class action. <p>​A plaintiff in proposed class action is ordered to pay costs of $1 million to the defendants after losing a motion that Ontario has jursidiction over the proposed class action. <br></p>In Yip v. HSBC Holdings plc, the Ontario Superior Court of Justice granted the class action defendants $1 million in costs, based in part on Justice Perell's conclusion that the "entrepreneurial" plaintiff ought to have reasonably expected that the defendants would spend that amount in response to an $8 billion lawsuit. The costs decision followed a ruling delivered earlier this year where Justice Perelll held the Ontario courts lacked jurisdiction over HSBC as a foreign issuer that does not do business in Ontario and whose shares do not trade in the province.[1]BackgroundIn the proposed class action, the plaintiff had asserted a misrepresentation claim under the Ontario Securities Act against HSBC Holdings ("the Bank") and a former employee, as well as a common law negligent misrepresentation claim. As described below, the Bank ultimately brought a successful motion to dismiss and stay the action on jurisdictional grounds. On the defendants' motion, Justice Perell held that to determine whether HSBC was a "responsible issuer" under the Ontario Securities Act, the essential question was whether it had a connection to Ontario. The Court confirmed that, in certain circumstances, an Ontario court will possess jurisdiction simpliciter over a foreign corporation where a real and substantial connection to Ontario exists, even where the company's shares do not trade in Ontario's secondary market. However, in this case, HSBC did not have a substantial connection to Ontario because it was based in the UK and did not carry on a business in the province. Notably, while HSBC managed a Canadian subsidiary, the Court held that a parent company does not carry on a business in Ontario simply by virtue of the fact it owns shares of a subsidiary that does operate in the jurisdiction. Moreover, the fact that the alleged misrepresentation would constitute a tort committed in Ontario does not constitute a real and substantial connection. To hold otherwise would effectively amount to universal jurisdiction for claims arising out of commercial activities.Therefore, lacking the necessary connection to Ontario, HSBC was not a "responsible issuer", and the Court held that it lacked jurisdiction simpliciter. In the alternative, Justice Perell noted that he would have declined to exercise jurisdiction on the grounds that the UK was a more appropriate forum. The preponderance of trading in HSBC securities takes place on the London exchange, the corporation is domiciled in the UK, and most witnesses and evidence were similarly located in that country. In addition, while Ontario possessed a juridical advantage over the UK, due to the acceptance of contingency fees in the former, this was characterized as a weak factor in deciding the appropriate forum. Justice Perell contrasted this with the much stronger factor of comity, which suggested that courts should not intervene in another country's securities regulation without a strong connection to Ontario. A Reasonable Expectation of Costs ExposureOn the subsequent motion to address the costs to be awarded to the successful defendants, the Bank sought roughly $1 million in costs. Justice Perell applied the factors under Rule 57 of the Rules of Civil Procedure, as well as the caselaw that has developed pertaining to the judicial discretion to award costs in the class proceedings context.The Court awarded the costs sought by HSBC. Among other things, Perell J. rejected the plaintiff's argument that the Bank had committed more resources than necessary to challenge a jurisdiction motion on a largely uncontested factual record, rendering HSBC's claim for costs excessive. Importantly, the costs sought had to be placed in the context of the Bank's potential exposure, and the corresponding need to mount a vigorous defence. Similarly, plaintiff counsel pursued entrepreneurial litigation with full knowledge of its risksThere is a make-believe quality to Mr. Yip's lawyers' characterization of Mr. Yip's lawsuit and of HSBC Holdings' defence to it. It is a fantasy to suggest that when Mr. Yip and his entrepreneurial class counsel sued a foreign defendant for $20 billion, later reduced to the not trifling $8.0 billion, that they did not reasonably anticipate that HSBC Holdings would spend $0.0001 billion to defend itself.The proposed class action was not altruistic litigation; it was entrepreneurial litigation. Mr. Yip and others willingly traded in foreign stock exchanges with no reasonable expectation that Ontario law might follow them overseas but with the knowledge that the foreign stock markets were regulated by foreign regulators. The putative class members have or had remedies available to them in the jurisdictions in which they traded. Putative class counsel's pursuit of access to justice for Canadians was a self-appointed engagement as a regulator in another jurisdiction's regulated stock market. The lawyers knew that their class action would be jurisdictionally challenged. Plaintiff counsel could not "take cover from their exposure to the risks they knowingly took on" through recourse to the argument that the issues raised on the jurisdiction motion were novel. The "loser pays" principle held sway; "Mr. Yip's lawyers' prime motivation was entrepreneurial and they had no reasonable basis for anticipating that the court would relieve Mr. Yip from any of the myriad purposes of a costs regime in which loser pays." Lastly, the proceeding had involved extensive expert evidence, a number of affidavits and cross-examinations in various cities. No issue was taken by Justice Perell with the extent of evidence proffered, or duration of the cross-examinations.The decisions in Yip v. HSBC Holdings provide a cautionary example of the limits to the entrepreneurial pursuit of class proceedings. The costs decision rests on an understanding of the economic interests of class counsel as a driver for class actions, as well as the fact that it is typically plaintiff counsel themselves that indemnify the representative plaintiff for an adverse costs award. Where successful class counsel are recognized for their risk-taking in having their contingency fees approved by the Court, it is only symmetrical that they bear the cost when their "bet" on high-stakes litigation goes wrong. <p style="text-align:justify;">In <a href="http://canlii.ca/t/hnv17"><em>Yip v. HSBC Holdings plc</em></a>, the Ontario Superior Court of Justice granted the class action defendants $1 million in costs, based in part on Justice Perell's conclusion that the "entrepreneurial" plaintiff ought to have reasonably expected that the defendants would spend that amount in response to an $8 billion lawsuit.  The costs decision followed <a href="http://canlii.ca/t/h5wlf">a ruling delivered earlier</a> this year where Justice Perelll held the Ontario courts lacked jurisdiction over HSBC as a foreign issuer that does not do business in Ontario and whose shares do not trade in the province.<a href="file:///C:/Users/EKrajewska/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/L35PKS30/TOR01%20-%237184458-v1-Yip%20v.%20HSBC%20Case%20Comment.DOCX#_ftn1">[1]</a></p><p style="text-align:justify;"><strong>Background</strong></p><p style="text-align:justify;">In the proposed class action, the plaintiff had asserted a misrepresentation claim under the Ontario <em>Securities Act </em>against HSBC Holdings ("the Bank") and a former employee, as well as a common law negligent misrepresentation claim. As described below, the Bank ultimately brought a successful motion to dismiss and stay the action on jurisdictional grounds. </p><p style="text-align:justify;">On the defendants' motion, Justice Perell held that to determine whether HSBC was a "responsible issuer" under the Ontario <em>Securities Act</em>, the essential question was whether it had a connection to Ontario. The Court confirmed that, in certain circumstances, an Ontario court will possess jurisdiction <em>simpliciter </em>over a foreign corporation where a real and substantial connection to Ontario exists, even where the company's shares do not trade in Ontario's secondary market. However, in this case, HSBC did not have a substantial connection to Ontario because it was based in the UK and did not carry on a business in the province. </p><p style="text-align:justify;">Notably, while HSBC managed a Canadian subsidiary, the Court held that a parent company does not carry on a business in Ontario simply by virtue of the fact it owns shares of a subsidiary that does operate in the jurisdiction. Moreover, the fact that the alleged misrepresentation would constitute a tort committed in Ontario does not constitute a real and substantial connection. To hold otherwise would effectively amount to universal jurisdiction for claims arising out of commercial activities.