While this post has nothing to do with small business law per se, I thought that I would put up this post because, to be honest, I had a real bugger of a time trying to find any information out regarding hearings before the Trade-Mark Opposition Board and there wasn’t a lot of procedural information out there.  I was surprised that there wasn’t much in either Odutola on Canadian Trade-Mark Practice or Hughes on Trade-Marks in this regard.  I made inquiries of numerous colleagues for whom they all had had the same experience as myself – they have done trade-mark oppositions but the determination was always on the basis of written arguments and nobody had attended an oral hearing.  Then I spoke with my good friend Aaron Schwartz who had done them in the past and his advice to me was “they’re just like arguing an appeal, don’t worry you’ll be fine.”  That made me feel better in the sense that at least I was sure that I wouldn’t be involved in something completely foreign to my sense of understanding.  And so yesterday I caught a plane and attended my first oral hearing on a trade-mark opposition.

I did manage to find one continuing legal education program in which oral hearings were quickly mentioned.  Unfortunately, I only copied the two pages that covered the section – if anyone ever happens upon this program again and wants to let me know who said these passages I’ll happily give credit to the author where it is due.  It was written:

Hearings are held in Hull, Quebec before a one-person board.  Note also that is is possible to participate in hearings by way of telephone conference call. … French language hearings along with simultaneous language translation facilties are available.  …  There is currently a backlog of approximately 190 cass for which hearings have been requested and are scheduled or await scheduling, or for which decisions are pending.  The actual hearing date that is granted is typically anywhere from nine months to one year from teh date the request is made.  Decisions typically issue within one month of a hearing.

…

One can expect a high level of adjudication in oppositions, indeed often better than other venues.  … With this in mind, it is advisable not to waste the Board’s time by restating the obvious, belabouring issues of law which have long been decided, or droning on about basic points which are raised in every hearing in which an Officer participates.  The experienced practitioner quickly and succinctly canvasses issues such as the onus on the parties, and the material dates for considering the various grounds of opposition.  Keep in mind that each Hearing Officer has the pleasure of listening to a trade-mark agent or lawyer remind him or her on an almost weekly basis that the onus on the parties has not changed since the week before.

Nor does it advance a party’s case to reread its written argument.  The better approach is to simply inquire of the Board whether they have had an opportunity to read the party’s written argument and might have any qustions regarding same.  The one should go on to either add points not included in one’s own written argument or to add commentary on the other side’s case.  Do not be afraid to try out new points of law, even if prior Opposition Board decisions are against you.  The Board will at least consider and rule on them in writing, which may provide an opportunity to pursue the argument on appeal, if the case goes that far.

From my experience yesterday, I can add the following updates or my comments.  Firstly, Hull, Quebec is now known as Gatineau, Quebec (which threw me off a little and shows my age I suppose).  Second, as it now stands, the Board is finishing off its new swanky hearing room (we used it but it’s not done) and in a few months it will be ready for use with video conferencing which will be better than hearings by way of conference call.  Third, yes, English-French translation service is available, but one has to be somewhat wary of it.  The translators that they had for my hearing were good but they were not legally trained.  To give an example, the moving party or the applicant in a legal proceeding is a “Requerant”  The literal, non-legal translation would be “the requirer” or “the requiring party”.  In this case, however, the translator should have said “the applicant” but I was given the translation of “the requirer” and it took me a few seconds to figure out that it should have been the applicant – which meant that I lost a few seconds worth of translation.  After about the half-way point, I started to wear my headphones half on my ear and was listening more to the French than to the translation (I really should have more faith in my French abilities).

I’m not sure how many cases are backlogged now, but I can say that between the time the other side requested the oral hearing and yesterday was slightly more than one year.  In this instance, I cannot stress enough how important it was that I had the research updated between the time of the written arguments and yesterday’s hearing.  Why?  Because as it turned out the Supreme Court of Canada had released its decision in Masterpiece Inc. about five months after our written arguments had been submitted and that case changed the way one approaches trade-mark oppositions now.  As the Board member put it yesterday, she viewed Masterpiece Inc. as “Trade-Mark Oppositions 101″ – so that should be your starting point for the next few years at least – and I would have been very sorry if the research wasn’t updated and that case wasn’t found and addressed.

In addition, the Board member indicated that the Board’s internal guideline now is to get decisions released within four months – and that’s just the guideline so it could conceivably be a little longer.

I’m personally not a fan of assuming that the Board has read all of my arguments and I’m not a proponent of the “just ask them if there are any questions” approach.  I decided to hit the highlights at least of each of my arguments and still make the additional points or comments on the other side’s written argument.

