Tag: supreme court of canada
Last week, I blogged on the Supreme Court of Canada decision of Atlantic Lottery Corp. Inc. v. Babstock, 2020 SCC 19 (CanLII) and “three-card monte”. This week, I would like to discuss the bigger take-away from the decision: the rejection of the existence of the cause of action of “waiver of tort” in Canada.
In Atlantic, the claimants in a class action proceeding alleged that certain video lottery terminal games (“VLTs”) were inherently dangerous and deceptive, and contravened the Criminal Code. The defendants failed to warn the claimants. As a result, the claimants sought an order that the defendants disgorge any profits made by them. They did not allege any specific damages on the part of each claimant. The defendants moved to dismiss the claim.
The claimants pled “waiver of tort”. The term itself was criticized in the SCC decision as being a misnomer. Rather than “waiving” the tort or wrongdoing, the claimant is simply electing to pursue a different remedy: disgorgement of profits earned by the defendants without proof of any damages suffered by the claimants.
Brown J., speaking for the majority, held that disgorgement is a remedy, not a cause of action. Before disgorgement can be ordered, a recognized tort or breach of contract or claim in equity must be established.
In order to establish negligence, causation must be established. It must be shown that the defendant’s wrongful actions caused damages to the claimant. “…the conduct of a defendant in negligence is wrongful to the extent that it causes damage.” “In other words, negligence ‘in the air’ – the mere creation of risk – is not wrongful conduct.”
Citing certain scholarly articles on the topic, Brown J. went on to reject waiver of tort as an independent cause of action. “Granting disgorgement for negligence without proof of damages would result in a remedy ‘arising out of legal nothingness’ (Weber, at p. 424). It would be a radical and uncharted development, ‘[giving] birth to a new tort over night’ (Barton, Hines and Therien, at p. 147).
From an estates and trusts point of view, Brown J. acknowledged that disgorgement may be available without proof of damages for certain forms of wrongdoing, such as breach of trust. “However, it is a far leap to find that disgorgement without proof of damages is available as a general proposition in response to a defendant’s negligent conduct.”
R.I.P Waiver of Tort.
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The Supreme Court of Canada recently rejected a class proceeding seeking damages arising from “inherently deceptive” video lottery terminal games. The claimants sought the disgorgement of profits made from the operation of these devices on the basis of “waiver of tort”, breach of contract and unjust enrichment.
The decision, Atlantic Lottery Corp. Inc. v. Babstock, 2020 SCC 19 (CanLII) was released on July 24, 2020.
One of the claims advanced was that the video terminals were akin to the game of “three-card monte”, and thus unlawful.
Three-card monte is also known as “Find the Lady”. Three cards (usually two jacks and the queen of hearts) are placed face down by the dealer. The queen of hearts is shown to the player, and then placed face down again. The dealer then slides the cards around quickly. The player must then select the queen of hearts. If the player is correct, he or she wins. Betting is usually involved. The player puts up a bet. If the player wins, the player gets the bet back plus an equal amount from the dealer. If the player is incorrect, the dealer gets the player’s bet.
The game is often used as a con: a player is lured into playing, believing that the game is easy. The player often watches another player, a shill who is, unknown to the payer, working with the dealer, win lots of money. Sometimes the corner of the queen of hearts is bent, leading the player to believe that he or she has an unfair advantage. Through sleight of hand, the player usually loses.
Three-card monte and games similar to it are illegal under s. 206 of the Criminal Code. The Criminal Code defines “three-card monte”, as meaning “the game commonly known as three-card monte and includes any other game that is similar to it, whether or not the game is played with cards and notwithstanding the number of cards or other things that are used for the purpose of playing.
The Newfoundland and Labrador Court of Appeal held that expert evidence was required in order to determine the essence of three-card monte. The Supreme Court of Canada disagreed, holding that it was for the court to determine Parliament’s intention in prohibiting games similar to three-card monte. Referring to transcripts of the debate leading to the introduction of the law in 1921, they found that video lottery terminals were not similar to three-card monte. The law was directed at the “concrete attributes” of the game, and not “the abstract feature of deception”.
