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CSA Finds MFDA Has Made "Sufficient Progress" Towards Resolving Previously-Identified IssuesCSA Finds MFDA Has Made "Sufficient Progress" Towards Resolving Previously-Identified Issues281BLG Blog PostMarkus F. Kremermkremer@blg.com | Markus F. Kremer | 693A30232E777C626C6763616E6164615C6D6B72656D6572 i:0#.w|blgcanada\mkremer ​On September 15, 2017, the Canadian Securities Administrators ("CSA") released their Oversight Review Report of the Mutual Fund Dealers Association of Canada (MFDA), covering the period from August 1, 2015 to January 31, 2017. The review was conducted jointly by the Alberta Securities Commission, the British Columbia Securities Commission, the Financial and Consumer Affairs Authority of Saskatchewan, the Manitoba Securities Commission, the Nova Scotia Securities Commission, and the Ontario Securities Commission. CSA staff concluded that the MFDA had made sufficient progress towards resolving the specific issues that the CSA had raised in previous oversight review reviews. Additionally, the Report makes one medium priority finding (in the Financial Compliance department) and one low priority finding (in the Enforcement department.<p>​On September 15, 2017, the Canadian Securities Administrators ("CSA") released their <a href="http://www.osc.gov.on.ca/en/sor-mfda_20170915_oversight-review-rpt.htm">Oversight Review Report of the Mutual Fund Dealers Association of Canada (MFDA)</a>, covering the period from August 1, 2015 to January 31, 2017.  The review was conducted jointly by the Alberta Securities Commission, the British Columbia Securities Commission, the Financial and Consumer Affairs Authority of Saskatchewan, the Manitoba Securities Commission, the Nova Scotia Securities Commission, and the Ontario Securities Commission.  CSA staff concluded that the MFDA had made sufficient progress towards resolving the specific issues that the CSA had raised in previous oversight review reviews.  Additionally,  the Report makes one medium priority finding (in the Financial Compliance department) and one low priority finding (in the Enforcement department}.</p>9/19/2017 4:00:00 AM2017-09-19T04:00:00ZTrue1float;#9.00000000000000float;#2017.00000000000string;#Septemberfloat;#201709.000000000GP0|#75eda1bb-5890-4b6b-aad7-b703245ec2e8;L0|#075eda1bb-5890-4b6b-aad7-b703245ec2e8|Securities: Litigation Regulatory and Compliance;GTSet|#efd3ce69-ee46-4bca-b6af-3daf96f6b0ebSecurities: Litigation Regulatory and Compliance
BCSC Grants Bitcoin Investment Fund Manager RegistrationBCSC Grants Bitcoin Investment Fund Manager Registration279BLG Blog PostAndrew Pozzobonapozzobon@blg.com | Andrew Pozzobon | 693A30232E777C626C6763616E6164615C61706F7A7A6F626F6E i:0#.w|blgcanada\apozzobon ​Recently, the British Columbia Securities Commission (BCSC) announced (found here) the first registration of an investment fund manager in Canada dedicated solely to cryptocurrency investments. The BCSC granted First Block Capital Inc. registration as an investment fund manager and an exempt market dealer in order to operate a bitcoin investment fund.<p>​Recently, the British Columbia Securities Commission (BCSC) announced (found <span style="text-decoration:underline;"><a href="http://www.bcsc.bc.ca/News/News_Releases/2017/69_B_C__Securities_Commission_grants_landmark_bitcoin_investment_fund_manager_registration/">here</a></span>) the first registration of an investment fund manager in Canada dedicated solely to cryptocurrency investments. The BCSC granted First Block Capital Inc. registration as an investment fund manager and an exempt market dealer in order to operate a bitcoin investment fund.</p> Recently, the British Columbia Securities Commission (BCSC) announced (found here) the first registration of an investment fund manager in Canada dedicated solely to cryptocurrency investments. The BCSC granted First Block Capital Inc. registration as an investment fund manager and an exempt market dealer in order to operate a bitcoin investment fund. First Block, in partnership with Vancouver crowdfunding portal FrontFundr (Silver Maple Ventures Inc.), had announced in July, 2017 that it would launch Canada Bitcoin Trust, an investment fund designed to allow investors to buy into bitcoin. In the announcement, the BCSC noted that cryptocurrency investments raise risks that are different from traditional asset classes, including the cybersecurity risks inherent in dealing with digital currencies. These risks relate not only to the registrant, but also to the bitcoin fund's custodian, a third party chosen to facilitate the safekeeping and exchange of bitcoins. First Block was granted registration pursuant to NI 31-103 under the categories of "exempt market dealer" and "investment fund manager" in both Ontario and British Columbia, with the BCSC acting as the principal regulator. In granting the registration, the BCSC imposed conditions on First Block's Canada Bitcoin Trust because of the unique nature and risks of cryptocurrency investments. First Block will have additional reporting requirements concerning its oversight of the custodians and brokers it uses to buy and hold Bitcoin. The BCSC noted that the conditions of registration imposed on First Block were crafted to give flexibility to allow them to operate under the present regulatory framework, and give tools to the BCSC to evaluate the identified risks of this innovative fund type. <p>Recently, the British Columbia Securities Commission (BCSC) announced (found <span style="text-decoration:underline;"><a href="http://www.bcsc.bc.ca/News/News_Releases/2017/69_B_C__Securities_Commission_grants_landmark_bitcoin_investment_fund_manager_registration/">here</a></span>) the first registration of an investment fund manager in Canada dedicated solely to cryptocurrency investments. The BCSC granted First Block Capital Inc. registration as an investment fund manager and an exempt market dealer in order to operate a bitcoin investment fund.</p><p>First Block, in partnership with Vancouver crowdfunding portal FrontFundr (Silver Maple Ventures Inc.), had announced in July, 2017 that it would launch Canada Bitcoin Trust, an investment fund designed to allow investors to buy into bitcoin.  </p><p>In the announcement, the BCSC noted that cryptocurrency investments raise risks that are different from traditional asset classes, including the cybersecurity risks inherent in dealing with digital currencies. These risks relate not only to the registrant, but also to the bitcoin fund's custodian, a third party chosen to facilitate the safekeeping and exchange of bitcoins.</p><p>First Block was granted registration pursuant to NI 31-103 under the categories of "exempt market dealer" and "investment fund manager" in both Ontario and British Columbia, with the BCSC acting as the principal regulator. In granting the registration, the BCSC imposed conditions on First Block's Canada Bitcoin Trust because of the unique nature and risks of cryptocurrency investments. First Block will have additional reporting requirements concerning its oversight of the custodians and brokers it uses to buy and hold Bitcoin.</p><p>The BCSC noted that the conditions of registration imposed on First Block were crafted to give flexibility to allow them to operate under the present regulatory framework, and give tools to the BCSC to evaluate the identified risks of this innovative fund type. </p>9/18/2017 4:00:00 AM2017-09-18T04:00:00ZTrue1float;#9.00000000000000float;#2017.00000000000string;#Septemberfloat;#201709.000000000GP0|#75eda1bb-5890-4b6b-aad7-b703245ec2e8;L0|#075eda1bb-5890-4b6b-aad7-b703245ec2e8|Securities: Litigation Regulatory and Compliance;GTSet|#efd3ce69-ee46-4bca-b6af-3daf96f6b0ebSecurities: Litigation Regulatory and Compliance
Important Legislative Amendments in Health and Estate LawImportant Legislative Amendments in Health and Estate Law280BLG Blog PostEwa Krajewska;Ziad Yehia;Christine Lavioletteekrajewska@blg.com | Ewa Krajewska | 693A30232E777C626C6763616E6164615C656B72616A6577736B61 i:0#.w|blgcanada\ekrajewska;zyehia@blg.com | Ziad Yehia | 693A30232E777C626C6763616E6164615C7A7965686961 i:0#.w|blgcanada\zyehia;claviolette@blg.com | Christine Laviolette | 693A30232E777C626C6763616E6164615C636C6176696F6C65747465 i:0#.w|blgcanada\claviolette The All Families Are Equal Act (“AFAEA”), which entered into force on January 1st, 2017, reflects the Government of Ontario’s desire to implement a broad progressive agenda throughout provincial legislation, recognizing that the underlying basis of the Canadian family unit has evolved over the past few decades.<p>The <em>All Families Are Equal Act</em> (“AFAEA<strong><em>”</em></strong>), which entered into force on January 1st, 2017, reflects the Government of Ontario’s desire to implement a broad progressive agenda throughout provincial legislation, recognizing that the underlying basis of the Canadian family unit has evolved over the past few decades.