But Can You Prove It?

February 1st, 2016

I was at a pre-trial conference last week.  The situation was one where something fell down and the plaintiff said that it must have been one of 4 different defendants that did or failed to do something that caused the fall.  Not surprisingly, each defendant (including my client) all said “not me!”  The bigger problem, however, was the fact that the plaintiff could not definitely show that it was one or the other of the defendants.  And therein lies the plaintiff’s problem (and an issue with the legal system – unless you happen to be the defendant in this particular case).

The pre-trial judge made mention of a case in the English House of Lords which he cited incorrectly but it is the case of Rhesa Shipping Co SA v. Edmunds, [1985] 1 WLR 948 (commonly known as the “Popi M” case – being the name of the ship at issue).  The ship sank and the question was what was the cause.  All of the “usual” or “normal” potential causes were considered and rejected for one reason or another.  Ultimately, the conclusion was that it “had to be” that a submarine caused the damage because (a) submarines were known to be in those waters; (b) contact with a submarine could have caused that type of damage; and (c) it was not unknown for submarines to “hide” under commercial ships to avoid detection.  This, however, wasn’t good enough for the House of Lords.

Citing a passage from Sherlock Holmes to the effect that if you can eliminate all other possibilities, then the only remaining possibility (no matter how odd or improbable it may seem) must be the truth of the situation.  The House of Lords said that that may be good enough for Mr. Holmes and fiction, but it’s not good enough for the court.  That being the case, a plaintiff must not prove that it “makes sense” that what it says happened actually happened, but there must be at least some proof to substantiate such a conclusion.

Going back to my pre-trial.  The best that the plaintiff appears able to do is to say “well, it had to have been one of the defendants who screwed up and caused the damage, so we should get money from someone.”  That’s not good enough and if everyone says “it wasn’t me”, then the plaintiff still has to be able to show something to say “yes it was”.  Without that, the plaintiff will lose the lawsuit.

This is also something to consider when you think that two or more people have done something to harm you.  This is known as the tort of conspiracy and it is one of the hardest torts to prove in court (because nobody is usually dumb enough to admit that, yes, he/she was acting in concert with someone else to harm you).  But if you do not have at least something to show a court to prove that the defendants were acting to harm you, then you will lose (and have to pay significant court costs to the defendants in the process).

I say to my clients quite often “that’s all well and good, but can you prove it?”  If the answer is “no”, then the likely result (as indicated once again in my recent pre-trial conference) is a loss after a trial.

Something to think about.

CALC

 

Happy New Year – My Resolution

January 3rd, 2016

I’m reading about 5 different books at the same time right now and in one of them I saw the most interesting fact, so I’ll quote it verbatim:

“It’s been said that children laugh an average of 450 times per day, while adults laugh an average of only 15 times a day.”

Thankfully, I laugh more than the average but, that being said, I’m clearly far below a child’s level.  So this year my New Year’s resolution will be one that should be easily attainable and hopefully not too costly: laugh more.

Now … where’s that old whoopee cushion?

 

Something to think (and laugh) about.

CALC

Une Lettre d’Amour et d’Encouragement à Paris

November 15th, 2015

Je m’assois devant mon ordinateur et je ne sais pas comment exactement m’exprimer au sujet des événements du vendredi passé.

En 2008, j’ai célébré le dixième anniversaire de mon mariage et on est allés à Paris où on a passé une semaine dans le premier arrondissement.  J’ai dit à ma femme qu’il nous faut vingt ans pour le faire, mais on passera nos vacances à Paris et on restera chaque fois dans un arrondissement différent et on a presque fait ça chaque année depuis 2008.  Cela nous donne un goût pour chaque quartier de la ville que l’on aime tant.  On a déja passé nos vacances dans les premier, deuxième, troisième, cinquième, huitième et quatorzième arrondissements – trois fois avec nos gosses.  La dernière fois, en août 2015, c’était dans le quatorzième arrondissement près de la Tour Montparnasse.

