The recent case of Ralph’s Auto Supply (B.C.) Ltd. v. Ken Ransford Holding Ltd. et al, SCBC (April 23, 2010) involved an application by the Plaintiff to secure an interim injunction to enforce a Restrictive Covenant by one “partner” against a former “partner” and key employee.

This case points out the importance of ensuring that there is clarity when a Release is exchanged between different, albeit related parties, so as not to inadvertently result in a release of prior obligations.

*the author was counsel for the Plaintiff in Ralph’s Auto Supply (B.C.) Ltd. v. Ken Ransford Holding Ltd.

Tags: kornfeld mackoff silber llp, related parties, releases

Two recent appellate decisions make it harder for companies to resist certification of class action lawsuits.

A critical threshold for claimants wishing to bring class proceedings is the need to demonstrate that there be sufficient “common issues” amongst them to appreciably advance the case, and that the class action must be the best mechanism for doing that.    The BC legislation requires that “a class proceeding … be the preferable procedure for the fair and efficient resolution of the common issues”: Class Proceedings Act, R.S.B.C. 1996, c. 50, s. 4(1)(d).

The characterization of the common issues and the existence of different issues among claimants have, in past, often posed insurmountable complexity for plaintiffs seeking class certification.  Common issues were described by the Supreme Court of Canada in Hollick v. Toronto (City), 2001 SCC 68: “[A]n issue will be common “only where its resolution is necessary to the resolution of each class members’ claim” … Further, an issue will not be “common” in the requisite sense unless the issue is a “substantial…ingredient” of each class members’ claims.”

In the first case, franchisees of Quizno’s Canada Restaurants Corp allege that they were charged exorbitant prices for mandatory product in breach of their franchise agreements and of anti-competition and price-fixing laws: 2038724 Ontario Ltd. v. Quizno’s Canada Restaurant Corp., 2010 ONCA 466. Ontario’s Court of Appeal held that although franchisees’ individual damage calculations might be impossible to calculate at a group level, it made sense first to resolve the common issues and then, if appropriate, the individual claims could be quantified independently.   The overriding consideration in certifying the class was to ensure individual franchise operators could access justice through their numerical strength where individually the case might not have been tenable.   “I am … of the view that a class proceeding in this case will satisfy at least two of the objectives of the Class Proceedings Act of judicial economy and access to justice.  It seems to me that this case involving a dispute between a franchisor and several hundred franchisees is exactly the kind of case for a class proceeding”:  per Justice Robert Armstrong for the Ontario court.

Similarly, B.C.’s appeal court recently allowed a class of sperm bank donors to sue University of British Columbia over compromised sperm when the UBC freezer shut down without triggering any alarms: Lam v U.B.C., 2010 BCCA 325.   The freezer contained samples from men undergoing chemotherapy or other medical treatments that could affect their reproductive capacity.  Again, although the viability of the samples and calculation of losses may vary among donors, certain common issues relating to UBC’s alleged negligence, the availability to UBC of a contractual exclusion clause, and whether that clause is contrary to public policy, were held best resolved by certifying the class proceeding.   The results of the common issues determination would then dictate the extent of any individualized review of the cases.

The two appeal court decisions are consistent with recent changes to both Ontario and B.C. rules of court which, through the principle of ”proportionality”, seek to enhance access to justice to those for whom the cost of litigation would otherwise be prohibitive.

Tags: access to justice, class actions, class proceedings, proportionality

Effective July 1, 2010, the Harmonized Sales Tax (HST) will replace the GST and provincial sales tax (PST) in British Columbia.

Some products and services will see an increase in the amount of tax charged as a consequence of the HST, but the taxes on legal services will not increase. Legal services are already subject to both GST and PST and so costs will not increase with the implementation of the HST in B.C.  Legal fees for services rendered (lawyer time and disbursements on the clients behalf) prior to July 1, 2010 are being taxed at 12% (GST 5% + PST 7%), and similar charges after the July 1^st transition date will be subject to 12% HST.

In order to avoid the complications that result from having pre and post HST time and disbursements recorded on files, our law firm has elected to bill matters with outstanding entries prior to July 1, 2010 to clear accounts up to the effective date.

For clients who are not billed prior to this transition date, their bill may show GST and PST for services rendered up to June 30, 2010, and HST for services rendered after July 1, 2010 but without duplication.

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Tags: HST, legal bills, legal services, tax

This is the fifth and final post in a series of posts on this subject.
The full version of the article will be published in the Verdict,
a publication of the Trial Lawyers Association of B.C.

There are several key reasons why counsel will have to work harder in obtaining document discovery.  First, as noted earlier in this paper, the diminished breadth of the initial list means counsel can place less reliance than ever on opposing counsel’s duties in respect of production.

Second, the time limits on examinations will prevent counsel, in many cases, from conducting an oral fishing expedition.  Consider the examination of a bank officer with a view to determining what policy documents existed at the time that loans were granted to a party to the action.  An examination of the officer may take many hours, and require interim adjournments, to ascertain the existence of documents; and by the time they are produced, the time allotted for examination of the bank may have expired thereby preventing counsel from effective discovery on key issues of the case.

Third, there is no longer an automatic right to seek information by way of Interrogatories without consent or order.

In this author’s view, counsel should therefore:

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Tags: document discovery, New Rules, Rule 7-1

On June 10, 2010 the Canadian Securities Administrators issued new guidelines to assist insiders in  reporting certain derivative-based transactions, including transactions which are commonly referred to as “equity monetization” transactions.

An investor is said to monetize the equity in securities when she or he transfers the risk and/or return of those securities for cash, without actually transferring ownership or control.  It is a way for investors to lock in a market gain without concurrently transferring ownership of the underlying security.

The guidelines consider a number of common derivative transactions giving rise to the duty to file an insider report through the System for Electronic Disclosure by Insiders (SEDI):

• Entering into a forward contract to sell the securities for a fixed amount on a specific date
• Entering into a swap transaction which has similar effect to such a  forward contract
• Buying a put option which allows, but does not obligate, the insider to sell the securities on a specific date for an amount which is either fixed or formula-based
• Simultaneously buying a put option allowing the insider to sell to another party at a certain price, and selling a call option allowing the same party to buy the same securities from the insider at a higher price.  The sale of the call option exercisable at a higher price is a way of financing the purchase of the put option.  The combination of a put option and call option is sometimes referred to as a “collar”
• Borrowing an amount close to the current fair market value of the securities under a limited-recourse secured loan for which the lender cannot look beyond the securities for repayment on its due date

Such transactions are most commonly entered into with investment banks who hedge their risk by entering into a series of short sales in the secondary market.

Step-by-step details of the recommended filing methods can be found here.

The guidelines are not mandatory but do serve to give comfort to the investor that disclosure will be acceptable; and they also serve to enhance uniformity of insider reporting requirements throughout Canada.

Tags: call option, derivatives, disclosure of derivative transactions, forward contract, insider disclosure, put option, securities collar, short sales, swap agreement, swap transaction