</p> The All Families Are Equal Act (“AFAEA”), which entered into force on January 1st, 2017, reflects the Government of Ontario’s desire to implement a broad progressive agenda throughout provincial legislation, recognizing that the underlying basis of the Canadian family unit has evolved over the past few decades. By amending existing statutes, especially the Children’s Law Reform Act (“CLRA”) and the Succession Law Reform Act (“SLRA”), the AFAEA aims to transform key aspects of estate and health law, as summarized in the chart below All Families Are Equal Act Effects on Other Legislation Practical EffectsSection 71(1-5) Amends the definitions of child, issue, parent and spouse found in section 1(1) of the SLRA to include children conceived posthumously via assisted reproduction, and to broaden the definition of parent to include arrangements other than that of one father and one mother. Significantly alters who may bring an application for support as a dependent of a deceased’s estate, who may share in the deceased’s estate, and to whom lapsed gifts should be distributed.Section 71(6-10) Outlines detailed conditions under which a posthumously born infant may be legally recognized as the child of the deceased. Allows a posthumous child to bring an application for support as a dependent of a deceased parent’s estate, and creates a presumption that the child is a legitimate heir to the estate.Sections 4-6 Adds new sections to the CLRA, updating the conditions of parentage to create a presumptive exclusion of a person who provides reproductive material or an embryo, as well as a surrogate who waives their entitlement to parenthood. Changes the definition of parent throughout Ontario law, with a critical impact on issues such as Custody rights Child support Registration of births Medical consent Substitute decision-making Parental tax benefits Inheritance CitizenshipSection 7 Adds a new section to the CLRA, introducing a number of conditions which presumptively render an individual the parent of a child, such as being the spouse of the child’s parent at birth, and being in a conjugal relationship with the child’s parent within 300 days before birth.Section 8 Adds a new section to the CLRA, codifying the existing presumption that one parent’s spouse will be deemed the child’s parent even if the child was conceived via assisted reproduction with a third individual.Section 9 Adds a new section to the CLRA, introducing the concept of a “pre-conception parentage agreement,” which allows potential parents included within sections 6-8 of the AFAEA to contractually define their parentage status. Provides a new option for individuals seeking to clarify the parental status of their child, with complex parentage situations involving artificial insemination, surrogacy and intimate relationships among more than two individuals.Sections 10-11 Adds new sections to the CLRA, updating Ontario law to provide for surrogacy agreements, with a standard format for up to four legal parents, and an extraordinary format which can accommodate additional parents. These surrogacy agreements are not legally binding, but may serve as evidence of the parties’ intentions. Brings clarity to a previous convoluted aspect of Ontario law touching on the family, health and estates contexts. <p>The <em>All Families Are Equal Act</em> (“AFAEA<strong><em>”</em></strong>), which entered into force on January 1st, 2017, reflects the Government of Ontario’s desire to implement a broad progressive agenda throughout provincial legislation, recognizing that the underlying basis of the Canadian family unit has evolved over the past few decades. By amending existing statutes, especially the <em>Children’s Law Reform Act</em> (“CLRA<em>”</em>) and the <em>Succession Law Reform Act </em>(“SLRA<em>”</em>), the AFAEA aims to transform key aspects of estate and health law, as summarized in the chart below: </p><table width="0" align="left" border="1" cellspacing="0" cellpadding="5"><tbody><tr><td valign="top"><p> <strong><em>All Families Are Equal Act</em></strong></p></td><td valign="top"><p align="center"> <strong>Effects on Other Legislation</strong></p></td><td valign="top"><p align="center"> <strong>Practical Effects</strong></p></td></tr><tr><td valign="top"><p align="center">Section 71(1-5)</p></td><td valign="top"><p>Amends the definitions of child, issue, parent and spouse found in section 1(1) of the SLRA to include children conceived posthumously via assisted reproduction, and to broaden the definition of parent to include arrangements other than that of one father and one mother.</p></td><td valign="top"><p>Significantly alters who may bring an application for support as a dependent of a deceased’s estate, who may share in the deceased’s estate, and to whom lapsed gifts should be distributed.</p></td></tr><tr><td valign="top"><p align="center">Section 71(6-10)</p></td><td valign="top"><p>Outlines detailed conditions under which a posthumously born infant may be legally recognized as the child of the deceased.</p></td><td valign="top"><p>Allows a posthumous child to bring an application for support as a dependent of a deceased parent’s estate, and creates a presumption that the child is a legitimate heir to the estate.</p></td></tr><tr><td valign="top"><p align="center">Sections 4-6</p></td><td valign="top"><p>Adds new sections to the CLRA, updating the conditions of parentage to create a presumptive exclusion of a person who provides reproductive material or an embryo, as well as a surrogate who waives their entitlement to parenthood.</p></td><td valign="top" rowspan="3"><p>Changes the definition of parent throughout Ontario law, with a critical impact on issues such as:</p><ul><li>Custody rights</li><li>Child support</li><li>Registration of births</li><li>Medical consent</li><li>Substitute decision-making</li><li>Parental tax benefits</li><li>Inheritance</li><li>Citizenship</li></ul></td></tr><tr><td valign="top"><p align="center">Section 7</p></td><td valign="top"><p>Adds a new section to the CLRA, introducing a number of conditions which presumptively render an individual the parent of a child, such as being the spouse of the child’s parent at birth, and being in a conjugal relationship with the child’s parent within 300 days before birth.</p></td></tr><tr><td valign="top"><p align="center">Section 8</p></td><td valign="top"><p>Adds a new section to the CLRA, codifying the existing presumption that one parent’s spouse will be deemed the child’s parent even if the child was conceived via assisted reproduction with a third individual.</p></td></tr><tr><td valign="top"><p align="center">Section 9</p></td><td valign="top"><p>Adds a new section to the CLRA, introducing the concept of a “pre-conception parentage agreement,” which allows potential parents included within sections 6-8 of the AFAEA to contractually define their parentage status.</p></td><td valign="top"><p>Provides a new option for individuals seeking to clarify the parental status of their child, with complex parentage situations involving artificial insemination, surrogacy and intimate relationships among more than two individuals.</p></td></tr><tr><td valign="top"><p align="center">Sections 10-11</p></td><td valign="top"><p>Adds new sections to the CLRA, updating Ontario law to provide for surrogacy agreements, with a standard format for up to four legal parents, and an extraordinary format which can accommodate additional parents. These surrogacy agreements are not legally binding, but may serve as evidence of the parties’ intentions.</p></td><td valign="top"><p>Brings clarity to a previous convoluted aspect of Ontario law touching on the family, health and estates contexts.</p></td></tr></tbody></table><p> </p>9/15/2017 4:00:00 AM2017-09-15T04:00:00ZTrue1float;#9.00000000000000float;#2017.00000000000string;#Septemberfloat;#201709.000000000GP0|#fbfdfcb9-adbc-49cd-a509-671cc2c30fac;L0|#0fbfdfcb9-adbc-49cd-a509-671cc2c30fac|Estates and Trusts;GTSet|#efd3ce69-ee46-4bca-b6af-3daf96f6b0ebEstates and Trusts
Court of Appeal Significantly Reduces Judgment against GuarantorCourt of Appeal Significantly Reduces Judgment against Guarantor277BLG Blog PostGraham Splawski;Julie Lesagegsplawski@blg.com | Graham Splawski | 693A30232E777C626C6763616E6164615C6773706C6177736B69 i:0#.w|blgcanada\gsplawski;jlesage@blg.com | Julie Lesage | 693A30232E777C626C6763616E6164615C6A6C6573616765 i:0#.w|blgcanada\jlesage ​In Callidus Capital Corporation v. McFarlane, the Ontario Court of Appeal reduced an award on a guarantee of corporate debt from $3 million to $250,000, on the basis that the motion judge misinterpreted the guarantee. The creditor had been involved in a restructuring transaction, which had reduced the amount of the guarantee despite the creditor’s unilateral efforts to avoid this.<p>​<span style="font-size:11pt;line-height:107%;font-family:calibri, sans-serif;">In <em><a>Callidus Capital Corporation v. McFarlane</a></em>, the Ontario Court of Appeal  reduced an award on a guarantee of corporate debt from $3 million to $250,000, on the basis that the motion judge misinterpreted the guarantee. The creditor had been involved in a restructuring transaction, which had reduced the amount of the guarantee despite the creditor’s unilateral efforts to avoid this.