Legal Trends: Litigation & Dispute Resolution

Blake, Cassels & Graydon LLP
Contact

ONE | INCREASING POWER OF ADMINISTRATIVE TRIBUNALS

In 2016, regulated persons in Canada are increasingly likely to find themselves facing prosecution before tribunals, rather than in courts, and facing significant exposure to monetary penalties in those proceedings.

Administrative monetary penalties have become popular with regulators but controversial among regulated persons and legal observers. In recent years, both federal and provincial regulators across a range of regulated fields have been granted new or expanded powers to impose administrative monetary penalties and disgorgement orders against individuals and companies through prosecutions before specialized administrative tribunals. In general, these administrative tribunals afford significantly fewer protections to defendants than courts provide.

In a series of recent cases, persons threatened with administrative monetary penalties have challenged the constitutionality of the penalty powers. In its August 2015 decision in Guindon v. Canada, the Supreme Court of Canada (SCC) ruled for the first time on one such challenge and affirmed the constitutionality of the monetary penalty in question. The SCC’s decision was broadly permissive regarding the exercise of regulatory power, including the imposition of severe monetary sanctions on individuals and companies. It will likely increase the willingness of regulators to resort to administrative proceedings when seeking to impose monetary sanctions and obtain disgorgement orders.

TWO | LEAVE STANDARD IN SECURITIES CLASS ACTIONS

In 2015, the SCC considered for the first time the standard for granting a plaintiff leave to proceed with a statutory secondary-market securities class action. Previously, lower courts considering the issue arrived at inconsistent results, arming plaintiffs with precedents to support a very low threshold for leave.

The SCC in Theratechnologies Inc. v. 121851 Canada Inc. held that the threshold for obtaining leave to proceed with such class actions should be more than a “speed bump” and that courts must undertake a reasoned consideration of the evidence to ensure the action has some merit. The SCC noted that “[w]hat is required is sufficient evidence to persuade the court that there is a reasonable possibility that the action will be resolved in the claimant’s favour.” The parameters set by the SCC have already been employed in a series of 2015 decisions and were reinforced in the SCC’s decision in the limitation period trilogy of cases released in December 2015.

Going forward, courts are expected to follow the SCC’s approach when considering whether to grant leave to proceed with statutory secondary-market securities class actions. This development has affected and is expected to continue to affect the quantity and quality of evidence adduced by both plaintiffs and defendants on leave motions.

THREE | CONTINUING FOCUS ON BUSINESS INTEGRITY

In 2015, the Canadian government increased its focus on business integrity and anti-corruption enforcement, a trend that is expected to continue in 2016.

Taking a holistic approach to fighting corruption, Canada actively implemented new laws and policies to complement the Corruption of Foreign Public Officials Act (CFPOA). These new laws and policies include the new Integrity Regime for all federal government procurement, which can bar a supplier from doing business with the government for 10 years, and implementation of the Extractive Sector Transparency Measures Act, designed to create greater transparency regarding extractive sector payments to a government.

The focus on integrity has resulted in greater enforcement, including high-profile charges against Canada's largest construction and engineering firm and charges stemming from certain Canadian senators’ expense claims. Further, the Charbonneau Commission released its corruption investigation report regarding Quebec’s construction industry, which is likely to increase whistleblower protections and scrutiny over how public contracts are awarded and monitored. Internationally, successor governments and business competitors have been using corruption allegations as a defensive tactic in litigation and arbitration proceedings.

With increased focus on business integrity and enforcement, the private sector will need to continue to focus on internal compliance and proper structuring of internal investigations to identify and minimize business risks and proactively avoid corruption allegations.

FOUR | INCREASE IN ALTERNATIVE DISPUTE RESOLUTION IN QUEBEC

In Quebec, a new Code of Civil Procedure (CCP) is scheduled to come into force on a date to be determined in 2016. With the objectives of promoting access to justice and efficient court process, the new CCP will place more emphasis on private and alternate modes of dispute resolution, such as mediation, arbitration and out-of-court settlement conferences.

Parties will be obligated under the new CCP to consider private dispute prevention and resolution processes before going to court. Although mandatory mediation is not anticipated, the parties will have to inform the court whether such processes were considered. Consequences for failing to comply with this new obligation remain undefined.

With the new CCP, more disputes are expected to be resolved out of court, and increased interest in private mediations in the early stages of a dispute is also expected. The parties assume the costs of these modes of dispute resolution, and such costs may increase total litigation costs if a settlement is not reached. If these processes are unsuccessful, they may further delay dispute resolution through litigation.

FIVE | GREATER SCOPE TO DETERMINE LIQUIDATED DAMAGES?

Liquidated damages clauses (LDCs) in contracts enable parties to agree on damages for contractual breaches, thus avoiding litigation of the issue. A recent U.K. Supreme Court decision changed the law on LDCs in the U.K. and may pave the way for a similar change in Canadian law.

Previously, the test to determine the validity of an LDC in the U.K. and the current test in Canada derived from the U.K.’s Dunlop Pneumatic Tyre Company Limited v. New Garage and Motor Company Limited (Dunlop) decision and focused on whether damages stipulated by an LDC were a genuine pre-estimate of loss. If damages exceeded a genuine pre-estimate of loss, courts would not enforce the LDC.

Under the new test in the U.K., courts will determine whether an LDC “imposes a detriment on the contract-breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation.” This gives parties greater leeway to pre-determine damages for contractual breaches.

To date, Canadian courts have cited Dunlop as the leading authority on LDCs. Since Dunlop is no longer the leading case on LDCs in the U.K., Canadian courts may revise Canadian common law accordingly.​​

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Blake, Cassels & Graydon LLP | Attorney Advertising

Written by:

Blake, Cassels & Graydon LLP
Contact
more
less

Blake, Cassels & Graydon LLP on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide