the blg monthly update is a digest of recent developments...
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MAY
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The BLG Monthly Update is a digest of recent developments in the law whichNeil Guthrie, our National Director of Research, thinks you will find interestingor relevant – or both.
IN THIS MONTH’S EDITION
Access-to-information/privacy• governmentminister’suseofprivatee-mailstillsubjecttoATIrequest,saysUKinformationcommissionerAdministrative/securities• IIROC’sjurisdictioniscontractualnotstatutory;notamenabletojudicialreviewArt law/environmental protection/taxation/valuation• whatisthevalueofaworkofartyoucan’tsell?Civil procedure/torts• limitationperiodfornegligentmisreprunsfromwhenyouknowyouhaveaclaim,notnecessarily
fromwhenlossactuallyoccurred • UKSCon knowledgerequiredtosetlimitationclock runningConflict of laws/banking/carrying on business• NewYorkcourtonjurisdictionoverclaimsofbank’sforeignnon-customers–notentirelyclear-cutConflict of laws/civil procedure• Albertacourtaccedesto–butnarrowsscopeof–Kansascourt’sletterofrequesttoexamine
CanadianwitnessContracts• thecrucialcommaContracts/e-commerce• formationofguarantee throughaseriesofe-mails‘entirelycommonplace’forEnglishCA Damages• valueiswhatpeoplewillpay,andjudgesshouldn’tsecond-guessthat Damages/torts• damagesawardedforwrongfulusewherenolosssuffered Employment law/fiduciaries• non-competeclausesanddepartingfiduciariesEvidence/administrative law• litigationprivilegeandadministrativeinvestigationsFiduciaries/M&A• DelawaredecisionsonconflictsofinterestinM&AtransactionsLegal research• howtociteatweet(noteventhenewMcGill Guidecoversthis)Privacy/torts/damages/class actions• anxietyresultingfromlossofpersonaldatanotcompensable;proposedclassactionfailsSecurities• drawinginferencesfromcircumstantialevidenceofinsidertradingSecurities/consumer protection/contracts• securitiesdealer’sprocessingfeesdon’thavetobereasonable,justdisclosedTorts• permittooperatewaste-disposalsitedoesnotprecludenuisanceclaim• thecaseofthegreasychip–factualcausationyetagain• ziplineoperator’swaiversofliabilityenforceable
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ACCESS-TO-INFORMATION/PRIVACY
Government minister’s use of private e-mail still subject to FOI requests, says UK information commission
MichaelGove,theUKeducationsecretary,usedhisprivatee-mailaccounttosendmessagestotwomembersofhispoliticalstaffandacivilservant.FurthertoguidanceitpublishedinDecember2011,theUKInformationCommissioner’sOffice(ICO)hasruledthatthecommunicationshadtobedisclosedunderaFOIrequestbecausetheyrelatedtopublicbusiness;thesamerulewouldapplytotextmessagesorotherelectroniccommunications.TheICOrejectedtheargumentthatthee-mailswereforpoliticalratherthangovernmentalpurposes;theroleofapoliticaladviserisn’talwayspurelypoliticalbutmayalso(ashere)havean‘official’character.Useofprivatechannelsfortheconductofpublicbusinesswas‘amatterofconcerntotheCommissionerforanumberofreasons’:goodrecordsmanagementpractices,datasecurity,theintegrityofthepublicrecord,effectivecompliancewithaccess-to-informationobligations.
[Linksareavailablehereandhere].
ADMINISTRATIVE/SECURITIES IIROC’s authority is contractual not statutory; not amenable to judicial review
TheOntarioDivisionalCourthasconfirmedthenatureoftheauthorityoftheInvestmentIndustryRegulatoryOrganizationofCanada(IIROC)inDeeb v IIROC,2012ONSC1014.MichaelDeeb,thepresidentofHamptonSecurities,wasinvestigatedonthebasisofthreeanonymousletterstheregulatorhadreceivedaboutthefirm.Apparentlytheinvestigation
initiallyindicatedthateverythingwasfine,butIIROCsubsequentlyissuedanoticeofhearingwhichitpostedonitswebsite.DeebandHamptonallegedthatthiscausedtheirbusinesstosufferandthatIIROCwasactingmaliciouslyininstitutingproceedingsagainstthem.Theysoughtjudicialreview.PepallJagreedwithIIROCthatwhileIIROCisrecognisedunderPartVIIIoftheSecurities Act,itsregulatoryjurisdictionisnotstatutory;itisamatterofcontractbetweentheregulatoranditsmembers.Asaresult,IIROCdoesnotexerciseapubliclawpowerthatcanbethesubjectofjudicialreview.Evenifitdid,itwouldbeprematuretoallowjudicialreviewbeforeIIROC’shearingpanelhadmadeanactualdecisionthatcouldbereviewed.IIROC’smotiontoquashtheapplicationforjudicialreviewwasgranted.[Linkavailablehere].
ART LAW/ENVIRONMENTAL LAW/TAXATION/VALUATIONWhat is the value of a work of art you can’t sell?
ItisillegalintheUStopossessortrafficinliveordeadspecimensofthebaldeagle,thenationalemblem.Astuffedoneispartof‘Canyon’,a1959workbyRobertRauschenberg,ownedbyartdealerIleanaSonnabenduntilherdeathin2007.AfteravisitfromtheUSFish&WildlifeService,sheobtainedapermitbothtoowntheworkandtolendittotheMetropolitanMuseuminNewYork.AfterSonnabend’sdeath,herheirssoldworksfromhercollectioninordertopayfederalandNewYorkestatetaxesof$471million.
TheInternalRevenueServicesaystheRauschenbergisworth$65million,basedonthe$71.7-millionpriceofAndyWarhol’s‘CarCrash’.Sonnabend’sestatehassuedtheIRS,arguingthatthevalueis$0,therebeing
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nolegalmarketforthepiece;sellingittopaythetaxbillcouldputtheexecutorsinprison.TheIRStakesthepositionthatthevaluationshouldbedeterminedaccordingtowhattheworkwouldsellforontheblackmarket,suggestingthatahypotheticalChinesebillionairemightbewillingtobuyitsecretly.
[Linksareavailablehere,hereandhere].
CIVIL PROCEDURE/TORTSLimitation period for negligent misrep runs from when you know you have a claim, not necessarily from when loss actually occurred
Withimpeccablyawfultiming,theCityofHamiltonboughtasset-backedcommercialpaper(ABCP)inJuly2007,threeweeksbeforetheABCPmarketcollapsed.ThepaperwastomatureinSeptember2007.InmidtolateAugust2007,banksandinvestorshammeredoutadealtorestructuretheABCPmarketwhichincludeda60-daystandstill,subsequentlyextendedtoJanuary2008.InSeptember2009,thecitybroughtaclaimfornegligentmisrepresentationagainsttheselleroftheABCP,onthegroundsthatthelatterhadnotaccuratelydisclosedthenatureoftheinvestment.Outoftime,saidthejudge.Theclaimarosewhenthecityrealiseditsinvestmentwouldgosouth,whichwassometimebeforetheABCPrestructuringwasconcluded;notknowingtheextentofthelossesdidnotpreventtheclaimfromaccruing.Theclaimwasformisrepresentation,notfordefaultinpaymentatmaturity(whenthecitysaidtheclaimarose).Thecityhadalsoissuedanalmostidenticalclaimthatwasclearlywithintime,suggestingitwasalerttoalimitationsissue.Thestandstilldidnotsuspendtherunningofthelimitationperiodbecauseitdidnotinvolvethird-partydisputeresolutionbetweentheparties,anddidnotpreventthecityfromsuing.TheOntarioCourtofAppealagreedwiththejudge
belowonallcounts:Hamilton (City) v Metcalfe & Mansfield Capital Corp,2012ONCA156.Notethedistinctionmadebetweendamage(lossgivingrisetoaclaim)anddamages (quantificationofthatloss):thecity’sclaimarosewhenitbecameawareofdamage(andnoteventhefullextentofdamage);thelimitationperioddidn’twaittorunfromthepointatwhichthereweredamages.
[Linkavailablehere].
UKSC on knowledge required to set limitation clock running
ThenineclaimsinMinistry of Defence v AB, [2012]UKSC9,relatedtonucleartestscarriedoutintheSouthPacificbytheUKgovernmentbetween1952and1958.Theclaimswerebroughtin2004,buttheUKSupremeCourthasruled(ina4-3decision)thattheywereoutoftime.Applicablelimitationslegislationstartstherunningoftheclockwhenthereisactualorconstructiveknowledgethatinjuryisattributabletoanactoromissionthatallegedlyconstitutesnegligence,nuisanceorbreachofduty.‘Attributable’herereferstocausation,andtoarealpossibilityofacausallink.Issuingaclaimobviouslydisplaystherequisitelevelofknowledge.Asdoes,forthemajorityoftheUKSC,firsthavingareasonablebeliefthereisaclaim–beliefthatismorethenmeresuspicionbutenoughtojustifyinvestigation.Onecanknowthereisaclaimwithouthavingtheevidencenecessarytoproveit,butevidentiaryobstaclestoprovingtheclaimdon’tsomehowstoptheclock.Consultinganexpertdoesnotalwaysmeanacquiringtherequisiteknowledge.Onthefacts,allnineclaimantsmusthavehadareasonablebeliefthattheirinjuriescouldbeattributedtothenucleartestsforlongerthantheapplicable3-yearlimitationperiod,especiallyinlightoftheirpublicstatementsandcampaigningonthesubjectbeforethattimeandgeneralpublicawarenessofthehealthconsequencesofnuclearfall-out.