En janvier 2015 il y a eu l’attentat contre Charlie Hebdo.  Un des personnes tué dans cet attentat était Georges Wolinski.  On a pris une partie de nos vacances pour se ballader dans la cimetière Montparnasse où est enterré, entre autres, Serge Gainsbourgh, Jean-Paul Sartre, Charles Beaudelaire, etc.  Par hasard, je me suis trouvé devant la tombe de  M. Wolinski.  J’ai pris une photo de sa tombe:

Parce que l’événement était encore frais dans mon ésprit, c’était un moment émouvant d’être devant sa tombe.

J’ai eu un procès qui aurait dû commencer à Belleville en Ontario le 16 novembre 2015.  Le 12 novembre j’ai reçu un courriel de la cour qui m’a dit qu’il n’y a pas de juge disponible pour entendre le procès et, ainsi, le procès doit être annulé et aura lieu quelquefois dans 2016.  Le procès aurait pris deux semaines et, parce que j’ai soudainnement deux semaines libre dans mon calendrier, j’ai dit à ma femme “Pourrais-tu parler avec ta sœur et peut-être elle peut surveiller les gamins et nous pourrions aller à Paris pour quelques jours car j’ai assez de points de voyage pour un billet gratuit.”

Le lendemain, vendredi le 13, les gamins n’ont pas dû aller à l’école et j’ai décidé de rester chez nous, travailler un peu, et jouez avec les gamins, faire des courses avec eux, etc.  Alors, je suis allé au lit tard jeudi soir (ou, plus exacte, tôt vendredi matin) après avoir regardé deux films francais, “La Femme du Cinquième” et “Qu’est-ce qu’on a fait au Bon Dieu”.

J’ai commencé le vendredi comme tous les jours du weekend avec mon espresso et croissant dans la cuisine en regardant les nouvelles de France 24 sur mon iPhone et aussi en regardant nos photos de Paris sur les murs de la cuisine.  Ensuite, je lisais des articles dans les éditions les plus récentes des magazines “Living France” et “French Property News” qui sont venues plus tôt cette semaine.  On a acheté des bottes d’hiver pour les gamins et on a décidé de prendre un casse-croûte chez un resto français.  Jusqu’a ce temps, c’était un jour parfait pour moi et j’étais tres content.  (Comme vous l’avez déja constaté, je suis juste un peu d’un francophile et ma ville préféré au monde est Paris.)

Pour rentrer chez nous, on a pris le métro et ma femme a noté un petit nouvelle sur l’écran au-dessus qu’il y avait une problème dans une boîte de nuit à Paris et qu’il y avait quelques morts.  Quand j’ai levé la tête pour regarder l’annonce il n’était pas encore là et il y avait une autre annonce.  J’ai essayé de me renseigner plus sur la site internet du Monde mais il n’y avait pas des nouvelles.  Quand on a rentré, on commence de savoir l’ampleur des événements et de la tragédie.  J’étais collé devant la télé pendant cinq ou six heures cet soir en télézappant entre CNN, SRC et CTV et, en même temps, en surfant sur les sites du Monde, BFM, France 24 et France 2.  Heureusement, ni nos amis ni nos proches ne sont pas parmi les victimes.

Josephine Baker, entre autres, a chanté qu’elle avait deux amours: son pays et Paris.  C’est pareil pour moi et ma famille.  Il va sans dire que je n’irai pas à Paris avec ma femme dans les deux semaines prochaines, mais maintenant la question n’est pas SI, mais QUAND, on y ira pour soutenir la ville que l’on aime et les gens qui étaient si accueillant pendant nos visites auparavant.

Je veux donner mes condoléances les plus profondes aux parisiens et parisiennes (et surtout à nos amis et nos proches) et vous dire que l’on partage votre tristesse et douleur.  La ville a eu des incidents pareils dans le passé et elle a réussi à les surmonter et je sais qu’elle le fera encore avec cette tragédie.  Bon courage Paris, toutes nos prières sonts avec vous.

CALC

 

 

 

Bonne Fête Nationale

July 14th, 2015

Je veux prendre un instant pour dire à tous mes amis en France que je vous souhaite une bonne Fête nationale ce 14 juillet.  Et à toutes mes proches, je vous verrai d’ici quatre semaines.  Pour moi, je vais célébrer le 14 juillet ce samedi quand PSG sera à Toronto pour affronter SL Benefica à BMO Field.

CALC

 

What is the Truth?

March 29th, 2015

Today is Palm Sunday.  I’ve been reading The Golden Legend for the last month or so and I’ve come to the section dealing with the Passion of Jesus (which is fitting since today is the day that the Passion Story is read out at mass).  In the text discussing the Passion, the author of The Golden Legend makes reference to a passage from the Gospel of Nicodemus.  The citation for the passage is not given, but it is found at Chapter 3, Verses 10 through 14:

10. Pilate said, Art thou a king then? Jesus answered, Thou sayest that I am a king: to this end I was born, and for this end came I into the world; and for this purpose I came, that I should bear witness to the truth; and every one who is of the truth, heareth my voice.

11. Pilate saith to him, What is truth?

12. Jesus said, Truth is from heaven.

13. Pilate said, Therefore truth is not on earth.

14. Jesus said to Pilate, Believe that truth is on earth among those, who when they have the power of judgment, are governed by truth, and form right judgment.

Wow, good luck to any judge.  If you get it right, then you’ve found the truth?  Well, not quite, because you could end up with the right judgment but got there by fluke or by reasons that may have little or no reason to deal with what was actually the truth.

If reading The Golden Legend and Christian texts which were deemed at the Council of Nicea to be unworthy of inclusion in The New Testament is “high brow” reading, then I can easily turn to “low brow” reading.  There is a well known legal dictionary entitled “Black’s Law Dictionary”.  As a spoof to this book, back in the mid-1980s a chap named Robert White wrote “White’s Law Dictionary”.  The definition of “Objection” was something along the lines of “what a lawyer says whenever the truth starts to enter into the courtroom.”

I was in examinations for discovery a little while ago and I questioned the other side first.  At the end of it, my client said to me about the other party’s evidence something along the lines of “what a complete and total pack of lies”.  It was then my client’s turn to be questioned and I had to smirk a little during the questioning because the party on the other side wrote a note to the lawyer and wrote it too big and didn’t hide the note, but all the note said was “LIES!!”.  I smirked for two reasons: (1) because it was clear that this examination was not going to result in the parties reaching a settlement sooner rather than later; and (2) because by giving the note to the lawyer, the client actually threw off the lawyer’s questioning a bit (which was to my client’s benefit / advantage) and all for a relatively useless comment.  But what is clear is that both sides genuinely believe that the other is not only not telling the truth but is going so far as to tell lies to hide the truth one way or the other.

I have often said to clients that if they want true justice, don’t ask it of our legal system – the only one who can give true justice is God and that all our human legal system can do is its best attempt to get a correct decision (but that if that were guaranteed to happen, there wouldn’t be a need for appeal courts).  In my client’s case that went to discoveries a little while ago, how do you determine the truth?  The simple answer is that, based solely on the testimony, you cannot.

So what does a judge look at?  The first, and probably easiest way, is to compare the stories given by each side and comparing it to the “objective” facts.  Person #1 says the sky was dark while Person #2 says it was clear blue sky.  Check the meteorological reports for that time and determine if it was clear skies or overcast skies – and whichever it is, then this lends support to one side or the other.  In some instances, the evidence cannot be confirmed by purely objective evidence but has to be viewed with a “reality check”.  To give a somewhat bizarre example, I was involved in a trial many years ago where a story was given of a woman who was alleged to have had sex with a gorilla.  Oddly enough, evidence was actually called at trial from someone who worked in the gorilla enclosure at the Toronto Zoo to show that it was physically impossible for the gorilla to have snuck out of the enclosure, scaled a large wall, crossed a big field, etc. to have sex with the woman.  But beyond that evidence was the “reality check” that if a wild gorilla was found in a room with an unknown human, chances are much more likely that the gorilla would have killed the person instead of having sex with her.