</span></p> In Callidus Capital Corporation v. McFarlane, the Ontario Court of Appeal reduced the amount of debt a company's President and CEO owed on a guarantee from $3 million to $250,000. The Court recognized that contractual interpretation is an issue of mixed fact and law, but found that the motion judge made palpable and overriding errors interpreting the contract and calculating the amount owing. McFarlane, the President and CEO of Xchange Technology Group LLC (Xchange), provided a bank with a personal limited guarantee of the Company's debt, in the amount of $3 million. This debt was purchased by Callidus Capital Corporation (Callidus). McFarlane and Callidus later negotiated a forbearance agreement, which amended the guarantee. The amendments removed McFarlane's responsibilities for any portion of Xchange's debt that arose from Callidus' fees. McFarlane's exposure would be limited to the lesser of $3 million or the "Deficiency Amount." When the amended guarantee was signed, Callidus charged a facility fee of $2.25 million. A second forbearance agreement was later signed in exchange for facility fee of $250,000. After the expiry of this agreement, Callidus commenced court proceedings to appoint a receiver for a credit bid agreement and sale process of Xchange. In the report of the proposed receiver, it was noted that Xchange was $37 million in debt to Callidus. The payment of the purchase price would first go to satisfying the Callidus debt, less $3 million. No description was given of the purpose of the $3 million carve out. In the end, Callidus itself was the successful bidder. After the deal closed, Callidus sued McFarlane on his guarantee and brought a motion for summary judgement. The motion judge held that under the amended guarantee, McFarlane's exposure to Callidus was $3 million. He found that there was still $3 million owing to Callidus after the credit bid. This $3 million carve out in the asset purchase agreement, the judge reasoned, was intended to maintain McFarlane's guarantee obligation. Callidus had applied the purchase price towards the $2.75 million owing from forbearance and facility fees, as it had no obligation to first apply payments received from a debtor to the guaranteed portion of the debt. The motion judge granted judgement to Callidus under the agreement for $3 million. The Court held that the motion judge made two errors first, he made an error of law by failing to consider that the amended guarantee had reduced the amount that McFarlane guaranteed to the lower of $3 million and the "Deficiency Amount". Second, he made an error of fact by miscalculating the amount owing under the guarantee. The Deficiency Amount was to be calculated by reducing the forbearance and facility fees ($2.75 million) from the Obligations owing after the completion of the transaction ($3 million). The Court rejected Callidus' argument that the $34 million of debt extinguished after the credit bid included the facility and forbearance fees, as there was no allocation. Since no purpose was given for the $3 million carve out, the debt was to be treated as a whole. The Court accordingly reduced McFarlane's obligation to $250,000. While the Court did not make a finding on this basis, the defence argued that Callidus had structured the transaction in the way it did in order to avoid reporting a loss to its investors. This decision is notable to creditors as it suggests the courts will carefully construe the language of a guarantee. Creditors should exercise care when restructuring debts related to guarantees. <p>In <a><em>Callidus Capital Corporation v. McFarlane</em></a>, the Ontario Court of Appeal  reduced the amount of debt a company's President and CEO owed on a guarantee from $3 million to $250,000. The Court recognized that contractual interpretation is an issue of mixed fact and law, but found that the motion judge made palpable and overriding errors interpreting the contract and calculating the amount owing.</p><p>McFarlane, the President and CEO of Xchange Technology Group LLC (Xchange), provided a bank with a personal limited guarantee of the Company's debt, in the amount of $3 million. This debt was purchased by Callidus Capital Corporation (Callidus).</p><p>McFarlane and Callidus later negotiated a forbearance agreement, which amended the guarantee. The amendments removed McFarlane's responsibilities for any portion of Xchange's debt that arose from Callidus' fees. McFarlane's exposure would be limited to the lesser of $3 million or the "Deficiency Amount." When the amended guarantee was signed, Callidus charged a facility fee of $2.25 million. A second forbearance agreement was later signed in exchange for facility fee of $250,000.  </p><p>After the expiry of this agreement, Callidus commenced court proceedings to appoint a receiver for a credit bid agreement and sale process of Xchange. In the report of the proposed receiver, it was noted that Xchange was $37 million in debt to Callidus. The payment of the purchase price would first go to satisfying the Callidus debt, less $3 million. No description was given of the purpose of the $3 million carve out.</p><p>In the end, Callidus itself was the successful bidder. After the deal closed, Callidus sued McFarlane on his guarantee and brought a motion for summary judgement. The motion judge held that under the amended guarantee, McFarlane's exposure to Callidus was $3 million. He found that there was still $3 million owing to Callidus after the credit bid. This $3 million carve out in the asset purchase agreement, the judge reasoned, was intended to maintain McFarlane's guarantee obligation. Callidus had applied the purchase price towards the $2.75 million owing from forbearance and facility fees, as it had no obligation to first apply payments received from a debtor to the guaranteed portion of the debt. The motion judge granted judgement to Callidus under the agreement for $3 million.</p><p>The Court held that the motion judge made two errors: first, he made an error of law by failing to consider that the amended guarantee had reduced the amount that McFarlane guaranteed to the lower of $3 million and the "Deficiency Amount". Second, he made an error of fact by miscalculating the amount owing under the guarantee. The Deficiency Amount was to be calculated by reducing the forbearance and facility fees ($2.75 million) from the Obligations owing after the completion of the transaction ($3 million). The Court rejected Callidus' argument that the $34 million of debt extinguished after the credit bid included the facility and forbearance fees, as there was no allocation. Since no purpose was given for the $3 million carve out, the debt was to be treated as a whole. The Court accordingly reduced McFarlane's obligation to $250,000.   </p><p>While the Court did not make a finding on this basis, the defence argued that Callidus had structured the transaction in the way it did in order to avoid reporting a loss to its investors.</p><p>This decision is notable to creditors as it suggests the courts will carefully construe the language of a guarantee. Creditors should exercise care when restructuring debts related to guarantees.  </p>9/14/2017 4:00:00 AM2017-09-14T04:00:00ZTrue1float;#9.00000000000000float;#2017.00000000000string;#Septemberfloat;#201709.000000000GP0|#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
Rule 12.02 of the Rules of the Small Claims Court is Not Equivalent or Analogous to Rule 20 Summary Judgment MotionsRule 12.02 of the Rules of the Small Claims Court is Not Equivalent or Analogous to Rule 20 Summary Judgment Motions278BLG Blog PostZiad Yehiazyehia@blg.com | Ziad Yehia | 693A30232E777C626C6763616E6164615C7A7965686961 i:0#.w|blgcanada\zyehia In Elguindy v. St. Joseph’s Health Care London, Justice Morissette of the Ontario Superior Court of Justice was required to answer the following question on appeal Did the deputy judge err by presiding over a motion under rule 12.02 of the Rules of the Small Claims Court after presiding over a settlement conference? <p>In <a href="https://www.canlii.org/en/on/onsc/doc/2017/2017onsc5360/2017onsc5360.html?searchUrlHash=AAAAAQAtRWxndWluZHkgdi4gU3QuIEpvc2VwaOKAmXMgSGVhbHRoIENhcmUgTG9uZG9uAAAAAAE&resultIndex=2"><em>Elguindy v. St. Joseph’s Health Care London, </em></a>Justice Morissette of the Ontario Superior Court of Justice was required to answer the following question on appeal: Did the deputy judge err by presiding over a motion under rule 12.02 of the <em>Rules of the Small Claims Court</em> after presiding over a settlement conference?  </p> ​In Elguindy v. St. Joseph’s Health Care London,* Justice Morissette of the Ontario Superior Court of Justice was required to answer the following question on appeal Did the deputy judge err by presiding over a motion under rule 12.02 of the Rules of the Small Claims Court after presiding over a settlement conference? Rule 12 of the Rules of the Small Claims Court allows a moving party to, among other things, move to strike a document or dismiss an action. The appeal arose from a Small Claims Court medical negligence action brought by the appellant against the hospital, a nurse, and two doctors arising from the cancellation of a medical procedure that he was scheduled to undergo. The appellant argued by analogy that the Rules of Civil Procedure and case law prohibit a judge who has conducted a pre-trial conference from presiding at a trial or hearing a summary judgment motion under Rule 20 (unless the parties consent). The appellant submitted that the same rationale applies to prohibit settlement conference judges from hearing a motion to dismiss under Rule 12 of the Rules of Small Claims Court. The respondents argued that nothing in the Small Claims Court Rules prohibits a judge who has presided at a settlement conference from hearing such a motion, which they say is not akin to a summary judgment motion. Justice Morissette ultimately agreed with the respondents, concluding that a rule 12.02 motion is not equivalent or analogous to a Rule 20 summary judgment motion under the Rules of Civil Procedure. The wording of rule 12.02 is not an actual determination on the merits, but rather a motion that is brought in the spirit of the summary nature of Small Claims Court proceedings and involves an analysis of whether a reasonable cause of action has been disclosed or whether the proceeding should be ended at an early stage because its continuation would be inflammatory, a waste of time or a nuisance. The stay and dismissal powers in Rule 12 are meant to facilitate the objectives of the Small claims Court, including hearing and determining all questions of law and fact in a summary way, and having matters proceed in such a way to secure the most just, expeditious and least expensive determination of every proceeding. In the present case, the deputy judge did not determine the merits of the issues in a proceeding. The deputy judge dismissed the claim because of the appellant's failure to abide by multiple orders of the court. The deputy judge reasoned that it would be a waste of time to proceed to trial on the action as the matter was started in October, 2014 and despite numerous requests and court orders, the plaintiff had still not provided any expert report regarding the standard of care required by either doctor. Without the expert reports supporting the position of the plaintiff there was no possibility of the plaintiff succeeding. The case provides useful procedural guidance that will be relevant to financial institutions involved in Small Claims Court proceedings. *Borden Ladner Gervais represented the respondent in the case.