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Theminoritytriedtodifferentiatebetweenknowledgeandbelief,suggestingthatwhilereasonablebelieffoundedonknownfactwouldstartthelimitationperiod,subjectivebeliefalonewouldnot.Fortheminority,becausetherewerenoknownfactscapableofsupportingabeliefthattheinjurieswereattributabletoradiationwhentheclaimswereissued,theclaimswerenottime-barred.
[Linkavailablehere].
CONFLICT OF LAWS/BANKING/CARRYING ON BUSINESS
New York court on jurisdiction over claims of bank’s foreign non-customers: not entirely clear-cut
TheplaintiffsinthetworelatedjudgmentsinLicci v Lebanese Canadian Bank SAL and American Express Bank Ltd(2dCir,5March2012)wereIsraeliresidentswhohadbeenthevictimsofHezbollahrocketattacksin2006.TheyallegedthatLebaneseCanadianBank(LCB)knowinglymaintainedbankaccountsforagroupallegedlyaffiliatedwithHezbollahandthatbothLCBandAmexBankhadfacilitatedwiretransfersfortheaffiliate.NewYorklawdoesnotimposeadutyonabanktoprotectnon-customersfromintentionaltortscommittedbythebank’scustomers,butwasitNewYorkorIsraelilawwhichgovernedtheclaims?NewYork,saidthebanks(forobviousreasons).Thetrialjudgefailedtoconductchoice-of-lawreviewandthoughttherewasnoconflictbetweenthelawsofthetwojurisdictions.Onappeal,the2dCircuitdidconsiderwhichlawgoverned.
AlthoughanytortwouldhaveoccurredinIsrael,alloftheconductonthepartofAmexBankthatmighthavegivenrisetoliabilityoccurredinNewYork,whichthereforehadthecloserconnectiontotheclaim.Thisledtothesame
resultthetrialjudgehadreached:theclaimagainstAmexBankwasdismissedbecauseNewYorklawdidn’timposeadutytonon-customers.
ThingswerelessclearinrespectofLCB.The2dCircuitdidn’tthinkNewYorklawprovidedsufficientguidanceonwhetheraNewYorkcourthadthejurisdictiontoheartheclaimsbeingasserted.ThetrialjudgethoughtthatthemerefactthatLCBmaintainedacorrespondingbankaccountinNewYorkandusedittowirefundstotheHezbollahaffiliatewasn’tasufficientbasisforjurisdiction,butthe2dCircuitthoughtthewholequestion‘insufficientlydeveloped’.ItthereforecertifiedtwoquestionstogouptotheCourtofAppeals:(1)iseffectingwiretransfersthroughacorrespondentaccountinNewYorkthetransactionofbusinessinthestate,suchthatitwouldbecapturedbythestate’s‘long-arm’CivilPracticeLawandRules?and(2)iftheanswertothepreviousquestionis‘yes’,didtheplaintiffs’claimsactuallyarisefromthattransaction–orwasthenexusbetweenwiretransfersandrocketattackstooattenuated?
CONFLICT OF LAWS/CIVIL PROCEDURE
Alberta court accedes to – but narrows scope of – Kansas court’s letter of request to examine Canadian witness
TheKansasdistrictcourtissuedlettersofrequestsothatarepresentativeofShellCanadacouldbeexaminedwithrespecttoissuesinKansasclassproceedings.ShellCanadaobjectedtotherequest,sayingthatitwasanoverlybroadfishingexpedition.WittmannCJQBAaccededtotherequestoftheKansascourt,butalsoagreedthatitwasover-broad–someofthemattersitcoveredwereonlyremotelyrelevant.ThejudgenarrowedthescopeofinquirytofitAlberta’sconceptionofrelevanceanditsrulesofcivilprocedureandappliedlocalruleswithrespecttorefusalsonexamination–buthedidsayOKtovideotapingtheexamination(whichisnotcommoninAlberta)ifthiswas
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acceptableunderKansasprocedure:Richardson v Shell Canada Ltd,2012ABQB170.
[Linkavailablehere].
CONTRACTS
The crucial comma
Atinything,thecomma–butall-importantinOsmium Shipping Corp v Cargill International SA, [2012]EWHC571(Comm).
[Linkavailablehere].
