Archive for June, 2008

Protecting Customers’ Privacy

Sunday, June 29th, 2008

Every Canadian small business is subject to PIPEDA – the Personal Information Protection and Electronic Documents Act.  PIPEDA applies to any “organization” (which includes individuals, companies and partnerships) that carries on a “commercial activity” during which personal information is collected, used or disclosed.  What is “personal information”?  The definition is broad and not completely determined so far.  It would clearly include what many would agree is personal: name, date of birth, address, phone number, social insurance number, etc.  However, it also includes some things that people might not agree is “personal information” that should be subject to protection: such as the business e-mail address, the computer IP address or a person’s photograph.  The failure to comply can result in either court orders forcing compliance or awards of damages to the individual(s) whose personal information is improperly disclosed or used.

The Office of the Privacy Commissioner of Canada has recently published an online treatise on how businesses can comply with their obligations under PIPEDA - including small businesses which may not have had the time to review their obligations or to retain a lawyer or a privacy consultant (such as my friends over at PrivaTech) to teach them their obligations.

If nothing else, I would recommend that all small businesses take a half-hour out of their busy schedules to at least skim through the Commission’s new publication.  In this case, at least a little awareness is far better than complete ignorance – since, as we know, ignorance of the law is no excuse.

The Commission’s publication can be found here.

CALC

Wrongful Dismissal – New Guidance from S.C.C.

Friday, June 27th, 2008

The Supreme Court of Canada has released its long-awaited decision in Honda v. Keays.  In that case, the employee became disabled but the employer started to have doubts about the truthfulness of the employee and his numerous absences.  As such, the employer required the employee to have an assessment from its own doctor to determine the extent of the employee’s disability.  The employee refused to go for the assessment, the employer treated this refusal as improper and fired the employee and the wrongful dismissal action was started.

The trial judge gave a HUGE judgment in favour of the employee.  The employee received 15 months’ pay in lieu of notice, but this was then increased to 24 months on the basis of what are known as Wallace damages for improper conduct in the way that the employee was fired, and punitive damages of $500,000 were also awarded.  When the decision came out, the employment lawyers in Ontario (and elsewhere) went “Whoa!”.

The case was appealed and the Court of Appeal upheld most of the trial decision, except that the punitive damage award was reduced from $500,000 to $100,000.  The employment lawyers, again, went “Whoa!”.  The Supreme Court has overturned the lower courts and restored what one would have expected originally from the trial judge.  In doing so, they have clarified some of the rules.

In recent years, wrongful dismissal actions have sought all sorts of damages – damages for the proper notice period, aggravated damages, special damages, punitive damages, Wallace damages, you name it.  The decision in Keays is likely to reduce the number of the categories of damage claimed and especially the number of claims for punitive damages.

The first item of note is that the practice by the trial courts of increasing the notice period to account for Wallace damages is to stop.  The Supreme Court has said that the lower courts should instead fix an amount (eg. $10,000) for these damages.  At first blush, this would seem to matter little.  For example, if you had an employee making a net $2,500 per month and the court awarded an extra 4 months to the notice period, that gets you to the same point as if the court awarded a fixed amount of $10,000.  The difference, though, is that the Supreme Court has noted that such increases in the notice period tend to be arbitrary.  I’m not sure that this is the case, but the difference is that if a fixed amount is awarded it will have to conform with other awards given in other cases.  For example, Wallace damages are awarded for compensation for things like mental suffering.  Well, if the average award for mental suffering arising out of, say, car crash cases is only $5,000, then it is now going to be difficult for a court in an employment law case to award $10,000 in Wallace damages.  When the number was put in the form of additional notice period time the amount ultimately being awarded was not as apparent as it will be now.