<p>​In <a href="https://www.canlii.org/en/on/onsc/doc/2017/2017onsc5360/2017onsc5360.html?searchUrlHash=AAAAAQAtRWxndWluZHkgdi4gU3QuIEpvc2VwaOKAmXMgSGVhbHRoIENhcmUgTG9uZG9uAAAAAAE&resultIndex=2"><em>Elguindy v. St. Joseph’s Health Care London,</em></a>* Justice Morissette of the Ontario Superior Court of Justice was required to answer the following question on appeal: Did the deputy judge err by presiding over a motion under rule 12.02 of the <em>Rules of the Small Claims Court</em> after presiding over a settlement conference?  Rule 12 of the<em> Rules of the Small Claims Court </em>allows a moving party to, among other things, move to strike a document or dismiss an action.   The appeal arose from a Small Claims Court medical negligence action brought by the appellant against the hospital, a nurse, and two doctors arising from the cancellation of a medical procedure that he was scheduled to undergo. </p><p>The appellant argued by analogy that the <em>Rules of Civil Procedure</em> and case law prohibit a judge who has conducted a pre-trial conference from presiding at a trial or hearing a summary judgment motion under Rule 20 (unless the parties consent).   The appellant submitted that the same rationale applies to prohibit settlement conference judges from hearing a motion to dismiss under Rule 12 of the <em>Rules of Small Claims Court</em>.  The respondents argued that nothing in the Small Claims Court Rules prohibits a judge who has presided at a settlement conference from hearing such a motion, which they say is not akin to a summary judgment motion.   </p><p>Justice Morissette ultimately agreed with the respondents, concluding that a rule 12.02 motion is not equivalent or analogous to a Rule 20 summary judgment motion under the <em>Rules of Civil Procedure</em>.  The wording of rule 12.02 is not an actual determination on the merits, but rather a motion that is brought in the spirit of the summary nature of Small Claims Court proceedings and involves an analysis of whether a reasonable cause of action has been disclosed or whether the proceeding should be ended at an early stage because its continuation would be inflammatory, a waste of time or a nuisance.</p><p>The stay and dismissal powers in Rule 12 are meant to facilitate the objectives of the Small claims Court, including hearing and determining all questions of law and fact in a summary way, and having matters proceed in such a way to secure the most just, expeditious and least expensive determination of every proceeding.  </p><p>In the present case, the deputy judge did not determine the merits of the issues in a proceeding. The deputy judge dismissed the claim because of the appellant's failure to abide by multiple orders of the court.  The deputy judge reasoned that it would be a waste of time to proceed to trial on the action as the matter was started in October, 2014 and despite numerous requests and court orders, the plaintiff had still not provided any expert report regarding the standard of care required by either doctor.  Without the expert reports supporting the position of the plaintiff there was no possibility of the plaintiff succeeding.  </p><p>The case provides useful procedural guidance that will be relevant to financial institutions involved in Small Claims Court proceedings.</p><p>*Borden Ladner Gervais represented the respondent in the case.</p>9/13/2017 4:00:00 AM2017-09-13T04:00:00ZTrue1float;#9.00000000000000float;#2017.00000000000string;#Septemberfloat;#201709.000000000GP0|#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
Ontario Court Further Clarifies Limitation Period for Statutory Securities Class ActionsOntario Court Further Clarifies Limitation Period for Statutory Securities Class Actions276BLG Blog PostGraham Splawskigsplawski@blg.com | Graham Splawski | 693A30232E777C626C6763616E6164615C6773706C6177736B69 i:0#.w|blgcanada\gsplawski ​In “the latest sequel or prequel in what has turned out to be the case law equivalent of a horror-movie franchise”, Justice Perell struck 11 of 14 statutory claims for secondary market misrepresentation in Kaynes v. BP PLC, and further clarified the “continuous misrepresentation” aspect of the cause of action.<p>​<span style="font-size:11pt;line-height:115%;font-family:calibri, sans-serif;">In “the latest sequel or prequel in what has turned out to be the case law equivalent of a horror-movie franchise”, Justice Perell struck 11 of 14 statutory claims for secondary market misrepresentation in <em><a href="http://canlii.ca/t/h5rj5">Kaynes v. BP PLC</a></em>, and further clarified the “continuous misrepresentation” aspect of the cause of action.</span></p> In "the latest sequel or prequel in what has turned out to be the case law equivalent of a horror-movie franchise", Justice Perell struck 11 of 14 statutory claims for secondary market misrepresentation in Kaynes v. BP PLC. This decision follows numerous other significant decisions considering the limitation period in the since-amended Part XXIII.1 of the Ontario Securities Act, which culminated in the Supreme Court's decision in a trilogy of cases, that we summarized here. In that trilogy, the Supreme Court held that under the previous version of the statute, leave must have been obtained to pursue the cause of action prior to the expiry of the three-year limitation period, but that leave could be granted nunc pro tunc in certain cases (e.g. where a notice of motion for leave had been served in time). The statute was subsequently amended to provide that the limitation is suspended on the filing of a notice of motion for leave to commence an action under that Part of the statute. Justice Perell's decision largely follows the previous decisions considering the "statute-bar monster", but was required to address one novel argument. The plaintiffs contended that the misrepresentations that occurred prior to the limitation period were part of a "continuing misrepresentation" (s. 138.3(6)), thereby defeating the defendants' limitation argument. Justice Perell found that the plaintiffs' argument ran contrary to the statutory scheme, considering that the "continuing misrepresentation" was included to protect defendants from "multiple liability for disclosure violations that were so interconnected to be considered a single disclosure violation" (para. 47). He held the plaintiffs' interpretation of the statute would upset the "delicate balance between various market participants" that Justice Côté described in the trilogy (para. 47). Despite being decided under the now-clarified statutory regime, this decision is notable for issuers as it suggests the Court will prevent plaintiffs' attempts to make the strict limitation period in Part XXIII.1 more plaintiff-friendly. <p>In "the latest sequel or prequel in what has turned out to be the case law equivalent of a horror-movie franchise", Justice Perell struck 11 of 14 statutory claims for secondary market misrepresentation in <a href="http://canlii.ca/t/h5rj5"><em>Kaynes v. BP PLC</em></a>. This decision follows numerous other significant decisions considering the limitation period in the since-amended Part XXIII.1 of the Ontario <em>Securities Act</em>, which culminated in the Supreme Court's decision in a trilogy of cases, that we summarized <a href="http://blg.com/en/News-And-Publications/publication_4340">here</a>. In that trilogy, the Supreme Court held that under the previous version of the statute, leave must have been obtained to pursue the cause of action prior to the expiry of the three-year limitation period, but that leave could be granted <em>nunc pro tunc</em> in certain cases (e.g. where a notice of motion for leave had been served in time). The statute was subsequently amended to provide that the limitation is suspended on the filing of a notice of motion for leave to commence an action under that Part of the statute.</p><p>Justice Perell's decision largely follows the previous decisions considering the "statute-bar monster", but was required to address one novel argument. The plaintiffs contended that the misrepresentations that occurred prior to the limitation period were part of a "continuing misrepresentation" (s. 138.3(6)), thereby defeating the defendants' limitation argument. Justice Perell found that the plaintiffs' argument ran contrary to the statutory scheme, considering that the "continuing misrepresentation" was included to protect defendants from "multiple liability for disclosure violations that were so interconnected to be considered a single disclosure violation" (para. 47). He held the plaintiffs' interpretation of the statute would upset the "delicate balance between various market participants" that Justice Côté described in the trilogy (para. 47).</p><p>Despite being decided under the now-clarified statutory regime, this decision is notable for issuers as it suggests the Court will prevent plaintiffs' attempts to make the strict limitation period in Part XXIII.1 more plaintiff-friendly. </p>9/8/2017 4:00:00 AM2017-09-08T04:00:00ZTrue1float;#9.00000000000000float;#2017.00000000000string;#Septemberfloat;#201709.000000000GP0|#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