In terms of logistics, the Oppositions Board hearing room has now moved to Room C232 of Phase II of Place du Portage.  Place du Portage runs from rue Victoria on one side to rue de l’Hôtel de Ville on the other side.  Phase II is on the Hôtel de Ville side – so if you have lots of materials to haul with you, have the taxi go to the Hotel de Ville side rather than the rue Victoria side.  Once you get into Phase II at the Hôtel de Ville side, go up the escalator and you will see Room C232 at the top of the escalator – so you don’t have to go through the security checkpoint.

I should also mention that it was stated by the Board Member that the Board does also hold hearings in Montreal – but only where both the applicant and the opponent are represented by lawyers or trade-mark agents based in Montreal.

There is a Practice Notice that is in effect for trade-mark opposition proceedings.  Suprisingly, it also says little about the actual procedure at the oral hearing.  The only portion that deals with the requirements for the hearing itself is found at Section X.8 and that simply says that parties are required to send to each other and to the Board at least five working days before the hearing a list of the case law and copies of any unreported decisions that they intend to rely upon at the hearing.  In this instance, I focused on the wording “to be relied upon at the hearing”.  I had cited about 20 cases, but I only planned to address about 6 of them in my oral arguments – the other 14 or so were either additional examples of my main case citations or else they dealt with items like on whom a certain onus rested.  So, I put in my 6 cases on the list and left it at that.  The other side, however, had cited over 30 cases and their lawyer sent in a list that had all of their cases listed.  The Board member said absolutely nothing about this – even though only a handful of cases were cited by the other lawyer.  I’m not complaining about this and it really didn’t matter in the end.  Next time, though, I will simply send in a list of all of my cases cited in the written arguments and any new cases that came up in between the written arguments and the hearing and then I can refer to whatever ones I want.

What was not clear was who speaks and when.  The onus is on the applicant to satisfy the Board that there is no likelihood of confusion.  As such, I presumed that I would go first, then the other lawyer and I would get a chance of reply.  As it turned out, the order of speaking was the Opponent’s lawyer first, then myself for the applicant, and then the Opponent got a chance of reply.  I was fine with either order, but at least now I know who speaks when.

When I was first married I had problems dealing with how to address my mother-in-law.  I was brought up not to call my elders by their first name.  I wasn’t going to call her “Mom” because she isn’t my mother.  I wasn’t going to call her “mother-in-law” because that sounded too formal and inappropriate.  I honestly had no idea what to call her so for over a year I simply spoke with her directly and never called her anything.  The “difficulty” (to the extent that there was one) was alleviated after a year with the birth of our first child and my ability to now call her “Grandma”.  Fortunately, though, that year gave me practice for speaking with the Board Member.  I couldn’t call her Your Honour, because she isn’t a judge.  I just couldn’t bring myself to referring to a woman (or a man for that matter) as a “member” – for reasons which should be obvious.  I did not feel comfortable referring to her by her personal name since I had never met her before and it seemed awfully familiar (although, in fairness, it wasn’t a stuffy or overly formalistic hearing).  So, I just spoke directly with the Board Member and didn’t address her directly but I did make mention from time to time along the lines of “if the Board should find …”  I had asked the registrar before the hearing how to address the Board Member and he had no idea.  I guess you’ll have to figure out what works for you and you are comfortable with.  I would still be calling judges “Mi’Lord” and “Mi’Lady” if we weren’t required to call them “Your Honour” nowadays – I like the old formalities.

In terms of the hearing itself, the Board Member basically said at the outset that she had a few questions she wanted to ask of each side and that some other questions might arise as we made our arguments, but that she was basically willing to let us make our arguments with little interference from her.  The hearing did proceed in that manner.  Compared to other hearings I’ve been in, it was quite painless.

The final issue to mention is that there are no costs provisions under the Trade-Mark Act or the regulations or the practice notice for opposition board hearings.  So, my last minute panic (that I always get before a hearing, motion, etc.) that I have forgotten to prepare a bill of costs or costs outline was quickly relieved when I ran into the office late the night before and saw in Hughes on Trade-Marks that there are no costs provisions so I didn’t have to prepare anything related to costs.  At least one less thing to worry about from a practice standpoint (although if my client wins the hearing I’m sure it would like its costs – but the same could be said for the other side if it wins).

Hopefully some of the above information might be useful to someone else facing their first opposition board hearing and looking for some practical tips on how it works.  Best of luck in your hearing!