So how do you get a trial to determine the truth?  To be honest, you probably cannot definitively determine the truth in a trial.  The only one who will know what the actual truth is will be God.  So with that in mind, you should always think to yourself – if a problem arises, how am I going to be able to get my version of events to be believed?  The answer is to try to document your transactions and interactions as much as possible.  That way, if a dispute arises and the other side tries to suggest that the reality of the situation is something different, you may not be able to prove “the truth”, but you will be able to get a judge to believe that your version of events is consistent with the documentation from the time – and so your version is closer to the truth than the other side’s version.  You may not get to the truth, but you will increase your chances of getting a favourable judgment which, short of being in Heaven for the trial, is probably as close as you can ever get for sure.

Something to think about.

CALC

 

When Arbitration Works, it Really Works

January 19th, 2015

One of the main advantages cited by those in favour of arbitration is that it is faster than litigation in the courts.  The flip-side argument is that it actually takes longer because in court the rules are already set whereas in arbitration (if not set before the dispute arose) the parties have to agree on what set of rules to use or else to create their own set of rules and this can give either party the opportunity to unnecessarily delay matters.  I’m not going to get into this debate since both sides have, to a certain extent, merit in their positions.  But I would like to recount a recent arbitration I was involved in, as counsel, that really worked out well – at least from a procedural standpoint (and, as it turned out for my client, on the merits as well).

My client has a business partner with whom they have a shareholders agreement.  One of the parties wanted to be bought out of the business by the other party and the shareholders agreement permitted this to occur.  If the parties could agree on the sale price then all is good.  Of course (because, why else would I have a story to tell), they didn’t agree on the price.  The shareholders agreement thought of this possibility and said that if they couldn’t agree on the price, then a valuator would be appointed to determine the price.  OK, but what if they couldn’t agree on a valuator?  Then the shareholders agreement provided that the valuator would be appointed by an arbitrator.  OK, and if they couldn’t agree on the arbitrator?  Then one would be appointed by the court.

Not a big surprise, they couldn’t agree on the price.  They couldn’t agree on the valuator.  And they couldn’t agree (at least initially) on an arbitrator.  The result was that the party who wanted to be bought out was threatening to bring an application to the court to have the arbitrator appointed.  By this point, things between the parties had become testy.  And then the lawyers stepped in.  The first thing I have to say is that I was pleased that both myself and the other lawyer took a very pragmatic approach to this.  It didn’t make much sense spending tens of thousands of dollars fighting in court just to get an arbitrator picked, only to then have the fight before the arbitrator as to whose valuator should be chosen.  This would increase legal costs unnecessarily and add to the acrimony.  So the other lawyer and I got on the phone and we quickly worked out an arrangement by which the arbitrator would be picked from someone who was an Ontario representative on the board of directors of the Canadian Institute of Chartered Business Valuators – of which there were about 5 people.  We also agreed on a “quick and dirty” method of proceeding that would have each side give their suggested valuator’s proposal to do the work, along with a 3 page written submission to the valuator as to either why their person should be chosen or why the other side’s person should not be chosen (or a combination of the two) and the arbitrator would take these submissions, have a one week period to put questions to the proposed valuators, and then make a decision.  All of this was quickly agreed between myself and the other lawyer, our clients agreed and we implemented the procedure.  We had a minor hiccup in that the first person agreed upon for the arbitrator’s role had a conflict of interest, but there wasn’t that problem with the second person chosen and the result was that in the course of a little over a month we had a decision on the valuator.

The end result was that the choice of the valuator was made at a fraction of the cost compared to if this had proceed to an application in court and in a fraction of the time that it would have taken if we had gone to court.