</p><p style="text-align:justify;">Therefore, lacking the necessary connection to Ontario, HSBC was not a "responsible issuer", and the Court held that it lacked jurisdiction <em>simpliciter.</em> In the alternative, Justice Perell noted that he would have declined to exercise jurisdiction on the grounds that the UK was a more appropriate forum.  The preponderance of trading in HSBC securities takes place on the London exchange, the corporation is domiciled in the UK, and most witnesses and evidence were similarly located in that country. In addition, while Ontario possessed a juridical advantage over the UK, due to the acceptance of contingency fees in the former, this was characterized as a weak factor in deciding the appropriate forum.  Justice Perell contrasted this with the much stronger factor of comity, which suggested that courts should not intervene in another country's securities regulation without a strong connection to Ontario.</p><p><strong>A Reasonable Expectation of Costs Exposure</strong></p><p style="text-align:justify;">On the subsequent motion to address the costs to be awarded to the successful defendants, the Bank sought roughly $1 million in costs.  Justice Perell applied the factors under Rule 57 of the <em>Rules of Civil Procedure,</em> as well as the caselaw that has developed pertaining to the judicial discretion to award costs in the class proceedings context.</p><p style="text-align:justify;">The Court awarded the costs sought by HSBC. Among other things, Perell J. rejected the plaintiff's argument that the Bank had committed more resources than necessary to challenge a jurisdiction motion on a largely uncontested factual record, rendering HSBC's claim for costs excessive.  Importantly, the costs sought had to be placed in the context of the Bank's potential exposure, and the corresponding need to mount a vigorous defence. Similarly, plaintiff counsel pursued entrepreneurial litigation with full knowledge of its risks:</p><p style="text-align:justify;">There is a make-believe quality to Mr. Yip's lawyers' characterization of Mr. Yip's lawsuit and of HSBC Holdings' defence to it. It is a fantasy to suggest that when Mr. Yip and his entrepreneurial class counsel sued a foreign defendant for $20 billion, later reduced to the not trifling $8.0 billion, that they did not reasonably anticipate that HSBC Holdings would spend $0.0001 billion to defend itself.</p><p style="text-align:justify;">The proposed class action was not altruistic litigation; it was entrepreneurial litigation. Mr. Yip and others willingly traded in foreign stock exchanges with no reasonable expectation that Ontario law might follow them overseas but with the knowledge that the foreign stock markets were regulated by foreign regulators. The putative class members have or had remedies available to them in the jurisdictions in which they traded. Putative class counsel's pursuit of access to justice for Canadians was a self-appointed engagement as a regulator in another jurisdiction's regulated stock market. The lawyers knew that their class action would be jurisdictionally challenged.  </p><p style="text-align:justify;">Plaintiff counsel could not "take cover from their exposure to the risks they knowingly took on" through recourse to the argument that the issues raised on the jurisdiction motion were novel. The "loser pays" principle held sway; "Mr. Yip's lawyers' prime motivation was entrepreneurial and they had no reasonable basis for anticipating that the court would relieve Mr. Yip from any of the myriad purposes of a costs regime in which loser pays."  Lastly, the proceeding had involved extensive expert evidence, a number of affidavits and cross-examinations in various cities. No issue was taken by Justice Perell with the extent of evidence proffered, or duration of the cross-examinations.</p><p style="text-align:justify;">The decisions in <em>Yip v. HSBC Holdings</em> provide a cautionary example of the limits to the entrepreneurial pursuit of class proceedings. The costs decision rests on an understanding of the economic interests of class counsel as a driver for class actions, as well as the fact that it is typically plaintiff counsel themselves that indemnify the representative plaintiff for an adverse costs award. Where successful class counsel are recognized for their risk-taking in having their contingency fees approved by the Court, it is only symmetrical that they bear the cost when their "bet" on high-stakes litigation goes wrong.<br></p><p><br></p>12/12/2017 5:00:00 AM2017-12-12T05:00:00ZTrue1float;#12.0000000000000float;#2017.00000000000string;#Decemberfloat;#201712.000000000GP0|#d531403d-b705-440c-8be2-98e2a4c77989;L0|#0d531403d-b705-440c-8be2-98e2a4c77989|Class Actions;GTSet|#efd3ce69-ee46-4bca-b6af-3daf96f6b0eb;GP0|#75eda1bb-5890-4b6b-aad7-b703245ec2e8;L0|#075eda1bb-5890-4b6b-aad7-b703245ec2e8|Securities: Litigation Regulatory and ComplianceClass Actions;Securities: Litigation Regulatory and Compliance
A lender does does not have a duty to advance new money... A lender does does not have a duty to advance new money... 307BLG Blog PostD. Ross McGowanrmcgowan@blg.com | D. Ross McGowan | 693A30232E777C626C6763616E6164615C64726D i:0#.w|blgcanada\drm ​Court of Appeal for Ontario rules that the common law duty of honest contractual performance does not necessarily require a lender to lend new money. <p>​Court of Appeal for Ontario rules that the common law duty of honest contractual performance does not necessarily require a lender to lend new money. </p> ​In Willowbrook Nurseries Inc. v. Royal Bank of Canada, the Court of Appeal for Ontario held that the common law duty of honest contractual performance does not necessarily require a lender to lend new money. A bank has a duty to give a customer reasonable notice of a change in the prevailing course of conduct with respect to overdraft lending, but that does not mean that the bank is obliged to loan new money. The reasonable notice duty is distinct from a bank's more commonly litigated but separate duty to give reasonable notice before calling for repayment of a demand loan. The recognized duty of "honest contractual performance" (i) does not require a party to forego advantages flowing from the contract; (ii) does not create commercial uncertainty in the law of contract; (iii) does not impose a general duty on a contracting party to subordinate his or her interest to that of the other party, and in the circumstances of the case, (iv) did not require the bank to advance new money during the notice period.<p>​In <em><a href="http://www.ontariocourts.ca/decisions/2017/2017ONCA0974.htm">Willowbrook Nurseries Inc. v. Royal Bank of Canada</a></em>, the Court of Appeal for Ontario held that the common law duty of honest contractual performance does not necessarily require a lender to lend new money.  </p><p>A bank has a duty to give a customer reasonable notice of a change in the prevailing course of conduct with respect to overdraft lending, but that does not mean that the bank is obliged to loan new money. The reasonable notice duty is distinct from a bank's more commonly litigated but separate duty to give reasonable notice before calling for repayment of a demand loan.</p><p><em> </em><br>The recognized duty of "honest contractual performance": (i) does not require a party to forego advantages flowing from the contract; (ii) does not create commercial uncertainty in the law of contract; (iii) does not impose a general duty on a contracting party to subordinate his or her interest to that of the other party, and in the circumstances of the case, (iv) did not require the bank to advance new money during the notice period.</p>12/12/2017 5:00:00 AM2017-12-12T05:00:00ZTrue1float;#12.0000000000000float;#2017.00000000000string;#Decemberfloat;#201712.000000000GP0|#2df25a26-3353-4357-8797-8d21a2ea3aee;L0|#02df25a26-3353-4357-8797-8d21a2ea3aee|Banking and Bills of Exchange;GTSet|#efd3ce69-ee46-4bca-b6af-3daf96f6b0eb;GP0|#83d31cc8-2281-46b1-bd03-ad81b15c38ff;L0|#083d31cc8-2281-46b1-bd03-ad81b15c38ff|Banking Regulatory;GP0|#edf60560-262c-4dfe-978c-31916bb6d7f5;L0|#0edf60560-262c-4dfe-978c-31916bb6d7f5|Bankruptcy, Insolvency and RestructuringBanking and Bills of Exchange;Banking Regulatory;Bankruptcy, Insolvency and Restructuring