TheshipCaptain StefanoswascapturedbypiratesoffthecoastofSomalia,whichgaverisetoadisputeaboutwhowastobearthecostsassociatedwiththesuspensionofthevoyage.Thecharterpartyprovidedthattheownersofthevesselwereonthehookintheeventof‘capture/seizure,ordetentionorthreateneddetentionbyanyauthorityincludingarrest...’Theownerscontendedthat‘byanyauthority’qualified‘capture/seizure’andthatbecausethepiratesdidnotconstitutean‘authority’,theownerswerenotresponsibleforcostsincurredasaresultoftheship’sseizure.Thecharterersarguedthattheplacementofthecommamadeitclearthat‘byanyauthority’referredonlytodetentionorthreateneddetentionbyagovernmentauthority,butthatcaptureorseizurecouldbebyanybody,includingpirates.Anarbitrationpanelagreedwiththecharterers’construction,andthiswasupheldbytheEnglishCommercialCourtinabriefandsensiblejudgment.SeealsoHerbert v JP Morgan Chase & Co(EWHC(QB),March2012;NoHQ11X02595),wherethebanksuccessfullyarguedthattheplaintiffwasawareofamissingdecimalpointwhenhesignedthebank’soffertorelocatetoSouthAfrica(subsequentlyrescinded),andthereforecouldn’tclaimlostearnings
basedonanannualsalaryhesaidwouldhavebeenR24million(US$3.1million).
[Linkavailablehere].
Closertohome,seethecaseofthe‘million-dollarcomma’:AMJ Campbell Inc v Kord Products Inc (2003)63OR(3d)575(SCJ).
[Linkavailable here].
CONTRACTS/E-COMMERCE
Formation of guarantee through a series of e-mails ‘entirely commonplace’ for English Court of Appeal
ConsistentwithwhattheOntarioCourtofAppealrecentlysaidinPintar Manufacturing Corp v Consolidated Wholesale Group Inc, 2011ONCA805(seetheBLGMonthlyUpdateforFebruary2012),theEnglishCourtofAppealhasheldthat‘theconclusionofcommercialcontracts...byanexchangeofemails,oncetelexesorfaxes,inwhichthetermsagreedonarenotrepeatedverbatimlaterintheexchanges,isentirelycommonplace’andsufficienttomeetthewritingrequirementsfortheformationofaguaranteeundertheStatute of Frauds 1677:seeGolden Ocean Group Ltd v Salgoacar Mining Industries PVT Ltd, [2012]EWCACiv265.Thecourtrejectedthe‘forensicexaggeration’thatthiswouldrequirean‘educatedtrawl’throughahugebinderofprintede-mailmessagesthatwasinimicaltotheintentofthewritingrequirement,whichisinsteadtobeconstrued‘inamannerwhichaccommodatesacceptedbusinesspractice’.Thee-mailsatissuewerealsosignedbyasenderwhoknewthattheywere‘notsimplyaninconsequentialcommunication’butonethatwouldgiverisetobindingobligations.
[Linksareavailablehereandhere].
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DAMAGES
Value is what people will pay, and judges shouldn’t second-guess that
Somelaw&economicsfromthe7thCircuit.Khanowned40%ofFalconHoldings,afast-foodfranchisor,andtoldhismanagersthathe’dbuytheremainingequityandallegedlytoldthemhe’ddistributehalfthecompanytothem,asanincentivefortheirhardwork.Khandidacquiretheremainingequitybutdidnotdistributeanyofittothemanagers,denyinghe’deverpromisedtodothat.Themanagerssued,sayingtheyhadacceptedlowersalariesinrelianceontheallegedpromise.ThetrialjudgegrantedsummaryjudgmentinKhan’sfavour,inpartbecausehethoughtthemanagershadfailedtoassesstheirdamagesadequately.TheyhadtakenthepricepaidbyKhanfortheremainingequity,divideditinhalf(torepresenttheportiontheysaidtheywerepromised)andthendivideditbythenumberofmanagers.Thejudgethoughtthiscouldn’tbesufficient,giventhatitwasimpossibletovaluethefirmonthebasisofwhatKhanhadpaidfortheremainingequitystake.
Nonsense,saidEasterbrookCJonappeal:Malik v Falcon HoldingsLLC(7thCir,14March2012).‘Thevalueofathingiswhatpeoplewillpay.Thejudiciaryshouldnotrejectactualtransactionspriceswhentheyareavailable.’JudgeEasterbrookdiddoabitofsecond-guessing,though:hethoughtitwasunsoundtoassumethatthevalueofKhan’s100%equitystakerepresentedtheentirevalueofthefirmorthatKhanwouldhaveofferedmanagersasharewithoutimposingterms(e.g. bymakingtheirshareavailableintheformofoptions).Inanyevent,hereversedthejudgmentbelowandremandedthecase.
