Top cases of 2006: Conflicts of interest hot topic for bar in 2006

66Issues of punitive damages awards, clarifying the rules of retroactive child support, and the use of famous trademarks dominated the top cases of the year in the areas of labour and employment, intellectual property, family law, and conflicts of interest.

Law Times surveyed leading lawyers in their areas of expertise and asked them to list their top cases of 2006. They were asked to select several decisions based on the impact on theire practice areas.

Conflicts of Interest
The issue of conflicts of interest was a hot topic in 2006 likely to continue into 2007 with the Supreme Court of Canada’s decision in 3464920 Canada Inc. v. Strother later this year.

Gavin MacKenzie, at Heenan Blaikie LLP, says the case will be the court’s third decision on conflicts in the legal profession, dating back to the 1990’s MacDonald Estate v. Martin, which looked at the duty of confidentiality, and R. v. Neil in 2002, which emphasized the duty of loyalty.

“I think the Strother case will be important because it will give the Supreme Court of Canada an opportunity to clarify and elaborate on some of the issues that have been raised since the Neil decision.”

These include when a retainer will be directly adverse to the immediate interests of another client at the firm, as well as the interrelationship between a law firm’s written retainer and its fiduciary duty, he said.

“One unanswered question after the Neil case was decided in 2002 was whether, in acting for commercial competitors, a law firm would be acting directly adverse to the immediate interests of another client.

Both the trial judge and the appeal court in Strother say there’s nothing impermissible about a law firm acting for two businesses that are in competition with each other, and I’d certainly expect the Supreme Court of Canada to come to the same view on that issue.”

Labour and Employment
The unanimous vote for the biggest case of the year in employment law was also one of last year’s top cases; Keays v. Honda Canada Inc., which went to the Court of Appeal in 2006. The wrongful dismissal case gained headlines for its record $500,000 punitive damages award in 2005. However the Court of Appeal reduced the award to $100,000 after concluding that there was no evidence Honda had been involved in any broad-based conspiracy or had anything to do with the insurer’s decision to terminate Keays’ benefits.

Kees Kort, of the Kingston, Ont., office of Hicks Morley Hamilton Stewart Storie LLP, says, “Although in Keays it reduced the amount of damages, it didn’t dissuade the trial judges from awarding punitive damages in circumstances where that was appropriate.

That, I think, is a warning sign to employers to make sure that when they’re dealing with employees such as Mr. Keays, that they’d better respect their dignity and they’d better respect their rights, and they’d better respect the fact that they have disabilities that need to be accommodated and if they don’t, they do so at their peril.”

Erin Kuzz, of Sherrard Kuzz LLP, says Keays was not only notable because of the award, “but even more so in terms of lasting effects because of the court finding that the violation of the Human Rights Code can be a separately actionable wrong that can be pursued in court.”

Also from the Ontario Court of Appeal, Alcatel Canada Inc. v. Egan, released in January, dealt with wrongful dismissal and an employee’s right to benefits. The case involved a former employee of Alcatel who was terminated with nine months’ pay in lieu of a notice period. She later became unable to work due to a disability and claimed wrongful dismissal and the benefits she would have earned had she worked the notice period, and was ultimately awarded disability benefits for 12 months.

“The courts in the Alcatel case made it very clear that if an employer decides to terminate benefit coverage before the end of the reasonable notice period, they’re doing so at their peril,” says Kuzz.
The issue of who pays the Ontario Health Premium was in a high number of cases in labour arbitration last year.

“There were probably in excess of 50 arbitration awards all on the same topic of whether the newly implemented Ontario Health Premium was captured by the old OHIP language,” noted David Bannon, a partner with Ogilvy Renault LLP. Of the six decisions that went to the Court of Appeal, two found in favour of the employer and four for the union, says Bannon. Themajority of arbitration decisions held in favour of the employer.

Intellectual Property
Supreme Court decisions handed down the same day in June involving two well-known brands topped the trademarks area of IP law in 2006. Commonly known as the “Barbie case,” Mattel, Inc. v. 3894207 Canada Inc. involved Mattel opposing the respondent’s application to register its “Barbie’s” trademark in association with restaurant and catering services in Montreal. The court unanimously dismissed the appeal, noting, “There was no likelihood of confusion in the marketplace having regard to all the surrounding circumstances.”

David Morrow, of Smart & Biggar/Fetherstonhaugh, says, “They lost, but the Supreme Court did make it clear that differences in the parties’ respective wares or services don’t trump all other characteristics. It’s always a question of weighing all the factors and deciding if there’s confusion or not, so there was some comfort for famous trademark holders in that decision.”

The decision in Veuve Clicquot Ponsardin v. Boutiques Cliquot Ltée, involved the champagne company seeking to stop a chain of clothing stores in Quebec and eastern Ontario from using the name Cliquot. In dismissing the appeal, the court also clarified s. 22 of the Trade-Marks Act.

Anthony Prenol, at Blake Cassels & Graydon LLP, said“prior to the decision, there was concern that when you used a competing trademark, you were violating s. 22.” He said the decision raises the bar on what it takes to violate s. 22, with plaintiffs having to show there’s significant goodwill attached to that mark.

On the copyright side, the SCC heard Robertson v. Thomson Corp., which dealt with whether a newspaper had the right to reproduce a freelancer’s work in an online database. The court concluded that the owner of the collective work could reproduce it as a whole, but not of individual work in part.

“That’s a point that hadn’t been clarified before and that was important to these independent contributors,” says Morrow.

Family Law
Released in the summer, the Supreme Court’s DBS v. SRG clarified the rules on retroactive child support and was unanimously chosen as the top family law case of 2006.

Grant Gold, of Goodman & Carr LLP, says the decision noted if there was a support agreement in place that didn’t require financial disclosure, then as long as the payor keeps paying, even if his or her income increases, there is not a huge risk. However, “From the child support point of view, once the recipient asks for up-to-date information, if there’s been a change in someone’s financial position, there’s going to be retroactive support,” he added.

Gerald Sadvari, of McCarthy Tétrault LLP, said “bad behaviour is defined as including knowing that you should be paying more and intentionally not doing it. Regardless of whether you have a court order or a separation agreement or no agreement at all, that’s going to be looked at unfavourably.”

The court also ruled that three years is generally the maximum period for retroactivity.

 “Piercing the corporate veil” was also a theme in a couple of important family law decisions from Ontario Court of Appeal last year, notably in Wildman v. Wildman. It centred on whether “piercing the veil” of a company owned by one person was appropriate in matrimonial litigation.

The court ruled unanimously that, “In appropriate cases, piercing the corporate veil of one spouse’s business enterprises may be an essential mechanism for ensuring that the other spouse and children of the marriage receive the financial support to which, by law, they are entitled.”

“That case stands for the proposition that where the corporation is really the individual or the payor, that the court can look to that company to satisfy the obligations of its, in that case, sole shareholder, which was the husband,” says Gold.

Gold also says LeVan v. LeVan, dealing with financial disclosure in marriage contracts, isone to watch. “When the decision is ultimately dealt with by the Supreme Court of Canada, I think it will be the definitive case on what financial disclosure is required for a marriage contract,” he says.

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