Litigation and ADR « Business Law Blog

Mandatory Mediation- Is this an Oxymoron?

Wednesday, October 10th, 2012 Posted by Herb Silber (posts)

Herb Silber brings a strong combination of experience, expertise and empathy to his role as mediator.

Many jurisdictions have mandatory mediation schemes of one type or another. Some are by a legislative scheme as is the case in British Columbia, [1] where any party can trigger the process to begin. Other jurisdictions, particularly in various states in the U.S., have a judicial process that gives discretion to order mediation. While a “mandatory mediation” may sound counter intuitive given that our understanding is that at its core mediation is intended to be a consensual process, my experience is that it is surprising what the dynamic of having the parties commit time, personnel and resources can achieve. Often times this may be the first time the parties have been a room together, either ever or certainly since the dispute arose. Whether they think they do or not, they have a psychological investment in seeking success. As such, while they may have met involuntarily, that does not necessarily mean that a voluntary agreement cannot be reached. It must be noted of course that no jurisdiction I am aware of requires the parties to come up with an agreement, only that they participate in arguably a good faith fashion to do so. At the very least the process can be useful to narrow the issues between the parties even if a full scale resolution is not achievable.

The one question sometimes arise is how to deal with a recalcitrant party who refuses to participate in the process. Various options may be available depending on the source of the mandatory mediation process. As an example, under the legislative model used in British Columbia, the defaulting party may ultimately find that their claim is dismissed or their defence is struck if they persistently refuse to engage in the mediation and the steps leading to it. Elsewhere where a judge is responsible for ordering the mediation, failure to comply with the Court’s Order could lead to a contempt citation. While these are draconian methods, the real objective of the mediator ought to be to ascertain why the party or parties, depending on the scheme employed, are objecting to the process and attempt to override through persuasion these concerns.

[1] Notice to Mediate

Tags: alternative dispute resolution, mediation

Posted by Herb Silber (posts) | Filed under Litigation and ADR | ....

Can a Partnership be an Employer of a Partner?

Tuesday, October 9th, 2012 Posted by Shafik Bhalloo (posts)

Shafik Bhalloo

Shafik Bhalloo has been a partner of Kornfeld LLP since 2000. His practice is focused on labour and employment law, and on commercial and civil litigation. He is also an Adjudicator on the Employment Standards Tribunal and an Adjunct Professor in the Faculty of Business Administration at Simon Fraser University.

*By Devin Lucas and Shafik Bhalloo

In Fasken Martineau DuMoulin LLP v. British Columbia (Human Rights Tribunal)[1], the equity partner, John Michael McCormick, entered into a partnership agreement with Fasken Martineau DuMoulin LLP, an international law firm operating as an extra-provincial limited liability partnership registered pursuant to the Partnership Act of British Columbia. Under this agreement, which governs the relationship of all of Fasken’s partners, McCormick was required to retire as an equity partner on January 31, 2011, the financial year end of the firm in which he turned 65.

The partnership agreement provided at section 9.2:

(a) Each Equity Partner shall retire as an Equity Partner at the end of the Year in which the Partner reaches the age of 65, but as provided in paragraphs (d) and (e) of this Section 9.2 may be permitted to continue working with the Firm.

(b) A Partner who retires from the Firm shall be deemed to have withdrawn from the Firm as at the date of his or her retirement, which date shall be his or her date of withdrawal.

(c) Upon reaching the age of 62, each Partner shall prepare and deliver to the Firm Managing Partner a practice transition plan.

(d) Agreements for working past age 65 are at the discretion of the firm Managing Partner and will be the exception rather than the rule. The criteria for approval shall include the value of the individual in coaching, business development, client relations, mentoring and community profile. Such agreements shall either be approved by the Board or be within any written policy established by the Board for this purpose.

(e) Partners who wish to continue in the practice of law with the Firm after age 65 may enter into an individual arrangement with the Firm as an employee or a Regular Partner as determined by the Firm Managing Partner and, if the Firm Managing Partner so decides, such individual may have the title of “Counsel” to the Firm. The Firm Managing Partner may at any time on three months’ prior written notice revoke, in his or her discretion, the right of such individual to continue in the practice of law with the Firm, whether as employee or Regular Partner, or to be Counsel to the Firm.

In December 2009, McCormick filed a complaint with the Human Rights Tribunal alleging that Fasken discriminated against him by forcing his retirement as an equity partner in 2011, contrary to s. 13 of the Human Rights Code of British Columbia.