[Note to my kids: our weekly game of three-card monte is postponed indefinitely. You can keep your money, for now.]
Next week, I will discuss the Supreme Court of Canada’s comments on “waiver of tort” as a cause of action.
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This week on Hull on Estates, Natalia Angelini and Nick Esterbauer discuss S.A. v Metro Vancouver Housing Corp., in which the Supreme Court of Canada addresses Henson trusts for the very first time.
Should you have any questions, please email us at email@example.com or leave a comment on our blog.
The Supreme Court of Canada’s recent decision in Moore v Sweet provided meaningful clarification on the Canadian law of unjust enrichment and, in particular, the juristic reason analysis.
As it made a finding of unjust enrichment, it was not necessary for the Court to consider the second issue before it, being whether, in the absence of unjust enrichment, a constructive trust could nevertheless be imposed in the circumstances on the basis of “good conscience”.
In 1997, the Supreme Court released its decision in Soulos v Korkontzilas. That case considered situations that may give rise to a constructive trust remedy. In referring to the categories in which a constructive trust may be appropriate, which were noted to historically include where it was otherwise required by good conscience, Justice McLachlin (as she then was) stated as follows:
I conclude that in Canada, under the broad umbrella of good conscience, constructive trusts are recognized both for wrongful acts like fraud and breach of duty of loyalty, as well as to remedy unjust enrichment and corresponding deprivation…Within these two broad categories, there is room for the law of constructive trust to develop and for greater precision to be attained, as time and experience may dictate.
Since 1997, Soulos and the above excerpt have been interpreted inconsistently by scholars and courts of appeal throughout Canada. Some consider Soulos to restrict the availability of constructive trust remedies to only situations where there has been a finding of unjust enrichment or wrongful conduct, while others favour a more liberal interpretation.
The appellant in Moore v Sweet sought, in the alternative to a remedy on the basis of unjust enrichment, a remedial constructive trust with respect to the proceeds of the life insurance policy on the basis of good conscience. In choosing not to address this issue, Justice Côté (writing for the Majority) stated as follows:
This disposition of the appeal renders it unnecessary to determine whether this Court’s decision in Soulos should be interpreted as precluding the availability of a remedial constructive trust beyond cases involving unjust enrichment or wrongful acts like breach of fiduciary duty. Similarly, the extent to which this Court’s decision in Soulos may have incorporated the “traditional English institutional trusts” into the remedial constructive trust framework is beyond the scope of this appeal. While recognizing that these remain open questions, I am of the view that they are best left for another day.
It will be interesting to see if and when the Supreme Court ultimately chooses to determine “the open questions” regarding the availability of the remedial constructive trust. Until then, it appears that some debate regarding the circumstances in which it may be imposed will remain.
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Earlier this year, we argued the appeal in Moore v Sweet before the Supreme Court of Canada. On Friday, the Court released its decision, which has provided what, in our view, was necessary clarification of the juristic reason component of the test for unjust enrichment. The Supreme Court has also confirmed the circumstances in which a constructive trust remedy is appropriate within the context of unjust enrichment. Our firm was pleased to argue the appeal at the Supreme Court in February 2018 and to learn on Friday of our client’s success in the reversal of the split decision of the Ontario Court of Appeal.
The facts of the case were relatively straightforward: The appellant had previously been married to the deceased. Around the time of their separation, the appellant and the deceased entered into an oral agreement whereby the appellant would remain the designated beneficiary for the life insurance policy on the deceased’s life on the basis that she would continue to pay the related premiums. The appellant paid the premiums on the life insurance policy until the deceased’s death approximately 13 years later, while, unbeknownst to the appellant, the deceased named his new common law spouse (the respondent), as irrevocable beneficiary of the policy soon after the oral agreement was made. At the time of his death, the deceased’s estate was insolvent.
At the application hearing, Justice Wilton-Siegel awarded the appellant the proceeds of the life insurance policy on the basis of unjust enrichment. The respondent was successful in arguing before the Ontario Court of Appeal that the designation of an irrevocable beneficiary under the Insurance Act was a “juristic reason” that permitted what was otherwise considered the unjust enrichment of the respondent at the appellant’s expense. The appellant was subsequently granted leave to appeal to the Supreme Court of Canada.
Justice Coté, writing for the Majority, agreed that the test for unjust enrichment was flexible and permits courts to use it in the promotion of justice and fairness where required by good conscience. The Court clarified that the juristic reason permitting an unjust enrichment needs to justify not only the enrichment of one party but also the corresponding deprivation of the other party. While the irrevocable beneficiary designation may have required the payment of proceeds for the policy to the respondent, it could not be considered as also requiring the appellant’s deprivation of the proceeds to which she was entitled under the oral agreement. The Court found that a designation of an irrevocable beneficiary under the Insurance Act precludes claims by creditors of an estate, but it does not state “with irresistible clearness” that it also precludes a claim in unjust enrichment by a party who has a contractual or equitable interest in the proceeds.
While reaching the opposite result, the dissent acknowledged that this was a difficult appeal, in which both parties were innocent and had strong moral claims to the proceeds of the life insurance policy.
We thoroughly enjoyed the opportunity to argue this case before the Supreme Court of Canada earlier this year and look forward to following the role of this decision in further developments in the Canadian law of unjust enrichment.
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The Supreme Court of Canada recently refused leave to appeal a decision of the Quebec Court of Appeal that raises the issue of whether old age should be considered as a factor during sentencing.
The appellant had been convicted of fraud, conspiracy to commit fraud, and laundering the proceeds of crime at the direction of or in association with a criminal organization. A prior appeal regarding the conviction itself had been dismissed by the Quebec Court of Appeal.
The Lower Court recognized the role of the appellant as a directing mind of a criminal organization and the losses suffered by the government as a result of his fraudulent acts. The Court had stated that age, even if it could be taken into account, was “only one factor among many”, which “cannot have a determinative impact because of the great number of aggravating factors”.
The appellant subsequently sought leave to appeal his four-year prison sentence. The appellant asserted that, at 81 years of age and in a poor state of health, his sentence ought to be replaced with a conditional sentence to be served in the community or otherwise limited in duration to allow him the prospect of life after prison.
The Quebec Court of Appeal summarized the law as it relates to the consideration of age during sentencing as follows (at paras 38, 39, 42, 43):
The advanced age of an accused must be taken into account when determining a sentence, as Chief Justice Lamer indicated in R. v. M. (C.A.)…
The age factor must, however, be considered in light of the health of the offender as it relates to his life expectancy. Consequently, the mere fact that an accused is elderly is not, in and of itself, a mitigating factor in determining a prison sentence, unless the evidence reveals that he has little chance of serving the sentence before passing away. This is increasingly true with the general aging of the Canadian population and the raised probability of longer life expectancies.
As a result, if at the time a sentence is imposed, the offender’s state of health does not suggest that he is unlikely to complete the sentence before his demise, the judge then has the necessary discretion to impose an appropriate sentence in light of all the usual factors and criteria…
It is possible that an offender’s state of health deteriorates following sentencing. This possibility increases with the age of the offender. The sentencing judge may not, however, speculate on this subject and must determine the sentence in accordance with the evidence before him when it is rendered…
The Court nevertheless considered the prison sentence to be appropriate, notwithstanding the expectation of the appellant that he may not survive it. The Supreme Court agreed with the reasons of the Quebec Court of Appeal.
With Canada’s aging population, cases like this, in which an individual convicted of a crime is elderly and/or in a poor state of health, can be expected to increase in frequency. The Supreme Court has confirmed that (for the time being at least), while age is a factor to be considered during sentencing, it is merely one to be assessed among others, rather than being determinative of the issue.