DAMAGES/TORTSDamages awarded for wrongful use where no loss suffered
CHEPisthelargesthirerofpalletsinAustralia.Solarge,infact,thatwhenBunningsGroup,anoperatorofretailhardwarestores,appropriatedalargenumberofpalletsforitsownuse,CHEPneverhadashortageofpalletstomeetitsownneeds.BunningswasfoundliableforconversionbecauseitknewthatCHEPdidnotconsenttotheuseofthepallets(unlessBunningspaidforthem)andatalltimeshadanimmediaterighttorepossessthem.Theinterestingthingistheawardofdamages:CHEPsufferednoactuallossfromtheconversion,buttheNSWCAheldthatitwasentitledtodamagestocompensateitforthelossofuseofotherwiseprofitableproperty(assumingtherehadalsobeensomeuseofthepropertybythewrongdoer).Suchanawardwas,inthecourt’sview,alegitimateaspectofcompensatorydamages.Noneedtoconsiderwhetheritwasreallyarestitutionaryawardrepresentingthewrongdoer’sprofit(althoughoneofthejudgesonthepanelpreferredtoframeitinthoseterms):Bunnings Group Ltd v CHEP Australia Ltd,[2011]NWSCA342.
[Linkavailable here].
EMPLOYMENT LAW/FIDUCIARIES
Non-compete clauses and departing fiduciaries
TheclauseatissueprovidedthatBrulé,thefounderofVeoliaESIndustrialServices,wouldnotcompetewiththebusinessfor‘two(2)yearscommencingonJanuary1,2007followingtermination’.Bruléleftthecompanyin2004,takingwithhimabinderofinformation
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abouttendersVeoliahadbeeninvolvedinandalistofVeolia’semployees.HeincorporatedacompanycalledCleanWaterWorks,whichin2005submittedabidonaproject,beatingoutVeolia.Veoliathensuedforbreachofthenon-competitionclause.Thetrialjudgeconcludedthattheclausewasbadlydraftedandcouldbemadeenforceableonlybyseveringthewords‘commencingonJanuary1,2007’,resultinginanon-competeperiodwhichranfromthedateheleftVeolia.Thiswasreasonable,andhadbeenbreached.TheCourtofAppealdisagreed:thetrialjudgehadbeentooreadytowieldtheproverbialbluepencil,whichistobeusedrarelyandonlywhereitcrossesouttrivialwordsnotaffectingthemainpurportofthecovenant.Notsohere,wherethepartiesclearlydidintendthelanguagetohaveeffect.Leavingthewordingasitwas,theclausewasclearlyunreasonable,inthatitpreventedcompetitionforaperiodstarting2yearsaftertheemployeehadlefthisoldjob.ThetrialjudgewasalsowrongtosaythatBruléhadbreachedhisfiduciaryduty:itwasn’tabreachofdutytotakethebinderofinformationbecauseBrulédidn’tactuallyusetheinformationinputtinghiscompetingbidtogether,anditwasn’tconfidentialanyway.Thereisnodutyonthepartofadepartedfiduciarywhoisfreetocompetetoinformhisformeremployerofanintentiontodojustthat.
Veolia ES Industrial Services Inc v Brulé,2012ONCA173
[Linkavailablehere].
EVIDENCE/ADMINISTRATIVE LAW
Litigation privilege and administrative investigations
TheUK’sOfficeofFairTrading(OFT)soughtdisclosureofnotesofaninternalinvestigation
conductedbyTescoStores,amajorsupermarketchain,inresponsetoallegationsthatithadengagedin‘concertedpractices’withsuppliersofcheese,inordertohikeprices.Tesco’sexternalcounselsubmittednewwitnessevidence(whichwasfavourabletoTesco)afterthedeadlineforrespondingtotheOFTallegationsbutbeforetheOFThadmadeafindingofinfringementofcompetitionlaw.TheOFTrefusedtoadmitthenewevidenceanddemandedtoseeTesco’snotesofitsinterviewswithpotentialwitnesses.Tescoclaimedlitigationprivilegeovertherecords.
LordCarlisleofBerriew,chairmanoftheCompetitionAppealTribunal,concludedthatdisclosureoftherecordswasnotnecessaryorproportionate,butwentontoconsiderthe(moreinteresting)questionwhethertheywereprivileged:Tesco Stores Ltd v Office of Fair Trading,[2012]CAT6.Henotedthatwhileithasbeensaidthatlitigationprivilegecannotbeclaimedwhereaninternaldocumentispreparedforuseinnon-adversarialorinvestigativeproceedings,itisn’talwaysclear(asinthiscase)whethertheproceedingsareadversarialormerelyinquisitorial,orabitofboth.TheOFTnaturallycontendedthatitsprocesswassimplyinvestigative:noprivilege,then.LordCarlisledisagreed,onthegroundstheproceedingswere‘confrontational’andraisedaseriousprospectthatTescowouldfacepenaltiesiffoundliableforinfringement.Thiswas‘notsimplyaninvestigationtogettothebottomofthefacts’;itwasasadversarialascivillitigationinvolvingthesameallegedinfringements.Litigationprivilegeappliedtothedocuments(andhadnotbeenwaivedbyTesco).