Now, I’m not going to go all “pollyanna” and view this with rose-coloured glasses and say that everyone should go with arbitration.  It is clear here that (a) both lawyers worked together to agree on a streamlined and cost-efficient procedure; (b) both parties wanted to have this decision made so that they could move on (as opposed to one side wanting to move forward quickly while the other wanted to drag its heels).  It is also clear that in many instances, you do not get both of these factors working in favour of your case – which means that even if you go the arbitration route, you still could get bogged down as badly (and maybe even worse) than if you had gone the litigation route.  The “moral of the story”, if you will, is that if all the stars align properly, etc., arbitration can be a very good alternative to the courts that will save you time and money (even, in this case, where the parties had to pay for the arbitrator’s fees).  The usual response to this is “yes, but if both parties agree to proceed as provided under the court rules, then the court can be just as fast as arbitration.”  That’s true, sort of.  We could have agreed to a simple approach for a motion before a Master in Toronto.  The only problem is that most motions before a Master in Toronto nowadays are being booked for 4 or more months in the future.  Until the Ontario government puts a lot more money into the legal system to help it get more judges / masters / registrars / etc. and to improve court facilities and systems, we will continue to have some systemic delays.  Again, there’s no need for me to get into this debate save and except to say that I fully expect that the government is doing the best it can among all of the various other competing priorities (health, education, infrastructure, etc.).  But the point of all of this is to say that, if everyone agrees and works together from the outset, arbitration can be a very worthwhile procedure for resolving your disputes.

CALC

 

Je Suis Charlie

January 7th, 2015

“I may disapprove of what you say, but I will defend to the death your right to say it.”  That quote is often, but incorrectly, attributed to the French writer Voltaire.

I will be the first to admit that Charlie Hebdo often pushes the envelope a little too far.  I may not agree with many things they publish.  I said the same thing for many years when Canada’s closest equivalent to Charlie Hebdo was in print – Frank Magazine.  But no matter how far Charlie Hebdo pushed things, nobody deserved to lose their lives over it.

And for that reason today,

 

Unfortunately, something to think about.

CALC

 

Record Retention Revisited

January 3rd, 2015

It’s January and a not-so-young man’s heart turns to, um, er, well … administrative matters.  Time to put away closed files, do all those full (as opposed to “quickie”) bank reconciliations and general cleaning up of records to hand matters over to the accountant in the next month or so to get things ready for tax return and financial statement preparation.  Suddenly all those essays on what I did over Christmas vacation – even the ones I thought were really boring – seem to be super-exciting.  There’s nothing like a day spent cleaning your desk and organizing paper to get the old motor running !!

On April 10, 2009, I did a post that looked at records retention and gave some of the reasons for keeping records and what the consequences were of not keeping records if you should later be sued.  I think it’s time to revisit and expand on this topic and to discuss further the amount of time that one should keep records.

The answer to the question of how long should you retain records is a gigantic “that depends”.  Different records have to be retained for different periods of time and it becomes difficult to say with certainty.  However, I can give a bit of a helpful start.

BEFORE ALL OF THIS HOWEVER – ONE KEY RULE:  If you have been sued, or if there is a threat by someone that they will sue you, then all documents should be segregated and retained.  If the lawsuit is actually started, then nothing should be destroyed.  If it is only a threat, then records should be kept at least a minimum of 2 years from the date of the threat to sue you and, preferably, for 4 years or more.

1. Tax records.  For our friends at the C.R.A., the general rule is that you have to keep records for a period of 6 years.  That is, unless they tell you otherwise – in which case you have to keep the records for such additional period of time as is set out in the notice.  The current version of the CRA’s record keeping guide can be found at:

http://www.cra-arc.gc.ca/E/pub/tg/rc4409/README.html

[NOTE: I'm having trouble with my linking function, so please cut and paste the above and put in your browser instead of clicking on the link.  Thanks and sorry for the inconvenience.]

2.  Formal documents.  Wills.  Government issued documents (birth certificates, marriage certificates, immigration documents, real estate documents such as deeds to land, mortgages, etc.).  Trust deeds.  Documents such as these should be kept as long as you are alive (for personal documents – and, in the case of wills, even after your death) or with the business.  Probably the easiest way to define a formal document is to ask yourself (a) whether people normally go to a lawyer to get this type of document prepared or for help with these documents and (b) whether your replacement (for example, the executor of your estate, your replacement at work, etc.) would want or need to know about the existence of this document to be able to handle matters after you are no longer there.