CALC

The Court of Appeal released a decision last week in the Dean case that deals in part with what a commercial landlord can do with assets belonging to a tenant.  In that case, the tenant entered into a five year lease but fell into default within five months.  While not discussed to any extent in the Court of Appeal’s decision, it would appear that the landlord (or someone) changed the locks.  On a commercial lease, one of the remedies available to a landlord is the remedy of “distress” which is, put as an oversimplification, the ability of the landlord to hold the tenant’s items located in the rented space until payment is made and if payment is not made to then sell the items.  However, the remedy of distress (or distraint – depending on the proper grammatical usage) will not be possible where the landlord has foreclosed on the lease.  One of the ways in which a landlord can foreclose is to change the locks.  Therefore, it would appear that there was a foreclosure on the lease.  As such, the tenant should have received its items back and it would then be up to the landlord to (a) try and get a new tenant in to the space in order to minimize the landlord’s damages from lost rent and then (b) to sue the tenant for that lost rent.

In this case, the locks were changed and certain items remained within the rented space.  Ultimately, the landlord was able to re-lease the space and in doing so the lease appeared to include some of the equipment that was owned by the tenant.  The tenant therefore sued for conversion – which is when one party unlawfully appropriates the property of another party.  One of the defences to a claim of conversion is that the plaintiff abandoned his/her/its property.  Abandonment requires a “giving up, a total desertion, and absolute relinquishment” of the items by the owner.  On the facts of this specific case, the Court of Appeal found that the tenant had not taken such steps.

The Court does make mention of the fact that abandonment could be found where the defendant took steps to contact the owner of the property before the property was disposed of and no response was made by the owner.  In this particular case, there was no notice or attempts by the landlord to contact the tenant. 

There are two points for commercial landlords to remember: the first is that if the lease is being foreclosed upon and being treated as at an end, you do not have a right to distrain the tenant’s goods in the rented speace.  The second is that if you do proceed to take the goods and sell them, you had better give notice to the tenant of your intention to do so – otherwise you could end up having to pay damages for conversion like the landlord in the Dean case.

Something to think about.

CALC

In Chinese Astrology, 2011 was the year of the Rabbit.  In my practice, 2011 was the year of the non-payer.  In the 17 years since I first became a lawyer, I have never had to bring more than one motion to be “removed from the record” (that is, approved by the Court to be excused from further acting for a client) in a year – and many years I have not had to bring a motion at all.  Yet, this past year I have had to bring several.  Was I busy last year?  Yes, extremely – and that has continued on to this year as well.  Did all of my clients pay?  Therein lies the rub, because the answer is “no”. 

I have said in the past that the key to good collections is to get deposits or retainers up front and to never extend credit too far.  This is especially true in service industries like law, accounting, consulting, etc.  With that practice, it is still not uncommon, though, to experience a 1 or 2% bad debt level.  But even in 2008 and 2009 I did not experience problems like I did in 2011.  The final numbers aren’t in yet (because it’s too early to talk about collections on December bills for example), but it’s looking like I will have ended the year being stiffed to the tune of about 10% of my invoices.  Thankfully, it’s not all on one or two files, so we’re still talking relatively small numbers.  The problem, though, is that a bunch of small numbers can still easily add up to the equivalent of one large number.

The storm clouds are on the horizon in terms of the economic forecasts for 2012.  I’m not sure that they ever really left the horizon but the issue becomes whether it’s better to keep a tighter rein on your customers’ receivables or to chase after them later to sue for a larger amount.  Alternatively, it might be time to start looking at your contracts with your customers – especially if you are a service-provider.  I have a couple of versions of retainer agreements.  When the economy gets really bad, I have a version that says that if my invoices go unpaid for 2 months or more, then I am fully entitled to stop working and that the client will consent to any motion I bring to get off the record so that I can get out of a bad situation as quickly as possible (although I then have professional responsibilities which always will temper that ability).  What does your contract say?

Something to think about.

CALC

Unfortunately this issue has been coming up a lot lately so it’s time for a quick reminder.  Suppose a business sends goods by shipment (truck, rail, air, bus, etc.), the business pays the shipper and the goods are delivered.  Then someone comes knocking on the door of the sender and asking for payment.  “What?  We’ve already paid for the shipping so go away and have a nice day,” is the response from the sender.  The response is “sorry, you have to pay me.”  And the response is correct.

Normally there is something called “privity of contract”.  Suppose that you agree to pay me $10 to paint your fence.  I then hire a teenager to actually paint the fence and I agree to pay him $5.  The teenager paints the fence and you are happy with the result, so you pay me the $10.  I then don’t pay the teenager.  Normally, the teenager cannot go after you for his $5 because his contract was with me, not with you.  That’s the concept of “privity of contract”.  You and I have privity of contract – that is, we are the parties to a contract – and the teenager and I have privity of contract, but you and the teenager are complete strangers for contract purposes.