In response, Fasken brought an application to dismiss the complaint pursuant to ss. 27(1)(a) and (c) of the Code, on the basis that that the Tribunal did not have jurisdiction to hear the complaint and there was no reasonable prospect that it would succeed. The root of Fasken’s argument was that McCormick was not an employee of the firm and there was no employment relationship that could be the subject of a complaint under s. 13.

The Tribunal ruled against Fasken stating that it had jurisdiction over the complaint on the ground that the firm, for the purpose of the Code, employed McCormick. According to the Tribunal, in the context of human rights legislation, a partnership may be considered as a separate legal entity from its partners and as the employer of a partner.

Fasken appealed the decision to the British Columbia Supreme Court claiming that the Tribunal did not have jurisdiction to hear the complaint, since in law a partnership is not a separate entity from its partners, and cannot in law employ a partner. The chambers judge upheld the Tribunal’s ruling. The chambers judge held that that the governance and management system of the firm met the criteria of an employment relationship for purposes of the Code, applying factors of “utilization”, “control”, “financial burden” and “remedial purpose” as held in Crane v. British Columbia (Ministry of Health Services).[2]

Once again, Fasken appealed the decision to the British Columbia Court of Appeal. The Court of Appeal in reversing the Tribunal and chamber’s judge decisions stated:

…the principles of interpretation of the Human Rights Code, R.S.B.C. 1996, c. 210, which mandate a broad, liberal approach consistent with its remedial purposes, do not change underlying legal relationships to the extent found by the Tribunal and the chambers judge. In particular, they do not extend to overriding the fundamental and well-established principle of law that a partnership is not, in law, a separate entity from, but is a collective of, its partners, and as such, cannot, in law, be an employer of a partner.

The Court of Appeal also observed that a partnership may employ other persons and, in those employment relationships, it normally makes no legal or commercial difference whether the partnership is seen as a separate body or a collective of the partners. According to the Court of Appeal, third parties, including employees of the partnership, are generally entitled to the same rights and obligations as against a partnership as they are against a corporation or a proprietorship, including protection from discriminatory employment practices. The court then drew the distinction between that of an employer-employee relationship and the relationship among all of the partners. The Court said:

In this case, one of the supposed parties to the relationship, the firm, while a “person” for the purpose of the Code, is not separate from any individual equity partner such as Mr. McCormick. The only relationship that exists, in law and in fact, is among Mr. McCormick and all of the other partners of the firm. And the relationship among them cannot be one of employer and employee, as they are all equal in their rights and obligations with respect to the business of the firm.

It is important to note that McCormick was one of approximately 60 full-equity partners at Fasken. McCormick has an ownership interest in the firm; therefore, he is entitled to a share of the profits of the firm and is personally liable for its debts. Further, he is permitted to participate in the meetings of the partners and to vote on various issues affecting the firm’s management. Conversely, employees do not enjoy any of these rights or obligations.

It remains to be seen, however, whether or not a partnership would be considered as a legal entity distinct from its non-equity partners for the purposes of human rights legislation? If a partnership may be treated as a separate legal entity from its non-equity partners, does it then follow that a non-equity partner is an employee of a partnership, which purportedly, he or she is a member? Applying the factual criteria of “utilization”, “control”, “financial burden”, or “remedial purpose” from Crane would appear to affect equity partners differently than non-equity partners. The crux of this distinction is whether the controls exercised by the firm’s management apply equally to all of the partners. If the controls are applied differently based on whether a partner is an equity or non-equity partner, it stands to reason that this would vary the relationship from one of partners collectively running a business to one of employment by equity partners over non-equity partners. This is still an open question at this point; however, it is an interesting issue that could have wide-ranging implications for partnerships and non-equity partners reaching the age of mandatory retirement.

[1] 2012 BCCA 313

[2] 2005 BCHRT 361, rev’d on other grounds, 2007 BCSC 460.

Tags: employee, employer, equity partner, human rights, non-equity partner, partnership

Posted by Shafik Bhalloo (posts) | Filed under Labour & Employment, Litigation and ADR | ....

Forum Non Conveniens – When Our Courts Pass The Buck

Thursday, May 17th, 2012 Posted by Susan Smith (guest author) (posts)

Susan Smith (guest author)

Susan Smith has been a lawyer in Vancouver since 1985. She has a wide range of experience in commercial and constitutional litigation, including products liability and work in the construction and forestry industries. Susan has been a guest speaker and contributor at several CLE conferences and other educational programs in the Lower Mainland and northern British Columbia.