3. Industry requirements / guidelines.  Are you in a regulated business?  For example, you are a doctor/dentist/chiropractor and the applicable College has rules requiring you to keep patient records and charts and x-rays for a specific minimum period of time.  If so, then you must comply with those requirements.

4.  Corporate records.  These are things like the articles of incorporation, by-laws, corporate resolutions – in other words, everything that is found in your company’s minute book.  The initial answer is simple – for however long your company exists, you keep these records.  A minute book for a company that has been around for 40 years should have 40 years worth of resolutions, etc.  But what happens if and when the company is wound up or otherwise ceases business.  Then you should keep them for either the 6 year tax requirement set out above or for the period of time determined for the next category – whichever is longer.

5.  General records (that is, everything not in categories 1, 2, 3 or 4).  There is no absolute requirement for the retention of records.  Suppose you get a letter from a supplier advising of the changes of prices to the supplies that you order.  If you continue to get invoices for your supplies, CRA is going to care about what you actually pay for your supplies, so you would have to keep the invoices for tax purposes, but the letter announcing the price changes is in most instances going to be irrelevant for the CRA.  If you ask most business people, they will say “it’s just a notice document, it’s not important, so feel free to throw it away as soon as you get it.”  And this is where the lawyer’s perspective differs from the business person’s perspective.  What happens if a dispute arises related to the price change?  When did you get notice of the change?  How did you get notice (was it a letter / notice / e-mail / fax)?  What were the terms of the price changes (for example, it’s hard for you to say “you told me that the new price would be $5 and now you’re charging me $7″ if you don’t have any longer the notice that said $5)?  So how long do you keep these records?  The answer is a resounding “I dunno”.  I’m not trying to be cute.  Let’s start with the easy answer – if the document relates to something more than 15 years ago, you are probably safe in destroying it.  But if the time since the document was created or the event to which it relates is less than 15 years ago we’re now into a grey area.

Again, let’s go with the minimum time period – two years.  Everyone in Ontario has up to 2 years to sue another person for any claim(s) that the first person has against the second person.  As a result, and at a minimum, therefore, you should keep records for at least two years.  The problem, however, is when does the 2 year period start to run?  An example should help.  Suppose you go to a party on New Year’s Day, 2014 and get more than tipsy and someone punches you and breaks your nose.  You definitely have until December 31, 2016 to sue the person.  But what if you don’t know (or remember) who did it?  And what if you find out on December 1, 2016 who did it?  Do you have only until December 31 to sue or do you have until November 30, 2018 – being two years after you learned of who did it?  Another example, you do a business deal and you are pretty sure that the other side has committed a fraud on you.  You cannot, however, confirm your suspicions until 3 years later – are you too late to sue or do you have 2 years from when you were able to piece it all together?  The answer for both questions is a resounding “it depends”.  The rule is that you have 2 years from when a reasonable person in your circumstances would have known that he/she could have sued.  If you did nothing for more than 2 years and then started to make inquiries after that time, you’re probably too late.  If you diligently looked everywhere for the information necessary to learn if you had a proper claim, you’re probably OK.  The reality, however, is that most cases fall somewhere in between these two extremes – and that’s why each case, and the answer to when the 2 years starts running, will depend on its own facts.

Now, we’ve looked at it from the perspective of when a plaintiff might be able to make a claim.  From the plaintiff’s perspective, he/she/it is likely going to keep the records relating to the claim.  But now suppose that you are the potential defendant.  You may not know that anything is wrong for years until suddenly one day you get a letter from a lawyer or you are served with a Statement of Claim.  If that happens more than 2 years later, you might get caught with your pants down (so to speak) if you have destroyed the documents related to the claim.  I often say to clients that if you want “pure” justice, you have to wait until you die and the other person to die and then God can give you pure justice.  Until then, the best you can get down here on Earth is justice based on whatever evidence can be proven in a court of law.  And in most commercial disputes, that translates into “he/she who has the most documents to prove her/his side of the case will win the case.”