Priority of Claims in a Bankruptcy: Does a Deemed Trust under the Pension Benefits Standards Act, 1985 Rank in Priority to a Secured Creditor?Priority of Claims in a Bankruptcy: Does a Deemed Trust under the Pension Benefits Standards Act, 1985 Rank in Priority to a Secured Creditor?305BLG Blog PostScott Pollockspollock@blg.com | Scott Pollock | 693A30232E777C626C6763616E6164615C73706F6C6C6F636B i:0#.w|blgcanada\spollock In ITB Marine Group Ltd. v. Northern Transportation Company Limited, Inuvialuit Development Corporation and Norterra Inc., the Court was required to determine the priority of claims in a bankruptcy between a secured creditor and a deemed trust provided by the Pension Benefits Standards Act, 1985 ("PBSA").<p>In <em>ITB Marine Group Ltd. v. Northern Transportation Company Limited, Inuvialuit Development Corporation and Norterra Inc.</em>, the Court was required to determine the priority of claims in a bankruptcy between a secured creditor and a deemed trust provided by the <em>Pension Benefits Standards Act, 1985 </em>("<em>PBSA</em>").</p> In ITB Marine Group Ltd. v. Northern Transportation Company Limited, Inuvialuit Development Corporation and Norterra Inc., the Court was required to determine the priority of claims in a bankruptcy between a secured creditor and a deemed trust provided by the Pension Benefits Standards Act, 1985 ("PBSA").. Northern Transportation Company Limited ("NTCL") was a marine shipping and transportation company. During a period of insolvency in 2011, NTCL was unable to rectify a shortfall in its pension plan. NTCL reached a "Workout Agreement" with representatives of the NTCL pension plan and unions representing NTCL employees that provided that NTCL would make payments to ameliorate the pension plan shortfall over the next 10 years. In 2012, NTCL agreed to purchase 19 vessels and related equipment from ITB. The purchase was financed by ITB through a charter party and equipment lease with NTCL. Pursuant to the financing arrangements, ITB retained title to the vessels and equipment until the purchase price was paid, while NTCL had possession and use of the assets. ITB registered its security interest in the vessels and equipment in the Alberta Personal Property Registry and the Northwest Territories Personal Property Registry on October 31 and November 1, 2013 respectively. NTCL made an assignment in bankruptcy on December 30, 2016. After the bankruptcy, NTCL's receiver sold the marine vessels and equipment for $6.1 million. ITB claimed it was entitled to the proceeds of the sale of the marine vessels and equipment by virtue of its security interest in the assets. Contrastingly, Morneau Sheppell Inc. (the "Pension Administrator") argued that a deemed trust pursuant to section 8 of the PBSA existed over the proceeds, which entitled it to the proceeds in priority to ITB. In order to determine which claim held priority, the Court asked three related questions Does a deemed trust arise under section 8(2) of the PBSC in respect of the payments made in the Workout Agreement? Does the deemed trust attached to the marine vessels and equipment purchased from ITB? Does the deemed trust rank in priority to ITB's claim as a secured creditor in a bankruptcy? On the first question, the Court held that the scope of the deemed trust under the PBSC included the payments that are required under a workout agreement that have "accrued to date". The Court found that the amount "accrued to date" was the amount of NTCL's obligation to make future payments that was fully constituted and precisely ascertainable at the time of the bankruptcy. In the Court's view, the entire remaining amount under NTCL's Workout Agreement was fully constituted and precisely ascertainable, despite not being payable at the date of the bankruptcy. As a result, the deemed trust extended to the payments that were required to be paid in the future under the Workout Agreement. On the second question, ITB argued that since title to the marine vessels and equipment remained with ITB until the purchase price was paid, that the PBSA's deemed trust did not attach to those assets. The Court disagreed in part, and held that NTCL held a proprietary interest in the marine vessels and equipment, notwithstanding the fact that title had not yet passed. As a result, the PBSA's deemed trust attached to NTCL's proprietary interest in the vessels and equipment, not to the assets themselves. Regarding the final question, The Court found that ITB's security interest held priority over the deemed trust set out by the PBSA. Justice Bowden held that the deemed trust in the PBSA arose upon the bankruptcy of NTCL. Since it did not arise until the bankruptcy, the Court determined that giving it priority over previously perfected security interests would complicate creditors' rights, and make it difficult to assess an entity's creditworthiness. To illustrate why granting the deemed trust priority under these circumstances is a problem, consider the following example. If you were a creditor, looking to extend credit to a business, you would be unable to ascertain in advance whether there was a deemed trust in priority to your own security. Even if you could uncover that there was a pre-existing workout plan, or amounts owing by the business to their pension plan, whether or not the pension plan's claim would rank ahead of your security would only be triggered by the bankruptcy, an event that may not be foreseeable years in advance. As a result, it would make extending credit to most business a much more uncertain proposition. As a result, the Court found that ITB had a valid and enforceable security interest in the vessels and equipment which ranked in priority to the deemed trust provided by the PBSA. <p>In <em><a href="http://canlii.ca/t/hmx8l">ITB Marine Group Ltd. v. Northern Transportation Company Limited, Inuvialuit Development Corporation and Norterra Inc.</a></em>, the Court was required to determine the priority of claims in a bankruptcy between a secured creditor and a deemed trust provided by the <em>Pension <a href="http://canlii.ca/t/52sfh">Benefits Standards Act, 1985</a> </em>("<em>PBSA</em>")..</p><p>Northern Transportation Company Limited ("NTCL") was a marine shipping and transportation company. During a period of insolvency in 2011, NTCL was unable to rectify a shortfall in its pension plan. NTCL reached a "Workout Agreement" with representatives of the NTCL pension plan and unions representing NTCL employees that provided that NTCL would make payments to ameliorate the pension plan shortfall over the next 10 years.</p><p>In 2012, NTCL agreed to purchase 19 vessels and related equipment from ITB. The purchase was financed by ITB through a charter party and equipment lease with NTCL. Pursuant to the financing arrangements, ITB retained title to the vessels and equipment until the purchase price was paid, while NTCL had possession and use of the assets. ITB registered its security interest in the vessels and equipment in the Alberta Personal Property Registry and the Northwest Territories Personal Property Registry on October 31 and November 1, 2013 respectively.</p><p>NTCL made an assignment in bankruptcy on December 30, 2016.</p><p>After the bankruptcy, NTCL's receiver sold the marine vessels and equipment for $6.1 million. ITB claimed it was entitled to the proceeds of the sale of the marine vessels and equipment by virtue of its security interest in the assets. Contrastingly, Morneau Sheppell Inc. (the "Pension Administrator") argued that a deemed trust pursuant to section 8 of the <em>PBSA</em> existed over the proceeds, which entitled it to the proceeds in priority to ITB. </p><p>In order to determine which claim held priority, the Court asked three related questions:</p><ol><li>Does a deemed trust arise under section 8(2) of the <em>PBSC</em> in respect of the payments made in the Workout Agreement?</li><li>Does the deemed trust attached to the marine vessels and equipment purchased from ITB?</li><li>Does the deemed trust rank in priority to ITB's claim as a secured creditor in a bankruptcy?