The second item deals with the surprise by employment lawyers at the size of the award originally given (and mostly upheld).  The Supreme Court has held that wrongful conduct in terminating an employee is compensated by Wallace damages.  To then go on and use that wrongful conduct as the basis for punitive damages amounts to double-compensation.  Punitive damages should only be used to punish the employer for conduct which is not otherwise compensated for by the award of Wallace damages.  This aspect will see a greatly restricted role for punitive damage claims by employees and awards for these damages by the trial courts.

The third area of interest was the refusal by the Supreme Court to recognize, at least in this case, an independent action for the “tort of discrimination”.  Many years ago the Supreme Court recognized that a person could not sue in the civil courts for breaches of the Human Rights Code.  It was held that if a breach occurred, then a complaint should be made to the Human Rights Commission and that was the proper approach.  In Keays, part of the basis for punitive damages was the fact that Honda had allegedly discriminated against the employee on the basis of his disability.  The Ontario Court of Appeal upheld this position on the basis that the prior Supreme Court ruling only applied to “direct” breaches of the Human Rights Code.  Mr. Keays had tried to make such a direct claim and it was rejected by the trial judge.  However, the Court of Appeal held that the breach of the Human Rights Code could be taken into account as part of the punitive damages award (ie. an indirect claim for the breach).  As such, according to the Court of Appeal, the prior Supreme Court decision did not apply and punitive damages on this basis could still be awarded.  Not quite, says the Supreme Court in today’s decision.  On the facts they found that there was no breach of the Code, but even if there were such a breach, there was nothing to show why the old ruling should not still be applied.  As such, no punitive damages can be awarded on the basis of the alleged discrimination – the employee can bring a complaint if he wishes for this aspect of the claim.

The fourth point of interest is that in reviewing the facts of the case, the Supreme Court concluded that the manner in which Mr. Keays was fired and the other surrounding circumstances were not sufficient to justify either Wallace damages or punitive damages.  This is an interesting contrast in that both the trial court and the Court of Appeal (in upholding most of the trial judgment) held that Honda had acted very poorly indeed.  The likely result of this aspect of the case is that future trial courts will be more “gun shy” to find that employers have acted so maliciously, etc. to justify such damage awards.

From time to time the Supreme Court issues a ruling and the trial courts seem to go crazy with it.  For example, in one criminal case the Supreme Court said that criminal trials should be heard within a certain time period and, if not, the criminal is released because his/her Charter right to a speedy trial have been violated.  The lower courts took the word “should” and interpreted that to mean “must” and criminals were being let go left, right and centre.  A few years later the Court had to issue another ruling saying “no, we meant “should”, so stop letting all these criminals go except in truly serious cases.” 

The decision in Keays is another of these types of cases.  This time the Court is saying “yes, there can be Wallace damages, but you lower courts have gone a little overboard in the wrongful dismissal awards you’ve been handing out, so we’re reeling you in a bit.”

In the end, the Court has provided some guidance and employers everywhere are probably now saying “Whoa!  We just dodged a bullet.”

CALC

I.D. Please

Tuesday, June 24th, 2008

The Globe and Mail has a very small story in today’s edition about new regulations that come into force today for anyone buying real estate.  From now on, realtors will be obligated to obtain identification such as a copy of your driver’s license or passport.  Normally this would lead to a federal-provincial flap since realtors are provincially regulated.  The reason given for the federal government’s new regulations is that it will help to spot money laundering or terrorism funding activities.  A really easy way to launder hundreds of thousands (or even millions) of dollars in one shot is to have a real estate transaction.  The provinces won’t complain about these requirements because the provinces are fighting real estate fraud.  To help combat that fraud, they would be requesting that similar identification and validation of identities occur.  So, they’ll let the federal government appear to be the “bad guy” by imposing these requirements on the realtors.

I should also mention that effective October 31st all lawyers in Ontario will be required to do the same thing.  As a matter of “good practice”, real estate lawyers have been doing this for some time now to try and minimize real estate fraud.  However, this new requirement will apply to all legal transactions – even civil litigation and corporate/commercial matters.  So, don’t be surprised when you are asked by me this Fall for copies of your driver’s license.