Forum non conveniens is a legal doctrine which allows a court to decline to exercise its jurisdiction over a lawsuit, on the basis that a court in another forum, or jurisdiction, is more suitable or convenient. Normally, forum non conveniens arises when a defendant challenges a local court’s exercise of jurisdiction. In a recent case involving two Ontario plaintiffs, who were injured on separate holidays in Cuba, the Supreme Court of Canada held in Club Resorts Ltd. v. Van Breda (and Charron), 2012 SCC 17 that the court’s exercise of discretion to defer to another court’s jurisdiction is highly dependent on the facts, or individual context, of each case.

The Supreme Court of Canada emphasized the distinction between the existence of a court’s jurisdiction, and the exercise of it. If jurisdiction is established (by a “real and substantial connection” between the subject matter of the litigation and the local forum), a court may nevertheless be asked not to exercise that jurisdiction on the basis of forum non conveniens.

In order to establish forum non conveniens, a defendant must show that an alternative forum is clearly more appropriate and that, in light of the characteristics of the alternate forum, it would be fairer and more efficient to chose that forum and to deny the plaintiff the benefits of the local forum. It is not enough to show that a comparable forum exists. A court must be able to conclude that the other forum is in a better position to dispose fairly and efficiently of the litigation.

A defendant may raise diverse facts, considerations and concerns in support of an argument that there is a fairer and more efficient forum elsewhere. In Club Resorts Ltd. v. Van Breda (and Charron), the Supreme Court of Canada reviewed the wide range of factors considered in the case law, along with the factors in the Court Jurisdiction and Proceedings Transfer Act such as:

(a) the comparative convenience and expense for the parties and their witnesses, in litigating in the local court or in any alternative forum;

(b) the substantive and procedural law to be applied to issues in the proceeding;

(d) the desirability of avoiding conflicting decisions in different courts;

(e) the enforcement of an eventual judgment; and

(f) the fair and efficient working of the Canadian legal system as a whole.

In view of the goals of fairness and efficiency, the Supreme Court of Canada concluded that the doctrine of forum non conveniens focuses on the individual context of each case. The relevant factors to be considered include:

(i) the domiciles of the parties;

(ii) the locations of the witnesses and pieces of evidence;

(iii) the comparative cost of transferring the case to another jurisdiction;

(iv) the impact of a transfer on the conduct of the litigation or on related or parallel proceedings;

(v) the loss of juridical advantage (for example through a local or procedural law);

(vi) the possibility of conflicting judgments

(vii) problems related to the recognition and enforcement of judgments; and

(viii)the relative strengths of the connections of the two parties.

In favour of Van Breda and Charron, the Supreme Court of Canada declined to give effect to the forum non conveniens argument and concluded that Club Resorts Ltd. had not met its burden of showing that a Cuba forum would be clearly more appropriate. A trial in Cuba would present serious challenges to the Ontario plaintiffs, including problems with witnesses, concerns about local procedures, and expenses connected with litigating in Cuba. The Court concluded, “All things considered, the burden on the plaintiffs clearly would be far heavier if they were required to bring their action in Cuba. They would face substantial additional expenses and would be at a clear disadvantage relative to the defendants.” Hence, it could not be said that it would be fairer or more efficient to dispose of the claims in Cuba, and both actions were allowed to proceed in Ontario where they were initially commenced.

The outcome in Club Resorts Ltd. v. Van Breda (and Charron) illustrates the heavy burden on a defendant who is raising an argument of forum non conveniens. Although a local forum is usually favoured, when litigation involves multiple claims, or parties in multiple jurisdictions, the individual context may be sufficient to meet the test for the forum non conveniens doctrine.

Tags: conflicts of laws, forum non conveniens, jurisdiction

Posted by Susan Smith (guest author) (posts) | Filed under Litigation and ADR | Comments (1) | ....

Advertising Alone Is Not Enough To Establish Court’s Jurisdiction in Canada

Monday, May 7th, 2012 Posted by Susan Smith (guest author) (posts)

Susan Smith (guest author)

The Supreme Court of Canada recently confirmed that in determining whether a “real and substantial connection” exists for a court to assume jurisdiction over a case involving a foreign accident or foreign defendant, advertising alone within a Canadian jurisdiction is not sufficient to establish that a business is being carried on there, regardless of whether that advertising is physical or virtual.

The Court found on April 18, 2012 in Club Resorts Ltd. v. Van Breda (and Charron) that a “real and substantial connection” had been established by way of physical circumstances linking Ontario and the foreign torts (or accidents) claimed by both parties. Both plaintiffs resided in Ontario and purchased travel packages to Cuba from an agent in Ontario, and while on vacation in Cuba (at the defendant’s hotel) both plaintiffs suffered catastrophic accidents. The Supreme Court of Canada revised the test to be used for evaluating the existence of jurisdiction of our courts in relation to foreign matters.