At an absolute minimum, I would say that you should keep all documents for at least 2 years.  Beyond that, I would highly recommend that you keep documents for at least 5 years.  If you have the room in your business’ office (or in your garage or if you rent a storage locker), then I would recommend that you keep the records for 10 years or more.

Personally, I keep all of my records in this category for at least 15 years.  Yes, that means that this year I can finally destroy records from 1999 and all of my records will be “new millenium” documents.

Whatever you determine to be your “cut off point”, I further recommend, however, that you consider scanning documents before you destroy them.  Did you enter into a big sales contract 20 years ago that ended 15 years ago?  If yes, then you can probably destroy it now (assuming that you haven’t been sued on the contract).  But before you do that, why not run it through the scanner and save it?  The storage of many documents on one CD or DVD takes up almost no physical room in your office – but if you later get sued and a court determines that it was not too late for the plaintiff to sue then at least you will have some documents remaining.  In my case, therefore, I will be scanning documents for 1999 before they are destroyed.  The response to this suggestion that I often get is “but that’s going to take forever and I don’t have the staff to do it / can’t afford it / etc.”  The answer is simple: hire a local high school kid to do it.  You do not have to index the documents and just about any monkey can put a pile of paper in a sheet feeder on your multi-function printer/scanner/fax and press the “scan” button and save the file as “XYZ Inc. file” or whatever the name is for the file.  The high school kid gets office experience, your regular staff are free to do their jobs, and the cost to you is minimal (and a total pittance compared to the potential cost of not having the document anymore and you are sued on them).

Something to think about.

CALC

 

 

Things That Make You Think “Hmmmm”

November 18th, 2014

Okay, so I have to admit that I’m not particularly original.  I end many blog posts with “Something to think about”.  For those who are 30 years old or more, you will remember the ORIGINAL Arsenio Hall Show and his segment of “Something to make you think HMMMM” that was usually during his monologue at the beginning of the show.  Make a slight twist to this and there’s my end line for each post.  I have never professed to be original and full props to Arsenio.

In any event, there I was sitting in Mass like a good little boy a couple of weeks ago and listening to the Second Reading and it’s from the First Letter to the Corinthians from St. Paul at Chapter 15, Verses 51 through 57.  And the lector is reading and I’m following along and everything is fine until the lector gets to Verse 56 and reads:

“The sting of death is sin; and the power of sin is the law.”

Um, excuse me?  OK, let me get this straight.  Are you, St. Paul, saying that as an officer of the law, and thus an agent of the law, I’m also an agent of sin?  I’ve heard of being the Devil’s Advocate before but this is a bit more than a label being stuck on here.

Maybe I heard it wrong.  So I make it home and pull out my French Bible to see if there was a problem in translation.  Nope, the French version is basically the same as the English version:  “L’aiguillon de la mort, c’est le péché; et la puissance du péché, c’est la loi.”  To make matters more interesting, there are no “side notes” to suggest that Saint Jerome or anyone after him made an error in translation.

So the power of sin is the law, eh?  Is that Roman law?  Jewish law?  Eccclesiastical law? Or “the law” in general?  And what if it is a general reference?  Interesting thought and, I have to admit, that for the past couple of weeks it’s been,

Something to think about.

CALC

 

 

Good Faith Performance of Contracts

November 14th, 2014

When I was a law student at McGill, one of the main areas where the Quebec civil law for contracts was different from the common law for contracts used in the rest of Canada was with respect to the imposition of a general duty of good faith performance of contracts.  As I practised in Ontario in the years that followed, this distinction was made quite explicit and the Ontario Court of Appeal re-affirmed from time to time that there was no such general duty.  Not surprisingly, though, as I gained experience of the “real world”, I would be asked by my clients from time to time if they could do something that they knew the other side of a contract would object to, but which was within the strict wording of the contract.  My answer became something along the lines of “strictly speaking, you are entitled to do this since it is clearly within the letter of the contract.  That said, you never know what a judge is going to do and if he/she thinks that you have broken the spirit of the contract – which this probably does – then you should be concerned that a judge might try to find a way to find against you because of this.  Happily, though, there is no general duty of good faith performance in contract law, so the chances of a judge doing this are minimized.”  Well, thanks to a decision of the Supreme Court of Canada yesterday in Bhasin, the last part of this advice will have to be scrapped.