Auditor Held to Owe Duty to “Client’s Clients”Auditor Held to Owe Duty to “Client’s Clients”275BLG Blog PostBevan Brooksbankbbrooksbank@blg.com | Bevan Brooksbank | 693A30232E777C626C6763616E6164615C6262726F6F6B7362616E6B i:0#.w|blgcanada\bbrooksbank ​In Lavender v. Miller Bernstein LLP, Justice Belobaba heard a motion by the representative plaintiff for summary judgment on several of the common issues certified in the class proceeding against the defendant auditor. The disposition of the motion turned on the question of whether a duty of care arose between Miller Bernstein and the class members who held investments with the auditor's client, a defunct securities dealer. Such a duty was found by Justice Belobaba, with the motion being decided in favour of the representative plaintiff.<p>​In <a href="https://www.canlii.org/en/on/onsc/doc/2017/2017onsc3958/2017onsc3958.html?autocompleteStr=Lavender%20v.%20Miller%20Bernstein&autocompletePos=1"><em>Lavender v. Miller Bernstein LLP</em></a>, Justice Belobaba heard a motion by the representative plaintiff for summary judgment on several of the common issues certified in the class proceeding against the defendant auditor.  The disposition of the motion turned on the question of whether a duty of care arose between Miller Bernstein and the class members who held investments with the auditor's client, a defunct securities dealer. Such a duty was found by Justice Belobaba, with the motion being decided in favour of the representative plaintiff.</p>In Lavender v. Miller Bernstein LLP, Justice Belobaba heard a motion by the representative plaintiff for summary judgment on several of the common issues certified in the class proceeding against the defendant auditor. The disposition of the motion turned on the question of whether a duty of care arose between Miller Bernstein and the class members who held investments with the auditor's client, a defunct securities dealer. Such a duty was found by Justice Belobaba, with the motion being decided in favour of the representative plaintiff.The facts of the case are straightforward, and concern the failure of a securities dealer, Buckingham Securities ("Buckingham") to segregate investor (class member) assets and maintain minimum net free capital in breach of regulatory requirements. The Ontario Securities Commission ultimately placed Buckingham in receivership, yet the unsegregated assets had by that time been appropriated resulting in a loss to the class members. In the course of subsequent OSC proceedings, it was admitted that materially untrue statements had been made in "Form 9" reports, which were to be audited and filed with the OSC to confirm the asset segregation and minimum capital. The Form 9s had been audited in the material years by Miller Bernstein ("MB").A class action was commenced in 2005, and subsequently certified, on behalf of investors in Buckingham, alleging that MB had breached its duty of care owed to class members through its negligent audit of the reports filed with the OSC. In short, the class allegation was that losses had been sustained which, but for MB's negligent audit of the Form 9s, would not have arisen since accurate Form 9s would have alerted OSC and precipitated an earlier intervention. On the summary judgment motion, there was little dispute over several of the common issues, such as causation or whether Buckingham had in fact failed to comply with regulatory requirements. Rather, the central point of contention was whether a duty of care was in fact owed to class members by MB. Justice Belobaba embarked on the established Anns-Cooper analysis, namely to determine i) whether the facts disclose a sufficient level of foreseeability and proximity to establish a prima facie duty of care, and ii) if so, whether there are residual policy considerations that would justify declining to impose liability in tort.On the first stage of the test, the Court held the question was simply whether "the defendant may be said to have had an obligation to be mindful of the plaintiff's interests in going about his business." The facts supported a prima facie duty of care. While the class members had little meaningful contact with MB, the auditor knew the Form 9s were used by the OSC to police securities dealers and to protect investors, and MB understood the consequences to its "client's clients" if the segregation or capital deficiency information was misstated. Moreover, MB was retained by Buckingham to do an assurance audit and had access to the individual investor names and account details.Moving to the residual policy concern stage, Justice Belobaba noted that the Court's primary concern when imposing a duty of care in cases of pure economic loss is the spectre of indeterminate or unlimited liability. However, it was determined that such a concern did not arise on the facts of the case. MB knew the identity of the class of plaintiffs, and the auditor's statements were used for the specific purpose for which they were prepared. As such, MB was aware of the narrowly circumscribed class of people to whom it could be liable for a negligent audit, and also its potential monetary liability through knowledge of the investments at issue.As a result, the Court held in favour of the representative plaintiff with respect to the common issues concerning the omissions of Buckingham, the duty owed by MB, and the auditor's breach of that duty through the preparation of negligent audit reports. Interestingly, while the representative plaintiff was largely successful the ultimate outcome remains to be seen. The plaintiff failed to put before the Court evidence of class members' actual losses, nor a proposed methodology for making such a determination. Belobaba J. noted that clarification would be needed in light of the fact, inter alia, that Class members received a court-approved distribution from the Receiver in 2005. Justice Belobaba reaffirmed that expert evidence speaking to estimated aggregate losses was of not assistance, as actual loss is a precondition to liability in tort, and aggregate damages under the Class Proceedings Act cannot be used to establish actual loss/liability. Consequently, whether liability is ultimately established, and recovery obtained for class members, will depend upon any further evidence proffered. <p style="text-align:justify;">In <a href="https://www.canlii.org/en/on/onsc/doc/2017/2017onsc3958/2017onsc3958.html?autocompleteStr=Lavender%20v.%20Miller%20Bernstein&autocompletePos=1"><em>Lavender v. Miller Bernstein LLP</em></a>, Justice Belobaba heard a motion by the representative plaintiff for summary judgment on several of the common issues certified in the class proceeding against the defendant auditor.  The disposition of the motion turned on the question of whether a duty of care arose between Miller Bernstein and the class members who held investments with the auditor's client, a defunct securities dealer. Such a duty was found by Justice Belobaba, with the motion being decided in favour of the representative plaintiff.</p><p style="text-align:justify;">The facts of the case are straightforward, and concern the failure of a securities dealer, Buckingham Securities ("Buckingham") to segregate investor (class member) assets and maintain minimum net free capital in breach of regulatory requirements. The Ontario Securities Commission ultimately placed Buckingham in receivership, yet the unsegregated assets had by that time been appropriated resulting in a loss to the class members. In the course of subsequent OSC proceedings, it was admitted that materially untrue statements had been made in "Form 9" reports, which were to be audited and filed with the OSC to confirm the asset segregation and minimum capital. The Form 9s had been audited in the material years by Miller Bernstein ("MB").</p><p style="text-align:justify;">A class action was commenced in 2005, and subsequently certified, on behalf of investors in Buckingham, alleging that MB had breached its duty of care owed to class members through its negligent audit of the reports filed with the OSC. In short, the class allegation was that losses had been sustained which, but for MB's negligent audit of the Form 9s, would not have arisen since accurate Form 9s would have alerted OSC and precipitated an earlier intervention. </p><p style="text-align:justify;">On the summary judgment motion, there was little dispute over several of the common issues, such as causation or whether Buckingham had in fact failed to comply with regulatory requirements. Rather, the central point of contention was whether a duty of care was in fact owed to class members by MB. Justice Belobaba embarked on the established <em>Anns-Cooper</em> analysis, namely to determine i) whether the facts disclose a sufficient level of foreseeability and proximity to establish a <em>prima facie</em> duty of care, and ii) if so, whether there are residual policy considerations that would justify declining to impose liability in tort.