eLaw - Business Law Update | September  2017 - No. 79

The Law Society of Manitoba
Professional Education and Competence 		The Law Society of Manitoba
eLaw Business Law Update September  2017
In This Issue
Fashioning a Fit Remedy for Oppressive Conduct a Fact-Dependent Exercise: SCC
Promise Doctrine Unsound and Incongruent with the Patent Act: SCC
“The Internet Has No Borders”: SCC
Awards in Highly Contested Private Commercial Arbitration Stand: MBCA
Directors Personally Liable for Tax Debt Incurred Under Former Directors: MBQB
Family Businesses, Estate Planning and the Oppression Remedy: MBQB
Legislative Update
Canadian Securities Administrators Update
Changes Proposed to the Voluntary Disclosures Program
Consultation on Proposed Changes to Private Corporation Tax Planning
Recommended Reading
2017 Isaac Pitblado Lectures
Fall CPD: LSM
MBA Programs
Upcoming Conferences

Fashioning a Fit Remedy for Oppressive Conduct a Fact-Dependent Exercise: SCC

The Supreme Court clarifies the test for personal liability of directors for oppressive conduct in Wilson v. Alharayeri, 2017 SCC 39, reaffirming the breadth of s. 241(3) of the CBCA and the court’s power to fashion an appropriate remedy. The court endorsed the two-pronged approach to personal liability outlined in the 20-year old Budd decision, and went on to articulate four principles to serve as guideposts informing the flexible and discretionary approach the courts have adopted to orders under s. 241(3) (see paras. 47-57). Here are some of the many commentaries on the decision:

Promise Doctrine Unsound and Incongruent with the Patent Act: SCC

Applying the promise doctrine “is not the correct approach to determine whether a patent has sufficient utility,” according to the Supreme Court in AstraZeneca Canada Inc. v. Apotex Inc., 2017 SCC 36. The court set aside lower court decisions holding AstraZeneca’s NEXIUM patent invalid for want of utility because, applying the promise doctrine, “it promised more than it could provide.” The court found that the promise doctrine is “excessively onerous in two ways: (1) it determines the standard of utility that is required of a patent by reference to the promises expressed in the patent; and (2) where there are multiple expressed promises of utility, it requires that all be fulfilled for a patent to be valid.” (para. 37)  “(T)o deprive…an invention of patent protection if even one “promised” use is not soundly predicted or demonstrated is punitive and has no basis in the Act,” according to the court. To determine whether a patent discloses an invention with sufficient utility under s. 2, courts must first identify the subject-matter of the invention as claimed in the patent, and second, ask whether that subject-matter is useful — is it capable of a practical purpose (i.e. an actual result). Even “a scintilla of utility will do.” (para. 55). These articles discuss the decision:

“The Internet Has No Borders”: SCC

A 7-2 majority of the Supreme Court upheld a worldwide interlocutory injunction against Google (ordering it to globally de‑index certain websites used to unlawfully sell the intellectual property of another company) in Google Inc. v. Equustek Solutions Inc., 2017 SCC 34. Google argued, among other things, that, as a non-party, it should be immune from the injunction; that a global injunction violates international comity; and that freedom of expression concerns should have tipped the balance against granting the order. The court found that the first two arguments contradict existing jurisprudence and that “while it is always important to pay respectful attention to freedom of expression concerns, particularly when dealing with the core values of another country, I do not see freedom of expression issues being engaged in any way that tips the balance of convenience towards Google in this case.” (para. 45)

These articles discuss the decision:

Awards in Highly Contested Private Commercial Arbitration Stand: MBCA

The Court of Appeal dismissed two applications for leave to appeal and a motion to stay a commercial arbitrator’s order liquidating farmland owned by two long-disputing corporations in Wolfe et al v Taylor et al; Fat Cat Farms Ltd et al v Wolfe et al, 2017 MBCA 74. Among other things, the appellants argued that the arbitrator did not follow the procedures set out in the parties’ mediation agreement and therefore did not have the jurisdiction to decide that the shotgun period had expired or to make the liquidation order. The court disagreed, finding that there were no procedural issues raised by the arbitrator’s interpretation of the mediation agreement and that the application judge did not err in relying on the wrong standard of review in concluding that the arbitrator had jurisdiction. The court also found that the appellants had not demonstrated the necessary public interest criteria, nor shown that an injustice would occur if leave was denied.