The concept of privity of contract can create real problems when it comes to shipping because often the actual truck or vehicle used to physically move the goods is done by a sub-contractor.  When we’re talking $5 and $10 it’s not a big deal, but when we’re talking about thousands of dollars in freight costs – especially for truckers who might not make a lot of money from their loads to begin with – it can be a huge problem when it comes to the shipper getting paid but then not passing on the trucker’s portion.  To the rescue (of the actual carrier, but not of the sender) comes Section 2 of the federal Bills of Lading Act and Section 7 of the Ontario Mercantile Law Amendment Act.  Both of these do away with the concept of privity of contract in shipping cases.

The result is that even if you pay the shipping company, if they turn around and don’t pay the actual carrier (eg. trucker), you could end up paying twice and then having to chase after the shipping company to get a refund on what you had to pay to the carrier.  How can you avoid this?  Make sure that the shipper you use owns the vehicles and doesn’t use sub-contractors.  Will they charge you more than the smaller operations?  Probably.  But the question is one of risk – which will cost you more: paying the higher cost now or potentially having to pay twice later on.

Something to think about.

CALC

The Court of Appeal released a decision yesterday that really doesn’t advance the law related to assignments so much as it serves to reinforce the the prior law is still valid and will be upheld.  Put simply, A and B were friends and work colleagues.  They did work with C.  Subsequently, B left the workplace and started up his own business and tried to do business with C.  A was able to get an injunction to stop B and C doing business for a short period of time – 3 months.  For whatever the stoppage for three months was worth, it clearly displeased B.  Later on, A wanted to buy property and C agreed to loan A over $100,000.  A subsequently defaulted and C agreed to assign the loan debt to B – with the result that B was now in the shoes of the lender and A owed the money to B.  B and C agreed that if A paid the money to B that B and C would then later decide how to split the monies that were recovered.

A complained that the arrangement between B and C was champertous and therefore should not be an enforceable assignment – that is, that A should still have to deal with C, not with B.  Why?  In part, I’m sure, because of the bad blood between A and B.  In part, I would expect, in that A would be concerned that his competitor, B, would now be in a position to potentially run him out of business, etc.

Madam Justice Feldman rejected the argument that this was a champertous situation.  She quoted from a prior decision of the Court of Appeal that nicely summarizes the law of champerty and maintenance:

Although the type of conduct that might constitute champerty and maintenance has evolved over time, the essential thrust of the two concepts has remained the same for at least two centuries. Maintenance is directed against those who, for an improper motive, often described as wanton or officious intermeddling, become involved with disputed (litigation) of others in which the maintainer has no interest whatsoever and where the assistance he or she renders to one or the other parties is without justification or excuse.  Champerty is an egregious form of maintenance in which there is the added element that the maintainer shares in the profits of the litigation.

The law had long held, however, that the mere assignment of a debt (even if it is does for an improper motive) is not, in and of itself, champertous.  In upholding this law, the assignment from C to B was not champertous and therefore was valid.

Similarly, the assignment was valid because there had been compliance with Section 53 of the Conveyancing and Law of Property Act.  That section reads as follows:

53.  (1) Any absolute assignment made on or after the 31st day of December, 1897, by writing under the hand of the assignor, not purporting to be by way of charge only, of any debt or other legal chose in action of which express notice in writing has  been given to the debtor, trustee or other person from whom the assignor would  have been entitled to receive or claim such debt or chose in action is effectual  in law, subject to all equities that would have been entitled to priority over  the right of the assignee if this section had not been enacted, to pass and  transfer the legal right to such debt or chose in action from the date of such  notice, and all legal and other remedies for the same, and the power to give a  good discharge for the same without the concurrence of the assignor.

Is there anything earth-shattering in this case.  Not really.  However, it does give me a good excuse to set out for you the law of champerty and to advise of Section 53 of the Conveyancing and Law of Property Act.

Let’s talk quickly about champerty and maintenance.  Litigation is not for the faint of heart – or of wallet.  What often happens is that people start the lawsuit expecting it to cost $X and soon realize that it is going to cost more than $X.  So, they start borrowing money from friends, relatives, etc. to help pay for their legal fees.  This is borderline maintenance but usually will not be overly problematic.  What is far more problematic is when Person X says to Person Y – go ahead and sue Person Z and I’ll cover your costs.  If that happens, then Persons X and Y are going to be in trouble.  So, you should watch out when you are asked to give guarantees or agree to cover legal fees for any business associates.

