Law Times

Law Times • February 28, 2011 CaseLawLaw SUPREME COURT OF CANADA Bankruptcy And Insolvency COURTS AND PROCEDURE When exercising CCAA authority, court should always bear in mind requirements of appropriateness, good faith, and due diligence Debtor company obtained stay of proceedings pursuant to Companies' Creditors Arrange- ment Act (Can.) ("CCAA"), to allow it time to reorganize fi- nancial affairs. Company owed unremitted Goods and Ser- vices Tax ("GST") to Crown. Section 222(3) of Excise Tax Act (Can.) ("ETA"), created deemed trust over unremitted GST which operates despite any other enactment of Canada except Bankruptcy and Insol- vency Act (Can.) ("BIA"). Sec- tion 18.3(1) of CCAA provides that statutory deemed trusts in favour of Crown do not operate under CCAA. Chambers judge ordered $5 million payment to company's major secured creditor and ordered company to hold back unremitted GST pending outcome of reorgani- zation. When reorganization became impossible, company obtained leave for partial lift of stay in order to make assign- ment in bankruptcy. Crown's motion for immediate payment of unremitted GST dismissed and assignment in bankruptcy approved. Court of Appeal al- lowed appeal, finding that once reorganization efforts failed, chambers judge bound to allow payment of unremitted GST to Crown and by ordering GST funds segregated in Monitor's trust account, chambers judge created express trust in favour of Crown. Appeal allowed. With respect to discretionary power of court supervising CCAA re- organization, most appropriate approach is hierarchical one in which courts rely first on in- terpretation of provisions of CCAA text before turning to inherent or equitable jurisdic- tion to anchor measures taken in CCAA proceeding. Issuance of order during CCAA proceed- ings should be considered exer- cise in statutory interpretation. Section 11 of CCAA provides that court may "make any order it considers appropriate in the circumstances". Requirements of appropriateness, good faith and due diligence baseline con- siderations that court should always bear in mind when ex- ercising CCAA authority. In this case, order staying Crown enforcement of GST claim en- sured that creditors would not be disadvantaged by attempted reorganization under CCAA and was in furtherance of CCAA's objectives to extent it allowed bridge between CCAA and BIA proceedings. Express trust in favour of Crown not created when unremitted GST ordered held in monitor's trust account pending results of re- organization. There was no cer- tainty of object inferable from court order sufficient to sup- port express trust. No certainty at time of order that Crown would actually be beneficiary, or object, of trust. Ted Leroy Trucking Ltd. (Re) (Dec. 16, 2010, S.C.C., McLachlin C.J.C., Binnie, LeBel, Deschamps, Fish, Char- ron, Rothstein, Cromwell JJ. and dissenting - Abella J., File No. 33239) Decision at 178 A.C.W.S. (3d) 134 was re- versed. 196 A.C.W.S. (3d) 27 (90 pp.). Courts JURISDICTION Federal Court had jurisdiction to entertain plaintiff 's claim as action for damages After being injured, plaintiff awarded monthly disability pension in addition to Canadi- an Forces salary. Plaintiff given involuntary, medically required release and approved to receive long-term disability benefits under Canadian Forces' disabil- ity plan. He received both dis- ability pension and long-term disability benefits but, pursuant to s. 24(a)(iv) of plan, disability pension deducted from amount he received for long-term dis- ability. Plaintiff commenced action in Federal Court seeking constitutional remedies, de- claratory relief and damages in relation to deductions. Federal Court certified proceeding as class action but Federal Court of Appeal allowed Crown's ap- peal, concluding that lawful- ness of decision or administra- tive activity like s. 24(a)(iv) of plan could only be challenged by judicial review. Appeal al- lowed. No question Federal Court has jurisdiction to enter- tain plaintiff's claim as action for damages. Pleadings disclose claims against Crown seeking remedies that Federal Court has authority to grant in an action. While there is residual discre- tion to stay action if premised on public law considerations to such a degree it is essentially a PAGE 17 COURT DECISIONS 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. CaseLaw is a weekly summary of notable unreported civil and criminal court decisions by the Supreme Court of Canada, the Federal Court of Canada and all Ontario courts. Single or multiple copies of the full text of any case digested in this issue can be obtained by: These cases may be found online in BestCase and other electronic resources from Canada Law Book. To subscribe, please call 1-800-565-6967. i) completing and mailing in the order form in this issue; or ii) calling CaseLaw's photocopy department at (905) 841-6472 in Toronto, (800) 263-3269 in Ontario and Quebec, or (800) 263-2037 in other provinces; or iii) faxing a copy of the completed order form to (905) 841-5085. claim for judicial review with only thin pretence to private wrong, claims alleged, as found by certification judge, reason- able causes of action. Nor was it plain and obvious plaintiff would not succeed in "rather sparse" allegations of breach of fiduciary duty and unjust en- richment. Manuge v. Canada (Dec. 23, 2010, S.C.C., Binnie, LeBel, Deschamps, Abella, Charron, Rothstein and Cromwell JJ., File No. 33103) Decision at 177 A.C.W.S. (3d) 632 was re- versed. 