Directors Personally Liable for Tax Debt Incurred Under Former Directors: MBQB

In Salisbury House of Canada Ltd. et al. v. Manitoba (Deputy Minister of Finance), 2017 MBQB 151, the directors of Salisbury House were unsuccessful in their application to rescind a series of tax assessments issued against them personally under The Tax Administration and Miscellaneous Taxes Act and confirmed by the Tax Appeals Commission. The directors argued that they should not be personally liable for the misdeeds of the former directors of the corporation given their ignorance as to the true financial picture of the company at the time they were elected. The court rejected their argument that the Commission had erred in applying the due diligence defence set out in s. 43(2) of the Act, finding no evidence that the directors did anything to “prevent the corporation’s failure to pay or remit tax” as required. The court also rejected the directors’ arguments that the Commission misinterpreted the meaning of s. 43(1) of the Act (concerning when the taxes were “due”); and that they were denied natural justice in not being allowed to adduce all relevant evidence in the Commission proceedings.

Family Businesses, Estate Planning and the Oppression Remedy: MBQB

In Glesby v. Glesby et al., 2017 MBQB 133, a son whose equity interest as a shareholder in a family held corporation was decimated following a corporate reorganization (in which he declined to participate), was successful in his claim that his father and the corporation contravened both s. 234(2) and s. 117(1)(a) of The Corporations Act. The court found that the since deceased father violated the oppression and duty of care provisions of the Act by taking an unjustified management salary, using his power as the sole controlling officer to strip the corporation of all equity, and breaching his duty as a trustee of the son’s shares. The court ordered the estate to repay the $2,293,963 management salary to the corporation, removed the other family members as directors, and appointed the son as sole director and officer.

Legislative Update

Federal

Bill C-25, An Act to amend the Canada Business Corporations Act, the Canada Cooperatives Act, the Canada Not-for-profit Corporations Act, and the Competition Act, passed third reading in the House of Commons June 21, 2017. It proposes significant changes to corporate governance, shareholder participation, and gender diversity for issuers incorporated under the CBCA. For further details see the legislative summary,  and these articles and blog posts from Canadian Lawyer, Blakes, BLG, Dentons,  Fasken Martineau, Norton Rose Fulbright, and Osler.

Proposed regulations to Bill C-25, fleshing out the details of the changes to corporate law, were published December 14, 2016. They are discussed in blog posts from McCarthy Tetrault, Torys LLP and Blakes, and in this article from the CBA: CBA welcomes diversity measures in Bill C-25.

Bill C-30, Canada-European Union Comprehensive Economic and Trade Agreement Implementation Act, received royal assent May 16, 2017 and Bill C-31, An Act to implement the Free Trade Agreement between Canada and Ukraine, received royal assent June 1, 2017. These bills implement recently negotiated trade agreements. The legislative summaries provide further details.

Bill C-49, An Act to amend the Canada Transportation Act and other Acts respecting transportation and to make related and consequential amendments to other Acts, received second reading and was referred to committee on June 19, 2017. It aims to modernize transportation laws in Canada, improving freight rail safety and efficiency; liberalizing international ownership restrictions for Canadian air carriers; and establishing new air passenger rights. For further information see the legislative summary, departmental information, and Transportation 2030 strategic plan. 

Provincial 

Bill 2, The Securities Amendment Act, received royal assent and came into force June 2, 2017. As detailed in the explanatory note, it amends The Securities Act to provide for the automatic enforcement of sanctions, conditions, restrictions or requirements imposed by other securities regulators when there has been a finding or admission of a breach of securities laws or acts contrary to the public interest. 

Bill 3, The Pooled Registered Pension Plans (Manitoba) Act, received royal assent June 2, 2017 and will come into force on proclamation. It provides the legal framework for certain pooled pension plans to be open to employees and self-employed persons in Manitoba. See the explanatory note for further detail.

