Law Times

Law Times • November 26, 2018 Page 17 www.lawtimesnews.com Supreme Court of Canada Contracts CONSTRUCTION AND INTERPRETATION General principles Court could not change content of contract, nor could it require parties to renegotiate it In 1969, HQ and CF signed con- tract that set out legal and finan- cial framework for harnessing hydro-electricity project. Par- ties chose to allocate risks and benefits of contract over 65-year period. Nearly 50 years later, purchase price for electricity set in contract was now well below market prices. Consequently, HQ sold electricity to third par- ties at current prices while con- tinuing to pay CF price agreed on in 1969. CF brought action ask- ing courts to order that contract be renegotiated and that its ben- efits be reallocated. Trial judge held that parties' relationship was not based on equitable shar- ing of risks and benefits. HQ had acted in good faith and there was no justification for disregarding will of the parties. CF appealed. Court of Appeal found that trial judge made no palpable and overriding error and dismissed appeal. CF further appealed to Supreme Court of Canada. Ap- peal dismissed. Trial judge cor- rectly defined parties' intention and nature of the contract. Court could not change content of con- tract, nor could it require parties to renegotiate it. Therefore, there was no justification for requiring that contract be modified. Churchill Falls (Labrador) Corp. v. Hydro-Québec (2018), 2018 CarswellQue 9514, 2018 CarswellQue 9515, 2018 SCC 46, 2018 CSC 46, McLachlin C.J.C., Abella J., Moldaver J., Karakat- sanis J., Wagner J., Gascon J., Côté J., Brown J., and Rowe J. (S.C.C.); affirmed (2016), 2016 CarswellQue 7084, 2016 Car- swellQue 8574, 2016 QCCA 1229, Schrager J.C.A., Thibault J.C.A., St-Pierre J.C.A., Mainville J.C.A., and Morissette J.C.A. (C.A. Que.). Criminal Law EXTRAORDINARY REMEDIES Certiorari Certiorari in criminal proceedings should not be available to parties to correct errors of law At request of accused, charged with impaired driving, Crown was ordered to disclose informa- tion relating to breathalyzer test. Crown applied for certiorari on basis that relevance of records sought had not been established and order was quashed. Accused brought second motion and sec- ond order was granted. Crown challenged that decision, alleging that motion judge had failed to give effect to doctrine of res judi- cata and accused appealed. Court of Appeal held that certiorari should not have been granted here as motion judge had acted within her jurisdiction and Crown ap- pealed. Appeal dismissed. Cer- tiorari in criminal proceedings should not be available to parties to correct errors of law. Certiorari should be available to parties only for jurisdictional error by provin- cial court judge. Failure to give ef- fect to res judicata is not jurisdic- tional issue, it is legal error. There- fore, in absence of jurisdictional error, Crown's appeal should fail, as certiorari was unavailable. R. v. Awashish (2018), 2018 CarswellQue 9200, 2018 Car- swellQue 9201, 2018 SCC 45, 2018 CSC 45, Wgner C.J.C., Abel- la J., Moldaver J., Karakatsanis J., Gascon J., Côté J., Brown J., Rowe J., and Martin J. (S.C.C.); affirmed (2016), 2016 CarswellQue 6306, 2016 QCCA 1164, Bouchard J.C.A., Thibault J.C.A., and Ga- gnon J.C.A. (C.A. Que.). Federal Court of Appeal Intellectual Property PATENTS Validity of patent Attributes of person skilled in the art determine extent of common general knowledge which is key component in obviousness analysis Federal Court found that certain claims in owner's 567 Patent were valid, determined that defendant had infringed some claims, is- sued injunctive relief, and award- ed owner accounting of profits and compensation for use prior to date of issue of 567 Patent. Fed- eral Court clarified accounting method in supplemental judge- ment, and fixed costs. Defendant appealed. Appeal allowed in part. Federal Court made contradic- tory and irreconcilable findings concerning attributes of person skilled in art (POSITA). Court held that POSITA would have some experience designing fuel- ing equipment for applications covered by 567 Patent, namely