Law Times

Page 9 Law Times • September 30, 2013 Focus On Litigation Courts tackle fee issues Appeal decision looks at payments to directors facing lawsuits BY JuDY VAN RHIJN For Law Times R ecent decisions from the Supreme Court and the Ontario Court of Appeal have grappled with issues at both ends of the fee spectrum. The Supreme Court has radically altered the current practice regarding fees for amicus curiae while the Ontario Court of Appeal has examined the advance payment of legal fees to directors and officers facing litigation launched by the company they formerly served. On Aug. 1, 2013, the Supreme Court released its decision in Ontario v. Criminal Lawyers Association of Ontario that canvassed a judge's ability to order a fair rate of pay for amicus curiae. The majority of five found that superior and statutory courts' inherent or implied jurisdiction to appoint amicus curiae doesn't extend to setting rates of compensation as it offends the separation of powers. The decision stated: "While court decisions can have ancillary financial consequences, the allocation of resources between competing priorities remains a policy and economic question; it is a political decision and the legislature and the executive are accountable to the public for it." Accordingly, the court recommended that the person appointed and the attorney general should meet to set rates and modes of payment with possible consultation with the judge. The decision flagged the stalemate that can then occur when it stated: "If the matter cannot be amicably resolved . . . the judge's only recourse may be to exercise his jurisdiction to impose a stay until an amicus can be found. If the trial cannot proceed, the court can give reasons for the stay, so that the responsibility for the delay is clear." Criminal lawyer Heather Pringle of Pringle & Bottomley worries about the effect of the decision. She believes the criminal bar has trusted judges' ability to order a fair rate of pay when they do appoint amicus curiae. "The majority of provincial judges were ordering a fair rate of pay based on a person's experience and the issues involved. This decision is limiting that." The CLA's policy is that members shouldn't accept an appointment at legal aid rates and it's not reviewing that approach in light of the decision. "If anything, it in the legislation. Secstrengthens our resolve tion 136 of the Ontario tenfold," says Pringle, a Business Corporations director of the organiAct says companies are zation. She points out permitted to indemthat if a stalemate of nify and advance. The this nature occurs, the bylaws say that they court is likely to end up are required to. The iswith lawyers without sue is that a lot of bythe necessary experilaws don't carve out ence. the actions started by Pringle and other the company against members of the crimiformer directors and nal bar are already seeboard members." ing a lot more stays but Toyne explains she's hopeful a show that some of the Delaof good faith by the ware cases speak to Crown will resolve the a change of control matter. "The decision 'The issue is that a lot of bylaws where the new board calls on the Crown to don't carve out the actions has concerns about bring an offer to the started by the company against malfeasance by the old table in a fair and reformer directors and board board. "They start prosponsible way." ceedings for breach of While Pringle is opmembers,' says Kevin Toyne. fiduciary duty against timistic the Crown will the former directors see the decision in the and often, to their Kevin Toyne of Brauti Thornsufficiently stringent to ensure same light, she raises the possibility of revisiting the is- advance funding is ordinar- ing Zibarras LLP participated surprise, they find they have sue. "They are officers of the court ily available to those claiming in a similar case based on the to fund the defence because of and ministers of justice. I am con- it unless there's strong evidence Ontario version of the statute in the wording of the corporate fident they will act in accordance of bad faith. The appellants also 2010 that also rejected the U.S. bylaws. The Court of Appeal with that, but if not, there is likely argued the court should deny jurisprudence. "Most corpora- has now told us what the test approval for advance funding tions have fairly similar bylaw is and what procedure is to be to be a Charter challenge." In the corporate law field, the only when it's able to make a fi- provisions when it comes to in- followed to stop payment in adOntario Court of Appeal has nal determination of mala fides, demnities and advances. They vance or to overcome corporate LT make mandatory what's allowed resistance to paying." added to the limited jurispru- something Sharpe also rejected. dence on the issue of advance legal fees for directors and officers sued by the company itself. Cytrynbaum  v.  Look Communications Inc., decided in July 2013, concerned claims by former corporate directors and officers of telecommunications company Look for advance funding to defend an action against them. Look alleges they improperly conferred $20 million of the Bryan Smith Sarah Conlin Joanne Stewart Lindsey Love-Forester $80-million sale proceeds when it sold its assets to a consortium. Central to the decision is s. 124(4) of the Canada Business Corporations Act that says a corporation may not indemnify individuals unless they've acted honestly and in good faith with a view to its best interests. The application judge found that as Look had established a strong Jennifer Howard Upasana Sharma prima facie case of bad faith, it should refuse advance funding. The appeal court firmly rejected the appeal and the contention that the rules requiring Lerners specializes in thorny cases. Cases that come to us because they court approval apply only to indemnities and not to advances. demand serious strategy. Now we've acquired five new faces who specialize An attempt to import the more in thorny cases, too. Joining Jennifer Howard, this new team supercharges highly developed jurisprudence our family practice. of the commercial hub of Delaware failed at the feet of Canadian parliamentary intention. Justice Robert Sharpe stated the We love a challenge statute imposes a judicial filter lerners.ca on advance funding. He found that the strong prima facie test is Growing. Family. www.lawtimesnews.com Untitled-1 1 13-09-26 8:02 AM

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