⚖️ Spy game

To: Hearsay Readers

A warm welcome to all of the newest readers tuning in.

I’ll be doing my part to give children cavities this week. Beyond that, I’m looking forward to the special committee hearing for Supreme Court nominee Chief Justice Mary Moreau. Thursday’s hearing will elaborate on the reasons for her appointment and give her an opportunity to answer questions.

Stay spooky.

— Dylan Gibbs 🧛‍♂️

TODAY’S DOCKET

  • Lawyers punished for spying on judge

  • SCC says directors had to disclose information to shareholders

  • Moonlighting MLA

  • Nygard facing cross-examination

ETHICS

Judicial surveillance nets Canada-wide ban on legal practice

Medical mask and gavel

The (over)zealous advocates who ordered surveillance on Chief Justice Glenn Joyal of the Manitoba Court of King’s Bench are now banned from practicing law in Canada. John Carpay and Jay Cameron each agreed to a peace bond on Friday, which bans them from practicing anywhere in Canada for the next three years. In exchange, the Crown stayed their criminal charges for obstruction of justice and interfering with a justice system participant.

Covert ops. In 2021, the Justice Centre for Constitutional Freedoms represented a group of churches challenging COVID-19 restrictions. Carpay was the Centre’s president and Cameron was the Director of Litigation. They wanted to catch important people breaking mandates and being hypocrites, so Carpay hired a private investigator. The investigator followed Chief Justice Joyal, who was presiding over the court case.

The plan was to catch Chief Justice Joyal in the act and turn the evidence over to the media, but that move didn’t quite pan out. Chief Justice Joyal spotted the private investigator and confronted him, then raised the issue in court.

Carpay soon admitted he was responsible for the surveillance, but that wasn’t enough to avoid disciplinary proceedings and criminal charges for both Carpay and Cameron. It didn’t help that — after their cover was blown — Carpay wiped his emails and Cameron told the investigator to “delete everything”.

Facing the consequences: In August, the Law Society of Manitoba fined Carpay and Cameron $5,000 each and permanently banned them from practicing in Manitoba. The three-year Canada-wide ban is a further punishment that ends the criminal charges.

For his part, the investigator has agreed to take a remedial course focused on the appropriate number of car lengths to leave behind a subject.

HEARSAY ROUNDUP

Canadiana

🌓 Manitoba MLA Mark Wasyliw will continue moonlighting as a criminal defence lawyer. He said he would wrap up his practice, but that was before Premier Wab Kinew passed him over for a cabinet position. Wasyliw says he’ll have nothing but time on his hands as a backbencher — so, why not? Premier Kinew audaciously suggested in response that being an elected official is …. a full-time job. Time management aside, Wasyliw’s side gig raises questions about whether it’s appropriate for a member of the governing party to face off against Crown attorneys representing the province.

🦌 The City of Longueuil can use crossbows to thin out the deer population in Michel-Chartrand park. Animal rights groups opposed the planned hunt and pushed for non-lethal alternatives, but the Superior Court sided with the City. Last week the Quebec Court of Appeal refused to hear an appeal from that decision, confirming a green light for the hunt.

🙅‍♂️ The Crown is expected to cross-examine former fashion mogul Peter Nygard tomorrow. Nygard is charged with sexually assaulting five women between 1980 and 2005. Thankfully the jury has already seen Nygard throughout the trial, otherwise they might mistake his ghoulish appearance for a Halloween costume.

CONTRACT

Supreme Court: Good faith means directors couldn’t stab former shareholders in the back

Et tu brute - photo of the painting by William Holmes Sullivan

Et tu brute — William Holmes Sullivan

Two business owners hired two directors to run their business. The directors found a buyer for the business, kept it a secret from the owners, bought the owners out, then flipped the business for a hefty profit. Is that okay? Did the directors owe the owners anything?

On Friday, the Supreme Court released a decision saying the directors are on the hook. They needed to act in good faith, by telling the owners about the potential sale. And because they didn’t — the directors owe the owners the profits they made from the flip.

Sure, it’s a Quebec civil law decision, but that doesn’t mean common law folk should sleep on it. After all, the Supreme Court is making a habit of using civil law concepts as a “source of inspiration” when it comes to performing contracts in good faith.

Background: Directors don’t usually owe anything to shareholders. They need to act in the best interests of the corporation, not in the interest of any particular shareholder. But the owners in this case relied on a contract they had with the directors.

The contract gave the directors a cut of profits, and a right to purchase the business if the owners ever decided to sell. The contract didn’t say the directors had to share information about the business in return, but the owners said that requirement was implicit. And, because civil law requires every contract to be performed in good faith, the owners said sharing information was the only way the directors could perform the contract in good faith.

On appeal: The Supreme Court agreed it was implicit in the agreement that the directors needed to maximize the value of the business, share material information with the owners, and — you know — not steal a major opportunity for themselves, harming the people who handed over the keys.

The Court also agreed the directors failed to act in good faith. The Court said good faith required the directors to act “proactively” and inform the owners about the potential sale.

Remedy: So, the directors’ secret sale was a breach of contract. Where does that leave the owners? Contract law is meant to make the owners whole, not to punish the directors — so the Court had to consider what the owners actually lost because of the directors’ bad conduct.

The directors argued it wasn’t appropriate to award the amount of profit the directors made on the sale. They said the owners might not have achieved the same result, even if the directors had been honest. Maybe the buyers wouldn’t have even wanted to deal with the owners.

But the Court rejected that argument. The Court said it’s appropriate to presume the owners lost exactly the same amount the directors gained. The directors could have rebutted that presumption with other evidence, but they didn’t.

And that means the directors need to fork over their profits.

Decision report card:

◻️😐◻️◻️◻️ Factual interest

◻️◻️🙂◻️◻️ Legal interest*

◻️◻️◻️◻️🛞 Wheelin’ and dealin’

*I don’t have a civil law degree — what do I know.