⚖️ Making ends meet

To: Hearsay Readers

TODAY’S DOCKET

  • SCC’s week ahead: insolvency is the word of the week, suing the government for unconstitutional legislation, and using personal anecdotes in your jury address

  • Round up: challenge to Canada’s electoral system, down with puppy mills, and federal judicial appointments

SCC

Appeal hearings this week

Decrepit building with company name "Business Corp" and For Sale sign in te window. Man sits on front steps looking sad amidst pile of papers

When can an individual’s actions be attributed to the insolvent corporation they represent?

The Court is hearing two appeals this morning about the “corporate attribution doctrine”. Each case involves a corporation run by a fraudster and driven into insolvency. The question is whether the fraudsters’ knowledge and intentions are attributable to the corporations they represent. The answer affects the amount of money available for creditors in the insolvency proceedings.

  • John Aquino ran Bondfield Construction. He took millions from the corporation using fake invoices. The lower courts attributed Aquino’s fraudulent intent to Bondfield. That means the fake invoice transactions are “transfers at undervalue”, Bondfield’s creditors can claw back five years’ worth of the shady transactions, and Aquino and his friends are on the hook for about $33 million.

  • Golden Oaks was a Ponzi scheme run by Jean Lacasse. As Ponzi schemes go, the first investors made some money and the rest were left holding the bag. Golden Oaks’s creditors want to claw back the money earned by the initial investors, but they’ll be up against a limitation period if Lacasse’s personal knowledge is attributed to Golden Oaks. To help the creditors out, the Court of Appeal treated this case differently than Aquino and refused to attribute Lacasse’s knowledge to the corporation.

On the merits: The Ontario Court of Appeal seems to have adopted a rule in these two cases of just doing whatever best suits the creditors. It’s tough to see the Supreme Court adopting the same approach — but stranger things have happened.

Can bankruptcy get you out of sanctions imposed by a provincial securities regulator?

Mr. Poonian and his wife committed securities fraud by manipulating the price of a publicly traded company. The BC Securities Commission ordered them to repay the $5 million they made in profit. The Commission also ordered them to pay $13.5 million in additional penalties.

The Poonians filed for bankruptcy — they want to wipe out the sanctions imposed by the Commission and start with a clean slate. But the BC Court of Appeal said that’s not how it works. Sure, bankruptcy generally extinguishes liabilities, but not if the liability results from the debtor obtaining property by fraud. The Court said the Commission’s sanctions fit within that exception.

The Alberta Court of Appeal took a different approach to this same issue, so it’s up to the Supreme Court to pick a side.

Can the people affected by unconstitutional legislation sue the government for damages?

Joseph Power served jail time for criminal offences in the 1990s. When his criminal record started causing employment problems, Power realized he should apply for a pardon. But the government changed the rules and made Power permanently ineligible. Courts later struck down the law that made Power ineligible for a pardon. Now Power wants to sue for the damage the law did to his career while it was still on the books.

Canada says the government has full immunity during the legislative process, so Power’s lawsuit isn’t viable. Following a 1995 Supreme Court decision, the New Brunswick Court of Appeal disagreed:

[T]he legislative branch and those within it are free to make policy choices and adopt laws, although they may have to pay a price if they do so in circumstances that are clearly wrong, or where bad faith or abuse of power is proven.

Star-studded: Both the Speaker of the Senate and the Speaker of the House of Commons are intervening in this appeal.

Did the Crown’s childhood anecdote render a trial unfair?

In a historic sexual assault case, the Crown explained the shifting nature of human memory to the jury using a story about a head injury from his childhood. Two judges at the Alberta Court of Appeal said it would have been preferable for the Crown to leave the story out of his submissions, but the anecdote didn’t render the trial unfair. One judge thought it was bad enough to order a new trial.

HEARSAY ROUNDUP

Canadiana

🗳 Ontario’s Superior Court of Justice upheld Canada’s first past the post electoral system:

[Proportional representation] has its merits and its shortcomings, as do all electoral systems in a large and complex country, including [first past the post]. To be sure, the Applicants have shown that [proportional representation] would be a fair system. It is not, however, required by the Constitution. The existing [first past the post] system is compliant with the Constitution and need not change.

Para 152

🐶 Ontario is planning to crack down on puppy mills. Legislation introduced yesterday would ban certain harmful practices including breeding female dogs too frequently and separating puppies from their mother before eight weeks of age. If enacted, there will be a $10,000 minimum fine for breaking the proposed new rules.

🧑‍⚖️ Canada’s Justice Minister and Attorney General announced judicial appointments in British Columbia, Quebec, and Ontario, as well as to the Tax Court of Canada.

  • In BC, Justice Janet Winteringham was elevated from the Supreme Court of British Columbia to the Court of Appeal

  • In Quebec, Ian Demers was appointed to the Superior Court of Quebec in Montreal.

  • In Ontario, Kerry McVey was appointed to the Superior Court of Justice of Ontario in Ottawa.

  • Scott Bodie (Calgary) and Ted Cook (Ottawa) are joining the Tax Court of Canada.

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