</p><p style="text-align:justify;">On the first stage of the test, the Court held the question was simply whether "the defendant may be said to have had an obligation to be mindful of the plaintiff's interests in going about his business." The facts supported a <em>prima facie</em> duty of care. While the class members had little meaningful contact with MB, the auditor knew the Form 9s were used by the OSC to police securities dealers and to protect investors, and MB understood the consequences to its "client's clients" if the segregation or capital deficiency information was misstated. Moreover, MB was retained by Buckingham to do an assurance audit and had access to the individual investor names and account details.</p><p style="text-align:justify;">Moving to the residual policy concern stage, Justice Belobaba noted that the Court's primary concern when imposing a duty of care in cases of pure economic loss is the spectre of indeterminate or unlimited liability. However, it was determined that such a concern did not arise on the facts of the case. MB knew the identity of the class of plaintiffs, and the auditor's statements were used for the specific purpose for which they were prepared. As such, MB was aware of the narrowly circumscribed class of people to whom it could be liable for a negligent audit, and also its potential monetary liability through knowledge of the investments at issue.</p><p style="text-align:justify;">As a result, the Court held in favour of the representative plaintiff with respect to the common issues concerning the omissions of Buckingham, the duty owed by MB, and the auditor's breach of that duty through the preparation of negligent audit reports. </p><p>Interestingly, while the representative plaintiff was largely successful the ultimate outcome remains to be seen. The plaintiff failed to put before the Court evidence of class members' actual losses, nor a proposed methodology for making such a determination.  Belobaba J. noted that clarification would be needed in light of the fact, <em>inter alia</em>, that Class members received a court-approved distribution from the Receiver in 2005.</p><p>Justice Belobaba reaffirmed that expert evidence speaking to estimated aggregate losses was of not assistance, as actual loss is a precondition to liability in tort, and aggregate damages under the <em>Class Proceedings Act</em> cannot be used to establish actual loss/liability. Consequently, whether liability is ultimately established, and recovery obtained for class members, will depend upon any further evidence proffered. </p>9/7/2017 4:00:00 AM2017-09-07T04:00:00ZTrue1float;#9.00000000000000float;#2017.00000000000string;#Septemberfloat;#201709.000000000GP0|#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
Personal Cheque Used to Pay Deposit on New Home is Deemed Sufficient by the Court of AppealPersonal Cheque Used to Pay Deposit on New Home is Deemed Sufficient by the Court of Appeal273BLG Blog PostMarion Unraumunrau@blg.com | Marion Unrau | 693A30232E777C626C6763616E6164615C6D756E726175 i:0#.w|blgcanada\munrau ​In Preiano v. Cirillo, the purchasers sued the vendors for specific performance of an Agreement of Purchase and Sale ("APS") regarding the vendors' home. <p>​In <em>Preiano v. Cirillo</em>, the purchasers sued the vendors for specific performance of an Agreement of Purchase and Sale ("APS") regarding the vendors' home. </p> In Preiano v. Cirillo, the purchasers sued the vendors for specific performance of an Agreement of Purchase and Sale ("APS") regarding the vendors' home. At the time they signed the draft APS by which they offered to buy the vendors' home, the purchasers delivered a $25,000 personal cheque as a deposit to the vendors' real estate agent. This real estate agent retained the personal cheque but told the purchasers that it would have to be replaced with $25,000 in certified funds if the vendors accepted the APS. He did not attempt to deposit the personal cheque. The APS required the purchasers to pay the deposit of $25,000 within 24 hours of the acceptance, and indicated that "time shall be of the essence". The purchasers delivered $25,000 in certified funds in the form of a bank draft approximately one day after the 24-hour deadline had elapsed. A few weeks later, counsel for the vendors wrote to the purchasers asserting that there was no valid APS because of the late receipt of the deposit. The motion judge found that because the bank draft was delivered a day late, there was no APS in effect to be specifically performed. Consequently, he dismissed the action. He arrived at this conclusion after finding that the personal cheque was "not capable of yielding funds upon negotiation" because the record of the chequing account did not show a balance that could accommodate payment of the cheque. The Court of Appeal for Ontario held that the motion judge made the error of interpreting the admission that the bank statement was authentic as an admission that the purchasers did not have the money to pay the cheque, so that upon presentation it would have been dishonoured by the bank. According to the reviewing Court, there was no evidence that the bank would not have honoured the cheque, nor was there any evidence as to the purchasers' financial capacity or their arrangements with the bank. As a result, the appeal was allowed and the action continued. This decision may entice home vendors to seek additional banking information from purchasers to verify that deposits paid by personal cheques will be honoured by the issuing bank.<p>In <a href="https://www.canlii.org/en/on/onca/doc/2017/2017onca615/2017onca615.html?autocompleteStr=preiano%20v%20&autocompletePos=2"><em>Preiano v. Cirillo</em></a>, the purchasers sued the vendors for specific performance of an Agreement of Purchase and Sale ("APS") regarding the vendors' home. At the time they signed the draft APS by which they offered to buy the vendors' home, the purchasers delivered a $25,000 personal cheque as a deposit to the vendors' real estate agent. This real estate agent retained the personal cheque but told the purchasers that it would have to be replaced with $25,000 in certified funds if the vendors accepted the APS. He did not attempt to deposit the personal cheque. The APS required the purchasers to pay the deposit of $25,000 within 24 hours of the acceptance, and indicated that "time shall be of the essence". The purchasers delivered $25,000 in certified funds in the form of a bank draft approximately one day after the 24-hour deadline had elapsed. A few weeks later, counsel for the vendors wrote to the purchasers asserting that there was no valid APS because of the late receipt of the deposit.</p><p>The motion judge found that because the bank draft was delivered a day late, there was no APS in effect to be specifically performed. Consequently, he dismissed the action. He arrived at this conclusion after finding that the personal cheque was "not capable of yielding funds upon negotiation" because the record of the chequing account did not show a balance that could accommodate payment of the cheque. </p><p>The Court of Appeal for Ontario held that the motion judge made the error of interpreting the admission that the bank statement was authentic as an admission that the purchasers did not have the money to pay the cheque, so that upon presentation it would have been dishonoured by the bank. According to the reviewing Court, there was no evidence that the bank would not have honoured the cheque, nor was there any evidence as to the purchasers' financial capacity or their arrangements with the bank. As a result, the appeal was allowed and the action continued. This decision may entice home vendors to seek additional banking information from purchasers to verify that deposits paid by personal cheques will be honoured by the issuing bank.</p>9/6/2017 4:00:00 AM2017-09-06T04:00:00ZTrue1float;#9.00000000000000float;#2017.00000000000string;#Septemberfloat;#201709.000000000GP0|#2df25a26-3353-4357-8797-8d21a2ea3aee;L0|#02df25a26-3353-4357-8797-8d21a2ea3aee|Banking and Bills of Exchange;GTSet|#efd3ce69-ee46-4bca-b6af-3daf96f6b0ebBanking and Bills of Exchange
