Archive for the ‘Litigation and ADR’ Category

Herb Silber, Q.C.
Tuesday, March 29th, 2016    Posted by Herb Silber, Q.C. (posts)
Herb Silber, Q.C.
Herb Silber, QC brings a strong combination of experience, knowledge and empathy to the arbitration process as Arbitrator or Counsel. Herb’s approach creates the positive, respectful atmosphere critical to a successful arbitration process.

In my last post, I addressed the question of whether an Arbitrator should conduct his or her own independent research of the facts outside of the evidence presented by the Parties. Now I want to address the second part of that question which deals with legal research. Succinctly put, should an Arbitrator engage in his her own legal research independent of the submissions made by the Parties or their Counsel.

It is not unusual for a Judge to refer to cases that have not been cited by Counsel that may be recent expressions of cases well known and referred to by Counsel to support one side or the other. I see no harm in that. However, once an Arbitrator embarks on his or her own to engage in legal research on an issue not raised or focused upon by the parties I believe he or she is on shaky ground and may subject their Award to a finding of arbitral error.

Underlying all arbitrations is the right of each party to know the case it needs to meet. That is inherent in the concept of a fair hearing. So for an Arbitrator to venture out on his or her own to research a legal issue that the parties have not raised or may be peripheral to the case, arguably, would be manifestly unfair. The saving grace however could be if the Arbitrator raised the legal issue with the parties that is of concern and asked them to address it, rather than doing his or her own research. This would be consistent with the direction to the Arbitrator in BCICAC Rule 19 to make a determination of the case on its merits, but in doing so treating both parties fairly and giving each an opportunity to present their case. Moreover, Rule 33 of the BCICAC Rules makes it clear any award must be decided in accordance with the law, in the absence of agreement by the Parties to do otherwise.

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Lana Li
Tuesday, February 16th, 2016    Posted by Lana Li (posts)

As the baby boomer generation see their children move out of the house and settle into their careers and family, some are now re-examining their marriages or long term relationships and considering what they want to do, and with whom, during their retirement years.  According to Statistics Canada (Marital Status Overview: 2011), there were a greater number of divorced and separated couples over the age of 65 in 2011 than in 2006.  A Times article in October 2014 provides that 1 in 4 divorces in the United States are experienced by those over the age of 50 and 1 in 10 divorces are experienced by those over the age of 65.  Given the aging population, it will not be surprising that these statistics are on the rise.

The social and financial impact of “grey” divorces, a phrase coined to refer to the demographic trend of rising divorce rates for older (grey-haired) couples in long term relationships, can be significant.  While the mortgage on the family home may well be paid off by then, the cost of maintaining two households, even if by modest standards, will likely be higher than for one household, coupled with reduced income in retirement years.  One party may require additional homemaker support, assisted living, or a care facility if there are significant health issues, including dementia or Alzheimer’s.  For some couples, there will be less time to rebuild assets given that one or both may be nearing the end of his or her working life.  The cost of health care coverage may be significant if one party loses coverage upon separation or divorce, previously available through the other spouse’s benefits plan.  Pension splitting will need to be considered.  Family businesses may need to be split up and tax considerations will need to be considered.  If there are prior marriages or relationships, competing interests of all of the children or prior spouses may need to be considered.  Life insurance and beneficiary designations must be re-examined.

From the courts’ perspective, it is unlikely that a court will “force” one party to work beyond his or her age of retirement, especially if there are health issues, but it will examine closely one party’s decision to retire early and the reasons for it. Where a party continues to work after the age of 65, a court may consider that he or she will not retire, absent any health or other reasons for not working and the court may require that party to pay, or continue to pay, spousal support based on that expected working income.  A court will only allow “double dipping” (paying spousal support to a spouse from that part of pension income that has already been equalized) in limited circumstances.[1]  Where one spouse’s needs due to dementia can be determined with some mathematical certainty, spousal support can be ordered and such spousal support can be binding upon the payor’s estate.[2]  In some circumstances, spousal support will be refused if the payor requires all of his or her income to pay for care facility costs, the marriage was short, and the division of assets would adequately compensate the other spouse.[3]   Thus, even if there is need of the other spouse, there might not be sufficient income available to pay after the payor’s needs are taken into account.

At the end of the day, those baby boomers who are facing divorce or dissolution of their relationship should obtain legal and financial advice to assist them in navigating these challenging issues.