The Supreme Court of Canada stated that while the “real and substantial connection” test was a well-established constitutional principle, there was a need to give certainty about its meaning and conditions of application, and “greater direction on how it applies”. The Court reviewed the factors traditionally considered by the courts (the Muscutt factors), together with the factors listed in the Court Rules for service beyond the jurisdiction, and factors in the Court Jurisdiction and Proceedings Transfer Act.

The Court stated, “The development and evolution of the approaches to the assumption of jurisdiction … suggest that stability and predictability in this branch of the law of conflicts should turn primarily on the identification of objective factors that might link a legal situation or the subject matter of litigation to the court that is seized of it. At the same time, the need for fairness and justice to all parties engaged in litigation must be borne in mind in selecting these presumptive connecting factors.”

The Supreme Court then formulated a list of “presumptive connecting factors” to be used in determining whether or not a “real and substantial connection” for jurisdiction in tort cases exists. This list of “presumptive connecting factors” is not exhaustive, and other connecting factors may be raised. When one or more of the presumptive connecting factors applies, a court will assume jurisdiction unless the defendant can show the absence of a real and substantial connection. If none of the presumptive connecting factors apply, the plaintiff must nevertheless prove that a sufficient relationship exists between the litigation and the forum.

The following factors are now the “presumptive connecting factors” that normally entitle a Court to assume jurisdiction over a tort dispute:

(i) the defendant is domiciled or resident in the province;
(ii) the defendant carries on business in the province (with some actual presence in the jurisdiction such as maintaining an office or making regular visits);
(iii) the tort was committed in the province; and
(iv) a contract connected with the dispute (or tort) was made in the province.

The Supreme Court of Canada specifically rejected the plaintiff’s presence in the jurisdiction as a presumptive connecting factor, and also the location of where the damage was sustained which may raise even more complex and difficult issues.

It is clear that the Supreme Court of Canada welcomes the development of additional factors over time, provided they are similar in nature to the factors listed above. Relevant considerations for developing new “presumptive connecting factors” include:

(i) similarity of the connecting factor with the already recognized presumptive connecting factors;
(ii) treatment of the connecting factor in the case law;
(iii) treatment of the connecting factor in the statute law; and
(iv) treatment of the connecting factor in the private international law of other legal systems with a shared commitment to order, fairness and comity.

As explained by the Court, the constitutional values of order, fairness and comity underlie all of the presumptive connecting factors, whether listed or new. All presumptive connecting factors point to a relationship between the subject matter of the litigation and the forum so that it would be reasonable to expect the defendant would be called on to answer legal proceedings in that forum. Where such a relationship exists, Canadian courts would recognize and enforce a foreign judgment on the basis of the presumptive connecting factor in question, and foreign courts could be expected to do the same with a Canadian judgment. The assumption of jurisdiction is thus consistent with the principles of order, fairness and comity.

The Supreme Court provided guidance on how a party can rebut a “presumptive connecting factor”. That party must establish facts, which demonstrate that the presumptive connecting factor does not point to any real relationship between the subject matter of the litigation and the forum. An example is when a defendant is carrying on business in the forum (with actual presence) but the subject matter of the litigation has little or no connection with that business.

In conclusion, under the Van Breda-Charron test, to establish a “real and substantial connection” for jurisdiction, the party seeking jurisdiction has the burden of identifying a “presumptive connecting factor” that links the subject matter of the litigation, or the defendant, to the forum in a real and substantial way. There are now four “presumptive connecting factors” for tort claims but the list is not exhaustive. Courts will undoubtedly identify additional presumptive factors over time.

Tags: conflicts of laws, jurisdiction, presumptive connecting factors, real and substantial connection

Posted by Susan Smith (guest author) (posts) | Filed under Litigation and ADR | ....

Service by Facebook: Canadian courts adapting to new technologies

Wednesday, March 7th, 2012 Posted by Shafik Bhalloo (posts)

Shafik Bhalloo

Courts and law have often been criticized for being slow moving and not keeping up with new technologies, however, Canadian courts, in the recent past, have shown a resolve to keep up with, or at least not fall too far behind, technology particularly in the area of serving legal process. While the rules of court in all Canadian provinces, including British Columbia, normally require personal service of legal process on the other party, in some cases that cannot be achieved for a variety of reasons including inability to find the party or repeated and deliberate attempts by a party to evade service. In such cases, there is available, in the rules of court of all Canadian provinces, a process for an alternative method to serve a party referred to as “substitutional service”. A party must apply to court for an order to serve another substitutionally. In such an application, the party seeking a substitutional service order must file an affidavit showing what attempts were made to serve the other party. The affidavit must contain evidence of the steps a party took to serve another; if a process server was hired; what is the last known address of the party sought to be served; any information of the whereabouts of the party sought to be served; any attempts by the party sought to be served to avoid service and the like. The court will need to be convinced that the applicant made a diligent effort to serve the party before it will grant an order for alternative service.