</li></ol><p>On the first question, the Court held that the scope of the deemed trust under the <em>PBSC</em> included the payments that are required under a workout agreement that have "accrued to date". The Court found that the amount "accrued to date" was the amount of NTCL's obligation to make future payments that was fully constituted and precisely ascertainable at the time of the bankruptcy. In the Court's view, the entire remaining amount under NTCL's Workout Agreement was fully constituted and precisely ascertainable, despite not being payable at the date of the bankruptcy. As a result, the deemed trust extended to the payments that were required to be paid in the future under the Workout Agreement.</p><p>On the second question, ITB argued that since title to the marine vessels and equipment remained with ITB until the purchase price was paid, that the <em>PBSA</em>'s deemed trust did not attach to those assets. The Court disagreed in part, and held that NTCL held a proprietary interest in the marine vessels and equipment, notwithstanding the fact that title had not yet passed. As a result, the <em>PBSA</em>'s deemed trust attached to NTCL's proprietary interest in the vessels and equipment, not to the assets themselves.</p><p>Regarding the final question, The Court found that ITB's security interest held priority over the deemed trust set out by the <em>PBSA</em>. Justice Bowden held that the deemed trust in the <em>PBSA</em> arose upon the bankruptcy of NTCL. Since it did not arise until the bankruptcy, the Court determined that giving it priority over previously perfected security interests would complicate creditors' rights, and make it difficult to assess an entity's creditworthiness.</p><p>To illustrate why granting the deemed trust priority under these circumstances is a problem, consider the following example. If you were a creditor, looking to extend credit to a business, you would be unable to ascertain in advance whether there was a deemed trust in priority to your own security. Even if you could uncover that there was a pre-existing workout plan, or amounts owing by the business to their pension plan, whether or not the pension plan's claim would rank ahead of your security would only be triggered by the bankruptcy, an event that may not be foreseeable years in advance. As a result, it would make extending credit to most business a much more uncertain proposition.</p><p>As a result, the Court found that ITB had a valid and enforceable security interest in the vessels and equipment which ranked in priority to the deemed trust provided by the <em>PBSA</em>.<br></p>12/1/2017 5:00:00 AM2017-12-01T05:00:00ZTrue1float;#12.0000000000000float;#2017.00000000000string;#Decemberfloat;#201712.000000000GP0|#edf60560-262c-4dfe-978c-31916bb6d7f5;L0|#0edf60560-262c-4dfe-978c-31916bb6d7f5|Bankruptcy, Insolvency and Restructuring;GTSet|#efd3ce69-ee46-4bca-b6af-3daf96f6b0ebBankruptcy, Insolvency and Restructuring
Former CEO of Mount Real Sentenced to 5 Years in Prison for Ponzi SchemeFormer CEO of Mount Real Sentenced to 5 Years in Prison for Ponzi Scheme304BLG Blog PostDaniel Grodinskydgrodinsky@blg.com | Daniel Grodinsky | 693A30232E777C626C6763616E6164615C6467726F64696E736B79 i:0#.w|blgcanada\dgrodinsky ​Quebec Superior Court sentences Lino Matteo, former CEO of Mount REal Corp. to five years in prison after he was foundguilty of 270 vilation of Quebec's Securities Act. <p>​Quebec Superior Court sentences Lino Matteo, former CEO of Mount REal Corp. to five years in prison after he was foundguilty of 270 vilation of Quebec's Securities Act. <br></p> In September, Lino Matteo, the former CEO of Mount Real Corp., was found guilty of 270 violations of Quebec's Securities Act for his role in the Mount Real Ponzi scheme. This week he learned the price to be paid a 5-year prison sentence along with $4.91 million in fines, plus court fees. Mount Real Corp., a Montreal-area investment management company, was shut down in 2006 by the AMF, Quebec's securities regulator. The company's executives set up an elaborate scheme including booking false transactions to boost the balance sheet in order to fool investors. The scheme left more than 1200 investors with $130 million in outstanding notes. In 2016, the company's auditors and security trustees settled a class action brought by investors for $43 million, though without any admission of liability. In rendering this week's sentence, the Quebec Court judge held that the case "contained all the elements of a premeditated or deliberate fraud in which Lino P. Matteo played a key role, showing disregard not only for the applicable principles but for everyone who dared slow down his ambitions…. In that sense, his moral blameworthiness is at the highest level". In 2016, Matteo was also sentenced to an 8-year sentence for defrauding investors of Cinar Corp. by sending more than $120 million to offshore Bahamian accounts. While he is appealing the sentence in the Cinar case, the most recent judgment of the Court specified that both sentences must be served consecutively. <p>In September, Lino Matteo, the former CEO of Mount Real Corp., was found guilty of 270 violations of Quebec's Securities Act for his role in the Mount Real Ponzi scheme. This week he learned the price to be paid: a 5-year prison sentence along with $4.91 million in fines, plus court fees.</p><p>Mount Real Corp., a Montreal-area investment management company, was shut down in 2006 by the AMF, Quebec's securities regulator. The company's executives set up an elaborate scheme including booking false transactions to boost the balance sheet in order to fool investors. The scheme left more than 1200 investors with $130 million in outstanding notes. In 2016, the company's auditors and security trustees settled a class action brought by investors for $43 million, though without any admission of liability.</p><p>In rendering this week's <a href="https://www.canlii.org/en/qc/qccq/doc/2017/2017qccq13813/2017qccq13813.pdf" target="_blank">sentence</a>, the Quebec Court judge held that the case "contained all the elements of a premeditated or deliberate fraud in which Lino P. Matteo played a key role, showing disregard not only for the applicable principles but for everyone who dared slow down his ambitions…. In that sense, his moral blameworthiness is at the highest level".</p><p>In 2016, Matteo was also sentenced to an 8-year sentence for defrauding investors of Cinar Corp. by sending more than $120 million to offshore Bahamian accounts. While he is appealing the sentence in the Cinar case, the most recent judgment of the Court specified that both sentences must be served consecutively.<br></p><p><br></p>11/29/2017 5:00:00 AM2017-11-29T05:00:00ZTrue1float;#11.0000000000000float;#2017.00000000000string;#Novemberfloat;#201711.000000000GP0|#75eda1bb-5890-4b6b-aad7-b703245ec2e8;L0|#075eda1bb-5890-4b6b-aad7-b703245ec2e8|Securities: Litigation Regulatory and Compliance;GTSet|#efd3ce69-ee46-4bca-b6af-3daf96f6b0eb;GP0|#11984f46-19e7-4b16-acce-db2c31f12bae;L0|#011984f46-19e7-4b16-acce-db2c31f12bae|Fraud and White Collar CrimeSecurities: Litigation Regulatory and Compliance;Fraud and White Collar Crime
Court Restates Law on the Defence of Material Alteration to GuaranteesCourt Restates Law on the Defence of Material Alteration to Guarantees303BLG Blog PostGraham Splawskigsplawski@blg.com | Graham Splawski | 693A30232E777C626C6763616E6164615C6773706C6177736B69 i:0#.w|blgcanada\gsplawski ​The British Columbia Supreme Court recently comprehensively restated the law on the defence of material alteration in the context of a personal guarantor who guaranteed a family business’s debts in Royal Bank of Canada v. Zuk. <p>​<span style="font-size:11pt;line-height:115%;font-family:calibri, sans-serif;">The British Columbia Supreme Court recently comprehensively restated the law on the defence of material alteration in the context of a personal guarantor who guaranteed a family business’s debts in <a href="http://canlii.ca/t/hnrq1"><em>Royal Bank of Canada v. Zuk</em></a>. </span><br></p> Ms. Zuk provided a personal guarantee for the business her husband founded ("Silverado"). Ms. Zuk was also an accountant, and was Silverado's sometime bookkeeper and shareholder prior to her divorce from Mr. Zuk, Silverado's principal. When Silverado defaulted on its loans, RBC called on the guarantee. Ms. Zuk argued that there had been material alterations to the credit advanced to Silverado, which absolved her of liability under the guarantee in respect of those later advances. In considering this defence, the Court provided