refueling equipment used in fracturing operations at well site, however, this experience was omitted from conclusion on at- tributes of POSITA and summa- ry of POSITA's common general knowledge. Contradiction dis- closed palpable and overriding error since attributes of POSITA determine extent of common general knowledge which is key component in obviousness anal- ysis. Construction of impugned terms should be re-determined since way POSITA would under- stand terms could be impacted by knowledge of fuel system design. AFD Petroleum Ltd. v. Frac Shack Inc. (2018), 2018 Carswell- Nat 3775, 2018 FCA 140, Wyman W. Webb J.A., Mary J.L. Gleason J.A., and J.B. Laskin J.A. (F.C.A.); reversed (2017), 2017 Carswell- Nat 183, 2017 FC 104, Michael D. Manson J. (F.C.). (F.C.A.); re- versed (2017), 2017 CarswellNat 6573, 2017 CarswellNat 6574, 2017 FC 274, 2017 CF 274, Mi- chael D. Manson J. (F.C.). Tax INCOME TAX Special rules Issuance of tax receipts for gifts to unrecognized beneficiaries sufficient for revocation of registration Minister revoked charitable registration of gallery. Gallery appealed. Appeal dismissed. Al- though promotion of art might be end benefiting community, evidence demonstrated sales of paintings for benefit of artists rather than promotional activi- ties. Donations to unrecognized beneficiary were not in keeping with objects of gallery. Issuance of tax receipts for gifts to unrec- ognized beneficiaries was suf- ficient ground in itself for revo- cation of registration. Minister's decision was reasonable. La Galerie Fôkus c. Canada (Revenu national) (2018), 2018 CarswellNat 6011, 2018 CAF 198, J.D. Denis Pelletier J.A., Boivin J.A., and de Montigny J.A. (F.C.A.). INCOME TAX Tax avoidance Although taxpayer benefitted from income tax deferral main reasons for investing in funds was not to defer or avoid taxes Offshore investment fund. Ca- nadian-controlled private corpo- ration taxpayer was established as holding company to invest spousal trust's capital and income during spouse's lifetime, with re- maining capital and income to go to spouse's children after her death. Taxpayer's main objective was capital preservation, with secondary objective of earning return consistent with market ex- pectations. Money invested had to be allocated to investments that were liquid, and provided suffi- cient cash to pay operating costs and sustain spouse's lifestyle. Tax- payer invested in five offshore in- vestment hedge funds ("funds"), located in low-tax jurisdictions, that had well-known managers and good returns. Minister of National Revenue assessed tax- payer and imputed to taxpayer income of $841,803 for 2005 and $754,210 for 2006 under s. 94.1 of Income Tax Act in respect of tax- payer's investments in funds. Tax Court judge allowed taxpayer's appeals. Judge held that taxpayer did not have to report imputed income under s. 94.1 of Act. Judge held that funds primarily derived value, directly or indirectly, from portfolio investments as contem- plated by s. 94.1(1) of Act. Judge held that, although taxpayer ben- efitted from income tax deferral, none of taxpayer's main reasons for investing in funds was to de- fer or avoid Canadian taxes as contemplated by offshore invest- ment fund property (OIFP) rules or in s. 94.1(1) of Act. Judge found that compelling business reasons and managers' reputations were taxpayer's dominant reasons for investing. Judge found that tax- payer invested in funds to obtain good returns, to reduce overall volatility of its portfolio, to invest with trustworthy individuals, and to hold liquid investments, which fed into overarching bona fide commercial reason for investing. Minister appealed. Appeal dis- missed. Judge did not make any reviewable error. Canada v. Gerbro Hold- ings Company (2018), 2018 Car- swellNat 5999, 2018 FCA 197, Wyman W. Webb J.A., Near J.A., CASELAW Caselaw is a weekly summary of notable civil and criminal court decisions by the Supreme Court of Canada, the Federal Court of Canada and all Ontario courts. These cases may be found online in WestlawNext Canada. To subscribe, please access carswell.com or call 1-800-387-5164. 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