Bill 7, The New West Partnership Trade Agreement Implementation Act (Various Acts Amended), received royal assent and came into force June 2, 2017. It amends three Acts so that Manitoba can join the above trade agreement, as well as participate in other future domestic trade agreements. Further details can be found in the explanatory note to the bill.

Bill 25, The Cannabis Harm Prevention Act (Various Acts Amended), received royal assent and came into force in part on June 2, 2017. Parts 2, 3, 5 and 6 will come into force on proclamation. It proposes amendments to several Acts to address health or safety concerns that will arise when cannabis consumption is no longer illegal (July 2018). For further information see the explanatory note.

Bill 30, The Local Vehicles for Hire Act, was introduced March 20, 2017. It would repeal The Taxicab Act and allow municipalities to make by-laws regulating the entire vehicle-for-hire industry. Further details can be found in the explanatory note to the bill and in this government news release.

Canadian Securities Administrators Update

The CSA released the following staff notices this summer:

Staff Notice 31-103 and 33-109 Amendments to National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, National Instrument 33-109 Registration Information and their respective Companion Policies – concerning the adoption of amendments to the current regulatory framework for dealers, advisers and investment fund managers, originally proposed in July of 2016;

Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions -concerning procedural safeguards intended to mitigate the risks to minority security holders in material conflict of interest transactions;

Staff Notice 46-307 – Cryptocurrency Offerings – providing guidance with respect to the applicability of securities laws to cryptocurrency exchanges, offerings, and investment funds.

For commentary on the notices see:

Changes Proposed to the Voluntary Disclosures Program

The Canada Revenue Agency released Draft Information Circular - IC00-1R6 - Voluntary Disclosures Program in June. It proposes amendments to the voluntary disclosure program and provides information on the discretionary authority of the Minister of National Revenue to grant relief from any penalty or interest under s. 220(3.1) of the Income Tax Act. Highlights of the proposed amendments can be found in the MLT Aikins article Proposed Amendments to the Voluntary Disclosure Program and in these CBA submissions.

Consultation on Proposed Changes to Private Corporation Tax Planning

The Department of Finance released its consultation document, Tax Planning Using Private Corporations, on July 18, 2017. The paper outlines proposed changes to private corporation and family trust tax planning, including three issues outlined in Budget 2017: income sprinkling, passive investment portfolios, and converting income into capital gains. The government invites comments on the proposals until October 2, 2017. The proposed changes will have a significant impact on private businesses in Canada, as outlined in these TDS LLP, MLT Aikins, and McCarthy Tétrault LLP articles. 

Recommended Reading

The August 2017 Business and Corporate edition of the CBA’s PracticeLink newsletter contains articles on the NAFTA dispute settlement mechanism, how Trump has affected Canadian businesses, fast-track arbitration, and a link to recent CBA submissions of interest to corporate lawyers.

Impending Changes To Trademark Law: Why You Should Consider Registering Yours Sooner Rather Than Later (TDS LLP) and Changing Canadian Trademark Laws – The Next Steps (Folger Rubinoff) – these articles discuss changes to Canadian trademark law, including proposed regulatory changes released for comment in June 2017 and amendments to the Trade-marks Act expected to come into effect in 2019. 

Financing a Commercial Tenant’s Leasehold Improvements and When is a Release not a Release? – Ned Brown posted these articles on the Pitblado Law blog this summer.

Are You Obligated to Disclose a Labour & Materials Payment Bond? – this MLT Aikins post discusses an Alberta Court of Appeal decision in which the majority held that a general contractor does not have a duty to proactively disclose the existence of a labour and materials payment bond. An appeal will be heard by the SCC this fall.

Personal Problems: Changes to the Personal Grievance Exception – this MLT Aikins post discusses a recent Ontario ruling on the personal grievance exception allowing directors to decline to call a meeting of shareholders.

Credit Unions Banned from Using “Bank,” “Banker” or “Banking” Terms and Ban on Credit Unions’ Use of Bank Terms Suspended– these MLT Aikins articles discuss OSFI Advisory 2017-01 (banning credit unions from using the term “bank”) and its subsequent suspension. 

Untied Tied Up… United Airlines Takes Aim At Complaint Website (Part I)  - this Bereskin & Parr article analyses the Federal Court of Canada decision in United Airlines, Inc. v. Jeremy Cooperstock, 2017 FC 616, which deals with trademark and copyright claims in the context of complaint websites.