a comprehensive restatement of the law on the defence of material alteration. The Court applied a two-step test (1) are the challenged alterations to the underlying loan arrangement material? and (2) does the language of the guarantee permit the material alterations? When discussing how to apply this test, the Court set out the law on the duty of disclosure to a guarantor, specific vs. continuing/all accounts guarantees, and compensated vs. accommodation sureties. Each of these three factors influences the Court's interpretation of the guarantee and the level of scrutiny the Court will capply to the language of the guarantee. In this case, the Court found it relevant that Ms. Zuk had an interest in Silverado, which the Court found made her a compensated guarantor – similar to a bond company. She was not an accommodation surety, like a spouse who receives no compensation for his or her guarantee. These latter types of sureties receive more protection from the Court and the terms of such guarantees will be construed more strictly. The Court found that the guarantee was a continuing/all accounts guarantee that had explicitly contemplated the type of alteration that in fact occurred. This case is notable for all guarantors as a restatement of the law on the defence of material alteration, and it is also helpful when drafting guarantees that the parties contemplate might evolve over time. <p>Ms. Zuk provided a personal guarantee for the business her husband founded ("Silverado"). Ms. Zuk was also an accountant, and was Silverado's sometime bookkeeper and shareholder prior to her divorce from Mr. Zuk, Silverado's principal. When Silverado defaulted on its loans, RBC called on the guarantee. Ms. Zuk argued that there had been material alterations to the credit advanced to Silverado, which absolved her of liability under the guarantee in respect of those later advances. </p><p>In considering this defence, the Court provided a comprehensive restatement of the law on the defence of material alteration. The Court applied a two-step test: </p><blockquote style="margin:0px 0px 0px 40px;border:none;padding:0px;"><p>(1) are the challenged alterations to the underlying loan arrangement material? and </p><p>(2) does the language of the guarantee permit the material alterations? </p></blockquote><p>When discussing how to apply this test, the Court set out the law on the duty of disclosure to a guarantor, specific vs. continuing/all accounts guarantees, and compensated vs. accommodation sureties. Each of these three factors influences the Court's interpretation of the guarantee and the level of scrutiny  the Court will capply to the language of the guarantee. <br></p><p>In this case, the Court found it relevant that Ms. Zuk had an interest in Silverado, which the Court found made her a compensated guarantor – similar to a bond company. She was not an accommodation surety, like a spouse who receives no compensation for his or her guarantee. These latter types of sureties receive more protection from the Court and the terms of such guarantees will be construed more strictly.<br></p><p>The Court found that the guarantee was a continuing/all accounts guarantee that had explicitly contemplated the type of alteration that in fact occurred. </p><p>This case is notable for all guarantors as a restatement of the law on the defence of material alteration, and it is also helpful when drafting guarantees that the parties contemplate might evolve over time.<br></p><p><br></p>11/28/2017 5:00:00 AM2017-11-28T05:00:00ZTrue1float;#11.0000000000000float;#2017.00000000000string;#Novemberfloat;#201711.000000000GP0|#2df25a26-3353-4357-8797-8d21a2ea3aee;L0|#02df25a26-3353-4357-8797-8d21a2ea3aee|Banking and Bills of Exchange;GTSet|#efd3ce69-ee46-4bca-b6af-3daf96f6b0eb;GP0|#edf60560-262c-4dfe-978c-31916bb6d7f5;L0|#0edf60560-262c-4dfe-978c-31916bb6d7f5|Bankruptcy, Insolvency and RestructuringBanking and Bills of Exchange;Bankruptcy, Insolvency and Restructuring
Class Action Carriage Fights: application of the principles in multi-jurisdicitonal class actionsClass Action Carriage Fights: application of the principles in multi-jurisdicitonal class actions302BLG Blog PostAlannah Fotheringhamafotheringham@blg.com | Alannah Fotheringham | 693A30232E777C626C6763616E6164615C61666F74686572696E6768616D i:0#.w|blgcanada\afotheringham ​In class actions against the Canadian and Manitoba Governments for the "60s Scoop", the Manitoba Court of Appeal stays one class action in favour of another despite the fact that the latter action was commenced several years later, had a narrower class definition, and fewer defendants. In so doing, the Court confirmed the principles applicable to pre-certification carriage motions and stays in multi-jurisdictional class actions. <p>​In class actions against the Canadian and Manitoba Governments for the "60s Scoop", t<span style="font-family:"arial",sans-serif;font-size:10pt;">he Manitoba Court of Appeal stays one class action in favour of another despite the fact that the latter action was commenced several years later, had a narrower class definition, and fewer defendants. In so doing, the Court confirmed the principles applicable to pre-certification carriage motions and stays in multi-jurisdictional class actions. </span></p> In Thompson et al v Minister of Justice of Manitoba et al, ("Thompson") the Manitoba Court of Appeal considered the decision of a motion judge who stayed a proposed class action after another proposed class action was commenced in respect of the same subject matter. The Court's decision provides helpful guidance to all litigants involved in multi-jurisdictional class proceedings, and confirms that the outcome of a carriage motion turns on much more than who filed their claim first, or which claim has the larger class definition. The two actions at issue in Thompson were commenced in relation to the events known as "the 60's scoop", in which Aboriginal children were removed from their families and placed with non-Aboriginal parents pursuant to government policies. One action was commenced seeking damages from Manitoba and Canada for breach of fiduciary duty, negligence and cultural genocide (the "Thompson Action"). Several years later, an action was commenced seeking damages from Canada alone for breach of fiduciary duty and negligence (the "Meeches Action"). The plaintiffs in the Thomson Action brought a motion seeking leave to proceed to certification to determine whether one or more class actions could be certified, and in the alternative, a stay of the Meeches Action. The plaintiffs in the Meeches Action then brought a motion seeking an order appointing their lawyers as counsel for the proposed class action, and a stay of the Thompson Action. At the return of their motions, the Motion Judge considered which action would serve the interest of the putative class members, and the policy objectives of the Class Proceedings Act, (the "CPA"). The Motion Judge also considered the factors to be considered on a carriage motion as set out in VitaPharm Canada Ltd v F Hoffmann-LaRoche Ltd., being the nature and scope of the causes of action advanced; the theories advanced by counsel; the state of each class action, including preparation; the number, size and extent of involvement of the proposed representative plaintiffs; the relative priority of commencing the class action (i.e. filing date); and the resources and experience of counsel. In applying the above principles and factors, the Motion Judge considered that some of the proposed members of the class in the Thompson Action could be excluded by the proposed class definition in the Meeches Action, but that the class definition would be considered more carefully at certification. He also considered the differences between the causes of action and the defendants in each action, and found that the Meeches Action had a narrower focus and fewer defendants, and that the Thompson Action had theories of liability that were novel and potentially problematic. Accordingly, he was of the view that the Meeches Action was more likely to be certified. He found the suitability of the representative plaintiffs in each action to be neutral, and that both actions were at the relatively same state of preparation. However, the Motion Judge also expressed concern about the delay from the time the Thompson Action was first filed, and found that the delay was not in the best interests of the putative class members. In the result, the motion judge stayed