The only thing that I initially thought was odd was that the new I.D. rules for lawyers start on October 31 and not on November 1.  Then as I started to think about it I realized that it is easier to start on October 31 since it is the end of the month and the majority of real estate closings occur on the last day of each month.  But then I realized what must be the true reason for the date – without the I.D. requirements, how am I to tell who my client is when he/she walks into my office in his/her Hallowe’en costume?!

CALC

Rights of Way

Monday, June 23rd, 2008

Years ago the City of Etobicoke, like many municipalities, decided that “more is better”.  More particularly, the decision was that the more houses you could cram into a given space, the more tax revenues the municipality could bring in.  This isn’t quite so bad in a large urban area when the people are living in apartments.  You come to expect a certain amount of “give and take” since you could have up to 8 groups of people hearing things like loud noises, etc.  Unfortunately, though, when you have single-family houses, the requirements of give and take are lessened and the concept of “my house is my castle” starts to take over.

In a case that I won at the Superior Court last week, that is basically what happened.  Picture a 26 foot wide house on a 30 foot lot of land.  Then permit the builder to put the house right on the edge of one of the property lines so that there is 4 feet remaining on the other side.  No problem for the home owner to get to the one side of his house to do repairs, etc.  However, the home owner can only repair the other side if he/she steps onto the neighbour’s property – since there is nothing left on the home owner’s property given that the house is built right on the property line.  This situation is great for the municipality because it packs in more houses in the area.  The situation is also OK if the neighbours get along.  Unfortunately, as in my case, if the neighbours don’t get along, then it’s a recipe for trouble.

My clients and the neighbours did not get along.  The result was that the neighbours (while my clients were away on vacation), slapped a padlock on one gate and then put up another gate (with, of course, another padlock) and also a fixed board fence.  For over a year my clients were cut off from accessing the side of their house – something for which they had a right-of-way over the neighbour’s property to do.

A right-of-way is, just like it sounds, a right for someone to go over another’s property.  In its most simple form, it is the right to cut across another’s land.  In other situations, like in my case, it was a right to go over the neighbour’s land at the side of my client’s house to bring equipment, tools, etc. and perform maintenance on the one side of the house.

A person who is subject to a right of way (in this case, the neighbours) is entitled to limit the use of the right of way.  In this instance, for example, the neighbours could have put up the gate.  They could have even put on locks.  But they would have had to give my clients a key to the lock – which they did not.  This case is also important in that it breaks some new legal ground.  Not only did the neighbours wish to put up the gate and locks, but they then wanted my clients to give 24 hours prior notice and to sign a waiver of liability.  No Canadian case had ever permitted such a restriction.  However, no case had prohibited such a restriction being sought by the neighbour.  To the extent, therefore, that the neighbours sought these two restrictions as conditions on the use of the right-of-way, the rejection by the Court makes new law.

They say that good fences make good neighbours.  Not always.

CALC

Some Days I Just Shake My Head

Thursday, June 19th, 2008

Today’s Globe & Mail has a story regarding a 12 year old girl who was denied access to the Internet by her parent because of improper behaviour and then denied going on a 3 day school trip because of other bad behaviour.  Like most kids, did she silently sulk in her room wishing evil thoughts on her parent?  Nope – she sued to have the parent’s decision overturned.

Surprisingly, the Quebec Superior Court gave judgment in her favour.  Not surprisingly, the parent is appealing the decision.

Everyone seems to be jumping on the bandwagon of how this is terrible for parental rights and implicitly questioning the wisdom of the judge.  As a parent, my gut reaction would be to join them.  However, as an officer of the court, I refrain from doing so because (a) I don’t know what the arguments were and (b) the decision – given last Friday – is not available online anywhere yet.  So, I don’t think it is fair to comment on the decision itself until I see it.

This, of course, does not keep me from shaking my head in disbelief at how our society is becoming so insular that even relatively trifling family disputes are now being resolved through litigation.  That’s the real shame, whatever the ultimate result of the case.

CALC

Settling Lawsuits

Wednesday, June 18th, 2008

Let me start with a simple statistic – over 95% of lawsuits settle.  The exact number varies from year to year, but it is always that high.  Why?  There are two main reasons.  The first is that litigation is costly and both sides will “cry uncle” to some extent at some point.  When that happens, both sides want to settle.  The second is that if a case is a clear cut winner, the other side will usually realize it and try to cut its losses.

Settlements are also crucial to the proper administration of justice.  Think of it this way – if the courts are backlogged and there are not enough judges and the wheels of justice are grinding slowly – and that’s with only 5% or less of the lawsuits actually making it to trial – just think of how bad it would be if more cases went to trial.  The legal system is very much aware of this reality.  As such, it has created rules to encourage settlement.  So, for example, in Ontario if a formal offer to settle is made and the person to whom the offer is made rejects the offer AND if that person then gets a decision that is as favourable or less favourable than the offer, then the person who rejected the offer has to pay costs to the person who made the offer.  Why?  Because if the person had accepted the offer then the lawsuit would have ended and there would not have been a need for the court to be tied up with a trial that could have, and should have, been settled.

I was in court very recently on an appeal from exactly such a situation.  Before trial, my client made an offer to settle.  The other party was adamant that he would never accept such a low offer and he wanted over 10 times what my client had offered.  So we went to trial.  After the trial, my client was ordered to pay approximately half of the amount that had been put in the offer to settle.  So, I advised the court of the offer to settle and the court awarded costs to my client in an amount that wiped out the amount owing by my client on the judgment.    Not satisfied with this result, the other party appealed and at the appeal the other party lost and was ordered to pay my client thousands of dollars for the costs of the appeal.

To the other party, this was completely unfair since he “won” and yet he lost in that he got nothing from the judgment and now has to pay costs for the appeal.  If you look at it solely from his perspective, I can see how it would be unfair.  However, the old saying “no man is an island” applies and you have to put that person into the context of a judicial system with rules that encourage settlement.  When looked at from that perspective, then the result is not unfair because if the other party had accepted the settlement offer: (a) he would have received a more favourable result than he got from the court; (b) he could have saved himself the time, trouble, effort and expense of going through the trial; (c) my client would have saved similar amounts for time, trouble, effort and expense; and (d) the court would have saved itself the costs of holding the trial and then the appeal.

A judge said to me years ago, “I usually know that I’ve come to the right decision when both parties walk away angry.”  Why is that?  Because few cases are clearly black and white and most are shades of grey.  If that is the case, then it follows that neither side is completely in the right and neither side is completely in the wrong.  If both sides are displeased with the result, then the decision is probably fair because it recognizes rights and responsibilities on both sides.

When it comes to considering whether to settle a lawsuit, you should balance not only your chances of success, but also your chances of failure.  You should also consider how much more it will cost you to proceed and you might even want to consider the possibility that you just might get the judge who is content to have both parties displeased at the end of the day.  Finally, you should consider the cost consequences because if you do not, you could end up winning the battle but losing the war – just like the other party on the recent appeal.

CALC

Paper, Paper, Paper

Tuesday, June 10th, 2008

A decision in an Ottawa case was released by the Ontario Superior Court of Justice last week.  A lawyer was representing clients who had a lawsuit in Quebec.  That much is agreed upon.  From there we have two completely different stories. 

According to the lawyer’s parents, the lawsuit was becoming too expensive for the clients to handle and the lawyer made arrangements for his parents to provide a private loan to the clients to permit them to finance the remainder of the lawsuit.  According to the clients, the lawyer made arrangements through some private financiers he knew to invest in one of the client’s companies – which was not related, it appears, to the litigation.  The company failed.  When the parents did not receive their money back (however one characterizes it), they sued the clients.  The clients defended saying “we never had any loan arrangement with [the parents], there was only an investment and when the investment failed that was the risk the investors took.”

Not surprisingly, the lawyer supported his parents’ version of events (as you would hope your child would do).

The main problem for the Court was that there was no party providing sufficient evidence to either support the claim that this was a loan arrangement or that it was an investment.  The key difference, though, is that it was the parents’ (as plaintiffs) burden of proof and since they did not satisfy that burden, they lost the lawsuit – even though the clients couldn’t prove their version of events.

This is another example of my usual mantra of “paper, paper, paper”.  If there is no evidence – preferably some piece of paper with terms of the arrangement on it and signed by the other side – you are not likely to win if a dispute arises.  In this case it cuts both ways.  If we assume that the parents are telling the truth, then they lost not only the value of their loan (just over $85,000), but also their lawyer’s fees and possibly a portion of the clients’ lawyer’s fees (assuming the court awards the clients’ the costs of the lawsuit).  It is similarly not a great situation for the clients.  They have been dragged through a lawsuit that they sort of won (more a win by default, really), but they will still have to pay whatever portion of their lawyer’s fees that the parents are not ordered to pay.  If either side had taken the time to put their arrangement on paper, a lot of time, money and energy may well have been saved for not only the parties but also the courts.

CALC

Fraudulent Certified Cheques #2

Sunday, June 8th, 2008

In my January 8 post I mentioned a new practice by which people are using supposedly valid certified cheques which, it then turns out, are forgeries.  An article in yesterday’s Toronto Star shows that the practice remains alive and well.

It seems to me that the best practice for small businesses is to not treat certified cheques like cash any more.  Instead, wherever you feel it necessary, explain to your customers the series of problems with fake certified cheques and that you will not perform services or deliver goods until your bank has confirmed with the customer’s bank that the cheque is a valid certified cheque.  It may delay things a few hours or possibly even a few days.  However, if you think about it, the main reason why you obtain a certified cheque is either because you are dealing with a rather large amount of money or because you do not trust the customer (eg. a new, unknown customer or else a customer who has “stiffed you” in the past).  Either way, a little delay is going to hurt customer relations far less than the pain you would feel if you have performed a large amount of service or if you delivered a significant amount of goods only to find out that the cheque is a fake and the customer is nowhere to be found.

CALC

Has it Been Two Years Already?

Tuesday, June 3rd, 2008

I had to laugh yesterday.  Sunday marked the second anniversary of the start of the law firm.  Just as it had started two years ago with a serious computer malfunction, I arrived at the office yesterday morning to learn that the server had gone down taking our network and Internet connectivity with it.  As it turned out, it was just the UPS power backup system and once we replaced that everything was back in order.  The more things change …

The firm’s mascot, Goldie the Hamster, still lives on.  When we got the hamster we were told that the average life expectancy was six months to a year.  The darned thing is over two years old now and even his occasional break-outs from the cage and cavorting through the home office haven’t put a dent in his life expectancy (although it has given me the occasional idea of denting it – if the teacher didn’t buy “the dog ate it”, the judge isn’t likely to buy “the hamster ate it” as the excuse for why a document was chewed up).

More imporantly, with two years down, my two clerks, Emily and Paula, haven’t killed me (although, like myself with the hamster, I’m sure they’ve thought about it a time or two).

Have I made as much money as I wanted?  Nope.  Have I found all of that extra “quality time” to spend with the family?  Nope (but it’s still better than it was at the big law firm).  If I had to do it again, would I?  Yup.  Would I do anything differently?  Possibly, but not much.  Do I have any regrets in going out on my own?  A definite nope.

Many firms fail within their first two years and the statistics show that if a business is going to survive it is most likely to do so if it makes it for five years.  Two down, three to go.

CALC