CompareIn the matter of an application by Canadian Distributed Antenna Systems Coalition (OEB,22February2012),reportedintheBLGMonthlyUpdateforApril2012.
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FIDUCIARIES/M&ADelaware decisions on conflicts of interest in M&A transactions
Tworecent,oneabitolder.TheCEOofElPasoCorp.wasthecompany’snegotiatorinaproposedsaleofthebusinesstoKinderMorganInc.Noprobleminthat;it’swhatCEOsdo.WheretheproblemlaywasintheCEO’spre-closingdiscussionswithKinderMorganaboutasidedealwhichwouldinvolveabuy-outbyElPasomanagement(includingtheCEO)ofabusinessunitthatKinderMorganintendedtoselloff.ChancellorStrinetookaverydimviewofthisobviousbutundisclosedconflictofinterest:itwasclearlyintheCEO’sinterestnottomaximisethethevalueofElPaso–andbyextensiontheobjectoftheproposedmanagementbuy-out.GoldmanSachs,whichadvisedElPasobuthadasignificantstakeinKinderMorgan,alsotakesajudicialdrubbing.Intheend,though,thisdidn’tamounttogroundsfortheoddinjunctionrequested,whichwouldhaveallowedElPasotoshopitselfinparts(incontraventionofthemergeragreement)butthenrequireKinderMorgantocloseifnobetterdealemerged:In re El Paso Corp Shareholder Litigation,2012DelChLEXIS46.MoreCEOconflictsin Re Delphi Financial Group Shareholder Litigation,2012DelChLEXIS45,wherethechapinquestionfailedtodisclosetotheboardthatheintendedtoseekacontrolpremiumfortheclassofshareshealoneheld.Therewerealsoallegationsthathewasnegotiatingsidedealswiththebuyerwithrespecttobusinessesofhisownthatprovidedservicestothecompany.Inspiteof‘troubling’breachesofduty,itwasneverthelesslikelythattheCEOhadanincentivetomaximisethesalepriceofthecompany:theremedywouldbedamagesforbreachnotaninjunctionpreventingthedeal.SeealsoIn re Del Monte Foods Co. Shareholders Litigation, 25A.3d813(DelCh2010),whereafinancialadviserinanM&Adealwascriticisedforhavingasignificantequityinvestmentinthepurchaser.
LEGAL RESEARCH
How to cite a tweet (not even the new McGill Guide covers this)
Infact,the7thedition(2011)alreadyhasaslightlydustyfeeltoit,withitscoverageofthingslikeCD-ROMs.Shouldyoueverneedtociteatweet,theModernLanguageAssociationofAmerica(amajorgroupofacademicsinthehumanities)haspublishedguidanceinitsstylehandbook:‘Lastname,firstname(username).“Thetweetinitsentirety.”Date,Time.Tweet.’TouseoneofourheaviestusersofTwitterasanexample,thecitationwouldbe(useyourowndateformat,ifyouwant):Smith,Michael(MichaelSmithYYZ).“ImportantcasefromONCA–jointandseveral#liabilityfor#negligence&offerstosettleinmultipledefendantcaseshttp://www.ontariocourts.on.ca/decisions/2012/2012ONCA0025.htm”.26January2012,9.58am.Tweet.
[Linkavailablehere].
PRIVACY/TORTS/DAMAGES/CLASS ACTIONS
Anxiety resulting from loss of personal data not compensable; proposed class action fails
TDAutoFinanceServices(actually,itspredecessor)sentatapecontainingthepersonalinformationofitscustomersbycourier.Thetapewaslostintransit,andcustomerswereinformedofthis.AnnaMazzonna,oneofthecustomers,allegedthatthishadcausedherandothersanxietyandfearaboutpossibleidentitytheft,aswellaspotentialinconvenienceinobtainingcreditandhavingtomonitorforfraud:Mazzonna v Daimlerchrysler Financial Services Canada Inc,2012QCCS958.
[Linkavailablehere].
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LacoursièreJSCrefusedtocertifytheproposedclassactionforthesimplereasonthatMazzonnafailedtoshowthatsheoranyoneelsehadsufferedcompensabledamages;therewasnoevidencethatherpersonalinformationhadinfactbeenmisused,andnocauseofactionforthestresscausedbybeinginformedofapossibleriskofmisuseofpersonalinformation.ThejudgereliedinpartonOntariolaw:Mustapha v Culligan of Canada Ltd,2008SCC27.
[Linkavailablehere].
BobCharbonneau,SuzanneCourchesneandAnneMerminodoftheMontrealofficeofBLGactedfortherespondents.