Section 53 of the Act, is also important for you to know about.  Why?  Because it has two aspects.  The first is that any assignment is not effective as against a debtor unless and until notice of the assignment is given.  So, suppose that one of your customers cannot pay you, but he says that he is owed a lot of money by one of his customers and he agrees to assign over to you the accounts receivable so that when that customer pays, the money goes to you.  That could be a very good setup and ensure that you get paid.  However, unless and until the customer is given written notice of this assignment, he has the right to continue to pay your customer directly, instead of paying to you, and you will have no right to complain (especially when, as usually happens, your customer then proceeds to blow the money instead of forwarding it to you).

The other aspect to bear in mind is the fact that Section 53 of the Act preserves the concept that a person takes an assignment “subject to the equities”.  So, in my example immediately above, suppose that the assignment occurs and then you go to your customer’s customer and say “you owe my customer $100,000 and you are now to pay me.”  The customer’s customer has the right (assuming it is a valid claim) to say something like “I admit that I would owe $100,000, except for the fact that the product / services / whatever provided by your customer to us was deficient / non-existent / whatever and so we do not have to pay $100,000 but only $X (being some amount less than $100,00) because of the problems caused by your customer.”  If it is a valid claim, then you will be stuck with this reduction and will not be able to say “that’s between you and our customer, pay us the $100,000 and then any rebate or reduction you will have to take up with our customer.”

So, if you are either giving or taking an assignment of a debt, always bear in mind that you will want to ensure that it is not seen as being a form of maintenance or champerty that will invalidate the assignment and also keep in mind the requirements of Section 53 of the Conveyancing and Law of Property Act to ensure that you can enforce the assignment and also to ensure that either there are no set-offs or reductions that can be applied or that a sufficient discount is given on the price paid for the assignment to take such potential set-offs or reductions into account.

Something to think about.

CALC

Ontario’s franchise legislation is known as the Arthur Wishart Act, 2000.  Among its various provisions is the requirement that franchisees are entitled to get disclosure of certain items such as financial statements or projections, copies of franchise documentation, etc.  This permits franchisees to get an idea of what they are truly getting into.  Or, alternatively, it gives them enough that they can take all of this documentation to their lawyer and their accountant who can then lead them through the mass of paper and explain it all to them.

But when are you entitled to get this disclosure?  The Act has a loophole and it has now become, I would argue, a rather large loophole thanks to a decision today by the Ontario Court of Appeal.  The loophole is found in subsection 5(7).  The requirement for disclosure does not apply if (a) the term of the franchise agreement is for one year or less AND (b) no franchise fee is charged.

In TA & K Enterprises, the plaintiff became a franchisee of Suncor Energy.  It signed a franchise agreement that was for only one year and did not have any franchise fee but, rather, required only payments of royalties.  The franchise agreement expired at the end of the one year and at the end of the year then Suncor would normally negotiate a new franchise agreement or, as happened in this case, Suncor wrote to the franchisee and said that the parties would continue their arrangement through a series of extensions of the franchise agreement on a “month to month” basis.  Thus, if they kept their relationship going for 100 years, it would technically be a one year agreement combined with 99 years worth of monthly extensions.

In the case, the franchisee had the franchise for one year and the agreement expired in accordance with its terms.  It was then extended on the same terms and conditions on a month to month basis for another 9 months.  Meanwhile, two months after the franchise agreement expired, Suncor wrote to the franchisee and gave notice that the monthly extensions would only continue for another 7 months and then the franchise arrangement would be terminated.  Prior to this, however, the franchisee sued and sought class action status on the basis that the agreement should be rescinded because there was no franchise disclosure given.  (Why would they do this?  Ultimately it would still terminate the relationship but then the franchisee would be able to get its franchise royalty payments back and well as other costs.  From the franchisee’s perspective, it would be “I worked hard and paid money to you in terms of royalties to build up your brand and you’ve now pulled the rug out from under me.  That’s fine, but it will now cost you in that you have to reimburse me for what I did for you.”)

Suncor brought a motion for summary judgment on the basis that the term was only for one year and that there were no franchise fees – only royalties.  Suncor won at the Superior Court and the franchisee appealed.  Mr. Justice Goudge in today’s decision on behalf of the Court of Appeal also agreed with Suncor’s position holding that the fact that the franchise agreement was subsequently extended did not mean that this was not a one year agreement and also that royalties are not franchise fees.

Is the decision wrongly decided?  Not at all.  Based on the facts of this case, if I had been the judge I would have come to the same conclusion.  But what it does, though, is recognize a flaw in the legislation, I would suggest.  As Justice Goudge recognized, a primary concern of the exception was that if someone set up a Pizza Pizza franchise booth at The Ex for a few weeks each Summer, it wouldn’t be fair to require Pizza Pizza to prepare a ton of disclosure documents for a relatively short franchise arrangement.  Similarly, it is a little difficult for the franchisee in this case to complain that it did not get the disclosure since it continued on as a franchisee for more than one year and it appears that the main purpose for complaint was the fact that Suncor decided to terminate the arrangement (in other words, it was trying to use the Act to help it get out of what turned out to be a bad deal it had made).