[1] Boston v Boston, 2001 SCC 43

[2] S.(E.R.) v S(H.C.), 1998 CanLII 4619

[3] W.C.L. v A.J.L, 2003 BCSC 971

 

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Alisha Parmar
Friday, February 5th, 2016    Posted by Alisha Parmar (posts) and Dan Parlow (posts)
Alisha Parmar
Alisha joined Kornfeld LLP as an associate in 2015 after completing her articles with the firm.
Dan Parlow
Dan is a partner at the firm of Kornfeld LLP. He helps resolve commercial disputes for clients including investors, brokerage houses and financial institutions in the realization of claims by creditors and over disputed investments; entrepreneurs in claims over business assets, shareholder and partnership interests and commercial property; estates, trusts and beneficiaries over disputed wills, trusts and related claims; clients of realtors, lawyers, accountants, brokers and investment advisors; and businesses in the telecom, oil & gas and high-tech industries.

Defending a legal action can be an expensive process, even where a defendant is ultimately successful in having the claims against it dismissed. Normally, legal costs are “in the event”, so that a successful defendant will have some of its legal costs awarded to it. However, there may be serious difficulty recovering legal costs depending on the circumstances of the plaintiff – the plaintiff may have no assets, for example.

As a result, in certain cases, it will be appropriate to seek an order for “security for costs”, so that the plaintiff is required to pay a sum of money into court or into a trust account prior to trial of the action and the defendant can have quick recourse for its legal costs against those funds if it succeeds. An order for security can be an important defendant’s tool since a plaintiff who is ordered to, but does not post, security for costs will be precluded from pursuing its claims.

Interestingly, courts apply a different test in deciding whether to order security for costs depending on whether the plaintiff is a corporation or an individual. Where the plaintiff is an individual, the underlying concern is that poverty should not be a bar to the litigation proceeding.[1] Thus, the “fact that the plaintiff resides outside the jurisdiction, has no assets within the jurisdiction, or is impecunious, is not sufficient in itself” to order security for costs.[2] A defendant must show that special circumstances exist for the order, which “could arise if an impecunious plaintiff also has a weak claim, or has failed to pay costs before, or refused to follow a court order for payment of maintenance”.[3]

In contrast, once a defendant can demonstrate that a corporate plaintiff will not likely be able to pay costs if the defendant is successful, security for costs is generally ordered unless the court is satisfied there is no arguable defence to the plaintiff’s claim.[4] The likelihood that a corporate plaintiff will be barred from proceeding with a claim is an insufficient reason, without more, to refuse to order security for costs.[5]

However, a corporate plaintiff may be wholly or substantially controlled by an individual who is also a plaintiff in the proceeding – in this scenario, an order requiring the corporate plaintiff to post security will likely affect the individual plaintiff as well. The question arises whether in such a situation the court should be less inclined to compel a corporate plaintiff to post security?

The British Columbia Court of Appeal recently considered this question and answered in the negative – the test remains the same against a corporate plaintiff even if there is a single shareholder who is also a plaintiff in the action.

In Ocean Pastures Corporation v. Old Masset Economic Development Corporation, 2016 BCCA 12 (“Ocean Pastures”), the two plaintiffs (a corporation and its sole shareholder) sued several defendants, including two corporations and three individuals. Early on, these defendants argued that the plaintiffs would not be able to pay costs if the action was dismissed because neither plaintiff appeared to have assets. The judge first hearing the application ordered security for costs for the actions against the three individual defendants, as the claims against them were weak, but refused to order security for costs for the claims against the corporate defendants.

Despite finding that security for costs would have been warranted if the corporate plaintiff’s claim had been considered in isolation from its shareholder’s claim, the chambers judge denied security, reasoning that (a) any security posted by the corporate plaintiff would have to be supplied by the individual plaintiff; and (b) there were no “special circumstances” which would have justified granting security against the individual plaintiff.

The corporate defendants appealed the decision, arguing that the chambers judge erred in law by applying the “special circumstances” test to the corporate plaintiff. In agreeing with the defendants, the Court of Appeal relied on an older English decision, for the principle that the existence of an individual plaintiff should not shield a corporate plaintiff from an order for security for costs, and that a stricter test for security for costs against corporations is appropriate to prevent individuals from using companies (with the benefit of limited liability) to abuse the litigation process.[6]

Since an order requiring a plaintiff to post security for costs can be a decisive factor early in the litigation process, this decision of our Court of Appeal has both legal and practical implications. Notably, in Ocean Pastures, as the plaintiffs had failed to post security for costs for the actions against the individual defendants, those claims were dismissed.[7] The Court of Appeal decision threatened to have the same result on the balance of the plaintiffs’ claims.