the Thomson Action and appointed the lawyers of the Meeches Action as lead counsel. The plaintiffs in the Thompson Action appealed the decision of the Motion Judge. Their position on appeal was primarily focused on their argument that the class definition in the Meeches Action was deficient and the Motion Judge erred in considering how the pleadings could be amended to broaden the class, rather than on the basis of the record. They also argued that the Motion Judge went too far in assessing the merits of the causes of action in their claim the Motion Judge should not have evaluated the suitability of the representative plaintiffs on the basis of the pleadings, that he should not have determined carriage prior to certification, and that he erred by taking fairness to the defendants into account. The Manitoba Court of Appeal dismissed each of these arguments On the issue of the class definition, the Court found that even if the Meeches Action was certified with the existing class definition, and individuals who fall within the Thompson Action class definition would be excluded, they would not be deprived access to justice because they could advance individual claims; On the issue of the scope of the claims in each action, the Court found that the Motion Judge considered all of the relevant differences between the two actions regarding the defendants, and that the plaintiffs in the Thompson Action had not identified an error in that regard; Finally, on the issue of the suitability of the proposed representative plaintiffs, the Court found that the Motion Judge had considered an affidavit filed by one of the lawyers representing the plaintiffs in the Meeches Action, which did provide some evidence of the suitability of the representative plaintiffs. Ultimately, the Court dismissed the appeal, without costs.<p>In <a href="https://www.canlii.org/en/mb/mbca/doc/2017/2017mbca71/2017mbca71.pdf" target="_blank"><em>Thompson et al v  Minister of Justice of Manitoba et al</em>, </a>("<em>Thompson</em>") the Manitoba Court of Appeal considered the decision of a motion judge who stayed a proposed class action after another proposed class action was commenced in respect of the same subject matter. The Court's decision provides helpful guidance to all litigants involved in multi-jurisdictional class proceedings, and confirms that the outcome of a carriage motion turns on much more than who filed their claim first, or which claim has the larger class definition. </p><p>The two actions at issue in <em>Thompson</em> were commenced in relation to the events known as "the 60's scoop", in which Aboriginal children were removed from their families and placed with non-Aboriginal parents pursuant to government policies. One action was commenced seeking damages from Manitoba and Canada for breach of fiduciary duty, negligence and cultural genocide (the "Thompson Action"). Several years later, an action was commenced seeking damages from Canada alone for breach of fiduciary duty and negligence  (the "Meeches Action"). </p><p>The plaintiffs in the Thomson Action brought a motion seeking leave to proceed to certification to determine whether one or more class actions could be certified, and in the alternative, a stay of the Meeches Action. The plaintiffs in the Meeches Action then brought a motion seeking an order appointing their lawyers as counsel for the proposed class action, and a stay of the Thompson Action.</p><p>At the return of their motions, the Motion Judge considered which action would serve the interest of the putative class members, and the policy objectives of the <a href="http://canlii.ca/t/ktrm" target="_blank"><em>Class Proceedings Act</em></a>, (the "<em>CPA</em>"). The Motion Judge also considered the factors to be considered on a carriage motion as set out in <a href="http://canlii.ca/t/gb2jv" target="_blank"><em>VitaPharm Canada Ltd v F Hoffmann-LaRoche Ltd</em></a><em>.</em>, being:</p><ol><li>the nature and scope of the causes of action advanced;</li><li>the theories advanced by counsel;</li><li>the state of each class action, including preparation;</li><li>the number, size and extent of involvement of the proposed representative plaintiffs;</li><li>the relative priority of commencing the class action (i.e. filing date); and</li><li>the resources and experience of counsel.</li></ol><p> <br>In applying the above principles and factors, the Motion Judge considered that some of the proposed members of the class in the Thompson Action could be excluded by the proposed class definition in the Meeches Action, but that the class definition would be considered more carefully at certification. He also considered the differences between the causes of action and the defendants in each action, and found that the Meeches Action had a narrower focus and fewer defendants, and that the Thompson Action had theories of liability that were novel and potentially problematic. Accordingly, he was of the view that the Meeches Action was more likely to be certified.</p><p>He found the suitability of the representative plaintiffs in each action to be neutral, and that both actions were at the relatively same state of preparation. However, the Motion Judge also expressed concern about the delay from the time the Thompson Action was first filed, and found that the delay was not in the best interests of the putative class members. In the result, the motion judge stayed the Thomson Action and appointed the lawyers of the Meeches Action as lead counsel. </p><p>The plaintiffs in the Thompson Action appealed the decision of the Motion Judge. Their position on appeal was primarily focused on their argument that the class definition in the Meeches Action was deficient and the Motion Judge erred in considering how the pleadings could be amended to broaden the class, rather than on the basis of the record. They also argued that the Motion Judge went too far in assessing the merits of the causes of action in their claim: the Motion Judge should not have evaluated the suitability of the representative plaintiffs on the basis of the pleadings, that he should not have determined carriage prior to certification, and that he erred by taking fairness to the defendants into account.  </p><p>The Manitoba Court of Appeal dismissed each of these arguments:</p><ul><li>On the issue of the class definition, the Court found that even if the Meeches Action was certified with the existing class definition, and individuals who fall within the Thompson Action class definition would be excluded, they would not be deprived access to justice because they could advance individual claims;<br><br> </li><li> On the issue of the scope of the claims in each action, the Court found that the Motion Judge considered all of the relevant differences between the two actions regarding the defendants, and that the plaintiffs in the Thompson Action had not identified an error in that regard;<br><br> </li><li>Finally, on the issue of the suitability of the proposed representative plaintiffs, the Court found that the Motion Judge had considered an affidavit filed by one of the lawyers representing the plaintiffs in the Meeches Action, which did provide some evidence of the suitability of the representative plaintiffs. </li></ul><p> <br>Ultimately, the Court dismissed the appeal, without costs.</p>11/27/2017 5:00:00 AM2017-11-27T05:00:00ZTrue1float;#11.0000000000000float;#2017.00000000000string;#Novemberfloat;#201711.000000000GP0|#d531403d-b705-440c-8be2-98e2a4c77989;L0|#0d531403d-b705-440c-8be2-98e2a4c77989|Class Actions;GTSet|#efd3ce69-ee46-4bca-b6af-3daf96f6b0ebClass Actions