The problem, though, is the recognition that many businesses fail within their first year.  Suppose that I wanted to set up a submarine sandwich franchise through Mr. Wraps Sub Shops.  I enter into the arrangements but I don’t get full or proper disclosure.  I carry on for, say, 9 months and then come to the realization that I have lost a ton of money.  I then find out after my business has failed that, in fact, the franchise never had a hope of succeeding and that I was basically suckered out of my money by the franchisor.  Am I protected by the Act?  Nope.  Not if it was only a one year term on the franchise agreement.  And what franchisor in the future is going to want to put franchise agreements for more than one year?  Probably not many now.  To this, however, we add the fact that the key money maker for franchisors has been the collection of franchise fees.  How do they now get around that?  They just up the amount of the royalties payable or front-end load a higher royalty that is subsequently reduced over time.

Many small business opportunities come through franchising arrangements.  What today’s decision means for you is that you are going to have to either seek a franchise arrangement that exceeds one year or else you are going to have to insist on obtaining full and complete disclosure of the type required under the Act.  Otherwise, the protections afforded under the Act are likely to not be available to you.  Does that mean that you are s.o.l.?  Not necessarily, but without the helpful provisions under the Act, it makes your situation a little harder to handle and makes any litigation a little tougher (but not impossibly so) to win.

Something to think about.

CALC

One of the ways that I can tell how good or bad the economy is going is based on the frequency that I get inquiries from clients about collection agencies – either because they want to use a collection agency or because they are getting called by collection agencies.  Not too surprisingly, I am seeing more matters lately between my clients and collection agencies. 

Now, I have to say up front that I have mixed feelings about collection agencies – just like I have mixed feelings about many other trades: lawyers, dentists, doctors, police officers, real estate agents, etc.  Many are very good and professional in their dealings but there are more than a few “bad apples”.  I average about two or three instances per year where I am required to send a letter to a collection agency to have them tone down or reel in one of their agents.  And I also appreciate that sometimes you have to break a few eggs to make an omelette, but when I have to send the letters that is because things have gone too far and the collection agent has become too aggressive.

In Ontario there is a Collection Agencies Act and, more importantly, there is a regulation under that Act which sets out what collection agents can and cannot do.  That regulation can be found here and, most importantly, you want to look at Sections 20 to 25 which set out the rules more fully.  By summary, though, here are some of the key rules that collection agents should be following (and that if you are the one hiring the agency, you will want them to follow and, if you are getting the calls from the agent, you will want them to follow as well):

1. The collection agency cannot simply call the debtor out of the blue.  A written notice must be sent first and then the collection agency has to wait six days before they can start calling.  That said, if you are the debtor, check your mail because if the letter comes and you decide not to open it, that’s not going to be sufficient – all they have to do is send the notice.

2. If you are the debtor and you dispute that you owe the money AND you suggest that the matter be dealt with in the Courts AND IF you send a letter to this effect by registered mail THEN the collection agency should stop trying to contact you.  Of course, though, this will then mean that the lawsuit is on and you will have to deal with the issue in the Court.  That said, if a collection agency is involved, then chances are likely that you are dealing with a matter under $25,000 so the claim will go to Small Claims Court and you do not have to have a lawyer representing you.

3. With various exceptions, the collection agency should not be speaking with your relatives or employer about your debt and trying to get them to assist in the payment of the debt in some way (either through payments on your behalf or simply to have you contact them - ie. applying pressure on you through your relations and boss).

4. There are certain times when the collection agency is not allowed to call (for example, after 9:00 p.m.) as well as certain days (such as holidays) and any communications should not be threatening or have improper (ie. profane) language used.  In this regard, I’ll take a moment to mention my favourite story regarding an abusive collection agent.  This guy was really bad and I had to send his bosses a very strongly worded cease and desist letter.  The response I got from him was a voice-mail telling me to “F” myself this way and that way but that he wouldn’t be calling my client anymore.  However, after threatening to report me to the Law Society (a threat that either he never fulfilled or, if he did, the Law Society just ignored it and never bothered telling me it was ever made because it would have been a b.s. complaint), he said that he would also be calling “Mr. Gowling” to report about my behaviour.  At the time, I was working at Gowling Lafleur Henderson.  Not only was I not worried about any such complaint to Mr. Gowling because I knew that I had done absolutely nothing wrong, but more importantly, I had to laugh because Gordon Gowling had died many years before that time.  I figured that if the abusive collection agent was truly able to speak with Mr. Gowling about my conduct, I would have bigger problems to deal with than the collection agent and would have to call Ghostbusters!