In Bhasin, the contract had a renewal clause and provided that it would renew automatically unless either party gave notice at least six months before the end of the contract’s term that they did not wish to renew the agreement.  The defendant was involved in attempts to move the business from the plaintiff to a different party and, for lack of a better phrase, “strung the plaintiff along” and in some cases lied and in some cases gave equivocal answers.  Then the defendant invoked the notice provision and terminated the contract.  The Supreme Court of Canada held that this was not proper.  More importantly, however, they recognized a full “free standing” general duty of good faith performance of contract.

Mr. Justice Cromwell found that such a duty existed in certain types of contracts: employment contracts, insurance contracts or tendering situations.  In addition, some courts in Canada (like B.C. or Nova Scotia) were inclined towards a general duty of good faith performance while others (such as Ontario) were not so inclined.  Meanwhile, the Quebec (see article 1375 of the Civil Code) and the United States did have general duties of good faith performance.  For Justice Cromwell, it was time to put an end to the patchwork arrangement and have a general approach to the issue.  In finding a general duty of good faith performance, and while trying to set out a general framework for such a duty, Justice Cromwell has provided some guidance but also some areas that will create at least initial confusion and require the courts to clarify the rules through future cases.  For example, Justice Cromwell wrote:

The organizing principle of good faith exemplifies the notion that, in carrying out his or her own performance of the contract, a contracting party should have appropriate regard to the legitimate contractual interests of the contracting partner. While “appropriate regard”for the other party’s interests will vary depending on the context of the contractual relationship, it does not require acting to serve those interests in all cases. It merely requires that a party not seek to undermine those interests in bad faith.

The principle of good faith must be applied in a manner that is consistent with the fundamental commitments of the common law of contract which generally places great weight on the freedom of contracting parties to pursue their individual self-interest. In commerce, a party may sometimes cause loss to another — even intentionally — in the legitimate pursuit of economic self-interest …  Doing so is not necessarily contrary to good faith and in some cases has actually been encouraged by the courts on the basis of economic efficiency… The development of the principle of good faith must be clear not to veer into a form of ad hoc judicial moralism or “palm tree?justice. In particular, the organizing principle of good faith should not be used as a pretext for scrutinizing the motives of contracting parties.

I would hold that there is a general duty of honesty in contractual performance. This means simply that parties must not lie or otherwise knowingly mislead each other about matters directly linked to the performance of the contract. This does not impose a duty of loyalty or of disclosure or require a party to forego advantages flowing from the contract; it is a simple requirement not to lie or mislead the other party about one’s contractual performance. …

I am at this point concerned only with a new duty of honest performance and, as I see it, this should not be thought of as an implied term, but a general doctrine of contract law that imposes as a contractual duty a minimum standard of honest contractual performance. It operates irrespective of the intentions of the parties, and is to this extent analogous to equitable doctrines which impose limits on the freedom of contract, such as the doctrine of unconscionability.

Viewed in this way, the entire agreement clause in cl. 11.2 of the Agreement is not an impediment to the duty arising in this case. Because the duty of honesty in contractual performance is a general doctrine of contract law that applies to all contracts, like unconscionability, the parties are not free to exclude it …

The duty of honest performance that I propose should not be confused with a duty of disclosure or of fiduciary loyalty.  A party to a contract has no general duty to subordinate his or her interest to that of the other party. …   But a clear distinction can be drawn between a failure to disclose a material fact, even a firm intention to end the contractual arrangement, and active dishonesty.

Wow, how do you reconcile all that?  Not easily.

Until yesterday it was easy.  I could simply say that there was no duty of good faith performance, but to be safe consideration should be made to ensure that the “spirit” of the deal wasn’t broken.  Now, every party will have to ensure that the “spirit” of the contract is honoured because to do otherwise could lead to a claim that there was bad faith in performing the contract.

Something to think about.

CALC