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TOPJune 2017

Expanding the Iniquity Exception to Ensure Corporate Accountability

By: Alexander Gay, Department of Justice

Corporations are becoming far savvier in managing corporate information within the organization. The in-house lawyer is often interposed in the middle of all sensitive communications for the purpose of eventually asserting privilege claims should litigation arise. The end result is that the in-house lawyer may sometimes be used by a company for the furtherance of an immoral act or an act that runs counter to public policy and avoiding accountability. The solution to what can only be described as a shell game lies with the iniquity exception to privilege which precludes a party from receiving the benefits of a privilege claim where it is used to perpetrate an immoral act or an act that runs counter to public policy. While the courts have circumscribed the application of the iniquity exception to cases where there is fraud or crime, it must be given broader application if we are to ensure greater corporate accountability.

The iniquity exception to privilege dates back to the case of R. v Cox and Railton (1884), 14 QBD 153 and has been applied in most jurisdictions across Canada. While the rule is often described by the case law as the "crime-fraud exception", it is not restricted to criminal or fraudulent activities and includes all immoral conduct that offends public policy or the interests of justice. Although it is described as an exception, it is not an exception but rather a situation in which privilege does not arise at all. Longmore LJ in Kuwait Airways Corpn v. Iraqi Airways Co (No 6), [2005] 1 WLR 2734 summarized the exception, saying that where a person consults a solicitor in furtherance of a criminal purpose then, whether or not the solicitor knowingly assists in the furtherance of such purpose, the communications between the client and the solicitor do not attract legal professional privilege. In order to defeat a claim of privilege, the applicant need not prove the alleged fraud, criminality or immoral conduct. The applicant need only show a prima facie case of fraud, criminality or other immoral conduct. While there is case law in Canada to suggest that the threshold is that of a strong prima facie case, as opposed to simply a prima facie case, the lower standard may be considered if the exception is to gain greater usage: Canbook Distribution Corp. v. Borins, 1999 CanLII 14842 (ON SC).

 

If My Neighbour Is a Thief, Do I Owe Him a Duty Of Care - SCC Will Decide...

By: Chad Leddy, Dutton Brock LLP

The Supreme Court of Canada has granted leave to appeal the Ontario Court of Appeal's October 2016 decision in J.J. v. C.C., 2016 ONCA 718, which upheld a jury verdict in which a garage owner who left keys in an unlocked car was found liable for a teenage joyrider's catastrophic brain injury.

This case arises from a series of bad decisions on a summer night in the small town of Paisley, Ontario (near Walkerton). On July 8, 2006, three teenage boys, aged 15 and 16, split a case of 24 beer that the boy C.C.'s mother D.C. bought for them to drink. They drank beer for several hours, then (after D.C. went to sleep) switched to vodka, then for good measure split a marijuana joint. One boy went home, but the remaining two, C.C. and J.J., walked around town looking to steal from cars. They found a Toyota Camry outside at Rankin's Garage. The car was unlocked with the keys in the ashtray.

Despite not being licensed and never having driven, C.C. decided to drive the Camry to a nearby town. J.J. got in as passenger and suffered serious injury when C.C. crashed the car. C.C. was convicted of a number of criminal offences including theft and dangerous operation of a motor vehicle causing bodily harm. His mother, D.C., was convicted of supplying alcohol to minors. J.J. was not convicted of any offence, but it appears to have been accepted that he participated in stealing the car.

There was some dispute at trial over security practices at Rankin's Garage. The jury found that the garage owner made a habit of leaving keys in cars left outdoors, and not in a safe as he claimed. The jury found as a fact that on the night in question the garage owner left the keys in the car, left the car unlocked, and had very little security.

 


 

Ch-Ch-Ch-Ch-Changes (to Estate Trustee Compensation) in
Eve v. Wilhelm Estate

By: Noah Weisberg, Hull & Hull LLP

Although the title of this article suggests that a David Bowie quote will be used, attention is instead turned to Benjamin Franklin who was famously quoted for saying that there were only two things certain in life, death and taxes. An estate litigator though, would likely add a third in claims by an Estate Trustee for compensation. Almost all estates require attention to be turned to compensation claims, whether compensation ends up being taken or not. Given the commonplace of these claims, this article considers the proper approach in reviewing claims for compensation in light of the recent decision in Eve v. Wilhelm Estate (Trustee of), and the ch-ch-ch-ch-changes that the Court may impose on compensation.

The starting point for Estate Trustee compensation is section 61 of the Trustee Act which states that:
"A trustee, guardian, or personal representative is entitled to such fair and reasonable allowance for the care, pains and trouble, and the time expended in and about the estate, as may be allowed by a judge of the Superior Court of Justice".

So, the natural question that follows is how does an Estate Trustee quantify 'such fair and reasonable allowance'?

To answer this, attention must be turned to the Tariff Guidelines which provides assistance to the Courts in quantifying compensation. The Guidelines permit 2½% on capital receipts and disbursements, 2½ on revenue receipts and disbursements, and a care and management fee of 2/5 of 1% per annum on the gross value of the assets under administration. This is referred to as the percentage approach.

The analysis does not end with the percentage approach as the amount calculated must then be checked against the following factors as set out in Toronto General Trust Corp. v Central Ontario Railway, being: (1) the size of the trust; (2) the care and responsibility involved; (3) time occupied in performing the duties; (4) the skill and ability displayed; and (5) the success of the administration. This is referred to as the five-factors approach.

 

Consideration is Dead! Long Live Consideration!
Richcraft Homes Ltd. v Urbandale Corporation and the
Zombie-Theory of Contract Law

By:  Jason MacLean, Assistant Professor
University of Saskatchewan College of Law

A Personal Preface: Contracts, Consideration, and Zombies

Teaching contracts is sometimes a thankless task. I speak not of students' complete lack of familiarity with - let alone their total lack of interest in - titillating topics such as the mailbox rule, whether promissory estoppel may be used both as a sword and a shield, or the vagaries of the parol evidence rule. I speak, of course, of the doctrine of consideration. The doctrine of consideration is fascinating for a number of reasons but perhaps none more so than the fact that it is a zombie theory - it died long ago, and yet it keeps shambling along.

So that there is no confusion, let me state my position at the outset: consideration is not a thing. It is so nebulous, so shape-shifting, and ultimately so arbitrarily defined and deployed by courts that it cannot be said to be a meaningful or predictable element of contract law doctrine. It belongs more to the canon of Palm Tree Justice than the Rule of Law.
 
I only wish I had come up with this insight myself! Perhaps the most famous formulation of the idea belongs to the legendary Grant Gilmore of Yale Law School, who in his brilliant book The Death of Contract noted that the American Law Institute's Restatement (Second) of contract law conceded that "[t]he word 'consideration' ... is often used merely to express the legal conclusion that a promise is enforceable." Even the great Charles Fried, a legend in his own right at Harvard Law School, author of the luminous Contract as Promise, and a true believer - unlike Professor Gilmore - in a coherent, internally-consistent law of contract, argues that consideration "offers no coherent alternative basis for the force of contracts".

And yet consideration continues to consume the brains of first-year law students. Surely consideration is a thing, they say, year after year, almost zombie-like themselves. And not just any thing, but a most important thing! After all, long before beginning law school students learn that a legally-binding contract consists of an offer, acceptance, and consideration. They learn this from watching TV shows like The Good Wife, Damages, and perhaps the worst-ever show about the practice of law, Suits.

 

Published Monthly by The Toronto Lawyers Association.
 

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