[1]Ocean Pastures v. Old Masset Economic Development Corporation, 2016 BCCA 12 at para. 19

[2]Ibid at para. 20, citing Han v. Cho, 2008 BCSC 1229

[3]Ibid

[4]Ibid at para. 18, citing Fat Mel’s Restaurant Ltd. v. Canadian Northern Shield Insurance Co., (1993), 76 BCLR (2d) 231 (CA)

[5]Ibid at para. 17, citing Kropp v. Swaneset Bay Golf Course Ltd. (1997), 29 BCLR (3d) 252 (C.A.)

[6]Ibid at paras. 24 to 25, citing Pearson v. Naydler, [1977] 3 ER 531 (Ch. D)

[7]Ibid at para. 10

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Shafik Bhalloo
Thursday, October 8th, 2015    Posted by Shafik Bhalloo (posts) and Alisha Parmar (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.
Alisha Parmar
Alisha joined Kornfeld LLP as an associate in 2015 after completing her articles with the firm.

When an employee is wrongfully dismissed and the court determines that the employee is entitled to damages in lieu of reasonable notice, the employer will almost always argue that the employee was required to mitigate those damages and failed.  In essence, the employer will allege that the employee failed to take reasonable steps to obtain alternative employment, and that if the employee had taken those steps, then the damages suffered by the employee from wrongful dismissal would have been reduced.  If the court agrees that there was a failure to mitigate, then the employee may be barred from recovering a portion of the damages arising from wrongful dismissal on the basis that those damages could have been prevented by the employee.  Notably, mitigation does not require the employee to accept just any offer of employment in an effort to mitigate – as an example, the court will not find a failure to mitigate where a CEO declines to accept employment as a cashier at a fast-food restaurant, since those two positions are not at all comparable.

An interesting situation arises when the former employer offers the employee re-employment on the same terms.  The question then becomes whether a reasonable person in the employee’s position would have accepted the employer’s offer of re-employment.[1]  In Fredrickson v. Newtech Dental Laboratory Inc., 2015 BCCA 357 (“Fredrickson”), the British Columbia Court of Appeal recently considered that scenario and held the employee did not fail to mitigate by declining an offer of re-employment, where the offer did not fully compensate her for lost income, and where the trust relationship between the employee and employer had deteriorated because of the employer’s actions.

The Decision                                          

In Fredrickson, the plaintiff employee was employed as a dental technician assistant by the defendant company, for a period of eight and a half years.  The plaintiff had a good working relationship with the owner of the defendant company, her “boss”, and they worked closely together in a small office.

In 2011, the plaintiff came under stress resulting from her husband’s illness and her son being involved in an accident, both of which her boss was aware of.  On April 28, 2011, the plaintiff went on a medical leave of absence without informing the defendant that she was doing so.  While the plaintiff was on leave, the defendant disputed her entitlement to take leave and there was some contention that the defendant did not properly respond to the plaintiff’s request to complete Employment Insurance forms. During this time, the plaintiff’s boss surreptitiously recorded two conversations with the plaintiff, which were later used by the defendant at trial.

On July 20, 2011 the plaintiff returned to work after her doctor advised her that she was fit to do so.  On the same day, the defendant informed her that she was laid off because of insufficient work, and provided the plaintiff with a record of employment and a letter of reference.  The plaintiff, through counsel, sent a demand letter to the defendant on September 9, 2011.  In that letter, the plaintiff took the position that she had been wrongfully dismissed when she was laid off in July.

The defendant responded to that letter with an offer of re-employment, with re-employment commencing September 26, 2011, and stated that the plaintiff had an obligation to mitigate her damages by accepting re-employment.  Then, on October 19, 2011, shortly after the plaintiff had commenced her action against the defendant claiming wrongful dismissal, the defendant made a second offer to re-employ the plaintiff including an offer to pay her unpaid wages from July 20, 2011 until September 26, 2011.  Following this, on October 25, November 4, 2011, and April 19, 2012, the defendant made three further offers to re-employ the defendant, including payment of lost wages from July 20, 2011 to September 23, 2011 (the date the first re-employment offer was made), at the same position, with identical salary and benefits, as before.  The plaintiff declined all of these offers.

At trial, the plaintiff was successful at showing that she was wrongfully dismissed, and in fact, the defendant acknowledged that it had dismissed the plaintiff without cause and without reasonable notice in its closing submissions.  Thus, the only issue that remained was whether the plaintiff had failed to mitigate her damages.