Ontario Court of Appeal Affirms Motherhood Contractual Interpretation PrinciplesOntario Court of Appeal Affirms Motherhood Contractual Interpretation Principles272BLG Blog PostAlannah Fotheringhamafotheringham@blg.com | Alannah Fotheringham | 693A30232E777C626C6763616E6164615C61666F74686572696E6768616D i:0#.w|blgcanada\afotheringham ​In RBC Dominion Securities Inc. v. Crew Gold Corporation ("Crew Gold"), the Ontario Court of Appeal reaffirmed a variety of fundamental contractual interpretation principles. While this case does not move the law in a significant way, it does provide certainty regarding the proper approach to be taken to contextual interpretation of a contract, the consideration of objective evidence of the surrounding circumstances of a contract, and the interpretation of the commercial reasonableness of a contract. This clear case from the Court of Appeal should provide assistance to financial institutions of all kinds in litigation involving contractual interpretation disputes. <p>​In <a href="https://www.canlii.org/en/on/onca/doc/2017/2017onca648/2017onca648.html?resultIndex=1"><em>RBC Dominion Securities Inc. v. Crew Gold Corporation</em></a> ("<em>Crew Gold</em>"), the Ontario Court of Appeal reaffirmed a variety of fundamental contractual interpretation principles.  While this case does not move the law in a significant way, it does provide certainty regarding the proper approach to be taken to contextual interpretation of a contract, the consideration of objective evidence of the surrounding circumstances of a contract, and the interpretation of the commercial reasonableness of a contract. This clear case from the Court of Appeal should provide assistance to financial institutions of all kinds in litigation involving contractual interpretation disputes. </p> In RBC Dominion Securities Inc. v. Crew Gold Corporation ("Crew Gold"), the Ontario Court of Appeal reaffirmed a variety of fundamental contractual interpretation principles, including the roles of contextual interpretation, objective evidence and surrounding circumstances, and commercial reasonableness. At issue in Crew Gold was RBC Dominion Securities' (the "FI") entitlement to a success fee under an agreement with Crew Gold Corporation ("Crew") for the provision of investment banking services (the "Agreement"). Under the Agreement, a success fee became due to the FI at the completion of a "transaction", which was defined to include (i) a sale of all or a substantial portion of the shares, business or assets of Crew to a third party; (ii) an investment by a third party in Crew that results in a change of control of Crew; or (iii) an amalgamation, arrangement or other business transaction involving Crew and a third party to effect such a sale or disposition. During the term of the Agreement, Crew was the subject of a takeover that neither Crew nor the FI had anticipated. The issue between the parties therefore became whether the FI was entitled to its success fee in respect of any or all of the transactions involved in the takeover, despite the fact that the FI had not participated in them in any way. The trial judge analyzed the plain language of the agreement, and concluded that the FI was not intended to receive a success fee unless there was a causal link between its activities and the completed transaction. The trial judge also reviewed the factual matrix, and found that the entire purpose of the FI's strategy for Crew was to maximize shareholder value by rolling out a process for the sale of Crew's assets or control shares, which would not have included the takeover. He also found that the FI never spoke of the possibility of a third party purchase. On appeal, the FI argued that the trial judge made three extricable errors of law, by (i) failing to consider the plain words of the agreement in the context of the contract as a whole; (ii) failing to correctly consider the objective evidence and surrounding circumstances of the agreement; and (iii) failing to consider the commercial reasonableness of the interpretation of the agreement. With respect to the FI's allegation that the trial judge failed to consider the context of the contract as a whole, the Ontario Court of Appeal held that the trial judge's finding that a causal link was required for the FI to be entitled to a success fee was a reasonable interpretation, and that he arrived at that conclusion after considering the specific words at issue in the context of the agreement as a whole. Accordingly, the Court found that the trial judge made no extricable error of law. With respect to the FI's contention that the trial judge failed to consider the objective evidence of the surrounding circumstances, the Court found that there was no evidence that the trial judge relied on the parties' subjective intentions. The Court also found that the trial judge's reference to the conduct of the parties following the execution of the contract was not considered in his interpretation of the contract. Therefore, the Court held that the trial judge made no extricable error of law. Lastly, with respect to the FI's argument that the trial judge failed to consider the commercial reasonableness of the interpretation of the agreement, the Court found that the trial judge did not need to analyze the FI's arguments under a separate point to avoid this error. The Court held that the trial judge considered the objective circumstances and factual matrix surrounding the agreement, which speak to the commercial context, and that his interpretation was not commercially unreasonable. The Court also noted that the FI's interpretation of the agreement would have resulted in them receiving a significant windfall, which itself did not make commercial sense. While this case does not move the law in a significant way, it does provide certainty regarding the proper approach to be taken to contextual interpretation of a contract, the consideration of objective evidence of the surrounding circumstances of a contract, and the interpretation of the commercial reasonableness of a contract. This clear case from the Court of Appeal should provide assistance to financial institutions of all kinds in litigation involving contractual interpretation disputes. <p>In <a href="https://www.canlii.org/en/on/onca/doc/2017/2017onca648/2017onca648.html?resultIndex=1"><em>RBC Dominion Securities Inc. v. Crew Gold Corporation</em></a> ("<em>Crew Gold</em>"), the Ontario Court of Appeal reaffirmed a variety of fundamental contractual interpretation principles, including the roles of contextual interpretation, objective evidence and surrounding circumstances, and commercial reasonableness. </p><p>At issue in <em>Crew Gold</em> was RBC Dominion Securities' (the "FI") entitlement to a success fee under an agreement with Crew Gold Corporation ("Crew") for the provision of investment banking services (the "Agreement"). Under the Agreement, a success fee became due to the FI at the completion of a "transaction", which was defined to include (i) a sale of all or a substantial portion of the shares, business or assets of Crew to a third party; (ii) an investment by a third party in Crew that results in a change of control of Crew; or (iii) an amalgamation, arrangement or other business transaction involving Crew and a third party to effect such a sale or disposition. </p><p>During the term of the Agreement, Crew was the subject of a takeover that neither Crew nor the FI had anticipated. The issue between the parties therefore became whether the FI was entitled to its success fee in respect of any or all of the transactions involved in the takeover, despite the fact that the FI had not participated in them in any way.</p><p>The trial judge analyzed the plain language of the agreement, and concluded that the FI was not intended to receive a success fee unless there was a causal link between its activities and the completed transaction. The trial judge also reviewed the factual matrix, and found that the entire purpose of the FI's strategy for Crew was to maximize shareholder value by rolling out a process for the sale of Crew's assets or control shares, which would not have included the takeover. He also found that the FI never spoke of the possibility of a third party purchase.</p><p>On appeal, the FI argued that the trial judge made three extricable errors of law, by: (i) failing to consider the plain words of the agreement in the context of the contract as a whole; (ii) failing to correctly consider the objective evidence and surrounding circumstances of the agreement; and (iii) failing to consider the commercial reasonableness of the interpretation of the agreement.</p><p>With respect to the FI's allegation that the trial judge failed to consider the context of the contract as a whole, the Ontario Court of Appeal held that the trial judge's finding that a causal link was required for the FI to be entitled to a success fee was a reasonable interpretation, and that he arrived at that conclusion after considering the specific words at issue in the context of the agreement as a whole. Accordingly, the Court found that the trial judge made no extricable error of law.</p><p>With respect to the FI's contention that the trial judge failed to consider the objective evidence of the surrounding circumstances, the Court found that there was no evidence that the trial judge relied on the parties' subjective intentions. The Court also found that the trial judge's reference to the conduct of the parties following the execution of the contract was not considered in his interpretation of the contract. Therefore, the Court held that the trial judge made no extricable error of law.</p><p>Lastly, with respect to the FI's argument that the trial judge failed to consider the commercial reasonableness of the interpretation of the agreement, the Court found that the trial judge did not need to analyze the FI's arguments under a separate point to avoid this error. The Court held that the trial judge considered the objective circumstances and factual matrix surrounding the agreement, which speak to the commercial context, and that his interpretation was not commercially unreasonable. The Court also noted that the FI's interpretation of the agreement would have resulted in them receiving a significant windfall, which itself did not make commercial sense. </p><p>While this case does not move the law in a significant way, it does provide certainty regarding the proper approach to be taken to contextual interpretation of a contract, the consideration of objective evidence of the surrounding circumstances of a contract, and the interpretation of the commercial reasonableness of a contract. This clear case from the Court of Appeal should provide assistance to financial institutions of all kinds in litigation involving contractual interpretation disputes. </p>8/29/2017 4:00:00 AM2017-08-29T04:00:00ZTrue1float;#8.00000000000000float;#2017.00000000000string;#Augustfloat;#201708.000000000GP0|#2df25a26-3353-4357-8797-8d21a2ea3aee;L0|#02df25a26-3353-4357-8797-8d21a2ea3aee|Banking and Bills of Exchange;GTSet|#efd3ce69-ee46-4bca-b6af-3daf96f6b0ebBanking and Bills of Exchange