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Last week, the Supreme Court of Canada granted leave to appeal the judgment of the Federal Court of Appeal in the Minister of Citizenship and Immigration v Alexander Vavilov, and announced that this appeal will be heard along with the appeals of two other judicial review matters.
The Vavilov appeal concerns the decision of the Registrar of citizenship to revoke the status of a Canadian on the basis that his parents were not lawful Canadian citizens or permanent residents at the time of his birth. Though Canadian citizens, the man’s parents had been undercover spies and, under the provisions of the Citizenship Act, were considered to be “employees or representatives of a foreign government”, rather than lawful citizens of Canada whose son would be Canadian by virtue of their citizenship and the place of his birth alone. The man’s application for judicial review of the decision of the Registrar to cancel his citizenship was initially dismissed by the Federal Court on the basis that the relevant section of the Citizenship Act did not limit the meaning of representatives or employees of foreign governments. The Federal Court of Appeal reversed this decision, concluding that the decision of the Registrar was unreasonable and that the purpose of the section of the Citizenship Act in dispute was to apply only in respect of representatives of foreign governments who enjoy diplomatic immunities or other privileges.
While it is rare for the Supreme Court to release reasons granting or refusing leave to appeal beyond one sentence, the Court’s recent judgment granting leave to appeal elaborates as follows:
The Court is of the view that these appeals provide an opportunity to consider the nature and scope of judicial review of administrative action, as addressed in Dunsmuir v. New Brunswick,  1 S.C.R. 190, 2008 SCC 9, and subsequent cases. To that end, the appellant and respondent are invited to devote a substantial part of their written and oral submissions on the appeal to the question of standard of review, and shall be allowed to file and serve a factum on appeal of at most 45 pages.
Matters of judicial review are generally unrelated to estates law. However, members of our firm have assisted clients with applications for judicial review involving estate-related issues and we can appreciate the value of the clarification of the state of the law involving standards of review that may come from the Supreme Court’s reconsideration of these principles.
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Other blog entries that you might enjoy reading:
- Leave to Appeal to the Supreme Court of Canada
- Everything Your Ever Wanted to Know About the Supreme Court of Canada
The facts in the new Supreme Court of Canada decision on trustee duties were previously set out in last Tuesday’s edition of this blog.
Valard Construction Ltd. v. Bird Construction Co. arose from a commercial matter in which Valard was a subcontractor in a construction oilsands project where Bird was the general contractor. Bird was the trustee of a labour and material payment bond that could have been available for Valard’s claim for unpaid invoices if notice of claim was given to the surety within a fixed time limit. Valard claimed against Bird when Bird failed to disclose the existence of the bond to Valard within the relevant time period.
Justice Brown, for the majority, found that Bird had a fiduciary duty to disclose the bond to Valard even though Valard did not explicitly ask about the existence of the bond until it was too late. In order to determine whether a breach of trust occurred, Justice Brown went on to consider what was required of Bird in order to discharge its duties to Valard because “the question is not what Bird could have done in this case, but what Bird should reasonably have done in the circumstances of this case to notify beneficiaries such as Valard of the existence of the bond” (paragraph 29). In concluding that the duty was breached in this instance, paragraph 26 is particularly instructive for the analysis:
Like all duties imposed upon trustees, the standard to be met in respect of this particular duty is not perfection, but rather that of honesty, and reasonable skill and prudence. And the specific demands of that standard, so far as they arise from the duty to disclose the existence of a trust, are informed by the facts and circumstances of which the trustee ought reasonably to have known at the material time. In considering what was required in a given case, therefore, a reviewing court should be careful not to ask, in hindsight, what could ideally have been done to inform potential beneficiaries of the trust. Rather, the proper inquiry is into what steps, in the particular circumstances of the case — including the trust terms, the identity of the trustee and of the beneficiaries, the size of the class of potential beneficiaries and pertinent industrial practices — an honest and reasonably skillful and prudent trustee would have taken in order to notify potential beneficiaries of the existence of the trust. But, where a trustee can reasonably assume that the beneficiaries knew of the trust’s existence, or where practical exigencies would make notification entirely impractical, few, if any, steps may be required by a trustee.