The plaintiff tendered evidence that she had applied for nearly 100 jobs, and was not successful obtaining any of those positions, until she eventually secured a position as a bookkeeper in August 2012.  However, the trial judge concluded it would have been reasonable for the plaintiff to accept re-employment by the defendant and that by failing to do so she had failed to mitigate her losses.  As a result, the plaintiff was only awarded damages from the period between July 20, 2011 and September 23, 2011, the date the first offer was made.

The plaintiff appealed, and the Court of Appeal overturned the trial judge’s finding on mitigation.  The Court of Appeal held that the trial judge erred by (1) “failing to accord significance to the incomplete nature of the offer” and by (2) “failing to reflect the intangible element of mutual trust, commensurate with the nature of employment, that flows like a current in the employment relationship”.[2]

On the first point, the Court of Appeal stated that none of the offers made by the defendant were “make whole” offers, in that the offers did not fully compensate the plaintiff for her lost income following July 20, 2011.  The first offer did not include an offer to compensate the plaintiff for the income she had lost between July 20 and September 26, 2011.  The second offer did not compensate the plaintiff for the lost income between September 26, 2011 to October 18, 2011, and each of the other offers left a similar gap in the compensation being offered to the plaintiff.   As such, the “offers coming from Newtech to Ms. Fredrickson never caught up to her loss of income situation”.[3]  The Court of Appeal held the trial judge did not give adequate consideration to the gap in income between the plaintiff’s claim for wrongful dismissal and the defendant’s offers of re-employment, since even the earliest offer for compensation resulted in the plaintiff losing 8% of her annual income.[4] Further, if the plaintiff accepted the offer of re-employment, she would have a very difficult time maintaining a claim for the lost income.[5]

Aside from this, the Court of Appeal found the trial judge erred by not considering the trust relationship between the plaintiff and defendant.  The Court stated that whether or not a reasonable person would accept an offer of re-employment includes an assessment of the obligations of good faith or fidelity on the part of the employer and employee, since mutual trust is an important aspect of the employment relationship.[6]   The Court held that the plaintiff’s trust in the defendant had been eroded by the defendant’s actions in at least two ways.  First, as stated previously, the plaintiff’s boss had secretly recorded conversations with her and then used those conversations at trial.  Second, her boss had engaged in conversation with another employee, in which he agreed that the plaintiff would be too embarrassed to return to work with the defendant.  Interestingly, the Court found that whether or not the plaintiff felt “embarrassed” was inconsequential, and what mattered was that her boss had breached the confidence of the plaintiff by having this conversation, particularly in the context of a small workplace.  The Court found that as a result of the defendant’s actions, “any chance of repairing the employment relationship was irretrievably lost”.  The Court of Appeal’s reasoning suggested that even if the offers had been “make whole” offers, the trial judge’s finding would still not have been upheld because the employee no longer trusted the employer. Thus, the decision illustrates in some situations, it will not matter that re-employment was offered, since the damage has already been done.


[1] Fredrickson at para. 29

[2] Fredrickson at para. 23

[3] Fredrickson at para. 24

[4] Fredrickson at para. 26

[5] Fredrickson at para. 27

[6] Fredrickson at para. 29

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Devin Lucas
Thursday, July 30th, 2015    Posted by Devin Lucas (posts) and Alisha Parmar (posts)
Devin Lucas
Devin Lucas maintains a general civil litigation practice with a focus on corporate and commercial litigation and landlord tenant and real property disputes. His commercial litigation experience includes contractual disputes, employment matters, and debtor-creditor law.
Alisha Parmar
Alisha joined Kornfeld LLP as an associate in 2015 after completing her articles with the firm.

The Supreme Court of British Columbia recently clarified renewal rights in the context of a commercial lease in The Zone Bowling Centre (2002) Ltd. v. 14100 Entertainment Blvd. Investments Ltd., 2015 BCSC 524.

The decision stresses the importance of parties to a lease reading and understanding their rights and obligations in the context of a lease renewal clause.  If the lease requires it, it is prudent for the tenant to exercise the option to renew in time and in writing.  If the tenant fails to do as the lease requires and instead enters into lease renewal negotiations with the landlord, the tenant does so at his own peril and with no guarantee that the landlord will allow the tenant to remain at the leased premises.  As this case demonstrates, courts are loathe to interfere with contractual certainty as bargained between two commercial parties and subsequent negotiations may not be enough to revive the right of renewal if it is not validly exercised by the tenant.