SECURITIES
Drawing inferences from circumstantial evidence of insider trading
SomeinterestingpointsinRe Suman(OSC,19March2012).OSCstaffallegedthatSumanhad,inthecourseofhisemploymentatMDSSciex,communicatedundisclosedmaterialinformationtohiswifeabouttheproposedacquisitionofMolecularDevicesCorp.byMDSSciex’sparent.Sumanandhiswifeboughtalargenumberofsecuritiesinthecompany,whichtheysubsequentlysoldforjustunder$1million.Firstinterestingpoint:MolecularDeviceswasnotareportingissuerinOntario,sotherewasnobreachofs76(1)oftheSecurities Act,whichprohibitsinsidertradinginsecuritiesofareportingissuer(oraTSXVentureissuerwitharealandsubstantialconnectiontoOntario).TheallegationswerethereforethatSuman’stradeswerecontrarytothepublicinterest(whichtheCommissionultimatelyaccepted).Secondinterestingpoint:theevidenceofinsidertrading(andtipping)waslargelycircumstantial,althoughtheCommissionwaspreparedtoinferfromitthattheoffenceshadbeenmadeout.
Sumanhadtheopportunitytoacquiretheinsiderinformationfromhisjob,thetradesinquestionwerecompletelyatypical,hehadgoogledmediastoriesonMarthaStewartandinsidertradingonthedayhebegantomakepurchases,andheappearedtohaveusedspecialsoftwaretoerasedataonhishomeandworkcomputers.Thirdinterestingpoint:theCommissionreliedinparton Re Shevlin (FSA,2008),wheretheUKregulatorwaswillingtoinferthatanITtechnicianhadobtainedmaterialnon-publicinformationinthecourseofhisemployment,whichheusedtotrade–notinsecuritiesoftheemployerbutincontractsfordifferenceswiththeemployer’ssecuritiesastheunderlyinginstrument.(OSAs76(6)wasamendedin2010toextendtheinsidertradingprohibitiontoderivativesbasedonsecuritiesofareportingissuer,inresponsetotheShevlinscenario.)
[Linkavailable here].
SECURITIES/CONSUMER PROTECTION/CONTRACTSSecurities dealer’s processing fees don’t have to be reasonable, just disclosed
MorganStanley(MS)chargedwhatwasdescribedasahandling,postageandinsurance(HPI)feeinrelationtoeachtradeconfirmationitmailedouttoinvestors.SusanAppertinitiatedclassproceedingstorecoverHPIfeeschargedsince1998,onthegroundsthefeesborenorelationtoMS’sactualcharges:insurancemaynothavebeenapplicabletoalltransactions,actualmailingcostswereneverdisclosed,multipleconfirmationsmayhavebeensentinasinglemailingetc.SheestimatedthatactualcoststoMSwere42centspertransaction;thefeein2005was$5.25.ThedistrictcourtinChicagodismissedherclaim,arulingupheldbythe7thCircuit:Appert v Morgan Stanley Dean Witter Inc(7thCir,
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8March2012).Disclosureofafixedfeeforsomethinglikeshippingandhandlingdoesnotnecessarilymeanthatthestipulatedamountistheactualcostofthoseservices,andacourt’sfocuswillbeonwhethertheamountwasdisclosed–notwhetheritisunreasonableorexcessive.MSdisclosedtheamountoftheHPIfeeandnotedthatitwassubjecttochangeuponnoticetothecustomer.TheconfirmationslipsthemselvessaidthefeerepresentedHPIcharges,‘ifany’.TherewasthereforenobreachoftheMScustomeragreement,andnoclaiminunjustenrichmenteither.IfAppertdidn’tlikethefee,shewasfreetotakeherbusinesselsewhere.
TORTS
Permit to operate waste-disposal site does not preclude nuisance claim
BiffaWasteServicesoperatedadumpforindustrialandhouseholdwaste,beginningin2004,onlandthathadbeenzonedforthepurposesincethe1980s.Biffaalsohadapermitforitsoperationsfromtheenvironmentalregulator,whichspecifiedthatBiffawastotakeappropriatemeasurestoensurethatthesitedidnotproduceodoursatlevelslikelytocausepollution,harmtohumanhealthordetrimenttotheenvironment.Thesitewaslocatednearahousingdevelopment,andcomplaintsaboutbadsmellsweremadefromday1ofBiffa’soperations,resultinginacrimoniousexchangesandeventuallylitigation.ThetrialjudgeheldthatBiffa’spermithadchangedthecharacterofthelocality,whichmeantinthiscasethatotherwiseoffensiveactivitiesceasedtoconstituteanuisance.Healsothoughtthatthemodernlawofnuisanceshouldbepredicatedonreasonableuse:ifthedefendanthasactedreasonablyandnotnegligently,anuisanceclaimshouldfail.Thepermitdidnotamounttostatutoryauthority(andthusadefencetoanuisanceclaim),butinformedtheanalysisof
Biffa’sactivitiesandwhethertheywerereasonable.TheEnglishCourtofAppealtookadifferentview,notingthatgoodold19th-centuryprinciplesofthelawofnuisanceforthemostpartremainvalidanddidn’tneedtobemodifiedtoaccommodatemodernstatutoryschemes.Statuteandcommonco-exist,andtheonedoesnotdisplacetheother.Theresidents’appealwasallowed: Barr v Biffa Waste Services Ltd,[2012]EWCACiv312.