Quebec Court of Appeal Authorizes Investor Class Action against Desjardins EntitiesQuebec Court of Appeal Authorizes Investor Class Action against Desjardins Entities301BLG Blog PostDaniel Grodinskydgrodinsky@blg.com | Daniel Grodinsky | 693A30232E777C626C6763616E6164615C6467726F64696E736B79 i:0#.w|blgcanada\dgrodinsky ​The Quebec Court of Appeal continues a pattern of reversing lower court decisions that refused to authorize class actions proceedings. <p>​The Quebec Court of Appeal continues a pattern of reversing lower court decisions that refused to authorize class actions proceedings. <br></p> In Asselin v. Desjardins Cabinet de services financiers inc. the Quebec Court of Appeal authorized a class action against two Desjardins investment entities relating to two under-performing investment funds. The appeal court's decision continues its pattern of reversing Quebec Superior Court decisions that have refused to authorize class actions. In so doing, the Quebec Court of Appeal may have further lowered the threshold at the authorization stage. The proposed class action relates to allegedly under-performing securities marketed by Desjardins Financial Services Firm and Desjardins Global Assets Management. Two of the investment funds were allegedly marketed as very secure and low risk products but, in actuality, are allegeded to have been highly leveraged, resulting in the liquidation of a significant part of the assets needed to produce returns. As a result, class members are alleged to have received no return on their investment for up to seven years. The Court of Appeal's may further lower the bar for the authorization of class actions by inviting judges to be flexible, to consider the substance of the allegations over its form and to "read between the lines" of the plaintiff's allegations. In the reasons, the Court of Appeal noted that in order to avoid class actions monopolizing an already large share of court resources, judges should consider whether the allegations meet a prima facie case and therefore avoid an in-depth analysis of the merits of potential grounds of defense. The Court of Appeal also may have raised the threshold for class action defendants to submit relevant evidence to resist authorization. The Court of Appeal criticized the lower court judge for permitting the parties to present a fairly substantial evidentiary record at the authorization stage as it led to a more detailed analysis than was appropriate at the authorization stage. <p>In <em><a href="http://canlii.ca/t/hmth5" target="_blank">Asselin v. Desjardins Cabinet de services financiers inc.</a> </em>the Quebec Court of Appeal authorized a class action against two Desjardins investment entities relating to two under-performing investment funds. The appeal court's decision continues its pattern of reversing Quebec Superior Court decisions that have refused to authorize class actions. In so doing, the Quebec Court of Appeal may have further lowered the threshold at the authorization stage.</p><p>The proposed class action relates to allegedly under-performing securities marketed by Desjardins Financial Services Firm and Desjardins Global Assets Management. Two of the investment funds were allegedly marketed as very secure and low risk products but, in actuality, are allegeded to have been highly leveraged, resulting in the liquidation of a significant part of the assets needed to produce returns. As a result, class members are alleged to have received no return on their investment for up to seven years.</p><p>The Court of Appeal's may further lower the bar for the authorization of class actions by inviting judges to be flexible, to consider the substance of the allegations over its form and to "read between the lines" of the plaintiff's allegations. In the reasons, the Court of Appeal noted that in order to avoid class actions monopolizing an already large share of court resources, judges should consider whether the allegations meet a <em>prima facie </em>case and therefore avoid an in-depth analysis of the merits of potential grounds of defense.<br></p><p>The Court of Appeal also may have raised the threshold for class action defendants to submit relevant evidence to resist authorization. The Court of Appeal criticized the lower court judge for permitting the parties to present a fairly substantial evidentiary record at the authorization stage as it led to a more detailed analysis than was appropriate at the authorization stage.<br></p><p><br></p>11/22/2017 5:00:00 AM2017-11-22T05:00:00ZTrue1float;#11.0000000000000float;#2017.00000000000string;#Novemberfloat;#201711.000000000GP0|#2df25a26-3353-4357-8797-8d21a2ea3aee;L0|#02df25a26-3353-4357-8797-8d21a2ea3aee|Banking and Bills of Exchange;GTSet|#efd3ce69-ee46-4bca-b6af-3daf96f6b0eb;GP0|#d531403d-b705-440c-8be2-98e2a4c77989;L0|#0d531403d-b705-440c-8be2-98e2a4c77989|Class ActionsBanking and Bills of Exchange;Class Actions
Forcing the Hand of a Trustee: Interim DistributionsForcing the Hand of a Trustee: Interim Distributions300BLG Blog PostVeronica Sjolinvsjolin@blg.com | Veronica Sjolin | 693A30232E777C626C6763616E6164615C76736A6F6C696E i:0#.w|blgcanada\vsjolin ​The Supreme Court of British Columbia granted an Order compelling an interim distribution where the executor was unable to demonstrate just cause for withholding the distribution, and granted costs against the executor personally. <p>​The Supreme Court of British Columbia granted an Order compelling an interim distribution where the executor was unable to demonstrate just cause for withholding the distribution, and granted costs against the executor personally. </p>In Reznik v. Matty, the petitioner sought an order compelling the executor and trustee to distribute about $15,000-$20,000 to each of the four residuary beneficiaries. The estate held a reasonable amount of assets, including approximately $96,000 in cash and was the sole shareholder in a company which owned three vacant lots that had been listed for sale for approximately $560,000. There had already been a previous interim distribution. Why is the Case Important?This case sets a precedent for beneficiaries that wish to compel the distribution of assets from the executor through court proceedings. While each case will turn on its facts (and the facts of this case were critical to the outcome), a court may have jurisdiction to compel an executor to make an interim distribution. If the executor does not demonstrate just cause for not making the distribution, he or she may be personally liable for costs of the proceeding. The Court's Analysis The petitioners took the position, and the Court agreed, that an assent of the estate may be compelled when it is withheld without just cause. An assent is an acknowledgment by a personal representative that an asset is no longer required for the payment of the debts of the estate. In the circumstances of this case, where the administrator of the estate had already taken over a decade to distribute assets (apart from one other interim distribution to the beneficiaries) and there was significant value and liquidity, the executor's assent could be compelled. The executor was unable to demonstrate just cause for not making the interim distribution. Consequently, Funt J. ordered a distribution of $40,000 ($10,000 to each residuary beneficiary), finding that this was a small portion of the residue of the Estate. The Court also ordered costs of the proceeding against the executor personally. The respondent argued that the Court lacked jurisdiction to make such an order. On this point, the Court found it was a court of general jurisdiction, with "all of the powers that are necessary to do justice between the parties" and thus, could grant relief under common law and equity. The Court clarified that there is some confusion between the terms "inherent jurisdiction" and "general jurisdiction". The former is simply an aspect of a courts general jurisdiction. The Court was not subject to supervisory control by any other court except by due process of appeal, and it exercised the full plentitude of judicial power in all matters concerning the general administration of justice within its area. <p style="text-align:justify;">In <a href="https://www.canlii.org/en/bc/bcsc/doc/2013/2013bcsc1346/2013bcsc1346.html" target="_blank"><strong><em>Reznik v. Matty</em></strong>, </a>the petitioner sought an order compelling the executor and trustee to distribute about $15,000-$20,000 to each of the four residuary beneficiaries.  The estate held a reasonable amount of assets, including approximately $96,000 in cash and was the sole shareholder in a company which owned three vacant lots that had been listed for sale for approximately $560,000.  There had already been a previous interim distribution. </p><p style="text-align:justify;"><strong><em>Why is the Case Important?</em></strong></p><p style="text-align:justify;">This case sets a precedent for beneficiaries that wish to compel the distribution of assets from the executor through court proceedings.  While each case will turn on its facts (and the facts of this case were critical to the outcome), a court may have jurisdiction to compel an executor to make an interim distribution.  If the executor does not demonstrate just cause for not making the distribution, he or she may be personally liable for costs of the proceeding.  </p><p style="text-align:justify;"><strong><em>The Court's Analysis</em></strong> </p><p style="text-align:justify;">The petitioners took the position, and the Court agreed, that an assent of the estate may be compelled when it is withheld without just cause.  An assent is an acknowledgment by a personal representative that an asset is no longer required for the payment of the debts of the estate.  </p><p style="text-align:justify;">In the circumstances of this case, where the administrator of the estate had already taken over a decade to distribute assets (apart from one other interim distribution to the beneficiaries) and there was significant value and liquidity, the executor's assent could be compelled.  The executor was unable to demonstrate just cause for not making the interim distribution.  Consequently, Funt J. ordered a distribution of $40,000 ($10,000 to each residuary beneficiary), finding that this was a small portion of the residue of the Estate.  The Court also ordered costs of the proceeding against the executor personally. </p><p style="text-align:justify;">The respondent argued that the Court lacked jurisdiction to make such an order.  </p><p style="text-align:justify;">On this point, the Court found it was a court of general jurisdiction, with "all of the powers that are necessary to do justice between the parties" and thus, could grant relief under common law and equity.  The Court clarified that there is some confusion between the terms "inherent jurisdiction" and "general jurisdiction".  The former is simply an aspect of a courts general jurisdiction.  The Court was not subject to supervisory control by any other court except by due process of appeal, and it exercised the full plentitude of judicial power in all matters concerning the general administration of justice within its area. </p>11/17/2017 5:00:00 AM2017-11-17T05:00:00ZTrue1float;#11.0000000000000float;#2017.00000000000string;#Novemberfloat;#201711.000000000GP0|#fbfdfcb9-adbc-49cd-a509-671cc2c30fac;L0|#0fbfdfcb9-adbc-49cd-a509-671cc2c30fac|Estates and Trusts;GTSet|#efd3ce69-ee46-4bca-b6af-3daf96f6b0eb;GP0|#2df25a26-3353-4357-8797-8d21a2ea3aee;L0|#02df25a26-3353-4357-8797-8d21a2ea3aee|Banking and Bills of ExchangeEstates and Trusts;Banking and Bills of Exchange
Cyber Threats and Social Media Pose Growing Risks For Registered FirmsCyber Threats and Social Media Pose Growing Risks For Registered Firms299BLG Blog PostIvana Nenadicinenadic@blg.com | Ivana Nenadic | 693A30232E777C626C6763616E6164615C696E656E61646963 i:0#.w|blgcanada\inenadic ​The Canadian Securities Administrators have issued guidelines on how to minize the risk of cyber security attacks and threats arising from the use of social media. <p>​The Canadian Securities Administrators have issued guidelines on how to minize the risk of cyber security attacks and threats arising from the use of social media. </p> ​The Canadian Securities Administrators ("CSA") published the results of the CSA's survey of cybersecurity and social media practices of registered firms dealing in securities and guidelines on how to minimize the risks posed by cyber threats and social media. Fifty-one percent of firms surveyed had experienced a cybersecurity incident in 2016. Addressing the risks posed by cyber threats and the use of social media is a requirement under Section 11.1 of National Instrument 31-103, which mandates that registered firms "establish, maintain and apply policies and procedures that establish a system of controls and supervision sufficient to (a) provide reasonable assurance that the firm and each individual acting on its behalf complies with securities legislation, and (b) manage the risks associated with its business in accordance with prudent business practices." The CSA recommends that registered firms do as follows to minize the risk All firms should have policies and procedures that address, among others, the use of electronic communications, the use of firm-issued electronic devices, reporting cybersecurity incidents, and vetting third-party vendors and service providers. Firms should conduct a cyber risk assessment at least annually and review the firm's cybersecurity incident response plan to see whether changes are necessary. Firms should have a written incident response plan, which should include the different types of cyber attacks; who is responsible for communicating about an incident; procedures to stop the incident from causing further damage; and data recovery and investigation procedures. Firms should periodically evaluate the adequacy of their cyber security practices, including safeguards against cyber security incidents and the handling of such incidents by any third parties that have access to the firms' systems and data. In addition to using encryption for all computers and other electronic devices, the CSA expects firms to require passwords to gain access to these devices and recommends so-called "strong" passwords be required, and change with some frequency. Firms should review their existing insurance policies (e.g., financial institution bonds) to identify which types of cyber security incidents, if any, are covered. Firms should have appropriate approval and monitoring procedures for social media communications.<p>​The Canadian Securities Administrators ("CSA") <a href="https://www.osc.gov.on.ca/documents/en/Securities-Category3/csa_20171019_33-321_cyber-security-and-social-media.pdf" target="_blank">published </a>the results of the CSA's survey of cybersecurity and social media practices of registered firms dealing in securities and guidelines on how to minimize the risks posed by cyber threats and social media. </p><p>Fifty-one percent of firms surveyed had experienced a cybersecurity incident in 2016. </p><p>Addressing the risks posed by cyber threats and the use of social media is a requirement under  Section 11.1 of National Instrument 31-103, which mandates that registered firms: "establish, maintain and apply policies and procedures that establish a system of controls and supervision sufficient to (a) provide reasonable assurance that the firm and each individual acting on its behalf complies with securities legislation, and (b) manage the risks associated with its business in accordance with prudent business practices."</p><p>The CSA recommends that registered firms do as follows to minize the risk: </p><ul><li>All firms should have policies and procedures that address, among others, the use of electronic communications, the use of firm-issued electronic devices, reporting cybersecurity incidents, and vetting third-party vendors and service providers.</li></ul><ul><li>Firms should conduct a cyber risk assessment at least annually and review the firm's cybersecurity incident response plan to see whether changes are necessary.</li></ul><ul><li>Firms should have a written incident response plan, which should include the different types of cyber attacks; who is responsible for communicating about an incident; procedures to stop the incident from causing further damage; and data recovery and investigation procedures.</li></ul><ul><li>Firms should periodically evaluate the adequacy of their cyber security practices, including safeguards against cyber security incidents and the handling of such incidents by any third parties that have access to the firms' systems and data.</li></ul><ul><li>In addition to using encryption for all computers and other electronic devices, the CSA expects firms to require passwords to gain access to these devices and recommends so-called "strong" passwords be required, and change with some frequency.</li></ul><ul><li>Firms should review their existing insurance policies (e.g., financial institution bonds) to identify which types of cyber security incidents, if any, are covered.</li></ul><ul><li>Firms should have appropriate approval and monitoring procedures for social media communications.</li></ul>11/14/2017 5:00:00 AM2017-11-14T05:00:00ZTrue1float;#11.0000000000000float;#2017.00000000000string;#Novemberfloat;#201711.000000000GP0|#75eda1bb-5890-4b6b-aad7-b703245ec2e8;L0|#075eda1bb-5890-4b6b-aad7-b703245ec2e8|Securities: Litigation Regulatory and Compliance;GTSet|#efd3ce69-ee46-4bca-b6af-3daf96f6b0eb;GP0|#11984f46-19e7-4b16-acce-db2c31f12bae;L0|#011984f46-19e7-4b16-acce-db2c31f12bae|Fraud and White Collar Crime;GP0|#da989fe7-de9b-44ca-9a7c-ade6643bc163;L0|#0da989fe7-de9b-44ca-9a7c-ade6643bc163|CybersecuritySecurities: Litigation Regulatory and Compliance;Fraud and White Collar Crime;Cybersecurity