Summary of Facts

The Zone Bowling Centre (“the Zone”) operated a popular bowling alley and brew pub in the Riverport Sports & Entertainment Park in Richmond, British Columbia.  The Zone, as tenant, had entered into a lease with 14100 Entertainment Blvd. (the “Original Owner”), as landlord, for the premises (“Premises”).  The initial term of the lease was 10 years ending on April 30, 2014, with three lease renewal options, each for an additional five years.  Prior to expiry of the initial term, the Original Owner sold the Premises and assigned the lease to 0984972 BC Ltd. (the “New Owner”).

Under the lease, the landlord covenanted with the Zone to grant a renewal of the lease, if the Zone:

1)      gave notice to the landlord that the Zone “wishes to obtain a renewal of this Lease” not earlier than twelve months and not later than nine months before the expiry of the initial term;

2)      was not in breach of any covenant or condition of the lease at the time of the renewal notice to the landlord; and

3)      had duly and regularly observed and performed the covenants and conditions contained in the lease.

The lease further required that any notice provided under the lease be in writing.

As the initial term was to expire on April 30, 2014, the cut-off date for the Zone to exercise the first renewal option was July 31, 2013.  However, the Zone did not exercise its renewal option until August 2013 and even then, it failed to do so in writing.  Further, throughout the term of the lease, the Zone was late in paying rent and, in fact, rent was overdue on July 31, 2013.

Despite this, after missing the cut-off date, the Zone entered into lease renewal negotiations with the Original Owner and later, the New Owner, as landlord.  These discussions broke down in July, 2014.  At this time, the New Owner informed the Zone that it did not consider that the option to renew had been validly exercised and instead considered the Zone to be an overholding tenant on a month to month tenancy.

On October 27, 2014, the New Owner gave the Zone written notice terminating the lease effective November 30, 2014.  In spite of this, the Zone continued to occupy the Premises based on the its view that it had properly exercised the renewal option.  The Zone then brought a petition, seeking a declaration that it had properly exercised the option to renew.

The Decision

The issue before the Court was whether or not the Zone had exercised the first renewal option under the lease.  To determine whether the option had been validly exercised, the Court analyzed whether the three conditions precedent set out in the lease had been met by the Zone.

Based on the evidence before the Court, Mr. Justice Bowden found that the Zone had not exercised the renewal option by July 31, 2013.  Furthermore, Mr. Justice Bowden held that during the period from June 1, 2013 to September 25, 2013 the Zone was in arrears in paying rent and, therefore, was in breach of its duties under the lease during the time that the Zone had allegedly exercised its renewal option.  Finally, on account of the Zone being consistently in default of its obligation to pay rent, it could not be said that the Zone had “duly and regularly performed its obligations” throughout the 10 year term of the lease.

Even so, the Zone argued that the respondents had waived strict compliance with the lease and the conditions precedent to the exercise of the option by accepting rent when payments were overdue, and that the respondents were precluded from alleging a breach of the lease as a basis for denying the renewal, given the continuing lease renewal negotiations among the parties.

The Court found the respondents’ late acceptance of rent payments did not amount to a waiver of their right to require the Zone to strictly comply with the preconditions to exercise the option to renew – at most, it could amount to a waiver of the landlord’s  right to terminate the lease on the basis of the Zone’s breach of its obligation to pay rent.  Further, as the Court found that there was no evidence that the respondents had promised the Zone it could exercise the renewal option without providing notice in writing, nor by providing notice after the cut-off date specified in the lease, the landlord was not precluded from insisting on enforcing its strict legal rights in connection with the renewal option

Finally, although the Court noted the potentially significant adverse impact on the Zone’s business, the Court found that the alternative remedy of “relief from forfeiture” – which often allows tenants who have been in breach one opportunity to reinstate it – was not available to the Zone in this case. By failing to exercise the option properly the Zone had not forfeited an existing tenancy, but instead had simply lost the right of renewal, so relief from forfeiture could not apply.

Thus, despite its efforts, the Zone was not able to salvage its option to renew.  (It was later reported that the parties had reached an agreement after this decision was handed down and the Zone was able to continue operating at the Premises.  We do not know the terms of that agreement.)

This case is a reminder to all contracting parties that if they intend to engage in negotiations during the currency of a contract, they should never do so without securing a legally enforceable agreement by the other side that it will not require strict compliance with the contract terms while the negotiations are underway.

 

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