5. Collection agencies are not allowed to threaten that if the debtor does not pay then there will be a lawsuit unless there will actually be such a lawsuit – in other words, no veiled threats.

6. The collection agency isn’t allowed to mislead the debtor in order to get the debtor to pay.  So, for example, there is a two year limitation period for most lawsuits in Ontario.  It is not uncommon for creditors to wait for most of the two years and then turn the matter over to collections just before it’s too late.  Suppose this happens and the collection agency says that if the debtor doesn’t pay that he/she/it will be sued.  And suppose further that the limitation period has now expired.  And, to round things out, suppose that the collection agent does actually know that the lawsuit would be brought (even though it would die due to the limitation period having expired).  In that instance, the collection agent has mislead the debtor because the lawsuit could not be brought and be valid.

Those are the main points to consider if you are dealing with a collection agent.  For a more fulsome list of the rules, go to the regulation and see for yourself.  And hopefully you will never have to make reference to these rules but if you have to do so, at least you now know that they are there.

Something to think about.

CALC

It’s been pretty crazy for me in court and otherwise the last few weeks.  However, I have just learned that my interview on the Court of Appeal’s decision in Tucows.com has been published in the September 16 issue of The Lawyers Weekly.  You can see the article here.  For other comments on the case, you can also see my August 8 post.

CALC

I was reading a write-up in the latest issue of Law Times that reported a decision of Madam Justice Pepall of the Ontario Superior Court back on August 9. It’s an interesting decision for a couple of reasons – but with a common thread. The gist of the case is that someone decided to write blog posts about a lawyer who didn’t like what was being said about him (exactly what was said isn’t set out in the decision) and he turned around and sued. This decision related to a motion to: (i) approve of service by e-mail; (ii) to grant an injunction to restrain the publication of the blog; and (iii) to force the blogger and others to reveal their identities.

Justice Pepall’s decision can be found here.

Her Honour granted the relief sought and ordered both the injunction and the requirement for the blogger to reveal his/her identity. Central to this latter part of the Order was the fact the Court held that anyone who was publishing defamatory statements on the Internet, with a possible exception for those commenting on political matters, had no reasonable expectation of privacy and thus could be compelled to reveal his/her identity. This also serves as a reminder to everyone to really think about what is being said before it is put into writing – whether in a blog, an e-mail or even just plain old pen and paper. Yesterday’s “flame war” on a forum can be tomorrow’s defamation lawsuit.

The final issue was that of service by e-mail. At the outset I should mention that with a few limited exceptions, the Rules of Civil Procedure haven’t quite made it to the 21st Century yet. Generally speaking, service via e-mail is one of the areas where the Rules haven’t caught up yet – although such service is permitted in some instances when the e-mails are between lawyers. In this case, the blogger had given a Gmail account and the plaintiff had sent the motion materials for the injunction to the blogger via e-mail. The blogger responded by saying that he/she had received the e-mail but didn’t receive the attachments. It was clear, though, that the blogger was trying to be cute. Justice Pepall didn’t buy it and found that the blogger had received sufficient notice of the motion that he/she could have tried to get the attachments if he/she wanted and that therefore the service via e-mail, even though it didn’t meet the full requirements of the Rules, was sufficient to be validated.

The common feature among the decision – sometimes it pays to shut up. If the blogger had kept his/her mouth (keyboard?) shut and not made the defamatory comments, then he/she wouldn’t be stuck in this lawsuit in the first place. Meanwhile, if he/she hadn’t responded to the e-mail serving the motion record then Madam Justice Pepall would have had more concern about granting the Order since she would have been worried that the blogger had no idea that the motion was being heard.

Beyond this, though, one should also give thought to the concept that it pays sometimes to shut up in a slightly different light. In the example of this case it is what the blogger said about the lawyer (that is, another person) that gave rise to legal problems for the blogger. However, in another case one’s own comments could come back to haunt you. As an example, a relative of mine was mentioning to me yesterday the situation of a person who posted to a forum that my relative frequents. This person gave numerous types of personal details about the person’s approach to parenting. One of the forum participants thought that these comments were examples of improper parenting. The person had given sufficient personal information over a series of posts such that the other participant was able to determine who the person was and then make a complaint to the local children’s aid society about the person. The children’s aid society investigated and found nothing improper. However, the reality with children’s aid societies is that if a second complaint is ever made against this person then the automatic presumption is that “where there’s smoke, there’s fire”. (How do I know? I had a similar case where a complaint was made against one of my clients to a children’s aid society that was ultimately dismissed by the CAS but because it had been a second complaint – the first one being an unsupported “anonymous” complaint that had been quickly investigated and determined to be unmeritorious – it was much harder to satisfy the CAS that there wasn’t a problem.) In this case, it was the person’s own posts to the forum that resulted in the person having to deal with the CAS – in other words, this person’s own words came back to haunt him/her.