2017 Isaac Pitblado Lectures

The 2017 Isaac Pitblado Lectures, #140Down – Now What? The Future of Lawyering is Here, will be held November 3, 2017 (the one day format is new this year) at the Grand Ballroom, Fort Garry Place. The lectures will explore the future of the legal profession, examining such topics as the future of adjudication, client centred service, and the role of technology in practice. The early bird discount ends September 29, 2017, so register soon to reserve your spot! Registrants will also receive a copy of Keynote Speaker - Jordan Furlong's 2017 book, Law is a Buyer's Market: Building a Client First Law Firm. Follow us on twitter @pitbladolecture for the most up-to-date information.

Fall CPD: LSM

Hot Topics in Wills and Estates  - Presenters Eleanor Wiebe, Q.C. and Caroline Kiva will address a wide range of topics at this upcoming half-day program, including the Rule 74 amendments, estate planning issues with US vacation property, powers of attorney, and recent case law. The program will be held in Winnipeg on September 26 (9:00 to noon) and in Brandon on October 4 (1:00 to 4:00 pm). Registrants will receive a copy of the 2d edition of Drafting Wills in Canada: A Lawyer’s Practical Guide.

Land Titles eRegistration & Electronic Funds Transfer - the new Land Titles eRegistration system will be open for use on December 17, 2017 and mandatory for all lawyers to use as of April 3, 2018. This education session will provide training on how to register documents electronically; the new Law Society Rules on electronic funds transfers; and what firms need to do to be ready to use the new system. One session will be held September 18, 2017 in Brandon and three half-day sessions will be held in the Law Society classroom in Winnipeg (Sept 27, Oct 2 and 5, 2017).

Utmost Good Faith: Yesterday and Today  - the legal principles (duty to disclose and utmost good faith) outlined 250 years ago in Carter v Boehm remain relevant today, even beyond their original insurance law context. Len French will discuss how the case has been applied over the years and its implications for general contract law at this November 8, 2017 lunch program. Students and webinar participants are eligible for registration discounts.

MBA Programs

Securities Regulation: Status, Changes, and Supporting Local Capital Markets - Don Murray, chair of the Manitoba Securities Commission, will speak at this upcoming CCCA section meeting on September 14, 2017. The program takes place between noon and 1:30 pm at the offices of Taylor McCaffrey LLP, 11th Floor - 400 St. Mary Ave.

Acquisition and Disposition of Interests in Crown lands in Manitoba Provincial Parks - representatives from Manitoba Crown Lands and Property Agency will discuss the rights and obligations of persons acquiring and disposing of recreational properties owned by the Crown within the boundaries of provincial parks at this Real Property section meeting on September 28, 2017. The meeting will be held at the offices of Pitblado LLP, 360 Main St. starting at 5:00 pm.

Upcoming Conferences

The CBA’s 13th annual National Insolvency Law Conference will be held September 14-15, 2017, in St. John's, Newfoundland and Labrador. Presenters will cover a wide range of topics from investigating and litigating fraud to the world of offshore financial centre insolvency and the latest Canadian case law. For further details see the conference agenda.

The CBA Competition Law Fall Conference will be held October 26-27, 2017, in Ottawa, Ontario. Presenters will share their knowledge and advice on critical and emerging competition law issues in a variety of areas including mergers, abuse, conspiracy, deceptive marketing, class actions and compliance. Register online or by completing this form.

The 8th annual CBA Access to Information and Privacy Law Symposium will be held October 27-28, 2017, in Ottawa, Ontario. Topics to be considered include: CASL and the right of private action; PIPEDA legislative reform; changes to US privacy laws; and the internet of things. See the conference agenda for further details.

The CBA will hold its first National Business Law Conference, The Future of M&A Transactions: Current Trends in an Evolving Practice, on November 2-3, 2017, in Toronto. Register online or by completing and faxing this pdf registration form. 

Beyond Borders: Business and Law in the Global Village – registration is now open for the 2018 CCCA National Conference and ICW Summit, which will take place April 29 - May 1, 2018, in Toronto.

 

ISSN 1916-3916

 

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