[Linkavailable here].
The case of the greasy chip: factual causation yet again
KathrynStrong,anamputeeoncrutches,slippedjustafternoononagreasychip(frenchfry)onthefloorofthesidewalksalesareaoutsideherlocalWoolworthsstore,sufferingseverespinalinjuriesfromherfall.ItwasacknowledgedthatwhileWoolworthsdidcleanthesidewalksalesarea,ithadnopropersysteminplaceforperiodicinspectionandcleaning,andtheareahadnotbeeninspectedinthe4.5hoursprecedingtheaccident.
TheNSWtrialcourtfoundthatWoolworthshadbeennegligent:itshouldhaveseenthechip(whichleftagrease-mark‘asabigasahand’)butfailedtodoso.TheCourtofAppealreversed,holdingthatitwasnotopentothejudge(whodidn’treallyaddresscausationinfact)toinferthatthechiphadbeenlyingonthegroundforlongenoughtohavebeendetected.ItwasnotmorelikelythannotthatregularcleaningwouldhavepreventedStrong’sinjury.TheHighCourtofAustraliareversedagain(HeydonJdissenting):Strong v Woolworths Ltd, [2012]HCA5.Thegeneralprincipleinslippingcasesisthatifmorethanonereasonableinspectionperiodhaspassed,onabalanceofprobabilitiesfailuretoinspecthasledtothe
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accident.Strongfellatlunchtime,whenchipsarelikelytobedroppedmorefrequently,butthecourtnotedthatinAustraliachipsareaslikelytobeeatenforbreakfastorasamid-morningsnackasatlunchtime,soitwaswrongfortheCourtofAppealtoconcludethatthechiphadnotbeentherelongenoughtohavebeendetectedandcleanedup.TheCAwasalsowrongtosaythattheusual‘butfor’testforfactualcausationexcludesconsiderationoffactorsmakingamaterialcontributiontotheplaintiff’sharm.FortheHighCourt,‘thedeterminationofthequestionturnsonconsiderationoftheprobabilities’–butwhetheramaterialincreaseinriskwouldbesufficienttoprovecausationwasleftasanopenquestion.ForHeydonJ,dissenting,materialcontributionwasirrelevant:eitherWoolworths‘madenocontributionatall[totheinjury],ortheonlycontribution’.Hedidn’tthinktherewasenoughevidenceonewayortheothertoestablishwhenthechipfellorfromwhichtodrawinferencesaboutcausation.
[Linkavailablehere].
Zipline operator’s waiver of liability enforceable
TheBritishColumbiatrialcourtheldlastyearthatreleasessignedbyparticipantsinzipliningwereacompletedefencetothenegligenceoftheoperator:Loychuck v Cougar Mountain Adventures Ltd,2011BCSC193.Thetrialjudgefoundthattheoperator’swaiverwasnotunconscionableeitheratcommonlaworunderBCconsumerprotectionlegislation.TheBClegislaturehad,furthermore,declinedtoactona1994reportwhichrecommendedlimitationsonwaiversofliabilityforcommercialrecreationalactivities.
TheBCCAhasupheldthetrialjudgment:2012BCCA122.ThereleaseswerediscussedinthelightofTercon Contractors Ltd v BC (Transportation and Highways), 2010SCC4,andfoundnottobeunconscionable.Therewasnoinequalityofbargainingpowerorsubstantialunfairnessinrequiringareleaseasconditionofparticipatinginadangerousactivity;thisdidnotoffend‘communitystandardsofcommercialmorality’.Thereleaseswerealsonotoffensivetopublicpolicy(andnoamountoflawreformcommissionreportsrecommendinglegislationtoprecludewaiversforrecreationalactivitiesestablishedapublicpolicyagainstthem).Itwouldbeagainstpublicpolicytoattempttorelyonareleasewhereonehadknowinglyorrecklesslyendangeredthepublic,butnotinasituationwheretherehadmerelybeennegligencethatcausedinjurytoaparticipantwith‘somemeasureofcontrol’overtheactivitiesinquestion.Thereleaseswerenotunconscionableunderconsumerprotectionlegislation(assumingitapplied)andargumentspredicatedonmisleadingadvertisingorlackofconsiderationalsofailed.
[Linksareavailable here and here].
AUTHOR
Neil GuthriePartner,[email protected]
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