Some of the traditional methods of serving legal process substitutionally ordered by courts have included publication in the local newspaper; leaving documents at the party’s most usual residence with an adult person; taping the documents on the door of the last known residence of the party; faxing the documents at the last known fax number of the party; leaving it with a family member or a friend of the party who could bring the documents to the attention of the party; and the like.

However, with the commercialization of internet in the mid-1990s and the creation of social networking sites such as facebook, twitter, Linkedin and MySpace, it was a matter of time before courts adapted to technology and took notice of the internet medium and social networking sites as an alternate source for one to serve a party, otherwise difficult to find, with legal process. In this regard, Australia can be credited with being one of the pioneers in embracing service by facebook with the decision of the Australian Capital Territory Supreme Court in MKM Capital Property Limited v Corbo and Poyser (No. SC 608 of 2008). In this case, a mortgage lender, MKM, obtained a default judgment against two defendants and after failing to serve the defendants personally with the default judgment sought an order to serve them substitutionally by facebook. Counsel for MKM was able to show personally identifiable information on the defendants’ facebook profiles including their birthdates, friends and email addresses and that the defendants were friends on facebook. The Court, satisfied that the facebook profiles or accounts belonged to the defendants, ordered substituted service of the default judgment by a private email message through computer to the defendants’ respective facebook pages.

The Canadian, New Zealand[1] and English[2] courts shortly followed suit. In the case of Canada, in Knott v. Sutherland[3], the Alberta Court of Queen’s Bench ordered subtitutional service of an amended statement of claim by sending it to the profile of the defendant on facebook together with a publication of a notice of the action in a local daily newspaper and a copy of the action sent to the human resources department of the defendant’s last known employer. Unfortunately, in the brief reported decision, the Court did not give reasons explaining the order.

In British Columbia, in 101 West Hastings Residential Limited Partnership v. Ursula Maria Schweighofer[4], Counsel for the Plaintiff, Mr. Gareth Carline of our firm, Kornfeld Mackoff Silber LLP, represented the Plaintiff who was suing for repayment of monies it had been required to pay to Revenue Canada on the Defendant’s behalf. The Defendant’s former counsel advised that the Defendant was a non-resident and did not give her contact information. A diligent search for the Defendant’s residential address and telephone listing within the province returned no leads. However, the Plaintiff’s counsel who had the email address of the defendant and had been corresponding with the husband via email sought to find out from the husband whether the Defendant would accept service via email at his email address and the husband responded in the negative. At such point, counsel conducted an internet search of the defendant’s name and discovered profiles of the defendant on two social network sites, namely, on Linkedin and on facebook. Both profiles had the defendant’s name and the same geographical location, Nigeria. On an application to serve the defendant substitutionally, the Court allowed the Plaintiff to serve the defendant substitutionally via her husband’s email and the former counsel’s office, as well as by sending a message to her of the claim via her Linkedin or facebook profile (although service via the latter mode was not specifically sought).

While courts are embracing technology in ordering substitutional service, there are some concerns with substitutional service using social networking sites. As with traditional alternatives to personal service, there is no guarantee that the party sought to be served will be served. In the case of social networking sites, a person registering for a social networking profile may not be who he or she claims to be. It is possible that the registrant on the site may be impersonating another person or may have a name identical to the party you are intending to serve. Another concern is that the party holding the social media accounts maybe an infrequent user of the accounts and may not receive notice of legal process in a timely fashion. Whether in the ethernet world or in the bricks and mortar world, courts must consider and weigh all available evidence in determining the probability or likelihood of achieving service of legal process on a party using whatever alternative method of service an applicant is proposing the court to order.

[1] Axe Market Gardens v Craig Axe (CIV: 2008-485-267)

[2] Blaney v. Persons Unknown (unreported)

[3] [2009] A.J. No. 1539

[4] Vancouver Registry No. M114652

Tags: civil litigation, evading service, facebook, internet, legal process, linkedin, service

Posted by Shafik Bhalloo (posts) | Filed under Litigation and ADR | ....

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