Something to think about – and seriously consider whether sometimes it just might be better to shut up than to say anything.

CALC

The Ontario Court of Appeal release a decision this past Monday regarding the sale of a business.  In Kapuskasing Plumbing, the vendor and the purchaser were both franchisees of Culligan in different towns.  The purchaser was interested in buying the vendor’s business (and thereby expanding the purchaser’s business and territory).  After discussions, it was ultimately agreed that the business would be purchased for $1.6 Million of which $600,000 would be paid on closing and the remaining $1 Million to be paid over time through a consulting agreement.

While negotiations were ongoing for the purchase and before the agreement of purchase and sale was drafted, the President of the purchaser, Mr. Fortier, went on a walk-about through the vendor’s business with the President of the vendor, Mr. Villeneuve.  At one point, Mr. Fortier asked Mr. Villeneuve how many 18 litre jugs of water the vendor sold in the prior year.  Mr. Villeneuve looked out in the shop floor, counted the number of pallets, multiplied that by 20 working days per month, multiplied that by 12 months and came up with the number of approximately 200,000 as an annual number.  As it turned out, Mr. Villeneuve’s “quick math” was more than double what the actual number was for the prior year.  When the purchaser learned after closing that the actual number was closer to 95,000, it refused to pay any more money on the $1 Million consulting portion of the purchase price.  The vendor sued for what was owed on the consulting portion and the purchaser counterclaimed for damages for misrepresentation on the sales figures.  At trial, the judge found that there had been a misrepresentation and therefore dismissed the vendor’s claim and awarded damages to the purchaser of approximately $70,000.  The vendor appealed and the Court of Appeal granted the appeal.

There are five elements to a claim for misrepresentation: (i) there must be a duty of care owed between the maker and the recipient of the statement; (ii) the statement must be untrue, inaccurate or misleading; (iii) the person who made the statement must have acted negligently; (iv) the recipient must have relied reasonably on the statement; and (v) there must have been some damage resulting from the reliance on the representation.  The vendor agreed that four of the five elements were present for the purchaser, but it disagreed that the purchaser reasonably relied on the misrepresentation about sales volumes.  The vendor showed that in pre-agreement discussions it had been stressed that the payment was to be without regard to sales volumes.  Moreover, the evidence was that the purchaser asked for all of the accounting information - including sales figures – and that it could have been relatively easily figured out if one took the sales and divided by the known sales price per water jug.

Justice Armstrong agreed that there was no reasonable reliance on the statement of 200,000 jugs.  He wrote:

In summary, the case comes down to this: Kapuskasing [the Vendor] refused to enter into a contract that was based on the number of bottles sold in the prior year.  Mr. Fortier accepted that position and asked that he be supplied with documentation from which he could review the sales figures prior to signing the agreement and address any issues with Mr. Villeneuve.  Mr. Fortier received the appropriate documentation and did nothing.  If he had an issue in respect of his ability to calculate unit sales from the information provided, he could have raised it with Mr. Villeneuve or sought the assistance of Mr. Gravel [the purchaser's accountant and controller].  He did neither.

As a result, the Court found that the reliance upon the “quick math” and estimate of 200,000 was unreasonable and therefore there was no actionable misrepresentation.  It further followed that the purchaser had no right to complain or to withhold payment under the consulting agreement.

While this case deals with the negotiations leading up to the signing of an agreement of purchase and sale to sell one’s business, the principle will be the same for any contract.  If you are going to base your transaction upon a statement or an assumption – even if it is a shared assumption – then you had better get it included in writing in your contract.  If you do that, then you can have a claim for breach of warranty of the contract.  However, if you do not, then you cannot simply take any representation at pure face value.  You have to ask for documents to support the assertions made in the statement that you intend to rely upon – which the purchaser did in this case.  But then you have to actually look at what is given to you and ensure that what you have been sent is consistent with what you have been told – that is where the purchaser failed.  The process is called “due diligence” not because it is a simple label for the process.  You actually have to be diligent in your review of the facts or statements that underly your transaction.  Failure to do so can prove to be costly later on.

Something to think about.

CALC