In this case, Justice Brown found that Bird could have reasonably discharged its duties by posting notice of the bond on its information board and that some method of notice was required of the company to notify beneficiaries like Valard with a caveat. The caveat being that, in some circumstances, nothing could be required to discharge this duty where industry practice and knowledge would render notice unnecessary.
Interestingly, what was or was not industry practice in this case was the question that divided the Court. For Justice Karakatsanis‘ dissenting opinion, she would have dismissed the appeal because Bird was not under an obligation to inform Valard beyond responding accurately when asked because this type of bond was common in this industry in her view.
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The Supreme Court of Canada released a decision last Thursday that is a must read for estates and trusts practitioners. Interestingly enough, Valard Construction Ltd. v. Bird Construction Co., 2018 SCC 8, arose from a commercial matter.
Bird was a general contractor for a construction project. When Bird subcontracted with Langford, Langford was required to obtain a labour and material payment bond which named Bird as trustee of the bond. If Langford was delinquent in paying its contractors, the bond would permit the contractor to sue and recover from Langford’s surety on the condition that notice of the claim must be made within 120 days of the last date in which work was provided to Langford. Langford became insolvent and some of Valard’s invoices went unpaid. Unfortunately, Valard was not notified of the existence of the bond and did not inquire about whether there was a bond in place until after the 120 day notice period. The surety denied Valard’s claim and Valard sued Bird for breach of trust. This matter was dismissed at first instance by the Alberta Queen’s Bench, dismissed again by the Alberta Court of Appeal, and finally reversed by the Supreme Court of Canada (with a dissent from Justice Karakatsanis).
Justice Brown for the majority (per McLachlin C.J., as she then was, Abella, Moldaver and Rowe J.J.) found that Bird had a fiduciary duty to disclose the terms of the trust, i.e. the bond, to Valard notwithstanding the fact that the express terms of the bond did not stipulate this requirement. Justice Brown was clear that “While the ‘main source’ of a trustee’s duties is the trust instrument, the ‘general law’ which sets out a trustee’s duties, rights and obligations continues to govern where the trust instrument is silent” (para.15). Justice Brown then went on to say that a beneficiary’s right to enforce the terms of the trust is precisely what keeps the trustee from holding the “beneficial as well as legal ownership of the trust property” (para. 18). Otherwise, no one would have an interest in giving effect to the trust.
With this logic in mind, Justice Brown developed the following framework at paragraph 19,
“In general, wherever “it could be said to be to the unreasonable disadvantage of the beneficiary not to be informed” of the trust’s existence, the trustee’s fiduciary duty includes an obligation to disclose the existence of the trust. Whether a particular disadvantage is unreasonable must be considered in light of the nature and terms of the trust and the social or business environment in which it operates, and in light of the beneficiary’s entitlement thereunder. For example, where the enforcement of the trust requires that the beneficiary receive notice of the trust’s existence, and the beneficiary would not otherwise have such knowledge, a duty to disclose will arise. On the other hand, “where the interest of the beneficiary is remote in the sense that vesting is most unlikely, or the opportunity for the power or discretion to be exercised is equally unlikely”, it would be rare to find that the beneficiary could be said to suffer unreasonable disadvantage if uninformed of the trust’s existence.”
Thanks for reading and more to follow later this week on Valard Construction Ltd. v. Bird Construction Co.
Today on Hull on Estates, Noah Weisberg and Rebecca Rauws discuss the recent decision of the Supreme Court of Canada in Cowper-Smith v Morgan , 2017 SCC 61, and the expanded scope of the doctrine of proprietary estoppel.