ASC Dismisses Application to Terminate Soliciting Dealer ArrangementASC Dismisses Application to Terminate Soliciting Dealer Arrangement271BLG Blog PostAndrew Pozzobonapozzobon@blg.com | Andrew Pozzobon | 693A30232E777C626C6763616E6164615C61706F7A7A6F626F6E i:0#.w|blgcanada\apozzobon ​Recently, the Alberta Securities Commission (ASC) released its decision in Re PointNorth Capital Inc., in which the ASC dismissed an application by dissident shareholders to terminate a soliciting dealer arrangement that had been entered into by an issuer in the context of a proxy fight. <p>​Recently, the Alberta Securities Commission (ASC) released its decision in <a href="http://www.albertasecurities.com/Notices%20Decisions%20Orders%20%20Rulings/Enforcement/PointNorth%20Capital%20Inc%20DECISION%202017%2007%2018%205361891.1.pdf"><em>Re PointNorth Capital Inc.,</em></a> in which the ASC dismissed an application by dissident shareholders to terminate a soliciting dealer arrangement that had been entered into by an issuer in the context of a proxy fight. </p> ​Recently, the Alberta Securities Commission (ASC) released its decision in Re PointNorth Capital Inc., in which the ASC dismissed an application by dissident shareholders to terminate a soliciting dealer arrangement that had been entered into by an issuer in the context of a proxy fight. Liquor Stores N.A. Ltd. (Liquor Stores), is an Alberta-based reporting issuer with 251 retail liquor stores. PointNorth Capital (Point North) held almost 10% of Liquor Stores' common shares and requested representation on the Liquor Stores Board. In January 2017, Liquor Stores formed a special committee of independent directors "to assist the [Liquor Stores] Board in its response to the anticipated proxy contest initiated by" PointNorth. The anticipated proxy contest materialized. Liquor Stores and PointNorth each made arrangements to solicit proxies from shareholders.Each of Liquor Stores and PointNorth issued news releases during the course of the proxy contest. In a June 2017 news release, Liquor Stores announced the recommendation that proxies be exercised in favour of Liquor Stores' candidates. The news release also announced Liquor Stores' formation of a soliciting dealer group that would compensate brokers for time spent alerting shareholders to the importance of voting the white proxy to protect the future value of the shareholders' investment in Liquor Stores. Pursuant to the soliciting dealer arrangement, Liquor Stores agreed to pay a dealer manager a work fee of $100,000 for services rendered in connection with the formation and management of a soliciting dealer group (Soliciting Dealer Group) and a solicitation fee of $0.05 per common share to any member of the Soliciting Dealer Group that facilitated the valid voting by a retail shareholder of his or her shares in support of each member of the Liquor Store's slate of directors, to a maximum of $1,500 per shareholder.PointNorth conceded that the soliciting dealer arrangement was not in contravention of Alberta Securities laws. Both PointNorth and Liquor Stores agreed that the ASC has broad – but not unlimited – powers to act protectively and preventively in the public interest, even in the absence of Alberta securities laws. Finally, all parties agreed that the standard test for exercising such jurisdiction was the impugned conduct was "clearly abusive" to shareholders and the capital market. However, PointNorth argued that where securities laws are silent on a topic (such as in this case), there might be a lower bar than the "clearly abusive" test. In its decision, the ASC Panel found that PointNorth had not established that any actual harm was caused by the soliciting dealer arrangement. The ASC Panel noted that Alberta securities laws set out detailed and comprehensive regimes for the solicitation of proxies and for the obligations of brokers and dealers. In the absence of a breach of specific securities law, the public interest jurisdiction should only be exercised to address a clearly demonstrated abuse of investors and the integrity of the capital markets. The ASC Panel did not accept that the ASC's public interest mandate included imposing new policy requirements, noting that any new policy requirements addressing potential dealer conflict issues could have broader and unintended consequences. The ASC Panel's decision confirms that the ASC will use caution and consider the consequences before exercising its extraordinary public interest jurisdiction. Further, in order to exercise its jurisdiction, the impugned conduct must be "clearly abusive" to shareholders and the capital market. <p>​Recently, the Alberta Securities Commission (ASC) released its decision in <a href="http://www.albertasecurities.com/Notices%20Decisions%20Orders%20%20Rulings/Enforcement/PointNorth%20Capital%20Inc%20DECISION%202017%2007%2018%205361891.1.pdf"><em>Re PointNorth Capital Inc.,</em></a> in which the ASC dismissed an application by dissident shareholders to terminate a soliciting dealer arrangement that had been entered into by an issuer in the context of a proxy fight. </p><p style="text-align:justify;">Liquor Stores N.A. Ltd. (Liquor Stores), is an Alberta-based reporting issuer with 251 retail liquor stores. PointNorth Capital (Point North) held almost 10% of Liquor Stores' common shares and requested representation on the Liquor Stores Board. In January 2017, Liquor Stores formed a special committee of independent directors "to assist the [Liquor Stores] Board in its response to the anticipated proxy contest initiated by" PointNorth. The anticipated proxy contest materialized. Liquor Stores and PointNorth each made arrangements to solicit proxies from shareholders.</p><p style="text-align:justify;">Each of Liquor Stores and PointNorth issued news releases during the course of the proxy contest. In a June 2017 news release, Liquor Stores announced the recommendation that proxies be exercised in favour of Liquor Stores' candidates. The news release also announced Liquor Stores' formation of a soliciting dealer group that would compensate brokers for time spent alerting shareholders to the importance of voting the white proxy to protect the future value of the shareholders' investment in Liquor Stores. Pursuant to the soliciting dealer arrangement, Liquor Stores agreed to pay a dealer manager a work fee of $100,000 for services rendered in connection with the formation and management of a soliciting dealer group (Soliciting Dealer Group) and a solicitation fee of $0.05 per common share to any member of the Soliciting Dealer Group that facilitated the valid voting by a retail shareholder of his or her shares in support of each member of the Liquor Store's slate of directors, to a maximum of $1,500 per shareholder.</p><p style="text-align:justify;">PointNorth conceded that the soliciting dealer arrangement was not in contravention of Alberta Securities laws. Both PointNorth and Liquor Stores agreed that the ASC has broad – but not unlimited – powers to act protectively and preventively in the public interest, even in the absence of Alberta securities laws. Finally, all parties agreed that the standard test for exercising such jurisdiction was the impugned conduct was "clearly abusive" to shareholders and the capital market. However, PointNorth argued that where securities laws are silent on a topic (such as in this case), there might be a lower bar than the "clearly abusive" test. </p><p style="text-align:justify;">In its decision, the ASC Panel found that PointNorth had not established that any actual harm was caused by the soliciting dealer arrangement.  The ASC Panel noted that Alberta securities laws set out detailed and comprehensive regimes for the solicitation of proxies and for the obligations of brokers and dealers. In the absence of a breach of  specific securities law, the public interest jurisdiction should only be exercised to address a clearly demonstrated abuse of investors and the integrity of the capital markets. The ASC Panel did not accept that the ASC's public interest mandate included imposing new policy requirements, noting that any new policy requirements addressing potential dealer conflict issues could have broader and unintended consequences. </p><p>The ASC Panel's decision confirms that the ASC will use caution and consider the consequences before exercising its extraordinary public interest jurisdiction. Further, in order to exercise its jurisdiction, the impugned conduct must be "clearly abusive" to shareholders and the capital market.  </p>8/25/2017 4:00:00 AM2017-08-25T04:00:00ZTrue1float;#8.00000000000000float;#2017.00000000000string;#Augustfloat;#201708.000000000GP0|#75eda1bb-5890-4b6b-aad7-b703245ec2e8;L0|#075eda1bb-5890-4b6b-aad7-b703245ec2e8|Securities: Litigation Regulatory and Compliance;GTSet|#efd3ce69-ee46-4bca-b6af-3daf96f6b0ebSecurities: Litigation Regulatory and Compliance