196 A.C.W.S. (3d) 94 (16 pp.). Crown ACTIONS AGAINST CROWN Section 18 of Federal Courts Act (Can.) did not oust jurisdiction of provincial superior courts to deal with private law claims against Federal Crown Due to labour dispute with Ca- nadian Food Inspection Agency ("CFIA"), veterinarians assigned to inspect slaughterhouses in Quebec did not report for work. CFIA issued direction that in absence of inspections during relevant period, meat and meat products did not meet Meat Inspection Regulations (Can.), requirements and had to be dis- posed of. Instead of challenging CFIA's decision, slaughterhouse operators commenced action in Quebec Superior Court seek- ing damages from veterinarians and their representative, Profes- sional Institute of the Public Service of Canada. Defendants argued that damages caused by CFIA's decisions and they each called CFIA in warranty. CFIA brought motions to dismiss re- courses in warranty on ground that its direction was decision of federal board over which Superior Court could have no jurisdiction unless it was first quashed on judicial review by Federal Court. Superior Court dismissed motion and Court of Appeal upheld decision on ba- sis that defendants not contest- ing validity of CFIA's decision. Appeal dismissed. Section 18 of Federal Courts Act (Can.), which grants exclusive jurisdic- tion to Federal Court to hear and determine applications for judicial review of decisions of Federal Crown and its agents, does not have legal effect of ousting jurisdiction of provin- cial superior courts to deal with private law claims against Fed- eral Crown. Party not required to successfully challenge ad- ministrative decision of federal board on judicial review before bringing action for damages www.lawtimesnews.com with respect to that decision. Veterinarians and Institute not challenging CFIA's decision on basis it was unlawful or invalid; recourse in warranty could not be characterized as attack on its legality or validity in guise of action for damages. Quebec's rules of civil liability apply to wrongful acts by government agencies unless party can show that other rules of law, such as those of public law, prevail. In civil liability cases, Superior Court of Quebec generally has jurisdiction over parties and over subject matter of dispute. It remains open to Federal Crown to argue that particular deci- sion made by agents acting in policy rather than operational capacity which would normally attract liability. Such arguments more appropriately dealt with at hearing on merits. Agence canadienne de l'inspection des aliments v. Institut profession- nel de la fonction publique du Canada (Dec. 23, 2010, S.C.C., Binnie, LeBel, Deschamps, Abella, Charron, Rothstein and Cromwell JJ., File No. 32880) Decision at 174 A.C.W.S. (3d) 1056 was affirmed. 196 A.C.W.S. (3d) 97 (23 pp.). FEDERAL COURT Admiralty CARRIAGE OF GOODS Plaintiff absolutely right to refuse to amend bill of lading Application by plaintiff for sum- mary judgment on claim for freight and demurrage charges. Plaintiff an international freight forwarder. Plaintiff made ar- rangements for cargo shipment to be received at Irricana, Al- berta, for pre-carriage by truck and rail to Vancouver where cargo was to be loaded on ship for carriage to and discharge at Haldia, India. Defendant called for a combined transport bill of lading consigned to the order of its purchaser's bank. Require- ment of contract that on board bill of lading be issued. Bill of lading issued by plaintiff stated it was dated August 25, 2008 at Calgary. Cargo was said to have been received for shipment in apparent good order and condi- tion at Irricana and shipped on board on September 4, 2008. Bank, rightfully or wrongly, re- fused to take up bill of lading and refused to honour letter of credit on grounds shipment was to have commenced by August 31, 2008. Containers remained for some time at Haldia as re- sult of refusal of anyone to take delivery running up demur- rage charges. Through its credit arrangements, plaintiff was obliged to honour those charg- es. Once bank refused to take up bill of lading, defendant re- quested for it to be altered to re- move date on which cargo had been shipped on board. Plain- tiff refused on grounds that such removal would be illegal. Judgment for plaintiff. Plain- tiff absolutely right to refuse to amend bill of lading. Defence utterly without merit. Kuehne + Nagel Ltd. v. Agrimax Ltd. (Dec. 17, 2010, F.C., Har- rington J., File No. T-1968-08) 196 A.C.W.S. (3d) 3 (11 pp.). Civil Procedure THIRD-PARTY PROCEEDINGS Not plain and obvious that interpretation of "first person" must fail Teva Counterclaim was for damages pursuant to s. 8 of Patented Medicines (Notice of Compliance) Regulations (Can.), that if "first person" ap- plies for prohibition order and application was withdrawn, dis- continued or dismissed, "first person" was liable to "second person" for any loss suffered during period of automatic stay. There was no dispute that Teva was "second person" and was entitled to bring claim against "first person". Teva claimed damages against S.C. and S.G. for damages for Teva's perma- nent loss of market share. S.C. and S.G. moved to dismiss Teva Counterclaim as against all de- fendants other than S.C., and order striking out portions of Teva Counterclaim relating to Teva's claim for loss of market share. Prothonotary refused to dismiss Teva Counterclaim in its entirety as against S.G.. In this case, without S.G., plain- tiffs could not argue that there could be joint liability because S.G. controlled S.C.. Removal of defendants was vital matter. Decision not to dismiss Teva Counterclaim against S.G. was to be reviewed de novo. It was not plain and obvious that Teva's interpretation of "first person" must fail. Further, sec- ond person may claim damages resulting from loss of market share, but only for losses actu- ally incurred within period. Section 8 does not provide any entitlement to damages in respect of losses incurred out- side period. Paragraphs of Teva Counterclaim which prothono- tary struck out related to dam- ages incurred both within and beyond period. Defendants acknowledged that Teva should

• Cover
• Thick Skins
• Philosophical Roots
• Focus On Labour & Employment Law